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Oct 7, 2010 Yiannos G Georgiades and Rebecca E Howarth Seaberg. Chapter 6 . Syed Ali Naveed Arshad and Stephen T Sayer&n...

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The Technology, media and Telecommunications Review Second Edition

Editor John P Janka

Law Business Research

The Technology, Media and Telecommunications Review second edition

Reproduced with permission from Law Business Research Ltd. This article was first published in The Technology, Media and Telecommunications Review, 1st Edition (published in October 2010 – editor John P Janka). For further information please email [email protected]

The Technology, Media and Telecommunications Review second Edition Editor

John P Janka

Law Business Research Ltd

Publisher Gideon Roberton business development manager Adam Sargent marketing managerS Nick Barette, Katherine Jablonowska marketing assistant Robin Andrews editorial assistant Lydia Gerges production manager Adam Myers production editors Joanne Morley subeditor Caroline Rawson editor-in-chief Callum Campbell managing director Richard Davey Published in the United Kingdom by Law Business Research Ltd, London 87 Lancaster Road, London, W11 1QQ, UK © 2011 Law Business Research Ltd © Copyright in individual chapters vests with the contributors No photocopying: copyright licences do not apply. The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of September 2011, be advised that this is a developing area. Enquiries concerning reproduction should be sent to Law Business Research, at the address above. Enquiries concerning editorial content should be directed to the Publisher – [email protected] ISBN 978-1-907606-23-6 Printed in Great Britain by Encompass Print Solutions, Derbyshire Tel: +44 870 897 3239

acknowledgements

The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book: ABOU JAOUDE & ASSOCIATES Law Firm ADVOKATSKO DRUZHESTVO ANDREEV, STOYANOV & TSEKOVA in cooperation with SCHOENHERR BAHAR & PARTNERS Baker & McKenzie.Wong & Leow CLEARY GOTTLIEB STEEN & HAMILTON LLP edward nathan sonnenbergs ELVINGER, HOSS & PRUSSEN GEORGIADES & MYLONAS, ADVOCATES & LEGAL CONSULTANTS JONES DAY Kocián Šolc Balaštík, advocates KROMANN REUMERT LATHAM & WATKINS LLP LATHAM & WATKINS GAIKOKUHO JOINT ENTERPRISE M&M Bomchil Minter Ellison Roschier Advokatbyrå AB Roschier Attorneys Ltd Said Al Shahry law office

i

Acknowledgements

SCHOENHERR & ASOCIATII SCA SCHOENHERR ATTORNEYS AT LAW Seth Dua & Associates Shalakany Law Office SNR DENTON Uría Menéndez – Proença de Carvalho Walder Wyss Ltd YOON & YANG LLC

ii

contents

Editor’s Preface

��vii John P Janka

List of Abbreviations

�� ix

Chapter 1

Argentina�� 1 Francisco M Gutiérrez and Héctor M Huici

Chapter 2

Australia��14 Anthony Lloyd, Paul Kallenbach and Paul Schoff

Chapter 3

Austria��30 Christian Schmelz and Andreas Orator

Chapter 4

Bulgaria��40 Radoslav Chemshirov

Chapter 5

Cyprus��50 Yiannos G Georgiades and Rebecca E Howarth Seaberg

Chapter 6

Czech Republic��67 Drahomír Tomašuk

Chapter 7

Denmark��81 Torben Waage, Louise Sofie Falch, Martin Dahl Pedersen and Daniel Herman Røjtburg

Chapter 8

Egypt��92 Aly El Shalakany and Omar Sherif

Chapter 9

European Union��102 Maurits J F M Dolmans, Francesco Maria Salerno and Malik Dhanani

iii

Contents

Chapter 10

Finland��131 Mikko Manner, Anna Haapanen and Vilhelm Schröder

Chapter 11

France��142 Myria Saarinen and Jean-Luc Juhan

Chapter 12

Germany��154 Zahra Rahvar

Chapter 13

Hong Kong��167 Simon Berry and Vi Vi Chow

Chapter 14

India��181 Atul Dua, Rahul Goel and Anu Monga

Chapter 15

Indonesia��194 Dewie Pelitawati and Melanie Hadeli

Chapter 16

Italy��206 Stefano Macchi di Cellere

Chapter 17

Japan��218 Hiroki Kobayashi, Tim Johnson and Tomohiko Kamimura

Chapter 18

Korea��232 Wonil Kim and Kwang-Wook Lee

Chapter 19

Lebanon��244 Souraya Machnouk, Rania Khoury, Anis Nasr and Ziad Maatouk

Chapter 20

Luxembourg��255 Franz Fayot and Linda Funck

Chapter 21

Oman��271 Syed Ali Naveed Arshad and Stephen T Sayer

Chapter 22

Portugal��281 Jacinto Moniz de Bettencourt, Joana Torres Ereio and João de Sousa Assis

Chapter 23

Romania��294 Adriana Năstase and Ionuţ-Alin Sava

iv

Contents

Chapter 24

Singapore��305 Ken Chia and Koh See Khiang

Chapter 25

South Africa��327 Zaid Gardner

Chapter 26

Sweden��340 Erik Ficks, Björn Johansson and Malin Falkmer

Chapter 27

Switzerland��351 Hans Rudolf Trüeb and Samuel Klaus

Chapter 28

United Arab Emirates��363 Joby Beretta

Chapter 29

United Kingdom��376 Omar Shah and Gail Crawford

Chapter 30

United States��392 John P Janka and Jarrett S Taubman

Appendix 1

About the authors��408

Appendix 2

Contributing Law Firms’ contact details�� 429

v

editor’s preface

The recent passing of TMT pioneer Steve Jobs provides an appropriate moment for reflecting on the impact that innovation in the sector has had on our lives, and how it also has driven – and outpaced – the development of the law. Dramatic advances in microchips have fuelled the digital revolution, spawning a wide range of devices and services that our parents never could have imagined. The iPhone, the iPad, iTunes and the iPod are but a few examples of technological changes that have challenged old ways of doing business, and also have changed society. We are connected to our work and our social circles anywhere we go; we instantaneously access vast information resources from mobile devices; and we watch films and TV programmes, and listen to music, of our choosing, whenever and wherever we want. Similarly, the Internet has changed the way people communicate, and has altered our preferences for receiving information and entertainment. Internet-based businesses have challenged traditional media businesses, such as print newspapers, print magazines, and television and radio broadcasting. Internet media delivery is now challenging more recently developed forms of media–cable and satellite delivery of subscription video programming. As a result, the legal constructs once put in place to govern media outlets are changing. The existing telecommunications infrastructure is becoming outmoded. ‘Twisted pair’ (copper) is being bypassed in favour of fibre and wireless, as existing phone lines cannot readily support the increasing demand for broadband speeds and throughput. A robust wireless communications infrastructure is necessary to support the booming demand for mobile broadband connectivity to smart phones and tablets. As a result, government policy is evolving to support the deployment of broadband infrastructure, and to facilitate the growth of mobile services; but regulatory change never seems to occur fast enough. While nations are making significant investments to deploy highspeed broadband services to their citizens, significant private investment is still needed for tomorrow’s critical telecommunications and information infrastructure. Historical spectrum planning did not provide for the current wireless boom. As a result, no incumbent user of spectrum is safe in the refarming of existing spectrum bands. The transition from analogue to digital signal forms is leading to more efficient use of the spectrum, and also is facilitating new approaches to sharing radio spectrum.

vii

Editor’s Preface Regulators are coming under increasing pressure to capture the value associated with the spectrum bands that are being opened for these new purposes. The broadband revolution has eliminated one information bottleneck that once existed when consumers had to rely on a few newspapers, TV stations and radio stations. Now they are able to use Internet-based services such as Facebook and Twitter – albeit sometimes in the face of governmental attempts to stem the free flow of information to and from their jurisdictions. Other ‘gatekeepers’ are developing in the distribution chain as application service providers seek to constrain access to certain content, whether by using their influence to cause broadband providers to block access to that content entirely, or to prioritise one information source over another. We are being monitored, and our personal information is being collected, stored and mined, in a manner that regulators never envisioned and that the law is not wellsuited to constrain. Virtually every Internet access and wireless device we use knows were we are, and tracks what we do. While this personal information can be used for purposes that some may find desirable (such as targeting products and services to us), gathering and storing that information virtually eliminates any expectation of privacy. In many jurisdictions, the law is inadequate to manage the chances for abuse and the consequences of security breaches. This second edition of The Technology, Media and Telecommunications Review expands to 30 the jurisdictions in which we provide an overview of the legal constructs that govern these types of issues. While the authors cannot fully address every one of these topics in the following articles, we do hope this book provides a helpful framework for your analysis. John P Janka Latham & Watkins LLP Washington, DC October 2011

viii

LIST OF ABBREVIATIONS

3G Third-generation (technology) 4G Fourth-generation (technology) ADSL Asymmetric digital subscriber line ARPU Average revenue per user BIAP Broadband Internet access providers BWA Broadband wireless access CATV Cable TV CDMA Code division multiple access CMTS Cellular Mobile Telephone System DAB Digital audio broadcasting DDoS Distributed denial-of-service DoS Denial-of-service DSL Digital subscriber line DTH Direct-to-home DTTV Digital terrestrial TV DVB Digital video broadcast DVB-H Digital video broadcast – handheld DVB-T Digital video broadcast – terrestrial ECN Electronic communications network ECS Electronic communications service EDGE Enhanced data rates for GSM evolution FAC Full allocated historical cost FBO Facilitates-based operator’ FTNS Fixed telecommunications network services FTTC Fibre to the curb FTTH Fibre to the home FTTN Fibre to the node FTTx Fibre to the x FWA Fixed wireless access Gb/s Gigabits per second GB/s Gigabytes per second

ix

List of Abbreviations GSM Global system for mobile communications HDTV High-definition television HITS Headend in the sky HSPA High-speed packet access ICT Information and communications technology IPTV Internet protocol television ICP Internet content provider ISP Internet service provider kb/s Kilobits per second kB/s Kilobytes per second LAN Local area network LRIC Long-run incremental cost LTE Long Term Evolution (a next-generation 3G and 4G technology for both GSM and CDMA cellular carriers) Mb/s Megabits per second MB/s Megabytes per second MMS Multimedia messaging service MMDS Multichannel multipoint distribution service MSO Multi-system operators MVNO Mobile virtual network operator MWA Mobile wireless access NFC Near field communication NGA Next-generation access NIC Network information centre NRA National regulatory authority PNETS Public non-exclusive telecommunications service PSTN Public switched telephone network RF Radio frequency SBO Services-based operator SMS Short message service STD–PCOs Subscriber trunk dialling–public call offices UAS Unified access services UASL Unified access services licence UHF Ultra-high frequency UWB Ultra-wideband UMTS Universal mobile telecommunications service USO Universal service obligation VDSL Very high speed digital subscriber line VHF Very high frequency VOD Video on demand VoB Voice over broadband VoIP Voice over Internet protocol WiMAX Worldwide interoperability for microwave access

x

Chapter 11

France Myria Saarinen and Jean-Luc Juhan*

I OVERVIEW The TMT sectors in France are characterised by the interactions of mandatory provisions originating from many sources. Indeed, in addition to statutes and regulatory texts, four specialist independent administrative authorities render decisions and opinions that constitute the regulatory framework for these sectors. The French Competition Authority (‘the FCA’) also renders decisions and opinions that may have a structural impact on these sectors. 2010 and 2011 (beginning) have not been marked by any major institutional changes in this regard. The regulatory framework applicable to TMT sectors is made up of rights and obligations. For instance, between 2009 and early 2010, the fourth 3G UMTS licence was allocated and the duration of the exclusivities in TMT sectors was limited. Incentives can also result from governmental measures. For example, a national ultra-fast broadband programme was launched in August 2010 in order to give every French citizen access to ultra-fast broadband by 2025. II REGULATION i

The regulators

There are four specialist authorities involved in the regulation of technology, media and telecommunications in France: a The Electronic Communications and Postal Regulatory Authority (‘ARCEP’) oversees the electronic communications and postal services sector. It ensures the implementation of the universal service, imposes requirements upon operators that exert a significant influence in the context of market analyses, participates

*

Myria Saarinen and Jean-Luc Juhan are partners at Latham & Watkins LLP. This chapter was written with the contributions of associate Delphine Sak Bun.

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France

b

c

d

in defining the regulatory framework, allocates finite resources (radio frequencies and numbers), sanctions, resolves disputes and delivers authorisations for postal activities. The Superior Audio-visual Council (‘the CSA’) is responsible for the audio-visual sector. The CSA sets rules on broadcasting content and allocates frequencies by granting licences to radio and television operators. It also settles disputes that may arise between TV channels and their distributors, and is empowered to impose sanctions on operators in case of breach of specific regulations. The national commission on computing and Liberty (‘the CNIL’) ensures the protection of personal data. Automatic personal data processing systems must be declared to the CNIL. The CNIL also supervises compliance with the law, by inspecting IT systems and applications, and is empowered to pronounce measures that range from warnings to sanctions. The High Authority for the Distribution of Works and the Protection of copyright on the Internet (‘HADOPI’) is in charge of protecting intellectual property rights over works of art and literature on the Internet, and was established in 2009 (see Section VI.iii, infra).

These four authorities may deliver opinions upon request by the government, parliament or other independent administrative authorities such as the FCA (except for the HADOPI). ii

Ownership and market access restrictions

Investment in TMT sectors in France could be concerned by the general regulation of foreign investments made in strategic sectors. In addition, specific ownership restrictions apply to the media sector. General regulation of foreign investment According to Articles L151-1 et seq. of the French Monetary and Financial Code, when a foreign (EU or non-EU) investment is made in a strategic sector (such as security, public defence, cryptology or interception of correspondence), the investor must submit a formal application file to the French Ministry of Economy for prior authorisation. Any transaction concluded without prior authorisation is null and void, and criminal sanctions (imprisonment of five years and a fine amounting to twice the amount of the transaction) are also applicable. Specific ownership restrictions applicable to the media sector French regulations provide for media ownership restrictions in order to preserve media pluralism and competition. In particular, any single individual or legal entity cannot hold, directly or indirectly, more than 49 per cent of the capital or the voting rights of a company that has an authorisation to provide a national terrestrial television service where the average audience for television services (either digital or analogue) exceeds 8 per cent. In addition, any single individual or legal entity that already holds a national terrestrial television service where the average audience for this service exceeds 8 per cent

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France may not, directly or indirectly, hold more than 33 per cent of the capital or voting rights of a company that has an authorisation to provide a local terrestrial television service.1 Further, unless otherwise agreed in international agreements to which France is a party, any foreign national may not acquire shares of capital of a company holding a licence for a radio or television service in France and that uses radio-electrical frequencies if this acquisition has the effect of raising (directly or indirectly) the share of capital or voting rights owned by foreign nationals to more than 20 per cent. This provision does not apply to publishers with less than 80 per cent capital or voting rights being held by public radio broadcasters belonging to Council of Europe Member States, or with less than 20 per cent being owned by one of the public companies mentioned at Article 44 of the Law of 30 September 1986.2 Specific rules restricting cross-media ownership also apply.3 The aforementioned restrictions with respect to media ownership and foreign investments have not been modified in response to the globalisation of media companies, and the operators active in the French media sector are still mainly French companies. However, the evolution of media consumption habits, and in particular the changes induced by the development of Internet-connected mobile devices that particularly enable listening to music, reading books and watching films and TV programmes, affects the French media sector, and are taken into consideration by the operators of this sector. iii

Transfers of control and assignments

French general merger control framework applies to the TMT sectors, without prejudice to the aforementioned ownership restrictions and to specific provision for the media sector. Any modification to the capital of companies authorised by the CSA to broadcast TV or radio services on an Hertz-based frequency is subject to the approval of the CSA.4 III

TELECOMMUNICATIONS and INTERNET ACCESS

i

Internet and Internet protocol regulation

As regards the ADSL network, and pursuant to local loop unbundling, alternative operators must be provided with direct access to the copper pair infrastructure of France Télécom, the historical operator. Therefore, as with traditional fixed telephony, DSL networks are subject to asymmetrical regulation. As regards services, ISPs must file a declaration with the ARCEP prior to commencing operations.5

1 Articles 39-I and 39-III of the Law of 30 September 1986. 2 Article 40 of the Law of 30 September 1986. 3 Articles 41-1 to 41-2-1 of the Law of 30 September 1986. 4 Article 41-4 of the Law of 30 September 1986. 5 Article 34-1 of the Post and Telecommunications Code

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France ii

Universal service

According to ARCEP, at the end of June 2011, there were 22 million high-speed and very high-speed broadband subscriptions, among which 20.5 million were xDSL subscriptions in French territory. The next step is the development of an ultra-fast fibre-optic broadband network (‘FFTx’). To this end, ARCEP granted alternative operators access to France Télécom civil engineering infrastructures by regulating the access conditions. It is now further developing its regulatory framework for the efficient deployment of the FFTx infrastructures throughout the country. After a series of public consultations in 2009 and 2010, it set the framework for operators to deploy and share the last mile of fibre networks and, notably, indoor networks. In addition, in August 2010, the government launched the national ‘ultra‑fast broadband’ programme, the aim of which is for ultra‑fast fibre-optic broadband infrastructure to cover the entire country. This programme, which the FCA endorsed in December 2009, will be partially financed by a national loan. iii

Restrictions on the provision of service

Network neutrality is a growing policy concern in France (see Section VII, infra, for further developments). Pursuant to the Law of 21 June 2004, ISPs have a purely technical role and they do not have the general obligation to review the content that they transmit or store. Nevertheless, when informed of unlawful information or activity, they must take prompt action to withdraw the relevant content, failing which their civil liability may be sought (see Section VII, infra). Since 2009, HADOPI has been competent to address theft and piracy matters. It intervenes when requested by regularly constituted bodies for professional defence who are entitled to institute legal proceedings in order to defend the interests entrusted to them under their statutes (e.g., SACEM), or by the public prosecutor. After several formal notices to an offender, the procedure may result in a request to the ISP to suspend the offender’s Internet connection for anywhere between two months to one year. iv Security Law No. 91-646 of 10 July 1991 concerning the secrecy of electronic communications provides that the French prime minister may exceptionally authorise, for a maximum period of four months (renewable only upon a new decision), the interception of electronic communications in order to collect information relating to the national defence or the safeguarding of elements that are key to France’s scientific or economic capacity. The collection and future processing of personal data is subject to several cumulative conditions, which include information, consent and legitimate purpose, and – as a matter of principle – no transfer outside the EU. Any operator that determines the purposes and the manner in which personal data are processed is considered a ‘data controller’, and therefore, needs to file a prior declaration of such processing to the CNIL. According to the CNIL, IP addresses are considered as personal data. However,

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France as French case law has not decided on the issue,6 a legal proposal is currently being examined by Parliament to qualify IP addresses as such. In addition to these general rules applicable to the protection of personal data, the Post and Electronic Communications Code (‘the CPCE’) provides specific rules pursuant to which operators must delete or preserve the anonymity of any traffic data relating to a communication as soon as it is complete.7 Exceptions are provided, however, in particular for the prevention of terrorism and in the pursuit of criminal offences. French e-consumers benefit from consumer law provisions and from specific regulations. In particular, they are protected against unsolicited communications (such as spam) insofar as their consent is required prior to the use of their personal data for commercial exploitation. Moreover, consumers must be provided with valid means by which they may effectively request that such unsolicited communications cease. Data used for the purpose of location identification are also to be considered as personal data in the meaning of the Law of 6 January 1978. During the past year, the CNIL has taken decisions on a statistical measure of advertising effects based on locational identification of smartphones, ‘pay-as-you-drive’ systems, anti-theft devices, Google Latitude and Google Street View. Two conditions are usually required: the individual’s knowledge and consent. Any person under 18 is considered as a child under French law. Unlike in the US, there is no specific statute governing the protection of children online. In general terms, the Law of 9 July 2004 provides that an ISP should inform subscribers where there is a technical means of restricting access to selected services. As for privacy, children’s online rights are protected in the same way as those of adults. According to CNIL practice, collecting children’s personal data is allowed only with prior authorisation from their parents and if clear information is provided to the child. Yet, the webmaster of a website to which a child connects is still allowed to collect his or her age and e‑mail address to send newsletters. In addition, provisions aimed at protecting children against activities or products such as pornography, gaming or alcohol are enshrined in criminal law and in a range of sectoral legislation. In order to increase the efficiency of the already-existing provisions meant to prevent child pornography, the proposed Law No. 1697 on guidance for police and security performance (‘LOPPSI 2’) suggests that the administrative authorities could order an ISP to cut access to websites displaying images of child abuse. Unauthorised access to automated data-processing systems are prohibited by Articles 323-1 to 323-7 of the French Penal Code. In addition, with regard to cyber attacks, the LOPPSI 2 proposal would introduce a new offence of online identity theft and would empower police officers, upon juridical authorisation and only for a limited period, to install software in order to observe, collect, record, save and transmit all the content displayed on a computer’s screen.

6 7

Supreme Court, criminal section, 13 January 2009 in a case opposing the SaceM to a person suspected of piracy. See Articles L34-1 and D98-5 of the CPCE.

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France v

Emergency response networks

In France, emergency calls are routed to a call centre located in the same geographical area as the caller. In this context, Article D98-8 of the CPCE provides that operators must allow their clients to access, and therefore route their calls, to the emergency services free of charge. IV

SPECTRUM POLICY

i Development The management of the entire French radio frequency spectrum is entrusted to a state agency, the National Frequencies Agency (‘the ANFR’). It apportions the available radio spectrum, whose allocation is administered by governmental administrations (e.g., civil aviation, defence, space, interior) and independent authorities (ARCEP and the CSA). ARCEP issues general authorisations for the use of radio frequencies (‘RFs’) for public networks, audio-visual carriage networks, independent networks and video reporting links. Articles 28 to 32 of the Law of 30 September 1986 determine the CSA’s allocation procedures. As for private television and private radio broadcasting on Hertz-based terrestrial frequencies, analogue and digital licences are granted by the CSA following a call for applications. Public television and radio channels are authorised without a call for applications. Authorisations granted cannot exceed 10 years. Broadcasting services that are not subject to CSA’s authorisation are nevertheless subject to a standard agreement or a declaration regime.8 Development of DTTV and release of the Digital Dividend French spectrum policy is currently primarily concerns the development of DTTV and the Digital Dividend. The Law of 5 March 2007 includes a coverage objective of 95 per cent of the population by the end of 2011 (the switch-off date of analogue terrestrial television). By September 2011, 93 per cent of the French metropolitan population could receive DTTV according to the CSA The digital switchover will free up a large amount of spectrum as a result of the superior transmission efficiency of digital technology, ‘the Digital Dividend’. On 22 December 2008, pursuant to the Law of 5 March 2007, which provides for the reuse of Digital Dividend frequencies to be planned under a national framework, the French prime minister issued orders formalising the government decisions on the national schemes relating to the end of analogue broadcasting (see Section V.ii, infra) and the allocation of Digital Dividend: a allocation to the ARCEP of the entire 790–862MHz sub-band for mobile services as of 1 December 2011; b densification of the use of the 470–790MHz band for the deployment and growth of DTT; and

8 Articles 33 to 34-5 of the Law of 30 September 1986.

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France c

allocation of band III (174–220MHz, currently used by the Canal Plus analogue network) for exclusive use by digital sound broadcasting.

At the European level, the commission adopted a communication9 and a recommendation10 in order to facilitate the release of the Digital Dividend in the EU and to transform the Digital Dividend into social benefits and economic growth. ii

Flexible spectrum use

The trend towards greater flexibility in spectrum use is facilitated in France by the ability for operators to trade frequency licences, as introduced by the Law 9 June 2004.11 The general terms of spectrum licence trading were defined by Decree No. 20061016 of 11 August 2006, and the list of frequency bands whose licences could be traded was laid down by a Ministerial Order of 11 August 2006. a frequency database that provides information regarding the terms for spectrum trading in the different frequency brands open in the secondary market is publicly accessible.12 The spectrum licence holder may transfer all of its rights and obligations to a third party for the entire remainder of the licence (full transfer) or only a portion of its rights and obligations contained in the licence (e.g., geographical region or frequencies). Transfer of frequency licences is subject either to prior approval of ARCEP13 or to notification to ARCEP, which may refuse the assignment under certain circumstances.14 Another option available for operators is spectrum leasing, whereby the licence holder makes frequencies fully or partially available for a third party to operate. Unlike in a sale, the original licence holder remains entirely responsible for complying with the obligations attached to the frequency licence. All frequency-leasing operations require the prior approval of ARCEP. iii

Broadband and next-generation mobile spectrum use

Three 3G (UMTS) licences were awarded to Orange France and SFR15 on 18 July 2001 and to Bouygues Telecom on 3 December 2002. The fourth 3G mobile licence was awarded to Free Mobile on 17 December 2009 (see Section VII, infra). Furthermore, on 18 May 2010 ARCEP awarded the two remaining blocks of available 3G spectrum in the 2.1GHz band (5MHz block and 4.8MHz block), respectively to SFR and to Orange France, for a total sum of €582 million.16 SFR and Orange have committed to improve hosting conditions for MVNO. The next stage is the allocation of spectrum in the 800MHz and 2.6GHz bands, for the deployment of ultra high-speed 4G mobile networks. The ARCEP launched two

9 COM(2009)586/2. 10 COM(2009)8287/2. 11 Article L42-3 of the CPCE. 12 www.arcep.fr/index.php?id=8977. 13 Article R20-44-9-2 of the CPCE. 14 Article R20-44-9-2 of the CPCE. 15 Société Française de Radiotéléphonie. 16 Decision No. 2010-0581.

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France public consultations on 5 March 2009 and 27 July 2010, respectively. The authority has launched the allocation procedures in June 2011 to award the licences to use these two frequency bands by the end of 2011. iv

Spectrum auctions and fees

Spectrum auctions in case of scarce resources Pursuant to Article L42-2 of the CPCE, as amended by the Law of 17 December 2009, when scarce resources such as RFs are at stake, the ARCEP may decide to limit the number of licences, either through a call for applications or by an auction. The government sets the terms and conditions governing these licensing selection procedures, and until now such proceedings have always been in the form of calls for applications (see Section IV.iii and the allocation of RFs for UMTS). Fees Depending on their size and their turnover, electronic communication operators are subject to different types and levels of fee.17 If an operator’s licence only covers one region in France or its overseas regions, the fee is reduced by half. In addition to these fees and pursuant to Articles R20-31 to R20-44 of the CPCE, licensed operators contribute to the financing of the universal services. V MEDIA i Digital switchover As previously indicated (see Section IV.i), the digital switchover was carried out in most areas of France and will be complete by the end of 2011. According to the government digital technology should be free of charge and accessible to everyone. As a consequence, financial aid has been released to help those who are located in ‘zones blanches’18 and those who cannot afford switching costs (the costs of a new antenna and of a decoder). As regards pay-DTTV, the CSA launched a call for applications to transmit payDTTV on the country’s R3 DTTV multiplex in July 2010;19 it was thought that the allocation of new pay-DTTV channels would boost the attractiveness of this service. The CSA should shortly launch calls for applications for two more pay-DTTV channels. Alongside this, the Law of 9 July 2004 on Electronic Communications and Audio-visual Communication Services provides a legal framework for digital terrestrial radio. The CSA launched a public consultation on 23 November 2009 relating to the deployment of digital terrestrial radio, which failed to be implemented in Paris and Nantes. Tests will now be launched in Lyon.

17 Article 45 of the Law of Finance of 1987 as amended. 18 Areas not served by a mobile or Internet network. 19 Decision No. 2010-569 of 20 July 2010.

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France ii

Internet-delivered video content

Internet video distribution refers to IPTV services, which can be classified into the three following main categories: live television, time-shifted programming and VOD. IPTV services were used by 26.7 per cent of households in 2009 and the number of users is growing steadily. For customers who cannot afford triple-play offers, access to video content is limited to the content of free channels (analogue and DTTV channels). The regulatory framework for ‘social’ offers set by the Law of 4 August 2008 is indeed limited to mobile telephony offers, triple-play offers being thus outside its scope; however, pursuant to Article 25 of Law of 17 December 2009, the government was asked to submit a proposal for a social Internet access subscription to parliament before July 2010. In January 2010, the prime minister asked willing ISPs to think about a social triple-play offer amounting to €20 and gave the Minister for Industry the task of taking all necessary steps to modify the CPCE for this purpose. iii

Mobile services

Mobile personal television (‘TMP’) was initiated by the Law of 5 March 2007. This new video broadcasting device has since suffered from substantial delays due to disagreements among operators and content providers on the applicable economic model and on how to finance the deployment of a new network. Nevertheless, on 8 April 2010, the CSA delivered authorisations to 16 channels (13 private channels selected by the CSA after the call for applications launched on 6 November 2007, together with three public channels selected by the government) for the broadcasting of personal mobile television services. On 22 April 2010, TDF20 and the operator Virgin Mobile signed an agreement under which TDF committed to developing the new network with up to a 50 per cent coverage of the ‘outdoor’ population and 30 per cent of the ‘indoor’ population, with Virgin Mobile paying TDF a monthly per-customer fee using DVB-H, an airwave broadcasting format that does not allow interaction with the user. In January 2011, TDF decided to end the agreement and in June it announced that it no longer wished to be the DVB-H operator in charge of the TMP. TDF will soon offer the use of the broadcast mobile multimedia, which would have a greater content and would also allow interaction; however such format may only be functional by 2014. VI

THE YEAR IN REVIEW

i

New security rules

LOPPSI 2 gives guidance on internal security and enforces the use of new technologies for the purpose of combating crime. The law makes online identity theft an offence and allows the police to intercept, record, keep and transmit e‑mails, phone communications and electronic data without the consent of the person concerned for the purpose of investigation. It further helps the detection of infringements, the collection of evidence

20

TéléDiffusion de France.

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France and search for criminals by facilitating the creation of police files and by organising their coordination using reconciliation software. In terms of personal data protection, LOPPSI 2 increases the instances where authorities may set up, transfer and record images on public roads, premises or facilities open to the public in order to protect the rights and freedom of the individuals, and recognises that the CNIL has jurisdiction over the control of video protection systems. Law No. 2010-788 dated 12 July 2010 (Grenelle II) forbids any type of communication with the purpose of promoting the sale, the provision or the use of a mobile phone for children under 14 years old. ii

Transposition of the EU telecom package

Directive No. 2009/136/EC and Directive No. 2009/140/EC, which amended the five Directives of the 2002 Telecom Package, have finally been implemented into French law by Order No. 2011-1012 dated 24 August 2011. The Order, which mainly aims to provide better regulation of the telecoms sector, facilitate the access to radio frequency and strengthen consumer and data protection, modifies the Code on Post and Electronic Communications, the Consumer Code, the Data Protection Act and the Criminal Code. The Order broadens the powers granted to ARCEP, which regulates the sector by setting obligations for operators and ruling on disputes arising between them. Furthermore, the Order imposes new obligations on telecoms operators in order to improve consumer protection, such as the reduction in delays to implement the portability of phone numbers, the obligation to notify any unauthorised access to personal data, the ban on spam and the mandatory consent of the user prior to the use of cookies (such consent may be expressed by specific settings of the browsers). Finally, the successful implementation of these provisions is backed up by the introduction of harsher sanctions to act as a deterrent. For instance, the manufacturing, importation, detention, offer, rent or sale of technical devices that enable the interception or use of electronic communications gives rise to a €300,000 fine and five years’ imprisonment, instead of a previous €45,000 fine and year’s imprisonment.21 Considering how recently the EU Telecom Package was introduced in French legislation, there is not much case law and only time will tell whether its aims have been achieved. iii

Case law on Web 2.0 sites

In the Joyeux Noël case,22 in which Dailymotion had posted a French movie online, the Supreme Court ruled that Web 2.0 sites (i.e., ‘community sites’ and ‘video-sharing sites’), are merely hosting service providers able to benefit from the liability exemption regime set out in Act No. 2004-575 on E-Commerce, and not editors that could be held directly responsible for infringing items or contents. Likewise, in a decision held the same day

21 Article 226-3 of the Criminal Code 22 Cass. civ 1ère, 17 February 2011.

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France in the O Martinez v. Société Bloobox-net case,23 the Supreme Court confirmed a prior decision of the Paris Court of Appeal, which had ruled that a company was not a website publisher, but a mere host (benefiting from the aforementioned exemption regime) since its activity was only structuring the information received from Internet users, and not in choosing the content of the website. These two decisions are a reversal of the previous Tiscali case,24 which, in contrast, had considered that the intervention of this Web 2.0 provider as going beyond the services performed by a hosting provider, and deprived it of immunity. iv

ARCEP decisions

Following a decision of the FCA, and taking into account observations of the European Commission and of participants in the sector, ARCEP has adopted Decision No. 20100892 dated 22 July 2010 regarding the analysis of wholesale SMS termination markets. In this decision, ARCEP sets the maximum tariffs for the SMS termination charged to third parties’ mobile operators, tariffs’ orientation and tariff framing must be maintained from October 2010 and for three years. ARCEP Decision No. 2010-1312 dated 14 December 2010, specifying access procedures to the ADSL networks in the whole of France except for high-density areas, has been homologated by an Order dated 10 January 2011. France thus becomes the first country of the EU to have implemented a regulatory frame for the deployment of optical fibre for the whole of its territory. v

HADOPI responsibilities

Decree No. 2010-1366 dated 10 November 2010 (regarding the labelling of service provisions of online communication to the public and the regulation of technical measures for protection and identification of works and objects protected by copyright), gives specific information on the functions of HADOPI. These include encouraging the development of legal offer of cultural products on the Internet and regulation of the legal and illegal use of copyright-protected items on the electronic networks, and oversight of the technical measures related to the protection and identification of protected works and objects. vi

4G licence

Four Orders and one Decree (No. 2011-659) dated 14 June 2011 regarding the call for proposals for the 4G licence frequency have been published.25 ARCEP has set deadlines to apply for the licence of 15 September 2011 for the 2.6GHz frequency and 15 December 2011 for 800MHz. Licences should be distributed by the end of 2011.

23 Cass. civ. 1ère, 17 February 2011. 24 Cass. civ. 1ère, 14 January 2010. 25 Official Journal No. 0137.

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France vii

Online gambling

Law No. 2010-476 dated 12 May 2010 allows online gambling and has created the Online Gambling Regulatory Authority (‘ARJEL’), an independent administrative authority whose mission it is to authorise operators and ensure they respect their obligations. ARJEL further seeks to protect vulnerable individuals such as children, prevent addiction, ensure the safety and the validity of the games and combat illegal site fraud as well as money laundering.

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Chapter 12

Germany Zahra Rahvar*

I Overview ICT contributes more to wealth creation in Germany than the traditional technologies of automotive and mechanical engineering. With an annual business volume of approximately €145.5 billion, the ICT sector is one of the largest economic sectors in Germany. More than 850,000 people are employed in the sector itself, and an additional 650,000 ICT specialists are employed in user sectors. It has become a driving force in Germany’s economy and, naturally, the legislator has to adjust the legal framework of media law accordingly. By focusing on key issues such as convergence, mobility and networking, the government has tried to advance the information society through targeted policies to modernise legal and technical frameworks and to promote research and market-oriented development. As part of this overall effort, the government adopted a programme entitled ‘Information Society Germany 2010’ (‘iD2010’). The iD2010 programme is specifically tailored to the needs of the ICT sector.1 Moreover, the question as to whether media convergence as a technological phenomenon inevitably will lead to a convergence in media law is the subject of much lively debate in the political and academic fields; the discussion is ongoing in Germany, with no clear trend apparent. The area of application of media law needs to be clarified, in light of the appearance of new and increasingly interconnected services along the

* 1

Zahra Rahvar is an associate at Latham & Watkins LLP. See www.bmwi.de/English/Navigation/Service/publications,did=192754. The government tries to support the process of convergence by adapting the legislative framework for telecommunications and media services at the national and European levels, by implementing a frequency policy geared to more efficiency and flexibility and by participating in joint initiatives.

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Germany convergence trend, and services need to be unambiguously and distinctly assigned to their suitable legal frameworks. II REGULATION i

The regulators

Due to the federal policy of considering media as a ‘fourth division’ of power and a tendency to deregulate and decentralise, there is no single media authority in Germany. All television and radio broadcasters are subject to state control. Public-service broadcasters are supervised by internal committees, and content-related supervision is carried out by the respective broadcasting council, whose administrative board supervises all management decisions made by the director. Private broadcasters, however, are subject to external supervision. The competent authority is the state media authority of each German state,2 whose responsibilities – apart from the supervision itself – includes granting authorisation according to Article 22, Paragraph 1 of the Inter-State Broadcasting Treaty (‘the RStV’), and assigning transmission capacities. Private and public television broadcasting in Germany is governed by the 1987 RStV, which outlines the side-by-side existence of public and commercial broadcasting. The provisions of the RStV have been modified 15 times, but the 14th modification of 2010 did not become effective because it had not been ratified by the state parliament of North-Rhine-Westphalia. Further legal sources, at a federal level, are various interstate treaties, especially on the Protection of Human Dignity and the Protection of Minors in Broadcasting and in Telemedia (‘the JMStV’) and on European-level directives (e.g., the Television without Frontiers’ Directive, treaties and conventions). In addition, there are individual state media laws. The state media authorities are responsible for general access regulation, (e.g., access to broadband services and other platforms) as well as additional applications like control systems and navigators.3 They also have a wide range of powers with which to supervise broadcasters, such as warnings, prohibition or withdrawal and revocation of licences.4 All private broadcasters must be registered. Commercial broadcasters require a licence for the purpose of providing broadcasting services. According to Article 20, Paragraph 2 of the RStV, the provider of an electronic information and communications service – if it is to be categorised as broadcasting – requires a licence. If the competent state media authority determines that this is the case, the provider, after being notified of this determination, must submit a licence application within three months to provide the relevant information in such a manner that the service can be categorised as broadcasting.

2

Several states have joint media authorities, such as Berlin and Brandenburg as well as Hamburg and Schleswig-Holstein. 3 Article 53 of the RStV. 4 Article 38 Paragraph 2 of the RStV.

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Germany If an enterprise wishes to obtain a licence as a national broadcasting service provider, it needs to be a natural or legal person who:5 a has unlimited legal capacity; b has not lost the ability to serve in a public capacity as a result of a legal ruling; c has its seat of residence or seat in Germany, another Member State of the European Union or another state of the European Economic Area (EEA) and can be pursued by court; and d warrants that in providing broadcasting, it will respect the legal provisions and any administrative acts passed thereon. The state media authorities work together in licensing and supervision as well as in the development of commercial broadcasting in fundamental questions, primarily with a view to the equal treatment of commercial TV and radio broadcasters. Their tasks are laid down in the ‘Basic Principles for the Collaboration of the Association of State Media Authorities in the Federal Republic of Germany’ of 20 January 2004 (‘the ALM Statute’). The main focus of the collaboration of the state media authorities is the promotion of programming diversity and thus freedom of information and opinion in commercial television and radio. This involves, in addition to controlling media power by means of licensing limitations and licence monitoring, also the promotion of the media literacy of viewers and listeners. The state media authorities are also responsible for compliance of commercial TV and radio broadcasters with basic programming principles. They also oversee the observance of regulations on advertising limitations or the protection of minors. The common tasks are carried out by the Regulatory Affairs Commission, the Directors’ Conference of the State Media Authorities, the Committee Chairpersons’ Conference, the Commission for the Protection of Minors in the Media and the Commission on Concentration in the Media (‘the KEK’). The compliance of telecommunications companies with the Telecommunications Act is monitored by the Federal Network Agency (‘the BNetzA’). The Agency ensures the liberalisation and deregulation of the telecommunications, postal and energy markets through non-discriminatory access and efficient use-of-system charges. It is responsible, inter alia, for securing efficient and interference-free use of frequencies and protecting public safety interests. Apart from regulation, the BNetzA performs a number of other tasks related to the telecommunications market such as administering frequencies and telephone numbers, detecting radio interference and offering advice to citizens on new regulations and their implications. German telecommunications law has developed in accordance with the European Regulations. The 2002 Telecoms Package caused fundamental changes to the previous German telecommunications law and was implemented into the German Telecommunications Act (‘the TKG’) on 22 June 2004. Since then, minor changes have been implemented (e.g., on data retention).

5 Article 20a, Paragraph 1 of the RStV.

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Germany The draft German legislation to implement the 2009 Telecoms Package, the TKGAmendment 2011, is still under discussion, but it is planned to have the parliament pass it by the end of 2011 with a six month delay against the EU implementation deadline. ii Regulated activities6 German telecommunications law does not oblige telecommunications services or network providers to apply for a general licence; however, in accordance with the Access Directive, it requires certain providers such as public telecommunications network providers or providers of public telecommunications services to notify the Federal Network Agency when they start to provide the services or the network.7 A notification is not necessary for non-public telecommunications networks or services. Enterprises importing ICT products to Germany must make sure that their goods are CE certified. The CE Mark identifies a product as complying with EU health and safety standards. Depending on the type of product, conformity can be proven by the manufacturer or with the involvement of an authorised body. Manufacturers and importers must be aware that in Germany, software and other ICT products must be modified according to the country’s customs and language. iii

Ownership and market access restrictions

German law generally makes no distinction between Germans and foreign nationals regarding investment or the establishment of companies; however, it provides for certain restrictions on foreign capital and investment. The German Federal Ministry of Economics and Technology may prohibit certain acts that might interfere with German interests. Inter alia, these interests are the general security of Germany or the acquisition of a company or parts of a company that is vital to the security of Germany according to Section 7, Paragraph 2 of the Foreign Trade Law. Telecommunications services are deemed essential for Germany’s security, and the German Telecommunications Act imposes certain obligations in that regard on telecommunications providers. Agreements relating to telecommunications services can be negotiated freely (e.g., payment terms, currency and billing) with business or carrier customers if no party has significant market power (in which case, price terms are regulated by the TKG and a provider with significant market power is not able to choose its customers freely). The TKG also provides for mandatory minimum liability for telecommunication providers. The provider’s liability for a publicly available telecommunications service can be capped at compensation for damages in the amount of €12,500 with regard to an individual end-user if the provider’s infringing act was not wilful. The total liability with

6

7

The German ICT industry generates a sales volume of about €145.5 billion annually. It has a market share in Europe of 18.9 per cent. It is Europe’s largest ICT market with a market share of 20 per cent and the fourth largest worldwide. The sector imported €38.6 billion in 2009, with ICT hardware products making up almost half of the imports. The industry has a workforce of 846,000 employees and about 73 per cent of the German private households have Internet access. Section 6 of the TKG.

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Germany regard to end-users for a single event can be capped at an amount of €10 million if the provider’s infringing act was not wilful. The Inter-State Broadcasting Treaty contains special ownership control provisions8 that are designed to ensure media plurality objectives. These rules apply in addition to the general merger control regime and are administered by the KEK. iv

Transfers of control and assignments

The German merger control provisions are enforced by the Federal Cartel Office (‘BkartA’) in Bonn. The current legislation can be found in Chapter VII of the GWB, which deals with the control of concentrations affecting the German market. The filing of merger notifications in Germany is mandatory if the turnover thresholds according to Section 36, Paragraph 2 of the GWB are met and none of the de minimis exemptions9 apply. In addition, the completion of a (cleared) merger must also be announced without undue delay (post-completion notice). This, however, is a mere formality.10 If the statutory conditions for prohibition are fulfilled, the BkartA will prohibit the merger. It also has the power to order the divestment or the disposal of certain assets where a merger has already been completed. Mergers that are subject to merger control may not be completed before either the BkartA has cleared the transaction or the relevant waiting periods of one month (first phase) or four months (first and second phases together) after submission of a complete notification has expired without the BkartA having prohibited the transaction. For the purpose of notification, the GWB requires, as a minimum, a description of the transaction to be given in the notification, and in addition, sets out the following required information in respect of all participating enterprises: a name; b place of incorporation; c type of business; d turnover of the parties involved (worldwide, in the EU and in Germany); e market shares of the parties in Germany and the basis of its own calculation if the combined market shares amount to 20 per cent or more; and f in the case of an acquisition of shares in another company, information about the shares already held in the target company and the shares to be acquired.

8 Article 26 et seq. of the RStV. 9 Two de minimis exemptions apply under the following conditions: a one party to the merger achieved less than €10 million worldwide turnover (in the case of the target including the seller and all its affiliates, provided that the seller controls the target and, in the case of the acquirer, including all its affiliates); or b the relevant market (which must have been in existence for at least five years) had a total annual value of less than €15 million in the last calendar year (‘de minimis’ market clause). 10 See Getting the Deal Through: Merger Control 2011, www.gettingthedealthrough.com/books/20/ jurisdictions/11/germany.

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Germany There are no legal deadlines for a notification of a concentration, but notifiable concentrations must not be completed before clearance. Therefore, it is advisable to submit a notification well before the envisaged completion date. It is possible to file a pre-merger notification even prior to the signing of the transactional documents. Parties should also not forget to submit the mandatory post-completion notice to the BkartA, which needs to be filed without ‘undue delay’ following completion of the transaction.11 In principle, all parties involved in a merger are responsible for filing. In the case of an acquisition of shares or assets, the vendor must also make a notification. In practice, the filing is often done by the acquiring firm also on behalf of all other parties involved. The GWB provides for filing fees payable to the BkartA for merger proceedings. The fees can amount to up to €50,000. Submission of an incorrect or incomplete filing constitutes an administrative offence and can lead to a fine of up to €100,000. The same applies to the failure to submit a postmerger completion notice or in cases of incomplete, incorrect or late notice.12 III

TELECOMMUNICATIONS and INTERNET ACCESS

i

Internet and Internet protocol regulation

Since the German parliament adopted the Telemedia Act (‘the TMG’) on 18 January 2007, all IP-based services are now regulated under this act. The Telemedia Act no longer distinguishes between ‘teleservices’, which were previously covered by the Teleservices Act and ‘media services’, which were previously the subject of the Inter-State Agreement on Media Services. Instead, it combines the two concepts: commercial rules for telemedia are covered in the TMG, while content-related aspects are regulated in a specific section of the Inter-State Broadcasting Treaty (Sections 54 et seq.) and the Inter-State Agreement on Protection of Youth in the Media. Telemedia services are permission-free and generally do not need to be registered. Telecommunications services and telemedia services are mutually exclusive; therefore, telecommunications are excluded from the scope of the Telemedia Act. In reality, the distinction is often difficult to make. In addition, the regulatory structure of telemedia services oscillates somewhere between unregulated press law and the framed supervision the television and radio broadcasters are under. Thus, the state media authorities are also the regulators of telemedia services. ii

Universal service

Germany currently has good broadband penetration, which compares well against international levels. Based on the currently accepted broadband definition of at least

11 Ibid. 12 A fine of up to €1 million or, in the case of an undertaking, up to 10 per cent of its total worldwide group turnover in the preceding business year, can be imposed if the notifying parties intentionally include or make use of incorrect or incomplete information in the notification with a view to causing the BkartA to refrain from issuing a prohibition decision or from opening a second-phase investigation.

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Germany 1Mb/s, penetration amounts to approximately 98.5 per cent of German households. Well over 70 per cent of households have potential access to transmission rates of at least 2Mb/s, while some 20 per cent can avail themselves of high-speed Internet access through ADSL connections of up to 50Mb/s. The federal government, however, intends to give a further boost to the development of the broadband network in Germany, which will be achieved by capitalising on synergies in the construction of infrastructure, using the ‘Digital Dividend‘, formulating regulation that fosters investment and growth and through financial support. Various initiatives exist at the federal, state and local level – especially the German Broadband Initiative, under which the aim is to have nationwide broadband access no later than the end of 2010. A total of 75 per cent of all German households should have high-speed broadband access with transmission rates of at least 50Mb/s by 2014. The government’s goal is to deliver nationwide access to this high-speed broadband as soon as possible.13 The federal government launched an initiative in spring 2010 to encourage innovative projects by promoting pilot schemes, and which supports local authorities that have developed exceptionally innovative solutions. It is hoped that these ‘broadband beacon projects’ will encourage businesses to pursue best-practice solutions. Small and medium-sized telecommunications companies in particular can borrow funds at terms that are in line with market conditions and with adequate risk pricing through Germany’s state-owned development bank’s (‘KfW’) corporate financing programme. In any event, the existing and modified federal and state loan guarantee scheme is generally available to companies in the telecommunications sector to prevent economically desirable broadband projects from failing due to a lack of suitable finance. With these programmes, the federal states or the federal government and federal states together assume up to 90 per cent of the risk of default for project financing. The government’s policy is to actively encourage people to use the Internet and to help them acquire skills in the area of new media by, for example, providing governmental services electronically (‘e-government’), transport and health-care telematics and the digitisation of cultural assets. The ‘white areas’ in rural Germany are shrinking rapidly, partly due to ongoing investment by the network operators. The reduction has also largely been achieved thanks to the host of action programmes offered by the federal states, local authority broadband initiatives in the areas affected and the nationwide activities of associations such as the German Association of Internet Enterprises (eco), the Association of the Providers of Telecommunications and Value-Added Services and the Association of Towns and Municipalities. The Dresden Declaration, published after the Fifth National IT summit in December 2010, examined the main challenges and identified solutions for high-speed networks in Germany. The development of a sustainable broadband network is seen as

13

The Federal Ministry of Economics and Technology (BMWi) will further develop its broadband portal www.zukunft-breitband.de. Apart from the Broadband Atlas and best-practice examples, this portal also currently includes checklists for local authorities and information on financial support.

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Germany an essential basis for the opening of new economic potential for growth and innovative business models. The TKG Amendment 2011 especially contains investments in fibre-optic networks, it is estimated that for the construction of next-generation networks between €36 and €117 billion will be needed.14 Terrestrial transmission in Germany is now exclusively digital after the last analogue transmitters were switched off in 2008. Digital satellite reception also continues to expand; the same applies for cable. But since the original switchover date – in 2010 – could not be met, at present, April 2012 is the new target date. iii Restrictions on the provision of service The Federal Network Agency is responsible for the surveillance of broadband network owners to comply with the TKG.15 Currently, no general legal provision of the TKG hinders broadband network owners from actively managing and differentiating between data packages to be sent online. A legal requirement for ‘net neutrality’ can neither be deduced from provisions regarding access16 and fee regulations17 nor from Section 42 of TKG, which governs control of abusive practices. The EU Commission has not yet regulated the issue of ‘net neutrality’. The EU focuses on transparency in the management of the network itself in order to protect consumers. The new EU regulation (Telecommunication Package) states that Member States should ensure consumers are informed in a clear manner before conclusion of the contract and thereafter on a regular basis about any restriction of their access to legitimate content by the provider. Moreover, national regulatory authorities can intervene so that operators have to publish comparable, adequate and up-to-date end-user information on the quality of their services. In Germany, the current legal framework is considered sufficient to secure unimpaired communication via the Internet. So, in the coalition agreement of the governing parties in Germany only a narrow passage can be found on the subject of ‘net neutrality’. It states: ‘We trust that the existing competition ensures neutral data transmission on the Internet and other new media (net neutrality), but [must] carefully monitor the developments and meet if necessary with the objective of maintaining network neutrality’. Therefore, at present, there appears to be no political force in Germany that would drive this issue.18 Additionally, Section 43a, Paragraph 2 number 2 of the draft TKG Amendment states that consumers must be informed about limitations concerning the access and the use of services applications.

14 Körber, MMR 2011, 215 (215). 15 See Section 126 of the TKG. 16 Sections 16 to 26 of the TKG. 17 Sections 27 et seq. and Sections 39 et seq. of the TKG. 18 Schrey and Frevert, MMR 2010, 596 (599); Spies and Ufer, MMR 2010, 13 (17).

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Germany iv Security The federal government implemented the National Protection Plan for Information Structures (‘NPSI’) based on plans for specific target groups. The aim is to ensure a high level of IT security in the medium and long term. The NPSI addresses all social groups, including citizens and small and medium-sized enterprises. With regard to the latter, the focus is on making them aware of the risks involved in using IT and informing them about the protection mechanisms available. Also, as of 5 December 2007, the Office of the Federal Government Commissioner for Information Technology was created. The Commissioner is the central point of contact for the states and the private sector when working with the federal government on IT matters. Unfortunately, there is no single act that regulates all the facets of IT security, so from a legal perspective, the matter is very disjointed.19 Privacy and consumer protection In order to better protect the privacy of individuals against intrusions of modern data processing, in a 1983 decision the Federal Constitutional Court developed the notion of individuals’ right to decide how their data are to be used.20 This right means that it is up to each individual to determine what and how much personal information he or she would like to reveal. This right to privacy is an element of the general right to free development of one’s personality, which is protected under Article 2(1) in conjunction with Article 1(1) of the German Constitution. The collection, processing and use of personal data is governed by the German Federal Data Protection Act. Its requirements are partially supplemented by the German Act Against Unfair Competition with regard to certain methods of marketing – particularly by e-mail and SMS – and by the Telemedia Act. The German Federal Data Protection Act applies mainly to federal public authorities and to non-public entities, such as corporations. Every private organisation is required to inform those persons whose personal data they are storing. However, some exceptions apply; for example, if the data subject is already aware of such storage from other sources, if the data are from publicly accessible sources or if they are to be kept confidential. Bodies responsible for processing data are required to correct information if necessary and to delete or block personal data if unlawfully stored or no longer needed. If a body responsible for processing data harms a data subject by unlawfully or incorrectly collecting, processing or using his or her personal data, and in doing so failed to act with due care, that body is liable for damages. Individuals may request information from public and private organisations about stored data concerning them and the reason for storing these data. Private organisations are also required to indicate whether they regularly transmit these data to others, and if so, to whom.

19 20

Gaycken and Karger, MMR 2011, 3(6). Federal Constitutional Court Decision 65,1 [41].

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Germany Protection for children Youth protection provisions applicable to the Internet can primarily be found in the Inter-State Treaty on the Protection of Human Dignity and the JMStV. The Federal Department for the Media Harmful to Young Persons (‘the BPjM’) is the responsible authority for protecting children and adolescents in Germany from any media that might contain harmful or dangerous contents. This work is authorised by the Youth Protection Law. The types of media monitored include videos, DVDs, computer games and Internet sites. The BPjM can act only on request of other administrative institutions, not on its own initiative. The German Youth Welfare Departments, among others, can file a complaint; once an official request has been filed, the BPjM is obliged to process the complaint. Possible measures in the event of a violation are prohibition from publication, blocking the provider and fines up to €500,000. Cybersecurity The parliament passed the Act to Strengthen the Security of Federal Information Technology on 14 August 2009. According to Section 1 of the Act, a Federal Office for Information Security (‘the BSI’) will be maintained as a superior federal authority, to be overseen by the Federal Ministry of the Interior. The BSI is responsible for promoting IT security in Germany.21 Due to the complexity of IT problems, the spectrum of tasks facing the BSI is wide-ranging. According to Section 3 of the Act, its tasks include developing criteria, procedures and tools to test and evaluate the security of information technology systems or components and to test and evaluate compliance with IT security standards, and developing technical security standards for federal information technology and for the suitability of information technology contractors in special need of protection. Furthermore, the BSI investigates security risks associated with the use of IT and develops preventive security measures, provides information on risks and threats relating to the use of information technology and seeks out appropriate solutions. This work includes IT security testing and assessment of IT systems, including their development, in cooperation with the industry. The BSI is organised into four divisions, one central and three specialised. v

The De-Mail Act

On 5 March 2011 the new De-Mail Act became effective. Through this it is now possible to offer new services for the communication via the Internet whose security is verified and accredited. De-Mail services can be used as the basis for safer electronic legal and business relations. The electronic communication is now legally viewed at the same level as the paper based communication, with additional functionality.22

21 www.bsi.bund.de. 22 Roßnagel, NJW 2011, 1473 (1478).

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Germany IV

SPECTRUM POLICY

i Development Originally, frequencies in Germany were used exclusively – with a few exceptions – by Germany’s federal mail service (Deutsche Bundespost). The Law concerning the Restructuring of Posts and Telecommunications was adopted as early as 1989, and this new law created new regulatory provisions for opening up broader competitive opportunities on the telecommunications markets. With the Telecommunications Act of 1996, the monopoly on both network and telephony was also finally abolished and these markets were hence fully liberalised. Today’s development goes hand in hand with the population’s increasing demand for mobile communication services. Not least because of the new technical possibilities opened up by, inter alia, UMTS demand for more bandwidth will continue to rise in line with increasing mobility. Both growing demand and technological innovation call for the availability of adequate frequency spectrum. Because of its type of use and the current state of technology, the frequency spectrum available is still considered a scarce resource. According to the regulatory authority, the Regulatory Authority for Telecommunications and Posts (‘the RegTP’), use of frequencies needs a forward-looking, non-discriminatory and proactive frequency regulation. The ‘Digital Dividend’ is the frequently used term whenever digitisation results in the freeing up of spectrum. ii

Flexible spectrum use

The newly amended Telecommunications Act announced in March 2010 takes account of the guidelines laid out by the European Directives (‘Better Regulation’ and ‘Citizens Rights’) and incorporate them into national German law. The amendment ensures the alignment of decision-making policy of the Federal Network Agency on competition and investment-friendly regulatory principles. Providing security for potential investors, the Federal Network Agency will be empowered to provide fundamental regulatory concepts at an early stage and to make binding preliminary specifications in regard to possible regulatory decisions. Also, the Federal Network Agency too can specify the sharing of land and installed facilities. Moreover, additional reporting requirements about infrastructural facilities are planned, the aim being to create a comprehensive list according to their nature, availability and geographical location, and to improve cooperation and ‘spectrum sharing’. Spectrum use should be more efficient and flexible. Tighter sanctions should lead spectrum to be actually used instead of merely maintained. At the same time, portability, trade, leasing and sharing of spectrum will be designed more openly. iii

Broadband and next-generation mobile spectrum use

Some rural areas of Germany still lack high-speed Internet connections (‘white areas’) and suffer substantial economic disadvantage as a result. As cable installation in those regions is not considered economical, using the spectrum resources made available through digitisation and providing Internet coverage via wireless broadband has become the main objective of the relevant German authorities. Thus, the Federal Network

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Germany Agency imposed rather strict requirements on the auction purchase of spectrum in 2010. Adequate Internet access has to be supplied ‘level-wise’: thus every successful bidder has had to agree to provide Internet access to communities and cities with no more than 5,000 inhabitants, to those with between 5,000 and 20,000 inhabitants and then to cities with more than 50,000 inhabitants. Further expansion of Internet services will not be allowed before supply to 90 per cent of any ‘level’ has been ensured. iv

Spectrum auctions and fees

Germany held Europe’s first 4G mobile broadband spectrum (radio airwave) auction from mid-April to mid-May 2010. The Federal Network Agency was in charge of the auction, which was the first wireless broadband spectrum auction in Germany for nearly a decade. Four operators23 were allowed to bid for frequencies from the fields at 800MHz, 1.8GHz, 2GHz and 2.6GHz amounting to approximately 360MHz; no new entrants were allowed to bid. The minimum bid price was set at €1.5 million per 5MHz frequency block. After 224 auctions on 27 days in total the auction aggregated a total amount of €4.4 billion for 41 frequency blocks. V

YEAR IN REVIEW

In the past 18 months, some important court decisions were rendered and legislative changes passed regarding Internet and multimedia law. The great number of judgments and essays published so far in 2011 represent an exciting development in this dynamic legal area in Germany. IT contract law has been most influenced by the contractual framework conditions of cloud computing, which has still lots of loopholes. Experts predict annual growth rates of more than 40 per cent and the federal government recognised this potential and launched the ‘trusted cloud’ technology programme in cooperation with the private sector.24 In the field of liability on the Internet, fundamental judgments have been issued about search engines and about individuals running unsecured wireless LAN connections. The copyright question about the legality of the use of on-demand streaming offers is still discussed a great deal. The area of media law saw with the judgments of the ECJ about Internet gambling25 and data protection law focused on the social networks and especially Facebook’s ‘like’ button, which constantly communicates with Facebook and most likely transfers personal

23

Telefonica O2 Germany GmbH & Co OHG, Deutsche Telekom GmbH, Vodaphone D2 GmbH and Erste MVV Mobilfunk Vermögensverwaltungs-gesellschaft mbH (E-plus). 24 www.bmwi.de/English/Navigation/Press/press-releases,did=383292.html. 25 In various decisions on September 8, 2010, the ECJ judged that the German monopoly for lottery and sports betting breaches against the European freedom of establishment and services.

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Germany data from non-Facebook-members, even if they have not used the button.26 The question of how to deal with a new data retention law was afforded lots of attention.27 VI

CONCLUSIONS and OUTLOOK

Convergence presents an abundance of challenges for policy-makers, industry and society. Cooperation on a European and global level is vital for most German ICT policy issues, including telecommunication and frequency policies, ICT research, anti-spam measures and consumer, copyright and youth protection in the context of new media. Indeed, it is impossible to separate these international activities from national policymaking. The German parliament has established a committee of inquiry on the topic ‘Internet and the digital society’. The aim of this committee is to work out a legal framework by 2012 designed for the digital society. The framework needs to be flexible enough to tackle the long-term consequences for German society, the economy and the law driven by the ever-increasing Internet penetration. The most relevant topics will be net neutrality, data protection, copyright protection, green IT, net anonymity, e‑government and legal security in electronic commerce. The working parties on media literacy and copyright have already finished their work and it has been announced that their reports will be released in the third quarter of 2011. In addition to that, the incorporation of the EU Telecoms Package into German law is eagerly awaited.

26 27

See also the decision of the superior Court of Justice of Berlin (Kammergericht), MMR 2011, 464, which sees no violation of competition law by using the ‘like’ button of Facebook. Gola and Klug, NJW 2011, 2484 (2485).

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Chapter 13

Hong Kong Simon Berry and Vi Vi Chow*

I overview Hong Kong has one of the most developed telecommunications and Internet services markets in the world. Its legal and regulatory system promotes competitiveness while at the same time striving to enhance and facilitate business investment. In terms of telecommunications, there are in total five mobile network operators,1 17 local fixed network operators,2 and 307 external fixed telecommunications service providers3 serving Hong Kong’s population of slightly over 7 million in a land area of approximately 1,000 square kilometres. The household fixed line penetration rate is 102.4 per cent4 and the mobile subscriber penetration rate is 199.6 per cent.5 The competition for Internet services is also intense with a total of 187 ISPs.6 The number of registered customer accounts with broadband access exceeds those with dial-up access by approximately 1.4 million, and the household broadband penetration rate is 84.9

* 1 2

3

4 5 6

Simon Berry is a partner and Vi Vi Chow is an associate at Latham & Watkins LLP. As at August 2011, provided by the Office of the Telecommunications Authority (‘OFTA’). Those who are authorised to provide facility-based local fixed telecommunications services under FTNS licence, fixed carrier licence (‘FCL’) or unified carrier licence (‘UCL’) using wireline or wireless technology (as at August 2011, provided by OFTA). Those who are authorised to provide facility-based external telecommunications services (‘ETS’) under FTNS licence, FCL, UCL and service-based ETS under SBO licence (as at August 2011, provided by OFTA). Household fixed line penetration rate is equivalent to the number of fixed lines divided by the number of households (as at June 2011, provided by OFTA). As at June 2011, provided by OFTA. Those who are authorised to provide Internet access services under FTNS licence, FCL, UCL and SBO licence.

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Hong Kong per cent.7 According to OFTA, there are nearly 1.2 million IPTV subscribers in Hong Kong,8 and there is, according to government census, around 2.35 million households in Hong Kong:9 this means more than half of all households in Hong Kong are using IPTV services. These figures demonstrate that the use of telecommunications services is advanced and widespread in Hong Kong.10 Looking at television broadcasting, Hong Kong is a peculiar place in that, despite the fact that there is no limit to the number of licences that can granted, there have only been two domestic free-to-air television programme service providers in about the past 30 years. Further, prior to 2000, there was a monopoly in domestic pay-TV programme service in Hong Kong. Given the potential influence of television programmes (whether domestic free-to-air, domestic pay or others) on the general population, the Broadcasting Ordinance11 contains stringent requirements with regards to the programmes that are broadcasted and generic codes of practice for programme, advertising and other standards. Apart from domestic free-to-air and domestic pay-TV service providers, there are two other main categories of television broadcasting licences: non-domestic pay-TV programme service licences and other licensable television programme service licences. Oddly, the four categories of licences are granted by different authorities: domestic television licences are granted and renewed by the Chief Executive in Council (with recommendations from the Broadcasting Authority (‘the BA’)) while the BA issues and renews the licences for the remaining two categories. Confusingly, post-licensing, the responsibility of regulating compliance with rules and regulations and monitoring compliance and non-compliance rests mainly on the BA. There are in total three radio programme providers operating 13 radio channels. Of the three providers, only one is funded by the government (and it does not hold a sound broadcasting licence). Although officially, there are only 13 radio channels, given the proximity of Hong Kong to mainland China, it is not uncommon for radio signals from radio stations of mainland China to be picked up in Hong Kong. The Chief Executive in Council is responsible for the issuing of sound broadcasting licences. Unlike for television, there is no categorisation for radio licences.

7 As at June 2011, provided by OFTA. 8 OFTA’s 2009/2010 Trading Fund Report. 9 According to statistics from March 2011 to May 2011, provided by Census and Statistics Department of Hong Kong. 10 Certain service providers are permitted to provide more than one type of services and therefore the total number of service providers may be larger than the total number of licensees. 11 Chapter 562 of the Laws of Hong Kong.

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Hong Kong ii REGULATION i

The regulators

The Telecommunications Authority and the Office of the Telecommunications Authority The Hong Kong telecommunications industry is regulated by the Telecommunications Authority (‘the TA’) through its executive arm, the Office of the Telecommunications Authority (‘OFTA’). OFTA advises and regulates the telecommunications industry with a view to formulating macro-supervisory policies, while at the same time, oversees licensing of telecommunications services providers (such as unified carriers, space station carriers and mobile virtual network operators). Its other roles include enforcing fair competition in the market (this may be changed by the proposed Competition Bill (see Section VII, infra)), formulating, allocating and managing radio frequency spectrum and satellite coordination. OFTA is also the regulator responsible for supervising and overseeing the implementation and enforcement of measures against unsolicited electronic messages. Finally, OFTA represents Hong Kong in the International Telecommunication Union and other international forums. The two main pieces of legislation administered by OFTA are the Telecommunications Ordinance12 and the Unsolicited Electronic Messages Ordinance (‘the UEMO’).13 The purpose of the Telecommunications Ordinance is to ‘make better provision for the licensing and control of telecommunications, telecommunications services and telecommunications apparatus and equipment’.14 For this purpose, the ordinance contains provisions regulating, inter alia, licensing, preventing some anti-competitive practices and imposing some restrictions on ownership. The UEMO ‘provide[s] for the regulation of the sending of unsolicited electronic messages and for connected purposes’15 and was adopted in 2007. All forms of commercial electronic messages with a ‘Hong Kong link’ are regulated so as to monitor and regulate ‘professional spamming activities’. Users of telecommunications services in Hong Kong now have an option to register on facsimile, short messages and pre-recorded message ‘do-not-call registers’. As of August 2011,16 more than 2.2 million numbers have been registered. However, the effectiveness of this piece of legislation is sometimes queried as service providers in various industries still manage to circumvent the regulations and restrictions and shamelessly make relentless unnecessary and irritating marketing calls, facsimiles and text messages.

12 13 14 15 16

Chapter 106 of the Laws of Hong Kong. Chapter 593 of the Laws of Hong Kong. Telecommunications Ordinance, Long title. UEMO, Long title. Based on the Registration Statistics on Do-not-call Registers published by OFTA.

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Hong Kong The Broadcasting Authority and the Television and Entertainment Licensing Authority The BA is an independent statutory body that regulates the broadcasting industry in Hong Kong. It is established under the Broadcasting Authority Ordinance17 and comprises members appointed by the Chief Executive of Hong Kong. The BA’s responsibilities include handling licence applications and renewals, handling complaints, conducting enquiries, overseeing the enforcement of fair competition and levying sanctions on licensees who breach the laws, rules and regulations. It relies on the Commissioner of the Television and Entertainment Licensing Authority (‘TELA’) to discharge executive functions. As the executive arm of the BA with regards to broadcasting regulation, TELA is mainly responsible for dealing with complaints against the contents of broadcasting programmes, complaints regarding anti-competitive behaviour and processing applications (new and renewals) for television programme service licences. However, being not only Hong Kong’s broadcasting regulator but also the regulatory agency responsible for the entertainment, film and newspapers industries, TELA also monitors publications, handles film censorship and processes applications for other entertainment and gaming licences (such as amusement arcade licences and mahjong licences) and registration of newspapers. The three main pieces of legislation administered by the BA and TELA for regulating the broadcasting industry are the Telecommunications Ordinance, the Broadcasting Ordinance and the Broadcasting Authority Ordinance. It is worth noting that the licences granted by the BA are different from those granted by OFTA in that television programme services licences issued by the BA are only for the contents, and the programme service providers must separately apply for a carrier licence from OFTA for use of the allocated frequencies. The Office of the Privacy Commissioner for Personal Data The Office of the Privacy Commissioner for Personal Data (‘the Privacy Commissioner’) is the only independent privacy commissioner in Asia. The Privacy Commissioner has formulated operational policies and procedures relating to the implementation of privacy protection provisions and is responsible for ensuring the protection of the privacy of individuals with respect to personal data and for overseeing the administration and supervision of the Personal Data (Privacy) Ordinance (‘the PDPO’),18 the legislation that regulates the collection and use of personal data in Hong Kong. There are six data protection principles under the PDPO that must be adhered to, and the fourth principle deals with the security of personal data. Telecommunications and broadcasting service providers must be prudent at all times to safeguard personal data that are in their possession against unauthorised or accidental access, processing, erasure or other use. There have been several recent incidents in Hong Kong regarding alleged breach of this principle (for example, the leakage of personal data by members of the Hong Kong police force as a result of a peer-to-peer application that was installed on their personal computers. Their alleged lack of awareness of the potential impact of

17 18

Chapter 391 of the Laws of Hong Kong. Chapter 486 of the Laws of Hong Kong.

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Hong Kong such programmes led to the leakage of important personal data to the public via the Internet). A second example is the alleged misuse of personal data of more than 2 million individuals in Hong Kong that had registered under a rewards programme run by the service provider of the biggest electronic payment system in Hong Kong (‘Octopus’).19 The leak of the personal data of Octopus users was so significant that, for the first time ever, the Privacy Commissioner issued an interim report on its investigation into the matter at the end of July 2010. The final report was published in October 2010. The Privacy Commissioner has published codes and guidelines on personal data privacy protection regarding the Internet for information technology practitioners and also mobile service operators. Sources of law As previously mentioned, Hong Kong’s laws governing broadcasting, communications, media and the publication of books and newspapers are scattered in multiple legislation the including: a the Broadcasting Authority Ordinance;20 b the Broadcasting Ordinance; c the Film Censorship Ordinance;21 d the Interception of Communications and Surveillance Ordinance;22 e the Telecommunications Ordinance; f the UEMO; g the Books Registration Ordinance;23 h the Registration of Local Newspapers Ordinance;24 and i the PDPO. The Communications and Technology Branch of Hong Kong’s Commerce and Economic Development Bureau (‘the CEDB’) is the policy bureau responsible for the policies for broadcasting and telecommunications. However, the responsibility for supervision rests with two separate regulators, the TA and the BA.

19 Octopus runs a rewards programme for customers to incentivise the usage of the Octopus card. When one registers for the Octopus reward programme, certain personal data is provided to Octopus. In summer 2010, it was revealed that Octopus had been selling personal data of those registered for the reward programme to other unrelated service providers (such as insurance companies) for direct marketing purposes. Octopus has made a total of HK$44 million selling personal data since early 2006. 20 Chapter 391 of the Laws of Hong Kong. 21 Chapter 392 of the Laws of Hong Kong. 22 Chapter 589 of the Laws of Hong Kong. 23 Chapter 142 of the Laws of Hong Kong. 24 Chapter 268 of the Laws of Hong Kong.

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Hong Kong ii Ownership restrictions The Telecommunications Ordinance The TA has the power to control the ownership of carrier licence holders by refusing to grant consent to any proposed change in a carrier licence holder. This power also allows the TA to determine whether competitiveness will be affected in the telecommunications market as a result of such change.25 The TA may conduct investigations whenever a person (whether on its own or together with its associated persons)2 6 becomes the beneficial owner or voting controller of (1) 15 per cent (except for those who do not acquire more than 30 per cent and are not or do not concurrently become the beneficial owner or voting controller of more than 5 per cent of the voting shares in any other carrier licence holder (nor exercise any power over the affairs of such other carrier licence holder)), (2) 30 per cent or (3) 50 per cent or more of the voting shares in a carrier licence holder, or acquires the power (whether or not in the form of voting shares) to control the affairs of the carrier licence such that the carrier licence holder must act in accordance with such person’s instructions.27

25 26

Sections 7P(1), (6) and (16) of the Telecommunications Ordinance. ‘Associated person’ includes: a in the case of a natural person: i

a relative of such natural person;

ii a partner of such natural person and a relative of that partner; iii a partnership in which the natural person is a partner; iv a corporation controlled by the natural person, by a partner such natural person or by a partnership in which the natural person is a partner; or v a director or principal officer of a corporation referred to in subparagraph (iv); b in the case of a corporation: i

an associated corporation;

ii a person who controls the corporation and where the person is a natural person, a relative of the person; iii a partner of a person who controls the corporation and, where the partner is a natural person, a relative of the person; iv a director or principal officer of the corporation or an associated corporation and a relative of the director or principal officer; or v a partner of the corporation and, where the partner is a natural person, a relative of the partner; c

in the case of a partnership; i

a partner of the partnership and, where the partner is a natural person, a relative of the partner;

ii a corporation controlled by the partnership, a partner in the partnership or where a partner is a natural person, a relative of the partner; iii a corporation of which a partner is a director or principal officer; or iv a director or principal officer of a corporation referred to in subparagraph (iii).

27

Sections 7P(16) and (17) of the Telecommunications Ordinance.

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Hong Kong The Telecommunications Ordinance disqualifies two categories of persons from controlling an entity with a sound broadcasting licence. Subject to exemptions, disqualified persons are restricted from exercising control (or increasing control) over a sound broadcasting licence holder.28 ‘Disqualified persons’ include advertising agents, suppliers of broadcasting materials to other sound broadcasting licence holders, another sound broadcasting licence holder and any person who (as its business) transmits sound or television material, whether in Hong Kong or outside Hong Kong, and domestic free‑to‑air or a domestic pay-TV licensees, or associate of any of the foregoing persons.29 The second category of ‘unqualified persons’ refers to persons who are not for the time being ordinarily resident in Hong Kong 30 and who have not at any time been resident for a continuous period of no less than seven years; or in the case of a company, is not a company that is ordinarily resident in Hong Kong. The aggregate of the voting shares that can be held by ‘unqualified persons’ may not exceed 49 per cent of the total number of voting shares of a sound broadcasting licence holder. The TA also imposes a disposal restriction within a three-year period after the grant of a sound broadcasting licence.31 Unless the BA otherwise agrees, the right, title or interest in 15 per cent or more of the shares in a sound broadcasting licence holder may not be transferred or acquired, directly or indirectly, within the three years after the grant date. Any agreement or similar arrangement or understanding that breaches this requirement is void.

28 29 30

Section 13G of the Telecommunications Ordinance. Section 13A of the Telecommunications Ordinance. ‘Ordinarily resident in Hong Kong’: a in the case of an individual, means: i

resident in Hong Kong for not less than 180 days in any calendar year; or

ii resident in Hong Kong for not less than 300 days in any two consecutive calendar years; and b in the case of a company, means a company: i

that is formed and registered in Hong Kong under the Companies Ordinance (Cap 32);

ii in the case of which: A if not more than two of its directors take an active part in the management of the company, each of those directors is for the time being ordinarily resident in Hong Kong and each of them has at any time been resident for a continuous period of not less than seven years; or B if more than two of its directors take an active part in the management of the company, a majority of those directors are each of them, for the time being ordinarily resident in Hong Kong and each of them has at any time been resident for a continuous period of not less than seven years; and iii the control and management of which is bona fide exercised in Hong Kong.

31

Section 13J of the Telecommunications Ordinance.

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Hong Kong The Broadcasting Ordinance As previously mentioned, the Chief Executive in Council grants licences under the Broadcasting Ordinance for domestic free-to-air and domestic pay-TV programme services, whereas the BA is responsible for granting licences for non-domestic and other licensable television programme services.32 Control restrictions for broadcasting licences are set out in Section 8(4) of the Broadcasting Ordinance. In relation to domestic free-to-air and domestic pay-TV programme service licences, such restrictions are as follows: a It must be proven that the exercise of the control and management of the licence holder is bona fide in Hong Kong, and where there are two or more directors (the majority being individuals as opposed to corporates), the individuals who actively participate in the company must satisfy residency requirements.33 The residency requirement is equally applicable to those directors who actively participate in management and operations, and on the principal officers (being those in charge of the selection, production or scheduling of television programmes) of the licence holder. b As previously mentioned, no disqualified person or their controlling entities or persons or associates (unless otherwise disclosed in the licence application) can exercise control (or remain in control) over the licence holder. The purpose of this is to restrict cross-media ownership. The restrictions are less stringent for non-domestic and other licensable television programme service licence holders, which are only required to have at least one director or principal officer to have satisfied the residency requirement. Broadcasting licences ownership and voting restrictions Restrictions regarding the holding, acquisition or exercise of voting control of a licence holder (except for domestic pay-to-air television programme licence holders) are set out in Schedule 1, Part 3 of the Broadcasting Ordinance. There are restrictions on the percentage of voting control of unqualified voting controllers in Schedule 1, Part 3(19) in that unqualified voting controllers cannot exercise voting control in excess of 49 per cent of the total voting control at the time. Further, prior approval of the BA is required for the holding, acquisition or exercise of voting control by an unqualified voting controller of 2 per cent to 6 per cent or 6 per cent to 10 per cent, or more than 10 per cent of a licence holder. If an unqualified voting controller holds more than 10 per cent, only up to 10 per cent of the voting rights can be exercised by such controller. An ‘unqualified voting controller’ is a controller who is not a qualified voting controller, and a qualified voting controller refers to a voting controller who satisfies the ordinarily

32 33

Sections 8(1) and (2) of the Broadcasting Ordinance. Such individuals must be ordinarily resident in Hong Kong, which means the individual must reside in Hong Kong for no less than 180 days in a calendar year or have done so for no less than 300 days in any two consecutive years (ordinarily resident) and further, such individuals must have ordinarily resided in Hong Kong for a period of not less than seven years.

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Hong Kong resident requirement and who, in the case of an individual, has resided in Hong Kong for a period of no less than seven years or in the case of a corporation, whose directors satisfy the Hong Kong residency requirement. An additional hurdle for obtaining a domestic free-to-air television programme service licence would be that the licence must not be a company that is a subsidiary of a corporation. iii

Competition measures

Competition provisions governing the broadcasting and telecommunications industry are currently set out in the Broadcasting Ordinance and the Telecommunications Ordinance, respectively. For the telecommunications industry, they are found in Sections 7K (anti-competitive practices), 7L (abuse of position) and 7N (non-discrimination) of the Telecommunications Ordinance. Under Section 7K, any licensee licensed under the Telecommunications Ordinance shall not (unless otherwise exempted pursuant to Section 39 of the Telecommunications Ordinance) engage in acts with the intention of restricting or that would restrict competition in the telecommunications market. When assessing whether certain conduct amounts to anti-competitive behaviour, the TA would consider, without limitation, (1) whether there is a price-fixing element, (2) whether the action would result in the prevention or restriction in the supply of goods or services to competitors, and (3) agreements regarding the sharing of markets on agreed geographical or customer lines. Certain actions prescribed under Section 7K(3) are deemed anti-competitive, such as, for example, entering into agreements, arrangement or understanding that would lead to (1) anti-competitive conduct, (2) giving an undue preference to, or receiving an unfair advantage from, an associated person placing a competitor at a significant disadvantage or (3) preventing or substantially restricting competition. The TA has the power to determine whether an act is anti-competitive. Section 7L of the Telecommunications Ordinance states that licensees licensed under the Telecommunications Ordinance that are in a dominant position are not to abuse their position. The TA has the discretion to determine whether an operator is in a dominant position or not, taking into account guidelines set out in the provision and if, in the opinion of the TA (following guidelines set out in the provision), the conduct in question has the purpose or effect of preventing or substantially restricting competition in a telecommunications market then such conduct would be deemed abuse of dominant position. In addition to the foregoing, as part of the competition measures under the Telecommunications Ordinance, no licensees are permitted to discriminate service recipients on charges or on terms of supply. The Broadcasting Ordinance also has its own competition provisions, similar to the Telecommunications Ordinance, which prohibit anti-competitive behaviour and abuse of dominance. Section 13 (prohibition on anti-competitive conduct) prohibits a licensee under the Broadcasting Ordinance from engaging in conduct that ‘has the purpose or effect of preventing, distorting or substantially restricting competition in a television programme service market’. When determining whether there is anticompetitive behaviour, the BA will look at, without limitation, (1) whether there is a price-fixing element; (2) whether the action would result in the prevention or restriction in the supply of goods or services to competitors; and (3) agreements regarding the

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Hong Kong sharing of markets on agreed geographical or customer lines. Any agreement permitting anti-competitive behaviour shall be void. Section 14 (prohibition on abuse of dominance) is similar to Section 7L of Telecommunications Ordinance as it prohibits a dominant market player from abusing its position in the television programme service market. Like the TA, the BA will follow guidelines and exercise discretion when assessing whether an entity is in a dominant position and whether there is abuse of such position. The conduct of an associate of a licensee, or the position of the associate in a television programme service market, may be considered when the BA assesses the situation. Where it is of the BA’s view that there is anti-competitive behaviour or abuse of position, the BA has the right to serve a cease-and-desist notice on the licensee,34 to be complied with by a particular date. iii

SPECTRUM POLICY

i Development Spectrum policy in Hong Kong encompasses management, pricing, supply and rights relating to spectrum. It is monitored and regulated by the TA. Since 2007, the approach adopted by the Hong Kong government regarding spectrum management has been the market-based approach35 and it will not depart from this approach unless there is a public policy reason to do so. The TA is open about the availability of spectrum and pursuant to the Radio Spectrum Policy Framework announced in April 2007, a spectrum release plan governing a three-year period going forward was released. Under the spectrum release plan, industry participants can bid for spectrum use rights through an open bidding or tendering process. To ensure industry participants are kept aware of the availability of spectrum, the release plan is updated every year. Unsurprisingly, spectrum availability determines the number of market players in the industry. Currently, spectrum is auctioned and allocated by the TA through the spectrum release plans. Where a spectrum has been previously allocated under an earlier release plan, it will be clearly stated in the current release plan. For the three-year period from 2011/12 to 2013/14, the spectrum release plan was announced on 27 April 2011 for the industry participants’ and the public’s information. The TA has clearly stipulated that the release plan is non-binding, and the TA is not bound to allocate or assign any spectrum to any industry player. All allocation of spectrum, as and when such allocation is made, is be subject to the TA’s discretion. As part of the spectrum management policy, Hong Kong is also considering spectrum trading so as to create a market for secondary trading of spectrum use. We understand that36 the government has commissioned feasibility studies but has yet to

34 35

Section 16 of the Broadcasting Ordinance. ‘Market-based approach’ for spectrum management means ‘methods relying on market forces to ensure the efficient use of spectrum as a public resource’. (From Radio Spectrum Policy Framework (April 2007) published by the Communications and Technology Branch of the Commerce, Industry and Technology Bureau of Hong Kong). 36 OFTA’s 2008/2009 Trading Fund Report.

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Hong Kong release any conclusions from such studies. One of OFTA’s major tasks for 2011/2012 (as published on 24 May 2011) is to consider whether a spectrum-trading scheme should be implemented based on such study. The TA is also considering further liberalisation by permitting changes in the use of assigned spectrum. Until the government announces the results of the feasibility report, the telecommunications industry in Hong Kong will not know what potential changes there may be (and the extent of such changes) in relation to spectrum. If spectrum trading is adopted, relevant competition measures may be required, and there may be allocation of spectrum bands that are permitted for secondary trading and a new licence category for spectrum use may need to be created. ii

Spectrum auction and fees

The government imposes fees on the use of spectrum since it is a limited resource, but demand is high. Such fees are referred to as the spectrum utilisation fee (‘SUF’) and are applicable to all use of spectrum save for those reserved for government use. As an example, in January 2009, the 2.3GHz and the 2.5/2.6GHz bands were made available for auction. In the end, a total of 90MHz in the 2.5GHz band sold for approximately HK$1.5 billion to three bidders.37 The results of the latest auction of spectrum (the 850MHz, 900MHz and 2GHz bands) for the provision of public mobile telecommunications services was announced by OFTA on 3 March 2011. The two winners to the auction each paid in cash the SUF (amounting to a total of HK$1.952 billion) and provided the TA with a performance bond in return for a total of 20MHz of radio spectrum. The two winners will be assigned the acquired spectrum under a 15-year unified carrier licence and are required to provide network coverage and services for areas with at least 50 per cent of the population of Hong Kong for each of the frequency bands respectively assigned to them within five years from the grant of the licences. iV MEDIA i

Digital switchover

Digital television was first introduced in 2000 by a pay-TV service provider, and then followed by other pay-TV service providers. Broadcasting of digital television by pay-TV service providers are through cable, satellite and broadband. It was not until December 2007 that Hong Kong’s only two domestic free-to-air television service providers commenced simulcast, that is, provided both analogue and digital terrestrial broadcasting services. These service providers broadcast digital television via radio communications. With television services becoming digital, consumers will have access to HDTV, interactive TV, electronic programme guides and datacasting services. It is the intention that digital television will solve technical issues, such as bad reception, while at the same time expanding consumers’ choice of programming. Further, spectrum will become available once analogue broadcasting is switched off

37

Please refer to Section VII, infra, for details regarding the latest spectrum auction, which was completed in June 2010.

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Hong Kong since analogue broadcasting requires more spectrum than digital broadcasting even if the same amount of information is carried, and the released spectrum can then be used for other telecommunications services, including more television channels. The two domestic free-to-air television service providers have, as a result of the introduction of digital broadcasting, introduced more television channels originating from Hong Kong, mainland China and also Taiwan. The results of a survey conducted in March 2011 showed that only approximately 63 per cent of the households in Hong Kong are receiving DTTV services, which is far from the target of 89 per cent by end of 2010 that was originally anticipated by the CEDB.38 As a result, the Hong Kong government has deferred the plan to switch off analogue television services from the end of 2012 to 2015 to bring it in line with the actual implementation and market situation of DTTV development in Hong Kong, even though as of mid-May 2011, the coverage of DTTV is over 95 per cent of the population (which will be further enhanced with nine more fill-in stations by the end of 2011). V the YEAR IN REVIEW i

The Competition Bill

A very important piece of future legislation, the Competition Bill, was introduced in July 2010 to the Hong Kong Legislative Council for consideration. Although not solely related to broadcasting or telecommunications, the proposed bill spans various sectors and business. If passed into law, relevant competition provisions that are currently embedded in the Telecommunications Ordinance and the Broadcasting Ordinance (and any subsidiary regulations) will be amended or repealed (as applicable). Amendments and changes to the Telecommunications Ordinance and the Broadcasting Ordinance are set out in Schedule 8, Parts 4 and 9 of the Competition Bill. Some more important changes are described below. It is proposed in the Competition Bill39 that the TA and the BA will have concurrent jurisdiction with the Competition Commission (‘the Commission’) with regards to telecommunications and broadcasting related competition matters. The TA will have jurisdiction over (1) entities licensed under the Telecommunications Ordinance (save for sound broadcasting licensees); (2) unlicensed entities whose activities require them to be licensed under the Telecommunications Ordinance (again, save for sound broadcasting licences); and (3) entities exempted pursuant to Section 39 of the Telecommunications Ordinance. There is a very specific ‘merger rule’ set out in Schedule 7 of the Competition Bill, which only applies to the telecommunications sector. Save as otherwise exempted, undertakings that are subject to this merger rule are prohibited from ‘directly or indirectly, carrying out a merger that has, or is likely to have, the effect of substantially lessening competition in Hong Kong’. Factors that can be taken into account in determining

38 39

Press release of the CEDB dated 22 June 2011. Part 11, Sections 158 to 161 of the Competition Bill.

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Hong Kong whether there is substantial lessening of competition are set out in Schedule 7 of the Competition Bill. The BA, like the TA, has concurrent jurisdiction with the Commission also with regards to (1) entities licensed under the Broadcasting Ordinance, (2) unlicensed entities whose activities require them to be licensed under the Broadcasting Ordinance, and (3) entities licensed under the Telecommunications Ordinance for sound broadcasting licence. Further, there is a mechanism in the Competition Bill whereby competition matters can be transferred between regulators with concurrent jurisdictions. Sections 7K (anti-competitive practices), 7L (abuse of position), 7N (nondiscrimination) and 7P (Authority may regulate change s in relation to carrier licensees) in the Telecommunications Ordinance and Section 13 to 16 in the Broadcasting Ordinance are to be repealed. They will be replaced by the conduct rules set out in Part 2 of the Competition Bill. A new Section 7Q (exploitative conduct) will be added to the Telecommunications Ordinance. One other potential area of change that may take place as a result of the passing of the Competition Bill will be in relation to the codes and guidelines that are currently in issue. The TA and the BA have each issued their own guidelines on competition-related matters, such as in relation to their approach to analysis, handling of competition complaints and enforcement of competition procedures under the Telecommunications Ordinance and the Broadcasting Ordinance respectively. Section 35 of the Competition Bill states that the Commission must, inter alia, ‘issue guidelines (a) indicating the manner in which it expects to interpret and give effect to the conduct rules […]’ after having consulted any persons it considers appropriate. However, it is not clear whether the Commission will waive its right under Section 35 of the Competition Bill and allow the BA and the TA to issue new guidelines on broadcasting and telecommunications-related competition matters pursuant to the concurrent jurisdiction provision. The first reading of the Competition Bill took place on 14 July 2010. However, there is no fixed date set yet for the second reading and the third reading of the Competition Bill. ii

The Communications Authority Ordinance

In light of the continued blurring of the roles of the BA and the TA, the Communications Authority Bill was passed by the Legislative Council on 30 June 2011. Although it is not yet in operation, the Communications Authority Ordinance was gazetted in the Government Gazette.40 Under the new Communications Authority Ordinance, the Communications Authority (‘the CA’) will be set up as a unified regulator under to service the broadcasting and telecommunications industries, and the functions of the BA and the TA will be transferred to the CA and – like the TA – the CA will operate through an executive arm, the Office of the Communications Authority (‘OFCA’). OFCA will be a combination of the broadcasting arm of TELA (other existing TELA functions such as entertaining and miscellaneous licensing, film censorship and registration of newspapers (the non-broadcasting functions) will be transferred to other government departments),

40 No. 17 of 2011 of the Government of the Hong Kong SAR Gazette.

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Hong Kong and OFTA. The CA will take over all powers and functions of the BA and the TA and the BA will both be dissolved.41 Though the Communications Authority Ordinance is not yet in operation, it is anticipated that after the new regime commences, there will be a comprehensive review of the current regulatory regime for the telecommunications sector and recommendations for updates to be made where required. iii

Charging scheme in respect of administratively assigned spectrum

Currently, radio spectrum without congestion that are assigned administratively (not through auctions) are not subject to any form of SUF (SUF is implemented on spectrum assigned through auction). In November 2010, the government issued a public consultation paper relating to the proposed implementation of a charging scheme in respect of SUF for such spectrum, including relevant guiding principles, the proposed SUF and its calculation methodology and the implementation details. The stated purpose of the charging scheme is to encourage spectrum users to use the spectrum wisely and effectively. The government envisaged the return of any surplus spectrum for subsequent reassignment to other users. To encourage the return of surplus spectrum, a one-off grant capped at 10 per cent of the annual SUF applicable to the spectrum is proposed. This grant is also available where users migrate to other means of providing their services. It is proposed that SUF be imposed on spectrum in frequency bands that are currently congested (that is, 75 per cent occupied) and are anticipated to be more congested in the future. As a result, eight frequency bands used as fixed links, electronic news gathering or outside broadcast links and selected satellite links will be subject to SUF. SUF will be determined based on the estimated opportunity cost of the spectrum. The proposed SUF will be payable annually and there will be a transition period of five years before the charging scheme is fully in force. SUF bands are also proposed to be reviewed every five years. Ten market participants have submitted their views on the consultation paper early this year. A consultation conclusion is yet to be published.

41

Part 2, Section 7 of the Communications Authority Ordinance.

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Chapter 17

Japan Hiroki Kobayashi, Tim Johnson and Tomohiko Kamimura*

I Overview The past year was an active one in Japan’s media and telecommunications sector. Japan’s parliament enacted key amendments to the Broadcast Act and the Radio Act to streamline the telecommunications licensing regime; the switchover from analogue to digital television broadcasts was completed in most areas of the country; and SoftBank consolidated its hold on the number three position among mobile phone providers with the takeover of Willcom, along with its 3.9 million mobile subscribers and its platform for high-speed mobile devices. The Japanese Ministry of Internal Affairs and Communications (‘MIC’) is the regulatory authority for the media and telecommunications sectors. MIC has overseen the implementation of the Radio and Broadcast Act amendments, fully implementing them by June 2011, and managed what has been broadly considered a successful transition to digital television. Key issues for the year ahead are likely to include greater discussion about the introduction of auctions for the allocation of radio spectrum – a move that would add greater transparency to MIC decision-making – and jockeying among market participants over the best way to expand Japan’s broadband infrastructure as the MIC releases plans for an ‘optical road’.

*

Hiroki Kobayashi is a corporate partner, Tim Johnson is a transactional associate and Tomohiko Kamimura is a transactional associate at Latham & Watkins Gaikokuho Joint Enterprise.

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Japan II REGULATION i

The regulators

MIC’s broad authority to regulate telecommunications and broadcasting derives from statutes, which are the ultimate source of law in the telecommunications and media sectors in Japan. The core statutes are: a the Wire Telecommunications Act, which governs facilities for wired signal transmission, such as wired telephony, wired broadband networks and cable television; b the Radio Act, which governs facilities for wireless signal transmission, such as mobile phones, terrestrial and satellite television broadcast infrastructure and high-powered Wi‑Fi networks; c the Telecommunications Business Act, which regulates telecommunications and media businesses; and d the Broadcast Act, which regulates the content that telecommunications and media businesses carry or provide. The Broadcast Act and the Radio Act were amended in November 2010 to provide for a streamlined broadcast licence regime, including the separation of broadcasting licences from transmission licences. Prior to the amendment, general broadcasting licences, cable radio broadcasting licences, CATV broadcasting licences and licences to broadcast through third‑party facilities were granted by MIC under different statutes using different procedures. Under the amended Acts, the statutory licensing provisions for these activities are consolidated into the Broadcast Act and the Radio Act, and broadcasting is divided into two major licensing categories: Main Broadcasting, consisting of terrestrial broadcasting, and broadcasting through broadcasting and communication satellites located over 110 east longitude and Regular Broadcasting, consisting of broadcasting through other satellites, CATV and IPTV. Also, prior to the amendment, terrestrial broadcasting licences were granted only to broadcasters that provided their own broadcast content and operated the wireless transmission facilities used to distribute it. Under the amended Acts, broadcasters are now able to distribute their programming through third-party terrestrial wireless transmission facilities, just as they already were permitted to distribute their programming through third-party satellites and third-party cable television providers. The reforms are expected to lessen the regulatory burdens on telecommunications and broadcasting companies, to provide flexibility to the management of those companies and to open up competition by decoupling the ownership of broadcasting facilities from the production of broadcasting content. ii Regulated activities MIC exercises its regulatory power in numerous ways. MIC has the authority to grant broadcasting licences (for facilities such as television and radio stations that produce or broadcast media content), wireless transmission licences (for mobile phones and facilities such as mobile phone base stations and satellites) and telecommunication business

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Japan licences (for traditional wired communications as well as mobile phone providers and ISPs), and monitors the businesses conducted with such licences. MIC also allocates radio spectrum and has adopted detailed regulations to monitor and establish technical standards applicable to spectrum users and their licensed facilities and businesses. MIC’s decision-making process in exercising this authority has often been criticised as opaque and arbitrary. For example, the allocation of radio spectrum to private sector users is based on the ‘overall judgement’ of MIC, not on any clear set of factors, leaving applicants unsure of what is required and opening MIC to accusations of favouritism or political manipulation. iii

Ownership and market access restrictions

Foreign ownership and management of broadcasting licence holders, wireless transmission licence holders and Nippon Telecommunication and Telegraph Corporation (‘NTT’), the semi-privatised national telecommunications service provider, is restricted by statute. As discussed in Section I.i, supra, the Broadcast Act and the Radio Act, each amended in 2010, now divide broadcasting into two categories: Main Broadcasting and Regular Broadcasting. Under the Acts, no licence for Main Broadcasting may be held by or granted to a foreign national, a foreign entity, or a Japanese entity that has either a non-Japanese director or 20 per cent or more of its voting shares directly owned by foreign nationals or entities. Further, indirect foreign ownership of 20 per cent or more through a subsidiary or affiliate is not permitted for terrestrial (non-satellite) Main Broadcasting licences. If foreign nationals or entities acquire 20 per cent or more of the voting shares of a Main Broadcasting licence holder, the licence will be cancelled. To avoid cancellation, any Main Broadcasting licence holder whose shares are traded on a stock exchange is permitted by statute to refuse to recognise the transfer of its shares if the transfer would cause it to violate foreign ownership restrictions. In contrast, foreign investment in Regular Broadcasting licence holders is not restricted. As a result, several foreign-owned broadcasters now broadcast into Japan through cable television and thirdparty satellites. Ownership of multiple broadcast outlets is also restricted by the Broadcast Act and related regulations. This restriction on the concentration of ownership is intended to support press freedom and diversity of speech in broadcasting. The restriction includes limits on ownership of shares in, and board seats of, multiple broadcasting licence holders, as well as upper limits on the use of satellite transponder capacity. However, in response to worsening business conditions for radio broadcasters, MIC amended its regulations in 2011 to relax cross-ownership restrictions on radio broadcasting licence holders, allowing entities to control up to four license holders. Cross-ownership of newspapers and broadcasters has not been restricted in Japan. Newspaper companies often hold large ownership stakes in broadcast companies – in fact, each major private Japanese television broadcast network is affiliated with a major newspaper. iv

Transfers of control and assignments

In addition to foreign ownership and management, and cross-ownership limits, MIC approval is required for mergers and acquisitions that result in a new entity holding Main Broadcasting or wire transmission licences. Therefore, a statutory merger involving

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Japan a licence holder or the divestiture of a business conducted under a licence generally requires MIC approval. The MIC review is primarily to determine whether the transferee of a licence would be eligible to independently qualify as a new licensee. Further, pursuant to Japan’s Foreign Exchange and Foreign Trade Act, certain acquisitions of shares in broadcasting licence, wireless transmission licence and telecommunication business licence holders by non-Japanese parties are subject to prior filing and a waiting periods.1 Ordinarily, this is a pro forma requirement where no national security concerns are present. III

TELECOMMUNICATIONS and INTERNET ACCESS

i

Internet and Internet protocol regulation

In Japan, MIC regulates Internet and IP-based services (such as high-speed Internet and VoIP), along with wired telephony and mobile phones, under the Telecommunications Business Act. The Act and the regulations thereunder emphasise protection of the secrecy of communications, and the reliable and non-discriminatory provision of telecommunication services. The Telecommunication Business Act not only regulates service providers that operate their own network facilities but also regulates service providers that provide services to facilitate telecommunication between users, but do not operate their own network facilities, such as dedicated hosting services on which clients can operate an email server. Internet-based services that are not designed to facilitate telecommunication, such as Internet banking and Internet-based newsletter and media subscriptions, are not considered to be ‘telecommunication’ and therefore are not regulated under such Act. Telecommunication regulations, in combination with antitrust law, also facilitate competition among telecommunication service providers. Because providers can become dominant to the exclusion of new entrants once their network or technology standard has been adopted by a critical mass of users, MIC and the Japan Fair Trade Commission have jointly adopted guidelines to regulate unfair competitive practices by providers that have high market shares. For example, such guidelines state that it would raise antitrust issues if a telecommunications service provider, such as a mobile phone carrier, with a high market share contractually restricts its customers from switching to another service provider or charges an excessive cancellation fee. MIC regulations do not impose technical standards for Internet protocol. MIC established a study group to facilitate the transition from IPv4 to IPv6 in 2003, and in 2007, MIC issued guidelines to encourage governmental entities to prepare for IPv6 by 2008. In April 2011, the Asia Pacific Network Information Centre, which is responsible for Internet resource allocation and registration services within the Asia-Pacific region,

1

Regulated transactions include (1) an acquisition of 10 per cent or more shares in such licence holder whose shares are traded on a stock exchange or over-the-counter market and (2) an acquisition from a Japanese party of any shares in such licence holder whose shares are not traded on a stock exchange or over-the-counter market.

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Japan announced that the pool of IPv4 addresses was nearly exhausted and encouraged the deployment of IPv6. However, because the adoption of IPv6 has been slower than anticipated, MIC’s efforts to facilitate the transition to IPv6 have had little impact. ii

Universal service

Under the Telecommunications Business Act and the NTT Act, NTT group must provide wired telephony service (analogue or IP over optical fibre) in all areas in Japan. There is no similar law requiring universal broadband service. To encourage private companies to construct broadband infrastructure, in 2004, MIC announced its u‑Japan strategy (‘u’ for ‘ubiquitous’). One goal of the initiative is the construction of nationwide broadband infrastructure, wired and wireless as appropriate, with a target date of March 2011 for 100 per cent coverage. In 2006, the government began to subsidise capital expenditure by private companies for the development of broadband infrastructure, and to provide tax benefits and low-interest financing for such projects. The u‑Japan strategy has been quite successful in facilitating the extension of broadband access to Japan’s population centres. Even with subsidies, however, private companies have been hesitant to build the infrastructure required to provide broadband service to Japan’s isolated islands and mountainous areas. The government estimates that for 110,000 households, satellite is the sole practical means of providing broadband services. In 2009, local governments launched programmes to subsidise the purchase of equipment to receive satellite broadband service in such areas. With such direct governmental assistance for the ‘last mile’ of broadband coverage, MIC announced that 99.2 per cent broadband coverage had been achieved by March of 2011. MIC is now striving to increase the coverage of high-speed broadband (optic and 30 Mb/s or faster cable (download)) from the current 90 per cent of households to 100 per cent. Despite these infrastructure improvements, many Japanese have not taken advantage of improved broadband access. Despite nearly universal availability, the broadband penetration rate for Japanese population stood at just 50.4 per cent as of the end of 2010. The Japanese government estimates that the adoption of broadband Internet usage by all households would raise annual consumption by up to ¥8.7 trillion, or 1.5 per cent of GDP, and has stated a policy to favour the enrichment of broadband applications and services in order to expand the demographic profile of Japan’s Internet users. iii Restriction on the provision of service Under the Telecommunications Business Act, prices charged to end-users by NTT East and NTT West (together, ‘NTT’) for wired telephony services and pay-phone services are subject to a cap determined by MIC. This is to prevent these companies from abusing their near monopoly power over these fundamental services and encourage them to improve efficiency. Prices charged by NTT for certain services including optic data services are subject to prior notification obligations to MIC. If MIC finds the pricing scheme inappropriate because it is anti‑competitive or otherwise significantly unreasonable, MIC may require the carrier to change the pricing scheme. Otherwise, prices charged to end-users of telecommunications services and other terms of service are not regulated.

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Japan As a general rule, all telecommunication business licence holders must provide access to any other carrier that seeks to interconnect with their network. However, prices for, and methods of, interconnection are areas of public controversy and regulatory scrutiny. Telecommunications companies, including SoftBank, have pressed for greater access to NTT’s infrastructure, including its optical fibre network. NTT only provides access to its fibre-optic network on a bulk basis, for what they describe as technical and economic efficiency reasons. SoftBank has argued that it is technically possible for NTT to provide third-party access for smaller volumes without unreasonable expense, and that such access would increase efficiency and promote competition. In early 2011, NTT proposed, and MIC approved, plans to reduce the prices to be charged for interconnection with its respective fibre-optic lines by 30 per cent over the next three years in response to pressure from SoftBank and other private telecommunications providers. In May 2011, access to SoftBank’s own network became an issue when NTT DOCOMO made a filing for governmental mediation for the first time, alleging lack of transparency of SoftBank’s pricing for interconnection to its mobile networks. In connection with expansion of the nation’s fibre-optic network in the future, SoftBank has proposed that NTT spin off their copper and optic networks that reach end-users to a new joint venture formed by the government and major carriers including NTT and Softbank, so as to make the networks available equally to all carriers and accelerate the replacement of the copper wire network with fibre-optic networks. However, the government’s task force turned down this proposal and recommended to the government a less drastic approach to segregate the division operating copper and fibre-optic networks within NTT by operational firewalls. iv Security In keeping with Japan’s constitutional protection of the freedom of speech and the secrecy of communication, the Telecommunication Business Act prohibits ISPs from censoring or infringing on the privacy of communications passing through their networks. As a general matter, the Law Concerning the Protection of Personal Information (‘the Privacy Act’) protects personal information or data that can be used to identify specific living persons, and generally applies to any entity that gathers the personal information of 5,000 or more individuals. Under the Privacy Act, such entities are required to publish a ‘purpose of utilisation’ regarding their use of personal information. Personal information incorporated into a database must be kept accurately, and necessary and proper measures to maintain its security must be instituted. Any person about whom personal data is kept in a database for more than six months has a right to request access to the data, and add to, modify or delete it. Further, MIC has issued Privacy Act guidelines that are specific to telecommunications businesses. Since MIC guidelines also take into account the obligations of telecommunication business licence holders to preserve the secrecy of communications, they provide for a more stringent data protection regime than would apply under the Privacy Act alone. MIC guidelines generally prohibit telecommunication businesses from collecting information related to race, religion, disability or other attributes that may form a basis for discrimination. The guidelines also require such licence holders to specify what length of time they intend to retain personal information and to

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Japan delete any personal information after the expiry of such period. Under MIC’s Privacy Act guidelines, information related to persons making or receiving communications, such as usage history, identity, and user location, may only be disclosed to third parties in very limited circumstances, such as pursuant to a search warrant. ISPs are not currently required to proactively delete content that infringes upon the intellectual property rights or privacy of others. However, the Internet Provider Liability Limitation Act, enacted in 2001, provides a safe harbour for ISPs that delete such content. Under the Act, no ISP may be held liable for the deletion of content on its network if the ISP reasonably believes that such content infringes the intellectual property rights or privacy of others, or a third party alleges such infringement and the sender of the content does not respond to the ISP’s inquiry within seven days. ISPs are further protected by the Internet Provider Liability Limitation Act, which shields ISPs from tortious liability for failing to delete infringing content. In reliance on this statutory defence to liability, ISPs generally do not take steps to monitor the content passing through their networks. The Act does, however, authorise persons whose rights are infringed by content delivered over the Internet to demand information regarding the sender of the content from ISPs, so that legal action may be taken against the sender. However, as a practical matter, it is often not possible to identify the original sender of such infringing content where content passes through multiple networks. A statute for the protection of children from harmful Internet content, known as the Youth Internet Environment Act, became effective in April of 2009. The statute directs governmental bodies to improve Internet safety for juveniles (under the age of 18) by encouraging ISPs to use technologies that limit juvenile access to harmful content. The statute targets content glorifying crime or suicide, obscene sexual content, and other depictions of extreme violence or cruelty. The statute further exhorts parents to monitor their children’s Internet use, and to limit access to inappropriate content by using filtering software and other measures. The statute requires mobile network service providers to filter Internet content for customers that are juveniles, except where a parent has expressly requested that filtering not be used. Also under the Act, from April 2010, manufacturers of devices with Internet connectivity (other than mobile phones) are required to pre‑install filtering software or otherwise facilitate the use of third-party filtering software or services. In Japan, cyber crime has long been an area of public concern. In recent years, law enforcement has focused efforts to combat cyber crime on (1) computer hacking through the unauthorised use of IDs and passwords, and other attacks on security holes, (2) the distribution of computer viruses, and the input of data and unauthorised commands that can cause damage to computers and data, and (3) other types of crimes facilitated through the Internet, such as drug trafficking, prostitution, fraudulent Internet auctions and child pornography. Combating the distribution of child pornography has been an area of particular scrutiny and public interest. The Act on Punishment of Activities Relating to Child Prostitution and Child Pornography and the Protection of Children, originally passed in 1999, prohibits the distribution of child pornography. This Act was amended in 2004 to outlaw the uploading and distribution of child pornography over the Internet. Lawmakers have proposed further amendments to the Act to criminalise the possession of child pornography images and to require ISPs to block child pornography. The amendment

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Japan has not yet passed due to concerns that it could lead to broader censorship of Internet content. Even without the passage of the amendment, major ISPs began to voluntarily block access to child pornography sites in April 2011, following a recommendation by the an interagency working group of the Japanese government. The National Police Agency is responsible for Japan’s information security. It established a cybersecurity department in 1997, and issued a comprehensive information security policy in 2000. In 2001, the National Police Agency also established a cyber terrorism department, known as the Cyber Force Centre, which monitors network information flows from nine offices around Japan. In 2005, the Cyber Force Centre became a member of the Forum of Incident Response and Security Teams, an international information sharing network for computer incident response organisations. Beyond the authorisation of day-to-day monitoring and information gathering carried out by the National Police Agency, Japan has no laws directly addressing issues of national security in cyberspace. However, a white paper published in August 2011 by the Ministry of Defence prominently addressed the importance of cybersecurity, stating: ‘Cyber attacks on the information and communications networks of governments and militaries as well as on important infrastructure significantly affect national security. Japan must continue to pay attention to developments in cyberspace threats.’ The Ministry of Defence has also established a systems command within the self-defence forces and this year created a new high-level post to formulate responses to the threat of cyber attack. The Ministry of Defence also reports that it is taking additional steps with respect to training and personnel in order to increase readiness for computer attacks that threaten Japan’s national security. IV

SPECTRUM POLICY

i Development The need for spectrum has steadily increased with the proliferation of new technologies utilising wireless data transmission. The number of licensed wireless stations and devices increased from 3.8 million in 1985 (a majority of which were for amateur radio stations and handheld two-way radios), to 122 million in 2011 (over 98 per cent for mobile devices). MIC describes its decision-making process on spectrum policy and allocation as open and collaborative – including consultations with the public, scholars and industry experts. However, MIC decision-making has been criticised by some as arbitrary and opaque. This has led to some calls for spectrum auctions as a fairer method of allocation. ii

Flexible spectrum use

When MIC grants a wireless transmission licence, the authorised use of the transmission station or device and the spectrum that is allocated for its operation are specified. The term of the licence is in most cases five years, during which MIC does not generally permit a change of the specified use. MIC’s rationale for this approach has been that licences are granted only after a finding that the specified use is consistent with public policy. Therefore, any change to the licence requires MIC’s de novo review.

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Japan Such inflexibility by MIC during a time of rapid change in wireless technology has had the effect of hindering the efficient use of allocated spectrum by licence holders who, for example, may wish to use a satellite for both broadcasting and telecommunications, or use a terrestrial broadcast station for television broadcasts instead of radio. To address this concern, the amendments to the Broadcast Act in 2010 authorise MIC to grant licences that allow for multiple uses (i.e., different types of broadcasts or both broadcasting and telecommunications) from a single facility. iii

Broadband and next-generation mobile spectrum use

Following the general discontinuation of analogue television broadcasts in 2011, the digital television broadcasts that replaced them occupy a much narrower band of spectrum. The remaining spectrum will be reassigned by MIC for other purposes. While the reassignment of spectrum is not yet completed, reallocation of much of the newly available spectrum has been announced. One such use is to increase wireless broadband spectrum to meet the recent explosion of demand. Another is for a next-generation platform for multimedia broadcasting to mobile devices, named ‘Moba-Cas’. In November 2010, MIC’s study group published an action plan to reallocate spectrum for wireless broadband. According to the plan, MIC plans to reallocate the 700MHz band from analogue television to mobile devices. Furthermore, MIC will relocate the systems currently occupying the 700MHz and 900MHz bands, such as wireless links for transmitting programming (such as live television links) and wireless microphones, so that such spectrum can be used for wireless broadband. Initially, MIC considered a unique approach to pair up the 700 and 900MHz bands, using the 700MHz band for wireless uploading and 900MHz band for wireless downloading. The appeal of this initial plan was that by allocating uploads and downloads to different portions of the spectrum, the relocation of existing spectrum users was not necessary. However, this initial plan was criticised and ultimately abandoned because it was inconsistent with spectrum allocation practice in other countries. MIC changed its policy and decided to pursue a more conventional use of spectrum, resulting in the use of each of the 700MHz and 900MHz bands for both uploading and downloading. Apart from the additional spectrum made available by the digital switchover, mobile carriers are establishing next-generation mobile services using spectrum bands that were already available. UQ Communications, an affiliate of KDDI, took the lead in next-generation mobile service by offering a mobile WiMAX service in February 2009 using the 2.5GHz band. NTT DOCOMO followed suit with its 3.9G LTE service named ‘Xi’ (pronounced as ‘crossy’) in December 2010, using the 2GHz band currently in use for 3G mobile service. SoftBank Mobile started its DC-HSDPA service named ‘Ultra Speed’ in February 2011, using the 1.5GHz band allocated in 2009. A next-generation multimedia broadcasting platform for mobile devices is planned to come online in the spring of 2012 using a dedicated spectrum band between 207.5MHz and 222MHz, which had been previously used for analogue television broadcasts. After a vigorously contested competition between two consortiums vying for the licence to build the platform led by Japan’s two largest wireless carriers, NTT DOCOMO and KDDI, MIC decided in September 2010 to award the licence to the consortium led by NTT DOCOMO, partnered with Fuji TV and other major TV stations. The decision

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Japan backed a format based on Japan’s current digital television standard ‘ISDB-T’, over the adoption of QualComm’s MediaFLO technology proposed by the consortium led by KDDI. In the coming months, the roll‑out of content to be distributed through the new platform, to be known as ‘Moba-Cas’, and mobile devices to support Moba-Cas is expected, as well as the announcement of the pricing structure for users. The spectrum band between 90MHz and 108MHz, also formerly used for analogue television broadcasts, will be allocated by MIC for local multimedia broadcasting. In a survey MIC conducted in January 2010, over 100 entities, including local radio stations and television stations, expressed their desire to be content providers for this proposed local multimedia broadcasting platform. iv

Spectrum auctions and fees

MIC imposes spectrum usage fees on broadcasters, mobile phone carriers and other businesses that use radio spectrum, as provided for in the Radio Act. The formulae used to establish the usage fees have been criticised as unfairly favouring broadcasters at the expense of mobile service providers. Until 2005, the fees were determined, in the case of broadcasters, per broadcaster, and in the case of mobile phone carriers, by the number of base stations and subscriber handsets. Even after changes were made in 2005, the formulae still favour broadcasters, satellite operators and other ‘vested’ rights holders. The total amount of spectrum fees MIC received for the fiscal year ending March 2010 was approximately ¥64 billion, 82 per cent of which was paid by mobile phone carriers and only 5 per cent of which was paid by broadcasters, even though the bandwidth of spectrum occupied by mobile phone carriers is narrower than that occupied by broadcasters. While spectrum fees are purportedly charged to cover spectrum administration costs, such as monitoring illegal spectrum use, MIC has been criticised for using the fees to pay for ‘miscellaneous’ expenses that appear to have little connection to spectrum administration. In August 2010, MIC’s committee to explore reform of spectrum usage fees announced a policy to strengthen links between the amount of spectrum usage fees and the bandwidth of spectrum occupied by fee payers, and to use the spectrum usage fees more efficiently. In May 2011, a bill to amend the Radio Act to implement the revised spectrum usage fee scheme was passed. An action plan published in November 2010 by MIC’s study group on spectrum allocation recommended that MIC consider the introduction of spectrum auctions as a way to allocate spectrum licences more efficiently and transparently. However, the plan also warned that the transition would raise questions of fairness such as those between existing licensees who did not pay for their licences at auction, and future licensees who would bear this additional cost, and a related concern for consumers that the cost of auction fees would be ultimately passed on to the public in increased fees for services. MIC has held a series of meetings led by scholars since March 2011 to consider the implementation of spectrum auctions. In an interim report published in August 2011, the study group identified the auction of the 3.4GHz to 3.6GHz spectrum for 4G mobile phone networks as an area for a more detailed study of spectrum auctions.

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Japan V MEDIA i Restrictions on broadcast content While the general rule of the Broadcast Act is freedom of broadcasting, the Act provides a variety of content restrictions. Examples include (1) an obligation to be politically impartial, (2) a prohibition on reporting ‘manipulated facts’, (3) an obligation to show diverse opinions on controversial issues, (4) an obligation to provide closed captioning or other aids for the visually impaired where possible and (5) an obligation to disseminate emergency broadcasts. Each of these restrictions is applicable to all Main Broadcasting licence holders, while only some of them apply to Regular Broadcasting licence holders, depending upon the restriction and the type of Regular Broadcasting licence. ii Digital switchover In Japan, satellite digital television broadcasts began in 2000, and terrestrial digital television broadcasts began in 2003. Both analogue terrestrial and satellite broadcasts were switched off on 24 July 2011, except in Iwate, Miyagi and Fukushima prefectures, which were hardest hit by the March 2011 Tohoku earthquake and tsunami. For those areas, the switch-off has been deferred for up to a year at the discretion of MIC. Digital television broadcasts occupy less spectrum, which opens up the residual spectrum for other purposes, as discussed in Section III.iii, supra. Although there have been trials for digital radio since 2003, there are no immediate plans to cancel or replace analogue radio. The future of radio broadcasting in Japan is currently being discussed by another MIC study group which is considering several approaches, including the eventual shift from traditional radio to digital broadcasts for mobile devices. MIC, television broadcasters and television manufacturers and retailers carried out an intensive public awareness campaign about the digital switchover to encourage the public to acquire the necessary equipment for digital reception. To support the switchover, MIC began to distribute free digital-compatible tuners and antennae to low-income households in January 2011. As a result of MIC and industry efforts, as of the end of June 2011, all but 290,000 households in Japan were equipped for digital reception. Daily inquiries to support centres established by MIC reached 124,000 calls on the day of switchover, but fell to 7,000 one week later. The switch to digital broadcasts poses technical problems for some households in areas where the reception of DTTV broadcasting is poor. According to a survey conducted by MIC in March 2011, upon the digital switchover, 274,000 households are in such areas, and more than half of them cannot access wired cable service or other remedial measures. As temporary relief, MIC is providing simultaneous broadcasting of terrestrial television programs via satellite to those affected by the switchover until March 2015. During that time, affected households may seek out remedial measures such as accessing relay stations or community reception stations, subscribing to a cable TV service, or installing high performance antennas. MIC has established a programme to subsidise such measures. In addition, MIC is also subsidising programmes by cable television companies that continue to provide analogue broadcasting by digital-toanalogue conversion for their subscribers. As discussed in Section III.iii, supra, the spectrum currently used for analogue terrestrial broadcasts is planned to be allocated for other purposes, including multimedia

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Japan broadcasting for mobile devices, and for ‘intelligent transport systems’ where the spectrum will be used for communication among vehicles or between vehicles and roads to prevent traffic accidents. The spectrum currently used for analogue satellite broadcasts will be allocated to several new digital satellite television channels, which are scheduled to launch in October 2011. iii

Internet-delivered video content

Video content delivery utilising Internet protocols, both through dedicated networks and over the Internet, has been steadily on the rise. The methods of video delivery vary from free video-sharing sites (such as YouTube), membership-based video-sharing sites (such as Nikoniko Douga), and partially fee-based video delivery sites (such as Gyao!). Traditional television stations (e.g., NHK, commercial television broadcasters) are making plans to capitalise on Internet video by offering archived shows for a fee. For regulatory purposes, MIC has taken the view that video delivery over the Internet is not a ‘broadcast’ under the Broadcast Act, and consequently the content restrictions under the Act discussed in Section V.i, supra, do not apply. While ‘broadcast’ is defined in the Broadcast Act as ‘transmission of telecommunication for the purpose of being directly received by the public’, MIC’s position is that video delivery over the Internet does not fall within this definition because it requires a request to send, which results in receipt by a specific recipient, not the public. This interpretation allows Internet content providers to distribute multimedia offerings without being regulated as traditional broadcasters. However, the technological distinction that it relies on has been criticised as resting on shaky ground, and calls have been made for a clearer legislative statement that content restrictions will not be applied to broadcasting over the Internet. IPTV is widely used for delivery of video through dedicated networks as well as the Internet. IPTV services available in Japan vary widely, from simultaneous transmission of terrestrial and satellite television broadcasts, to exclusive IPTV channels with programming from domestic and foreign third-party programme providers, to VOD services. As of November 2010, each second the download traffic from broadband networks in Japan averaged 1.71Tb, an increase of 25.4 per cent over November of 2009. In Japan, where flat fees for unlimited Internet usage are the norm for both household ISPs and for mobile networks, flat-fee Internet providers are now beginning to grapple with the question of whether their customers will accept a new pricing model that charges users based on the amount of data that they send and receive. The president of SoftBank, the mobile network service provider for iPhones and iPads in Japan, recently remarked that 2 per cent of users are responsible for 40 per cent of data traffic, and that revisions of the unlimited data plans will be necessary sooner or later to address this imbalance. iv

Mobile services

Video broadcasting service for mobile devices began in 2006. The first service, which is still popular today, is known as ‘One-Seg’ because it uses one out of the 13 segments that constitute the spectrum bandwidth allocated to each terrestrial digital television broadcasting channel (the other 12 being used for traditional television broadcasts). Currently, One-Seg service is generally limited to the simultaneous delivery of DTTV

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Japan broadcasts to mobile devices. As of June 2011, 83 per cent of the mobile phones sold in the Japanese market were able to receive One-Seg broadcasts. People in Japan enjoy video delivery over the Internet on their mobile devices. In addition, VOD services provided by mobile networks to their subscribers are also widely available. Major mobile carriers offer VOD services free of charge or at a low price, mainly to attract subscribers to their network and not as a significant revenue source. The next-generation multimedia broadcasting service ‘Moba-Cas’ described in Section IV.iii, supra, will provide viewers with higher-definition broadcasts than OneSeg, and will allow users to store content delivered through the dedicated spectrum band to their mobile devices. Apart from services using dedicated spectrum bands such as One-Seg and MobaCas, high-speed mobile networks now provide the best support for mobile media services. In Japan, 3G service has spread to over 99 per cent of wireless customers, and new networks with greater data capacity, such as 3.9G services, are becoming available. The maximum data transmission speed for mobile devices jumps from 7.2Mb/s using 3G service to 300 Mb/s using 3.9G service. VI

YEAR IN REVIEW

The most significant legal development for Japan’s media and telecommunications sector this year was the passage and implementation of the bill to amend and consolidate media and telecommunications laws, including the Radio Act and the Broadcast Act, as described in Section I.i, supra. Although the bill was first presented to the national legislature in March 2010, it did not achieve final passage at the time for parliamentary reasons, and did not become law until November 2010. The reforms were fully implemented by June 2011. The end of analogue television broadcasts and moves toward reallocating newly available spectrum to mobile broadcasts and other uses were the major technological and regulatory developments of the past year. In December 2010, SoftBank, a holding company of major telecommunication carriers including SoftBank Mobile, took over Willcom, a mobile phone service operator that had run into financial trouble and filed a corporate rehabilitation plan in February 2010. SoftBank was motivated in part by its desire to acquire the 2.5GHz spectrum band used for Willcom’s high-speed mobile data business, which had been awarded to Willcom over SoftBank by MIC in 2007. SoftBank acquired the data business through an affiliate formed with private equity fund Advantage Partners to comply with MIC’s policy to allocate the 2.5GHz spectrum band to companies other than the three major mobile carriers including SoftBank. SoftBank also acquired Willcom’s remaining businesses including its mobile phone business with its 3.9 million subscribers. The huge magnitude 9.0 earthquake that hit the Tohoku region of Japan on 11 March 2011 brought to the fore the importance of emergency alerts, particularly an early earthquake warning system launched in 2007. The system detects tremors at seismometers installed around the nation, and promptly issues early earthquake warnings, disseminated through television, radio and mobile devices. For the earthquake on 11 March, the system successfully detected tremors and an alert was issued, notifying people

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Japan a few seconds before the quake. Mobile phone carriers announced that they make alertreceiving functions available for almost all new mobile devices in the future. The earthquake and tsunami caused serious damage to Japan’s telecommunications infrastructure. Many fixed-line phones and mobile phones became unusable due to the destruction of utility lines or electrical outages. However, television broadcasting proved to be an extremely important and reliable way to disseminate information to the public. While carriers suspended mobile voice networks due to network capacity limits, mobile data networks were restored and Internet-based services, such as Twitter, Mixi, Facebook and a survivor-finding service that Google developed immediately after the earthquake, were successfully used for disseminating information about affected areas and survivors. However, these same networks could also be faulted for the rapid spread of false rumours in relation to the disasters and their aftermath. VII

CONCLUSIONS AND OUTLOOK

The abandonment of analogue television broadcasts in favour of digital broadcasts in July 2011 and the resulting reallocation of spectrum for other uses will result in more effective spectrum use. Continued discussions of spectrum allocation and the possibility of spectrum auctions are likely to be key areas of interest in the coming year. Another major policy issue on this year’s agenda is the further expansion of Japan’s wired broadband capacity including decisions relating to the construction of the ‘optical road’ and the regulation of charges for its use. The 2011 earthquake focused the attention of the Japanese telecommunications industry on the risks to telecommunications in a disaster, including physical damage to network infrastructure, damage caused by unstable electrical supply to data centres, and massive service disruptions due to user congestion. In particular, the concentration of network infrastructure and data centres in the greater Tokyo area has been identified as an important risk factor. As a result, the telecommunications industry is increasing its focus on disaster preparedness, enhancing earthquake protection of facilities, creating redundancy of key facilities, stockpiling of disaster recovery equipment, fuel and parts, setting up restoration programmes and providing additional training for employees.

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Chapter 29

United Kingdom Omar Shah and Gail Crawford*

I Overview The establishment of the Office of Communications (‘Ofcom’) and the entry in force of the Communications Act 2003 (‘the Act’) fundamentally altered the UK communications landscape. The Act mirrored the technological neutrality of the EU regulatory framework (i.e., that all transmission networks and the provision of services should be covered by a single regulatory framework). It also reflected the EU’s desire progressively to eliminate ex ante sector-specific regulation in the largely liberalised communications markets. In addition, the creation of Ofcom saw the consolidation of a patchwork of five previously distinct regulators with authority over telecommunications and broadcasting into a single unified regulator. Following the enactment of the Postal Services Bill, the government also plans in spring 2012 to have Ofcom take over the current duties of Postcomm in regulating the postal sector and, in particular, the incumbent postal operator, Royal Mail. Ofcom’s current priorities are set out in its 2011–12 Annual Plan.1

* Omar Shah and Gail Crawford are partners at Latham & Watkins LLP. The authors would like to acknowledge the kind assistance of their colleagues Justin Cornish, Júlia Samsó, Amy Taylor and Simon Yeung in the preparation of this chapter. 1 Available at www.ofcom.org.uk.

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United Kingdom II REGULATION i

The regulators

Ofcom is the independent communications regulator in the UK. The Department for Culture, Media and Sports (‘the DCMS’) remains responsible for certain high-level policy formulation and the promulgation of legislation (a role held by the Department of Business, Innovation and Skills prior to 2011) but most key policy initiatives are constructed and pursued by Ofcom. Ofcom has largely delegated its duties for radio and TV advertising to the Advertising Standards Authority (‘the ASA’) and a number of new regulatory bodies have been established within the ASA (such as the Broadcast Committee of Advertising Practice). Ofcom’s principal duty is ‘to further the interests of citizens in relation to communications matters and to further the interests of consumers in relevant markets, where appropriate by promoting competition’. This is embodied in Ofcom’s five strategic purposes: a promoting effective and sustainable competition; b promoting the efficient use of public assets; c helping communications markets to work for consumers; d providing appropriate assurances to audiences on standards; and e contributing to and implementing public policy defined by Parliament. Ofcom’s specific duties fall into six main areas: a ensuring the optimal use of the electromagnetic spectrum; b ensuring that a wide range of electronic communications services – including high-speed data services – is available throughout the UK; c ensuring a wide range of TV and radio services of high quality and broad appeal; d maintaining plurality in the provision of broadcasting; e applying adequate protection for audiences against offensive or harmful material; and f applying adequate protection for audiences against unfairness or the infringement of privacy. In addition, the Body of European Regulations in Electronic Communications (‘BEREC’) formed after the adoption of Regulation (EC) 1211/2009 is now playing an increasingly significant role at a pan-European level. BEREC replaces the European Regulators Group and acts as an exclusive forum and vehicle for cooperation between national regulatory authorities (‘NRAs’) and between NRAs and the European Commission (‘the Commission’). The prevailing regulatory regime in the UK is contained primarily in the Act, which entered into force on 25 July 2003. Broadcasting is regulated under a separate part of the Act, in conjunction with the Broadcasting Acts of 1990 and 1996. Other domestic legislation also affects this area, in particular, the Wireless Telegraphy Act 2006; the Digital Economy Act 2010; the Data Protection Act 1998; the Privacy and Electronic Communications (EC Directive) Regulations 2003 (as amended by the Privacy and Electronic Communications (EC Directive) (Amendment) Regulations 2011); the

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United Kingdom Freedom of Information Act 2000; the Regulation of Investigatory Powers Act 2000; the Enterprise Act 2002; and the Competition Act 1998. Following the review of the European Framework for Electronic Communications Regulation (‘the Revised Framework’), the government adopted the Electronic Communications and Wireless Telegraph Regulations 2011 on 4 May 2011, which amended the Communications Act, the Wireless Telegraphy Act and other primary and secondary legislation, and implemented most aspects of the EU Better Regulation Directive (2009/140/EC) and the Citizens’ Rights Directive (2009/136/EC). The entire data protection regime is under review at a European level. This review will take several years to complete, but is likely to result in significant changes. In May 2011, the DCMS also launched a review of communications regulation intended to lead to a new communications regulatory framework to be in place by 2015, focused on three key aspects: growth innovation and deregulation; a communications infrastructure that provides the foundations for growth; and creating the right environment in which the content industry may thrive. ii Regulated activities Ofcom oversees and administers the licensing for a range of activities, including, broadly speaking, mobile telecommunications and wireless broadband, broadcast TV and radio, and the use of radios for maritime, aeronautical and business purposes. The Communications Act replaced the system of individual licences with a general authorisation regime for the provision of ECN providers or ECSs. Operators of ECNs and ECSs that comply with the General Conditions of Entitlement as regulated in the Act may provide ECNs and ECSs. Besides the general conditions, individual ECN or ECS operators may also be subject to further conditions specifically addressed to them. These may fall into four main categories: universal service conditions; access related conditions; privileged supplier conditions; and conditions imposed as a result of a finding of significant market power (SMP) of an ECN operator or an ECS provider in a relevant economic market. Mobile and satellite services require licences under the Wireless Telegraphy Act 2006 to authorise the use of the operators’ radio transmission equipment and earth stations on specified frequencies. Under the Act, Ofcom should adopt decisions on the rights of use within six weeks for radio frequencies allocated for specific purposes within the national frequency plan and, in any other case, as soon as possible after receipt of the application. iii

Ownership and market access restrictions

No foreign ownership restrictions apply to authorisation to provide telecommunications services, although the Act directs that the Secretary of State for Culture, Olympics, Media and Sport (a government minister) (‘the Secretary of State’) may require Ofcom to suspend or restrict any provider’s entitlement in the interests of national security. In the context of media regulation, although the Act and the Broadcasting Acts impose restrictions on the persons that may own or control broadcasters, there are no longer any rules that prohibit those not established or resident in the EEA from holding broadcasting licences.

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United Kingdom iv

Transfers of control and assignment

The UK operates a voluntary merger control regime (i.e., there is no requirement to seek clearance prior to completing a merger in the UK).2 The two main administrative bodies involved in UK merger control are the Office of Fair Trading (‘the OFT’) and the Competition Commission (‘the CC’). The OFT is the primary competition regulator in the UK and is responsible for monitoring general merger activity and for conducting first-stage merger control reviews, while the CC is tasked with conducting the second stage of the merger review process. The OFT consults Ofcom in considering transactions in the broadcast, telecommunications and newspaper publishing markets. The Secretary of State also retains powers under the Enterprise Act to intervene in certain merger cases, which include those that involve ‘public interest considerations’. In the context of media mergers, such considerations include, for example, the need to ensure sufficient plurality of persons with control of media enterprises serving UK audiences, the need for the availability throughout the UK of high-quality broadcasting calculated to appeal to a broad variety of tastes and interests and the need for accurate presentation of news, plurality of views and free expression in newspaper mergers. In such cases, such as the recent proposed acquisition by News Corporation of British Sky Broadcasting Group plc (‘BSkyB’), the Secretary of State may require Ofcom to report on the merger’s potential impact on the public interest as it relates to ensuring the sufficiency of plurality of persons with control of media enterprises. Ofcom is also under a duty to satisfy itself as to whether a proposed acquirer of a licence holder would be ‘fit and proper’ to hold a broadcasting licence pursuant to Section 3(3) of each of the 1990 and 1996 Broadcasting Acts. For example, as a result of the recent ongoing criminal investigation and parliamentary inquiry into allegations of phone hacking by journalists employed by News Corporation, and the potential involvement of the management of News Corporation in that conduct, Ofcom has sought to keep itself informed of those investigations in order to make its determination as to whether News Corporation would nevertheless be a fit and proper holder of a broadcasting licence. III

TELECOMMUNICATIONS and INTERNET ACCESS

i

Internet and Internet protocol regulation

As previously noted, the Act is technology-neutral and as such there is no specific regulatory regime for Internet services. ISPs are also ECNs or ECSs depending on whether they operate their own transmission system and are entitled to provide services under the Act in compliance with the general conditions and, where applicable, specific conditions. VoIP and VoB are specifically subject to a number of general authorisation conditions under the Act, such as those related to emergency call numbers.

2

However, note that changes in control of certain radiocommunications and TV and radio broadcast licences arising as a result of mergers and acquisitions may in certain circumstances require the consent of Ofcom.

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United Kingdom Following various market reviews, Ofcom has imposed conditions on access to the Internet on BT and KCOM (formerly Kingston Communications) where it found that these had SMP. In the context of the ‘net neutrality’ debate, the Revised EU Framework adopted a range of Internet traffic management provisions allowing national regulatory authorities such as Ofcom to adopt measures to ensure minimum quality levels for network transmission services and to require ECN and ECS operators to provide information about the presence of any traffic-shaping processes operated by ISPs. These provisions were implemented into the UK telecoms legislation following the legislative changes approved by the government on 4 May 2011. In June 2010, Ofcom published a discussion paper in order to open the debate on what, if any, regulatory intervention should be required in connection with Internet traffic management. In a statement of November 2010 setting out its views on net neutrality, the coalition government announced that it does not propose to legislate further to regulate traffic management, though it stressed the importance of maintaining an open Internet in which all users could access any legal content, ensuring that ISPs’ traffic management policies are transparent to consumers, and allowing ISPs to manage their networks to ensure a good service, which will in its turn encourage investment and innovation. In March 2011, the Broadband Stakeholders’ Group published a voluntary industry code of practice on traffic management transparency for broadband services introducing transparency requirements on IPSs’ traffic management practices. The net neutrality debate also continues at EU level. In April 2011, the Commission published its Communication on the open Internet and net neutrality. ii

Universal service

Universal service is provided under the Act by way of the Universal Service Order. Universal service obligations in the UK cover ECNs and ECSs and activities in connection to these services. Ofcom designated BT and KCOM as universal service providers (‘USPs’) in the geographical areas they cover. In September 2008 and March 2010, the Commission launched a consultation on whether broadband services should be included within the scope of the universal service. The Commission’s Europe 2020 Strategy of March 2010 includes aiming for broadband access for all by 2013, and access for all to Internet speeds of 30Mb/s or above by 2020. The coalition government has confirmed that it supports the former Labour government’s policy of universal access to broadband at a speed of 2Mb/s. Even though the target was initially set for 2012, in July 2010, the Secretary of State for DCMS publicly stated that it would be 2015 before every home in the UK had at a least 2Mb/s broadband connection. The coalition government has stated that it expects the private sector to lead the necessary investment but it confirmed in the Spending Review of October 2010 that it is committed to investing £530 million until 2015 to help deliver superfast broadband into more rural and hard-to-reach areas. A further £300 million will be available by 2017 as part of the TV licence fee settlement. The development of super-fast broadband will require the rollout of fibre-optic cable throughout the UK telecommunications network infrastructure. In December

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United Kingdom 2010, Ofcom published its conclusions on the review of the wholesale broadband access market setting out remedies to promote competition and investment in current and super-fast broadband services. Access and interconnection are regulated in the UK by EU competition law and by specific provisions in the Communications Act aimed at increasing competition. The general conditions require all providers of public ECNs to negotiate interconnection with other providers of public ECNs. Specific access conditions may also be imposed on operators with SMP. Whereas prices charged to end-users are not regulated, Ofcom may regulate wholesale rates charged by certain operators to alternative operators for network access. This is the case, inter alia, of wholesale fixed termination rates, wholesale mobile call termination rates, wholesale broadband access rates (as detailed above), local loop unbundling (LLU) and wholesale line rental (WLR) services, etc. In connection to this, Ofcom has decided to impose specific conditions on BT and KCOM in certain areas where they each enjoy SMP so as to allow alternative operators to compete in the retail broadband market. These include an obligation to provide general and non-discriminatory network access to BT and KCOM’s wholesale broadband products to alternative operators on a reasonable request; an obligation to maintain separate accounts between the services to alternative operators and its own retail division as well as other related transparency obligations; and a charge control on BT to ensure that charges for its broadband wholesale products are based on the costs of provision. Network access obligations will include virtual access to new fibre lines laid by BT (through its access service division Openreach), allowing alternative operators to combine their own electronics with physical infrastructure rented from BT. iii Restrictions on the provision of service The Digital Economy Act gives power to the Secretary of State to impose obligations on ISPs to limit the Internet access of subscribers who engage in online copyright infringement. Under the Digital Economy Act, Ofcom has proposed a code of practice (in the absence of a code put forward by the industry) governing the ‘initial obligations’, which require ISPs to send notifications to their subscribers following receipt of reports of copyright infringement from copyright owners. ISPs must also record the number of reports made against their subscribers and provide copyright owners, on request, with an anonymised list that enables the copyright owner to see which of the reports it has made are linked to the same subscriber (also known as the copyright infringement list). The implementation of the initial obligations code is subject to an appeal to the Court of Appeal, expected in late 2011, of an unsuccessful judicial review application by BT and TalkTalk. iv Security Privacy and consumer protection In the UK, consumers’ personal data is primarily protected by the Data Protection Act 1998 (‘the DPA’), which implements the EU Data Protection Directive (‘the Data Protection Directive’),3 and by the Privacy and Electronic Communications (EC Directive)

3 Directive 95/46/EC.

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United Kingdom Regulations 2003 as amended this year by the Privacy and Electronic Communications (EC Directive) (Amendment) Regulations 2011 (‘E-Privacy Regulations’), which implement the EU Directive on Privacy and Electronic Communication,4 as amended by EU Directive 2009/136/EC (‘the E-Privacy Directive’, and together with the Data Protection Directive, the ‘EU Directives’). The DPA is based around the principles in the Data Protection Directive that impose strict controls on the processing (including disclosure) of personal data including: a providing one or more listed conditions that must be met to ensure personal data is processed fairly and lawfully; b the requirement that data can generally only be processed for the purpose for which is was obtained, must be kept accurate and up to date and for no longer than is necessary, and must not be excessive; c the requirement that data be kept secure (i.e., be protected against unlawful processing and against accidental loss, destruction or damage); and d the restriction that data cannot be transferred to countries outside the EEA unless certain conditions are met. The restrictions in the DPA can affect the ability of a business to disclose information to third parties including public bodies unless certain conditions are met. The E-Privacy Regulations introduced further rules for the electronic communications sector including: a controls on unsolicited direct marketing; b restrictions on the use of cookies; and c rules on the use of traffic and location data. The Information Commissioner’s Office (‘the ICO’) is responsible for the implementation and enforcement of the DPA and the E-Privacy Regulations as well as the Freedom of Information Act 2000 (which provides individuals with the ability to request disclosure of information held by public authorities). The ICO generally adopts a pragmatic approach to the implementation and enforcement of the EU Directives, perhaps taking a more balanced view of the commercial reality of the international business community than some other European regulators. The role of the ICO has changed over the past 10 years, with an increasing focus on enforcement bolstered in April 2010 by increased powers, that enable the ICO to impose fines directly of up to £500,000 (whereas previously enforcement notices had to be issued and fines could only be imposed if these were breached). Since April 2010, the ICO has imposed six fines under its increased fining powers, ranging from £1,000 up to its largest ever fine of £120,000 imposed against Surrey County Council (for repeated failures to properly secure its sensitive information, in breach of the DPA). Of the remaining four fines, three were imposed against public authorities (of £70,000, £80,000 and £100,000), and one was imposed against a private company data controller (of £60,000).

4 Directive 2002/58/EC.

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United Kingdom The most common ground for large fines and enforcement action is loss of data. The ICO takes a serious view of loss of unencrypted data. Where financial institutions are involved, the ICO often works in conjunction with the FSA. By way of example, Zurich was fined a record £2.3 million by the FSA in August 2010 for loss of an unencrypted back-up tape. Individual data subjects have the right under the DPA to notify a data controller to cease or not to begin processing their personal data for the purposes of direct marketing. Under the E-Privacy Regulations, an organisation must obtain prior consent before sending a marketing message by automated call, fax, e-mail, SMS text message, video message or picture message to an individual subscriber. There is a limited exemption for marketing by electronic mail (both e-mail and SMS) that allows businesses to send electronic mail to existing customers provided (1) they are marketing their own goods or services; (2) such goods and services are similar to those that were being purchased when the contact information was provided, and (3) the customer is given a simple opportunity to opt-out free of charge at the time the details were initially collected and in all subsequent messages. Under the E-Privacy Regulations, location data (any data that identifies the geographical location of a person using a mobile device) can be used to provide value added services (e.g., advertising) only if the customer has given prior consent. The requirements for the use of cookies and similar devices have changed significantly following the amendments to the E-Privacy Regulations (implementing amendments to the E-Privacy Directive brought in by EU Directive 2009/136/EC) in May 2011. Previously, cookies and similar devices could be used on the condition that the user of the relevant terminal equipment was given clear and comprehensive information about the reasons for storing and accessing the information collected by the cookie, and could refuse the storage of, or access to, information collected by cookies, including by using browser settings. The key change under the revised E-Privacy Regulations is the requirement of consent of the user of the relevant terminal equipment. In practice, and while the revised E-Privacy Regulations do provide for this required consent to be signified through browser settings, the ICO has indicated that current browser settings are not sufficient for these purposes. However, the ICO is working with industry and browser manufacturers to develop enhanced browser settings, which would provide greater functionality for the user to select and amend their ‘permission levels’ for cookies, as well as limitations on browser default settings (prohibiting default consent to all cookies), and which would be considered sufficient by the ICO; these are expected to be available before the end of 2011, together with further technical guidance and approved industry-led solutions. The ICO has also stated that, in light of the difficulties likely to be faced by organisations in implementing this consent requirement, it will not be taking enforcement action under the revised E-Privacy Regulations until May 2012, although it does expect organisations to be assessing their use of cookies and taking steps towards compliance in the meantime. It is worth noting that many other European countries have not yet updated their national legislation to deal with this controversial new consent requirement, and those that have taken different approaches. For example, the Republic of Ireland’s revised legislation (the European Communities (Electronic Communications Networks and Services) (Privacy and Electronic Communications) Regulations 2011) expressly

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United Kingdom provides that user consent to cookies may be given by the use of appropriate browser settings (or other technological applications), whereas the revised Danish rules (under the Executive Order on Information and Consent Required in Case of Storing and Accessing Information in End-user Terminal Equipment) makes no express provision for browser settings to effect consent, but strictly prohibits the use of cookies without the user consenting to such use, having been provided with comprehensive information about the storing of, or access to, the cookie data (such information to include details of the information collected by the cookie, who sets it, the purposes of the cookie, how long the information will be stored for and how to delete it). A further change brought in by the revised E-Privacy Regulations is the introduction of mandatory data security breach notification requirements. These new obligations fall on the providers of public ECNs or ECSs, and require such service providers to promptly inform the ICO of a personal data security breach and, where that breach is likely to adversely affect the personal data or privacy of a customer, that customer must also be promptly notified. Data retention, interception and disclosure of communications data Public Communications Providers (e.g., providers of fixed network telephony, mobile telephony and Internet access, Internet e‑mail or Internet telephony) must retain traffic, subscriber and where relevant location data for a period of 12 months.5 No data revealing the content of the communication can be retained. The Regulation of Investigatory Powers Act 2000 (‘RIPA’) imposes a general prohibition on the interception of communications without the consent of both the sender and recipient, unless a warrant is issued by the Secretary of State. Interception warrants can be requested by a limited number of individuals heading various security and law enforcement bodies, HMRC or by another state under a mutual assistance treaty. The grounds for issuing warrants are that the interception is in the interests of national security, for the purpose of preventing or detecting serious crime or for the purpose of safeguarding the economic well-being of the UK. Public telecommunications service providers who provide (or intend to provide) services to more than 10,000 users6 may be required to maintain interception capabilities on receipt of a notice from the Secretary of State. In certain circumstances, contributions will be made towards the costs of implementing intercept capabilities or responding to warrants. There is a similar prohibition on the disclosure of communications data (e.g., subscriber, traffic and location data); however, no warrant is needed to allow disclosure. Disclosure can be made on request by a far wider range of public bodies and the grounds on which requests can be made are far broader including that the request is in the interests of public safety, for the purpose of protecting public health or, for the purpose of assessing or collecting any tax, duty, levy or other imposition, contribution or charge payable to a government department.

5 6

Section 4 of the Data Retention (EC Directive) Regulation 2009. Regulation of Investigatory Powers (Maintenance of Interception Capability) Order 2002.

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United Kingdom In September 2010, the Commission announced that it had referred the UK to the EU’s Court of Justice for failing to fully implement the EU Data Protection Directive and the E-Privacy Directive. The Commission has previously written to the UK government on a number of occasions demanding that UK law be amended to fully implement the EU Directives. The case also appears prompted by the UK government’s response to the Phorm Internet monitoring scandal. Significant numbers of Internet users had complained to the UK authorities that the use of Phorm’s technology had recorded their Internet activity and made them a target for behavioural advertising campaigns without their consent. The complaints were investigated by the UK Information Commissioner but no laws were found to have been broken; however, questions were asked as to whether relevant UK laws were robust enough. The Commission has stated that existing UK laws governing the confidentiality of electronic communications are in breach of the UK’s obligations under the EU Directives on three specific points: a There is no independent national authority to supervise the interception of some communications, despite the establishment of such authority being required under the EU Directives. b Current UK law authorises interception of communications not only where the persons concerned have consented to interception but also when the person intercepting the communications has ‘reasonable grounds for believing’ that consent to do so has been given (which the Commission contends does not comply with EU rules defining consent as ‘freely given, specific and informed indication of a person’s wishes). c Current UK law prohibiting and providing sanctions in the case of unlawful interception is limited to ‘intentional’ interception only whereas EU law required Member States to prohibit and to ensure sanctions are imposed against any unlawful interception regardless of whether it is committed intentionally. The Commission’s referral is accompanied by a proposal on financial sanctions (either a lump sum or a penalty payment) but the final decision on the imposition of financial sanctions lies with the Court of Justice. Protection for children Currently, there is no specific legislation protecting children online. In relation to the collection of personal data from children online, the ICO7 has indicated that consent of a parent or guardian will normally be necessary to collect personal information from children under the age of 12. However, whether consent will be valid, and the nature of the consent, will depend on the complexity of the data usage and the degree of risk associated with sharing the information in question. For example, the publication of photos of a child, and potentially friends and family, would require a more demanding form of parental consent and control (such as requiring the parent to register and actively consent on the site and provide additional identification such as a credit card number), in comparison to requesting a child’s e-mail address for the sole purpose of sending a fan club newsletter that

7 ICO’s Personal Information Online – Code of Practice.

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United Kingdom they have requested (in which case, a tick box consent on the site for the child to tick and clear unsubscribe instructions may be considered more appropriate). Parental or guardian consent is recommended by the ICO when the collection of information from a child is likely to result in: a disclosure of the child’s name and address to a third party, for example as part of the terms and conditions of a competition entry; b use of a child’s contact details for marketing purposes; c publication of a child’s image on a website that anyone can see; d making a child’s contact details publicly available; or e the collection of personal data about third parties (for example, where a child is asked to provide information about his or her family members or friends). The Child Exploitation and Online Protection (‘CEOP’) Centre works to prevent exploitation of children online; it is affiliated to the Serious Organised Crime Agency and is made up of a large number of specialists who work alongside police officers to locate and track possible and registered offenders. CEOP also offers training, education and public awareness in relation to child safety online. Website operators are encouraged to provide hyperlinks to information for parents and guardians (e.g., currently some social networking service providers offer ‘panic-buttons’ that link directly to the CEOP online reporting and advisory services which enables parents and children to report, and access advice on, cyber bullying, harmful content and sexual behaviour). Website and software operators may also apply for the Kitemark for Child Safety Online. This has been developed through collaboration between BSI (the UK’s national standards body), the Home Office, Ofcom and representatives from ISPs and application developers. BSI will test Internet access control product, services, tools and other systems for their ability to block certain categories of websites (e.g., sexually explicit, violent, or racist activity). The Home Office’s ‘Good practice guidance for the providers of socialnetworking and other user-interactive services 2008’ recommends that websites should offer easy to use privacy settings and when dealing with child website visitors (those under 18 years old), these privacy settings should be set to the maximum protection level by default. Cybersecurity The Computer Misuse Act 2000 (as amended by the Police and Justice Act 2006) sets out a number of provisions that make hacking and any other forms of unauthorised access as well as denial of service attacks and the distribution of virus and other malicious code criminal offences. Further offences exist where an individual supplies ‘tools’ to commit the aforementioned activities. IV

SPECTRUM POLICY

i Development The Framework Directive and the Authorisation Directive, part of the Telecoms Reform Package, requires the neutral allocation of spectrum in relation to the technology and services proposed by the user (for example, mobile network operators and radio

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United Kingdom broadcasters). Following on from the Telecoms Reform Package, the Commission required Member States to adopt measures including greater neutrality in spectrum allocation, the right of the Commission to propose legislation to coordinate radio spectrum policy and to reserve part of the spectrum from the Digital Dividend (from the switchover to digital television services) for mobile broadband services through the Better Regulation Directive and the Citizens’ Rights Directive. In the UK, Ofcom is responsible under the Act for the optimal use of the radio spectrum in the interests of consumers. This includes, inter alia, monitoring the airwaves to identify cases of interference and taking action against illegal broadcasters and the use of unauthorised wireless devices. ii

Flexible spectrum use

As the uses of the radio spectrum have increased, so the allocation of spectrum by the regulator has developed from a centralised system, where use was determined by the regulator, to a market-based approach, where users compete for spectrum. Currently, auctions are the primary market tool used to implement the allocation. Spectrum trading was introduced in the UK for the first time in 2004 and is permitted under the Wireless Telegraphy Act and the associated regulations. Broadly, the trading of spectrum is subject to a multi-stage process that, inter alia, requires a decision by Ofcom whether to consent to the trade. On 22 September 2009, Ofcom published a consultation document on proposals to streamline the spectrum trading process to make the spectrum market more dynamic and efficient. In 2011, following the consultation process, Ofcom concluded that it should proceed to simplify the transfer process, in particular, by removing the need to obtain its consent for proposed trades in most cases. In December 2010, the government also directed Ofcom to make spectrum used for mobile telecommunications tradable, which it implemented in 2011, including permitting 2G spectrum to be used for the provision of 3G services by amending current licences. The changes, set out in the Wireless Telegraphy (Mobile Spectrum Trading) Regulations 2011, are directed at making more efficient use of the available spectrum, and improvements in mobile services to meet the demand for faster and more reliable services for consumers. Under the regulations, the licensee can transfer all or part of the rights and obligations under its licence. A partial transfer, or ‘spectrum leasing’, can be limited to a range of frequencies or to a particular area. Ofcom also plans to simplify the process for time-limited transfers in line with the revised Framework Directive. iii

Broadband and next-generation mobile spectrum use

The restrictions on the current 2G licences are being lifted to allow the spectrum to be used for 3G services. Ofcom is also expected to amend the terms of current 3G licences so that the licences become indefinite as well as allowing users to trade spectrum. In return, users will pay an annual fee (which Ofcom has yet to determine) from 2021, when the current licences are due to expire. Looking ahead, Ofcom is expecting 4G mobile technology to be rolled out in the UK from 2013, increasing the capacity of the existing 3G network by more than 200 per cent to meet the increasing demand from consumers.

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United Kingdom iv White space Following an earlier consultation, 2011 has seen Ofcom set out the use of free spectrum, or ‘white space’, made available from the UK’s switch from analogue to digital TV and radio, for applications such as mobile broadband (particularly in rural areas) and enhanced Wi-Fi. Ofcom has estimated that the bandwidth available is equivalent to the spectrum available to current 3G services. The UK is the first country in Europe to progress its plans. A white space device will search for spectrum that is available and check a thirdparty database to find out what radio frequencies are available to ensure that it does not interfere with existing licensed users of the spectrum. The white space devices will be licence-exempt, on the condition that they do not interfere with existing users. v

Spectrum auctions and fees

In March 2011, Ofcom announced its plans for the auction of the 2.6GHz and 800MHz bands, or 4G mobile spectrum, which includes spectrum from the Digital Dividend. 4G technology is expected to provide more capacity at faster speeds for mobile services on smartphones such as video streaming, e‑mail and social networking sites. Ofcom’s auction process is designed to promote competition and coverage, with the aim of widening the coverage of mobile broadband to 95 per cent of the population. To ensure competition between the national operators, Ofcom is proposing to introduce a floor and cap on the amount of spectrum that each of the operators can win and impose safeguard caps to prevent an operator from holding too much spectrum. Following the auction of the 2.6GHz and 800MHz bands, Ofcom is expected to auction the 600MHz band some time in 2012. Ofcom is also implementing changes to the terms of spectrum currently allocated to 2G services to allow the provision of 3G services and the trading of spectrum, with a revision of the licence fees to reflect their full market value. 3G licences will be amended to allow spectrum to be traded, with fees revised to account for their full market value applying from 2021 when the licences in their current form expire. vi Emergency services bandwidth prioritisation The Universal Services Directive, a further part of the Telecoms Reform Package, introduces several extended obligations in relation to access to national emergency numbers and the single European emergency call number (112). Prior to the Universal Services Directive, obligations to provide free and uninterrupted access to national and European emergency numbers applied only to providers of publicly available telephone services only. Under this Directive however, these obligations are extended to all undertakings that provide to end-users ‘an electronic communication service for originating national calls to a number or numbers in a national telephone numbering plan’; the UK has mirrored this wording in its revisions to General Condition 4 under the Act. Such electronic communication service providers are therefore required to ensure that a user can access both the 112 and 999 emergency call numbers at no charge (and without the use of any cards or coins), and, to the extent technically feasible, make caller location information for such emergency calls (meaning information indicating the geographical position of the terminal equipment of the caller) available to the relevant emergency response organisations.

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United Kingdom V MEDIA The UK media and entertainment industry continues to feel the effects of the advent of digital content and converged media platforms. The transition from traditional forms of media distribution and consumption towards digital converged media platforms is changing the commercial foundations of the entertainment and media industry in the UK. Politicians, lawyers, economists and members of the industry are all grappling with new business models to monetise content and control frameworks to provide sufficient protection for the rights of content creators and consumers alike. i Restrictions on the provision of service The service obligations and content restrictions described for the UK communications landscape in Sections I to IV of this chapter apply to providers of digital content and converged media platforms. The regulatory framework described in these paragraphs applies to network operators and content providers alike in the context of the transmission of digital content across these converged media platforms. ii Digital switchover ‘Digital switchover’ is the government’s nationwide programme to move all television services from analogue to digital between 2008 and 2012. Ofcom’s role in the switchover process includes licensing the broadcasters, planning the use of the radio spectrum and assisting on coverage issues. Ofcom’s wider role includes how best to use the spectrum (approximately 800MHz) that is freed up as a result of the digital switchover (as discussed in Section IV.v). iii

Internet-delivered video content

Digital content has driven new forms of consumption of, and interaction with, media a dnd entertainment content in the UK. This is primarily taking place on the Internet and as in other parts of the world the UK has seen a rapid rise in the use of IPTV and Web 2.0 on converged media platforms. Web 2.0 Web 2.0 is characterised as facilitating communication, information sharing, interoperability and collaboration for users on the Internet. Users are empowered and encouraged to play a more active role in the creation and consumption of content which has given rise to the concept of user-generated content (‘UGC’). UGC has created issues of liability and ownership that have been addressed to some extent by legislation (see the references to the Digital Economy Act Section III.iii, infra) and in court. The application of the Digital Economy Act is reliant on the ability of copyright owners to notify ISPs of potential copyright infringement. To do this copyright owners will send details of the infringement, including IP addresses, to ISPs. However, courts in the UK continue to cast doubt over the use of an IP address as evidence that an individual has downloaded content unlawfully. Given this, as well as US authorities suggesting that a provider of Web 2.0 content will not be liable for copyright infringement if it removes material from its site when notified by the copyright owner, along with the formal challenges to the

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United Kingdom Digital Economy Act (see Section III.iii, infra ), it remains to be seen how the Digital Economy Act will interpreted in the UK over the next 12 months. IPTV IPTV typically describes a platform that allows users to stream television content using the Internet or via mobile telephone networks. The key benefit of IPTV is that it allows a user to interact with the content because data can flow both ways in an IP network. IPTV is growing rapidly in the UK and this growth is predicted to continue, particularly in light of the new spectrum being made available as a result of the digital switchover. IPTV is being made available by a range of content providers in the UK, including public broadcasters (BBC’s iPlayer, ITV’s ITV Player, Channel 4’s 4oD), cable and satellite providers (both Virgin Media and BSkyB offer broadband-based VOD products), mobile operators (including Vodafone, Everything Everywhere (Orange and T-Mobile), O2 and 3), fixed-line operators, ISPs, online aggregators and websites. The mobile operators continue to investigate mobile television offerings and this technology should see dramatic acceleration following the auction of 4G spectrum in 2012 (see Section IV.v). To further facilitate user access to IPTV, the BBC, ITV, Channel 5 and BT have collaborated on an open-technology offering so that viewers with Freeview or Freesat and a broadband connection can access catch-up and on-demand programming via their televisions from online services such as the iPlayer. This initiative has been called ‘YouView’ (previously known as ‘Project Canvas’). In June 2010 the BBC Trust (the BBC’s independent regulator) gave its approval to YouView and the Office of Fair Trading found that it did not give rise to a merger qualifying for substantive investigations. VI

YEAR IN REVIEW

In July 2010, Ofcom opened an investigation into TalkTalk and Tiscali UK following complaints from over 1,000 customers that they had been billed for services that they had not received. Ofcom’s investigation found that the both companies had indeed wrongly issued bills to consumers for services that they had not received and set them a deadline of 2 December 2010 to correct their billing problems. However, although the companies did change their billing systems, they still incorrectly billed almost 3,000 customers between 2 December 2010 and 4 March 2011. On 18 August 2011, Ofcom announced that it had fined TalkTalk and Tiscali £3 million for billing thousands of customers for services that they had not received, thereby breaching the General Conditions under the Communications Act 2003. It is worth noting that these fines were in application of the new rules applying to contraventions of the General Conditions occurring after 26 May 2011 whereby Ofcom may issue financial penalties even where contravening providers have come into compliance and remedied their contravention. On 4 August 2010, Ofcom referred to the Competition Commission for investigation the supply and acquisition of subscription pay-TV movie rights and the wholesale supply and acquisition of packages that include core premium movies in the UK. On 19 August 2011, the Competition Commission provisionally found that BSkyB’s control over pay-TV movie rights in the UK was restricting competition between pay-TV providers thus limiting innovation, reducing choice and increasing price for

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United Kingdom consumers. The Competition Commission has proposed to remedy this by restricting the number of major studios from which BSkyB may license exclusive rights; restricting the range of exclusive rights that BSkyB may license from major studios; and ‘must-retail’ measures requiring BSkyB to acquire and resell to its customers movie content created by other parties. The Competition Commission has invited response to comments from interested parties on its provisional findings and proposed remedies and is due to give its final report by 3 August 2012. On 7 October 2010, Ofcom decided to make BT grant access to a dedicated virtual link over its new fibre lines (virtual unbundling). BT would be required to set its wholesale pricing for virtual unbundled access at a level that enabled competitors to ‘make a fair return reflecting commercial risk’. Competitors could use this wholesale product to provide superfast broadband to consumers using BT’s network. At the same time, Ofcom required BT to offer access to its underground ducts and telegraph poles to its competitors so they could roll out their own network using BT’s infrastructure. Although Ofcom required BT to make available a draft reference offer describing its duct and pole product by mid-January 2011, so far no agreement has been reached over price between BT and its competitors and Ofcom may be required to intervene to settle the issue. VII

CONCLUSIONS and OUTLOOK

This year is likely to continue the pattern, set last year, of retrenchment and consolidation of communications regulation as exemplified by the proposed integration of Postcomm into Ofcom and the proposed reduction in frequency of reviews of media ownership and public service broadcasting. However work on the review of the existing regulatory framework under Communications Act 2003 is continuing and is expected to put in place a new regulatory framework by 2015. The focus of this review is on growth innovation and deregulation, communications infrastructure that provides the foundations for growth and on creating the right environment for the content industry to thrive. We can therefore expect to see more proposals to deregulate the industry, but possibly with more focus on content regulation going forward. In terms of data protection, the European Commission’s 2010 proposals for a revised European regime introduced a range of significant potential changes, with a focus on improving the protection of individuals’ rights and expanding the responsibility of the data controller. These aims are exemplified in the Commission’s specific objectives, which include increasing harmonisation between national laws; reducing the administrative burden and simplifying cross-border data transfers; and introducing a general principle of ‘accountability’. The implementation of the revised regime across Europe is some years away however, though the legislative form and content is likely to become more clear over the next year.

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Chapter 30

United States John P Janka and Jarrett S Taubman*

I OVERVIEW This chapter provides an overview of telecommunications and media regulation in the United States. Given the complexity of such regulation – which is constantly evolving in response to technological advances, market shifts, and political dynamics – this chapter is not intended to be comprehensive. Rather, it is intended to demonstrate the nature and scope of such regulation, and to identify some of the more significant legal and policy developments of the past year – including attempts by the federal government to subject Internet access services to increased regulation. II REGULATION i

The regulators

Regulation of telecommunications and media in the United States is governed primarily by the following authorities, within parameters established under federal and state statutes and constitutions. The Federal Communications Commission The Federal Communications Commission (‘the FCC’) is an independent US regulatory agency established by the US Congress pursuant to the Communications Act of 1934, as amended (‘the Communications Act’). The FCC is charged with regulating all nonfederal government use of the radiofrequency spectrum, all interstate telecommunications, and all international telecommunications involving an end-point in the United States. Together with the US State Department Office of Communications and Information Policy, the FCC participates in international spectrum negotiations.

*

John P Janka is a partner and Jarrett S Taubman is an associate at Latham & Watkins LLP.

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United States The National Telecommunications and Information Administration The National Telecommunications and Information Administration (‘NTIA’) is an executive agency of the federal government within the US Department of Commerce. NTIA has primary responsibility for regulating all use of the radiofrequency spectrum by federal government users, and works with the FCC to coordinate spectrum use between federal and non-federal users. NTIA also administers the Broadband Technology Opportunities Program, which, together with the Rural Utilities Service of the US Department of Agriculture, administers a funding programme to promote broadband deployment pursuant to the 2009 American Recovery and Reinvestment Act. State regulators Telecommunications within a single US state are governed by individual state regulatory agencies, typically having jurisdiction over telephone companies and other ‘public utilities’ providing services within the state, as well as the siting of telecommunications facilities and many consumer protection matters. The jurisdiction of state public utility commissions (‘PUCs’) over intrastate telecommunications is limited by state constitutions and statutes as well as by federal supremacy. For example, in case of a conflict between the FCC and state regulations, the state typically would be preempted, unless the US Congress or the FCC expressly permits the states to enforce divergent regulations. The FCC has effectively exercised exclusive jurisdiction over most matters involving Internet access services, due to the interstate and international nature of the Internet. CATV operators also are subject to franchising by state or local authorities for the use of public rights of way. The Federal Trade Commission The Federal Trade Commission (‘the FTC’) protects consumer interests in such areas as online marketing and telemarketing, among other things. Both the FTC and the FCC have oversight over certain telemarketing matters. Both the FTC and the US Department of Justice (‘the DoJ’) Antitrust Division police market concentration by examining mergers and other major transactions in the sector, along with the attorneys general of the states. ii

Sources of federal telecommunications and media law and policy

In the US, federal telecommunications law is derived principally from statutes enacted by Congress (and signed by the President) as well as administrative regulations, orders, and policies adopted by the FCC. The Communications Act The FCC’s governing statute, codified in Title 47 of the United States Code, establishes the framework for federal regulation of telecommunications and media in the United States. The Communications Act consists of seven major Sections, or ‘Titles’. The most significant of these are Title I (establishing the FCC and defining the scope of its authority), Title II (governing the activities of telecommunications carriers), Title III (governing the use of radio spectrum, including by wireless carriers and mass media broadcasters) and Title VI (governing the provision of cable television services). The Communications Act

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United States was substantially amended by the enactment of the Telecommunications Act of 1996, which opened communications markets to greater competition in many respects. Ancillary authority Section 4(i) of the Communications Act provides that the FCC ‘may perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this chapter, as may be necessary in the execution of its functions’. In recent years, the FCC has attempted to use this ‘ancillary authority’ to regulate subject matter outside of the traditional scope of its jurisdiction (e.g., Internet services) although, as discussed below, these attempts have met with mixed results. FCC regulations and orders In fulfilling its statutory mandate, the FCC plays a quasi-legislative role by promulgating administrative regulations, after providing notice to the public and an opportunity for public comment, as required by the Administrative Procedures Act. The FCC also plays a quasi-judicial role in interpreting existing law in evaluating any number of disputes and applications (e.g., licence applications or petitions for interpretation of the law). The resulting orders and regulations constitute an extensive body of administrative law governing telecommunications and media in the United States. Judge-made law The judicial branch of the US government also plays an important role in US lawmaking, at both the state and the federal level, reviewing administrative agency decisions for consistency with the governing statutes, and reviewing statutory law for compliance with the federal and state constitutions. Any interested party may seek review of an FCC action in a federal court of appeals. The courts review FCC decisions for consistency with its governing statutes and the US Constitution. In general, the FCC is entitled to deference in interpreting the Communications Act where it is ambiguous and capable of more than one reasonable interpretation. In addition, the courts review FCC decisions to ensure that are not ‘arbitrary or capricious’ – for example, the FCC may not depart from its own precedent without a reasoned basis for doing so, and more generally must have a reasoned basis for its decisions. The FCC’s National Broadband Plan The FCC’s National Broadband Plan (‘the Plan’), published in 2010, is intended as a comprehensive blueprint for US broadband policy, and includes a number of recommendations for expanded access to broadband services in areas deemed ‘unserved’ or ‘underserved’ by the FCC’s standards. Initially, the Plan recommends that all Americans should have dedicated Internet access at speeds of at least 4Mb/s downstream and 1Mb/s upstream. The Plan also recommends that all Americans should have access to 100Mb/s transmission capability within 10 years, and seeks to facilitate the deployment of wireless broadband services in particular. The Plan makes only recommendations; the FCC must seek public comment before adopting any new rules to implement the Plan, and in some cases the recommendations could not be implemented without new legislation by the US Congress. The FCC currently is seeking comment on numerous proposals to achieve these goals.

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United States iii

Regulated activities

Among other things, the Communications Act requires a party to obtain authority from the FCC prior to constructing or operating an ‘apparatus for the transmission of energy or communications or signals by radio’ or engaging in the provision of interstate or international telecommunications services. The specific procedures for obtaining such authority vary based on a number of factors, including the nature of the underlying authorisation, the nature of the proposed service, and the subdivision of the FCC with primary responsibility for that service, etc. In most cases in which an applicant must file an application to obtain authority from the FCC, that application must be placed on ‘public notice’, giving interested parties an opportunity to comment during a specified period (e.g., 30 days). Certain types of application (e.g., many non-common carrier wireless applications, requests for short-term authority or experimental licences) are subject to more streamlined processing, that may circumvent the need for public notice and comment in the first instance. Notably, the FCC now permits most applications to be filed electronically, and also allows the public to track the status of such applications through electronic filing systems (databases) accessible over the Internet. The FCC has granted certain types of operating authority by rule, obviating the need for individual users to seek and obtain separate authority from the FCC. For instance, the FCC has authorised all common carriers to provide domestic interstate telecommunications services. The FCC also has permitted certain operations to proceed on an ‘unlicensed’ basis, provided that the equipment used in such operations has been evaluated and authorised in accordance with the FCC’s procedures. iv

Ownership and market access restrictions

Foreign ownership restrictions Sections 310(a) and (b) of the Communications Act restrict foreign ownership of common carrier, aeronautical and broadcast spectrum licences, and of US entities holding those licences. Foreign individuals and entities may not hold more than 20 percent of the equity or voting interests in a licensee. In addition, foreign individuals and entities may not, directly or indirectly, hold more than 25 per cent of the equity or voting interests in the US parent company of a FCC licensee. These restrictions generally do not apply to the foreign holding of debt, stock warrants or stock options in US licensees or their parent companies. The FCC has authority to permit foreign equity ownership in excess of the 25 per cent limit on indirect ownership of a parent company, and often has permitted up to 100 per cent foreign ownership of common carriers. The FCC has found that higher levels of foreign ownership from WTO member states presumptively serves the ‘public interest’. However, the FCC generally will not waive the 25 per cent limit with respect to broadcast licensees. In addition, transactions may be scrutinised by the Executive Branch’s Committee on Foreign Investment in the United States, an interagency group that reviews significant foreign investments to ensure that they do not raise national security or law enforcement concerns. Transactions also may be reviewed by ‘Team Telecom’, an informal group made up of staff from the DoJ, the Federal Bureau of Investigation, and the Department

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United States of Homeland Security, which is active in FCC proceedings involving significant foreign ownership. Market access Generally, the FCC does not authorise facilities located outside of the United States to serve the US market. An exception arises with respect to foreign satellites, which may serve the US if (1) the satellite is licensed by a foreign jurisdiction that permits US satellites to serve that jurisdiction without undue restrictions (such access is presumed where the foreign jurisdiction is a WTO member), (2) the satellite complies with the same FCC technical and service requirements that apply to US satellites, and (3) the satellite’s operation would not give rise to any national security, spectrum policy or other policy concerns. Multiple ownership With the exception of its broadcast licences, the FCC generally does not limit the number of spectrum licences that may be held by or ‘attributed’ to (i.e., deemed to be held by) a single individual or entity. However, in evaluating the likely competitive effects of significant wireless transactions, the FCC has utilised a ‘spectrum screen’ to identify local markets that merit closer scrutiny by looking at the total amount of spectrum that would be controlled by one individual or entity. The FCC also has imposed certain limitations on the ability of authorised parties of one type to hold licences or authorisations of another type. For example, the FCC’s rules prohibit cable service providers from holding an attributable interest in the incumbent local exchange carrier serving the same market, and vice versa. The FCC does impose explicit limits on the number of broadcast stations (radio and TV) an individual or entity can own in a given local market, as well as the percentage of households nationwide that can be covered by television stations attributable to a single individual or entity. The FCC also has adopted rules limiting the cross-ownership of radio and television stations, as well as the cross-ownership of broadcast stations and newspapers. Several of these rules are under review by the FCC and the courts. v

Transfers of control and assignments

Under Section 310(d) of the Communications Act, FCC approval must be obtained prior to assigning most types of radiofrequency-based licences, permits or authorisations from one party to another, or transferring ‘control’ of a radiofrequency licensee, permittee or authorisee from one party to another. There are exceptions for certain pro forma transactions, and certain types of licences. Similarly, under Section 214 of the Communications Act, FCC approval is required prior to an assignment of interstate or international telecommunications authorisations or transfer of control of a US carrier providing interstate or international telecommunications services. In reviewing such applications, the FCC typically attempts to gauge whether the application will serve the ‘public interest, convenience, and necessity’ by weighing the expected benefits of the proposed transaction against its expected harms, including the effects on competition and consumers. Most states have similar requirements applicable with respect to intrastate activities, and some require prior approval or notice regarding the issuance of debt by,

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United States or changes in the debt structure of, entities that are subject to their jurisdiction. State statutes sometimes require that other factors be considered as well, such as the expected effect on jobs in the state. The time frames for obtaining FCC approvals in connection with mergers, acquisitions or other major transactions vary widely. The FCC’s non-binding goal is to process combined applications for major transactions within six months. The FCC has exceeded this time frame on many occasions, typically when a transaction poses competitive concerns, or is contested by third parties, in which case approval can take nine to 12 months, or possibly longer. More routine transactions often are processed in a shorter period, but there can be no assurance that the FCC will act by any deadline. Within the past year, the FCC has completed its review of several major telecommunications and media transactions. Most notably: a In January 2011, the FCC approved the merger of NBC Universal, Inc and Comcast Corporation. The merger combined NBC’s two broadcast television networks (NBC and Telemundo), 26 local owned-and-operated broadcast television stations, national cable programming networks, film studio, international theme park businesses and online content businesses with Comcast’s regional sports networks, other programming networks, cable television distribution networks, and certain online businesses. b In March 2011, the FCC approved the acquisition of Qwest Communications, a large, full-service telecommunications provider by CenturyLink, also a fullservice telecommunications service provider. The deal created the third-largest telecommunications company in the United States. c In June 2011, the FCC approved the acquisition of Hughes Network Systems, a satellite broadband services provider, by EchoStar, a satellite services provider and equipment manufacturer. The FCC also has initiated but not yet completed its review of several other major transactions. Specifically: a In March 2011, AT&T and Deutsche Telecom filed applications seeking FCC consent for AT&T to acquire T-Mobile USA from Deutsche Telecom. The proposed transaction – which would combine the second and fourth-largest wireless telecommunications services providers in the US – has met with stiff opposition on multiple fronts from parties raising competitive and other concerns. In August 2011, the US DoJ filed suit in federal court to block the proposed transaction on antitrust grounds. It is unclear whether the deal will move forward in light of this action. b Also in March 2011, Cumulus Media and Citadel Broadcasting – both of which operate numerous radio stations throughout the United States – filed applications seeking FCC consent for Cumulus to acquire Citadel. The proposed transaction would combine the two largest radio broadcasters in the US. c In April 2011, DISH Network Corp (an affiliate of EchoStar) and DBSD North America (formerly ICO North America) filed applications seeking FCC consent for DISH to acquire DBSD. In August 2011, DISH and TerreStar Networks filed applications seeking FCC consent for DISH to acquire TerreStar. Both DBSD

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United States and TerreStar hold valuable spectrum assets in the 2GHz MSS band, which DISH wishes to use for mobile broadband services. d In May 2011, Global Crossing and Level 3 Communications – both providers of wireline communications services and Internet ‘backbone’ connectivity – filed applications seeking FCC consent for Level 3’s acquisition of Global Crossing. The deal has been opposed by certain other providers, and currently is under review. III

TELECOMMUNICATIONS and INTERNET ACCESS

i

Internet and Internet protocol regulation

Thus far, the United States has used a relatively light touch with respect to the regulation of ISPs and BIAPs, relying largely on market forces instead of prescriptive regulation. By many accounts, this ‘hands-off’ approach has contributed to the rapid growth of the US Internetbased sector over the past 15 years. Nevertheless, recent activity at the FCC suggests that it may soon be playing a more active role in the regulation of Internet-based services. ii

Universal service

The Communications Act directs the FCC to take steps to facilitate the universal availability of essential telecommunications services through, among other things, the use of a federal universal service fund (‘USF’). The USF supports various programmes that seek to promote the availability of quality telecommunications services at just, reasonable and affordable rates on a nationwide basis. The USF is funded through contributions from all providers of interstate and international telecommunications and interconnected VoIP services, as well as certain other providers of ‘telecommunications’. Universal service programmes and contribution obligations are administered by the Universal Service Administrative Company (‘USAC’) – an independent legal entity that is subject to the FCC’s oversight. Among the most significant regulatory changes proposed in the National Broadband Plan is the recommendation that the FCC modify existing ‘universal service’ subsidy programmes to target broadband expansion into areas where the FCC asserts BIAPs would not find it economically viable to provide broadband service, in the absence of this type of financial support. The FCC has proposed to establish a ‘Connect America Fund’ to support the deployment of broadband infrastructure to areas that are currently ‘unserved’, and to phase out legacy universal service support mechanisms in the process. These changes would be coupled with changes to the existing – and exceedingly complex – ‘intercarrier compensation’ scheme by which carriers pay or receive compensation for traffic carried on each others’ networks. Many details remain to be decided – including the methodology used to select the support recipient, whether incumbent providers would receive a funding preference, whether more than one provider in a market would be eligible for funding, whether all technologies would be equally eligible for support, and whether and how the requirement to contribute to the universal service fund would be extended to BIAPs. Regardless of exactly how these questions are resolved, the FCC’s decision to subsidise broadband Internet access services may provide a foundation for the eventual regulation of such services – whether or not supported with universal service funds.

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United States iii

Restrictions on the provision of service

Common carriage The Communications Act subjects all providers of ‘telecommunications services’ to common carrier regulation (i.e., the duty to provide service to all members of the public, including other carriers, without unreasonable discrimination). ‘Telecommunications services’ are defined to include the provision of ‘telecommunications’ to the public for a fee. ‘Telecommunications’, in turn, is defined to include the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received. Notably, this definition does not encompass the creation or publication of mere ‘content’. Telecommunications carriers tend to be heavily regulated by both the FCC and the state PUCs. In contrast, ‘information services’ are defined to include the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilising or making available information via telecommunications. These services typically involve what is called a ‘net protocol conversion’ – essentially, a change in the form, structure, or substance of the underlying communication. Providers of ‘information services’ are not subject to common carrier regulation and are traditionally have been lightly regulated at the federal level. State PUC jurisdiction over Internet services is severely circumscribed, as they are considered ‘interstate’ for most purposes. As communications technologies have continued to evolve, the lines between ‘telecommunications services’ and ‘information services’ have blurred, and the FCC has been slow to classify new service offerings. The FCC thus far has declined to classify VoIP services, creating uncertainty as to which regulations apply at both the federal and state levels. This uncertainty has been exacerbated by the FCC’s attempted use of its ‘ancillary’ authority to extend a number of common carrier-type requirements to such services. Because the classification of a service is of critical importance in determining the regulations applicable to that service, the reclassification of a service can have significant consequences. The FCC’s treatment of Internet access services provides a vivid illustration of this fact. Broadband Internet access services require, among other things, the transmission of data between an end-user and an ISP, and any number of other individuals or entities. For years, the FCC viewed this transmission capability as a ‘telecommunications service’, and required BIAPs to offer it to competitors on a stand-alone, common carrier basis. However, in a series of orders issued during the 2000s, the FCC reclassified broadband Internet access services as ‘information services’ functionally integrated with a ‘telecommunications’ component, such that BIAPs are no longer required to make the transmission capability available to competitors (unless that capability is offered to the public voluntarily on a non-integrated, stand-alone basis). More recently, the pendulum has begun to swing in the opposite direction. As noted above, the FCC has attempted to use its ‘ancillary’ authority to impose certain common carrier regulations (e.g., emergency calling (911) and outage reporting requirements, USF contribution obligations) on Internet access services without reclassifying those services as ‘telecommunications services’. While some of these attempts (e.g., with respect to the FCC’s initial ‘net neutrality’ regulations) have been rejected by the courts, the scope of the FCC’s authority over ‘information services’ generally, and Internet access services specifically, remains unclear. Moreover, there are indications that the FCC may attempt to reclassify

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United States certain services that have been treated as ‘information services’ as ‘telecommunications services’ subject to common carrier regulation. If it occurred, such reclassification could provide the FCC with a legal basis upon which to impose ‘net neutrality’ and other regulations on BIAPs. There are some practical and legal challenges associated with engaging in that type of reclassification, but the possibility reflects the belief of some that a ‘hands-off’ approach to the Internet is no longer tenable given the shift from traditional voice networks to broadband networks in many parts of the country. Price regulation The Communications Act gives the FCC the authority to regulate the rates charged by common carriers in connection with the telecommunications services they provide, and ensure that those rates are ‘just and reasonable’. Prior to the passage of the Telecommunications Act in 1996, rate regulation was accomplished through the filing of tariffs with the FCC and state PUCs. More recently, the FCC has eliminated much of its tariffing regime and instead relied upon market competition (backed by a complaint mechanism) to ensure that rates are ‘just and reasonable’. Notably, the FCC’s authority to regulate rates does not extend to ‘information services’ – including Internet access services. Net neutrality In recent years, one of the most significant policy debates at the FCC has focused on an ‘open Internet policy’ or ‘net neutrality’. Although the meaning of ‘net neutrality’ is itself a subject of debate, net neutrality advocates generally aim to constrain the rights of broadband network providers to block, filter or prioritise lawful Internet applications, websites and content. The FCC’s direct involvement with net neutrality policy began in 2005 with the issuance of its Broadband Policy Statement. Although the FCC’s authority under the Communications Act to regulate the Internet was not clearly articulated, the Broadband Policy Statement expressed four principles that the FCC intended to preserve the ‘open’ nature of the Internet for consumers, without discouraging broadband deployment by network operators. The FCC stated that consumers are entitled to (1) gain access to the lawful Internet content of their choice; (2) run applications and use services of their choice, subject to the needs of law enforcement; (3) connect their choice of legal devices that do not harm the network; and (4) benefit from competition among network providers, application and service providers, and content providers, all subject to a service provider’s right to engage in ‘reasonable network management’. In 2008, the FCC ruled that Comcast, the largest US CATV company, violated the Broadband Policy Statement by inhibiting users of its high-speed Internet service from using BitTorrent and other file-sharing software – a practice Comcast claimed was a type of ‘reasonable network management’ designed to block pirated content and alleviate network congestion. Comcast appealed this decision, arguing, among other things, that the FCC lacked the statutory authority to adopt or enforce net neutrality requirements. In early 2010, the US Court of Appeals for the District of Columbia Circuit agreed with Comcast and vacated the FCC’s order. In doing so, the court rejected the FCC’s attempt to rely on its ‘ancillary’ authority as a basis for its enforcement of the Broadband Policy Statement against Comcast, insofar as the FCC had failed to identify a source for such authority in the Communications Act.

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United States In December 2010, the FCC adopted new rules, applicable only to ‘mass-market retail services’, that would: a require broadband providers to disclose the network management practices, performance characteristics, and terms and conditions of their broadband services; b prohibit fixed broadband providers from blocking lawful content, applications, services, or non-harmful devices; c prohibit mobile broadband providers from blocking lawful websites, or applications that compete with their voice or video telephony services; and d prohibit fixed broadband providers from unreasonably discriminating in transmitting lawful network traffic. Although the FCC’s jurisdictional analysis is not entirely clear, it appears to have relied upon some combination of explicit and ‘ancillary’ authority as the basis for these new rules. These rules have not yet taken effect (pending the completion of certain procedural steps by the FCC), but almost certainly will be appealed once they do. Network access If the FCC’s net neutrality rules are ultimately upheld, the FCC still will need to resolve what tools BIAPs may use to ‘reasonably’ manage their networks (e.g., to address network congestion) and whether BIAPs may negotiate private agreements to offer ‘managed services’ and other ‘special arrangements’ that prioritise some types of traffic over others. BIAPs seek the right to charge a premium to high-volume users that threaten to slow transmission speeds for others and cause network congestion. The FCC consistently has acknowledged that ‘open Internet’ rights only are required for lawful uses of the Internet and lawful content. It remains to be seen how much the FCC’s net neutrality rules will constrain the ability of network operators to police their own networks. iv Security US regulatory approach to emergency preparedness Because US commercial communications networks are privately owned, the FCC’s role in ensuring emergency preparedness primarily is one of gathering and disseminating information and coordinating among different governmental agencies. For more than 15 years, the FCC also has required facilities-based telecommunications service providers to participate in industry-run working groups focused on developing best practices to ensure network reliability, to report network outages, and to be prepared to restore network services as rapidly as possible in the event of an outage. The recommendations of this group do not have the binding force of law, but have played an important role in shaping industry practice and have prompted some limited FCC rulemaking activity. For example, FCC rules now require all wireline and wireless telecommunications service providers to maintain on site a back-up power source (typically, a generator) capable of keeping networks functioning for a minimum number of hours. In addition, under the Telecommunications Service Priority (‘TSP’) programme, service providers must afford priority service to federal, state and local governments and other critical institutions.

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United States The FCC also is responsible for the emergency preparedness of US network operators, the radiofrequency spectrum needs of public safety ‘first responders’ (police, fire, ambulance and emergency medical teams), and coordination among network operators and various governmental organisations to address cyber-security concerns. Much of this activity has focused on ensuring adequate spectrum for public safety users, and ensuring the interoperability of different public safety networks. The FCC recently proposed to create a ‘nationwide interoperable public safety broadband wireless network’, funded in part through a national grant programme, to permit first responders to communicate with one another when other networks are inoperable. The FCC also is examining ways to update the Emergency Alert System (used to distribute critical messages in times of emergency) and expand it to include wireless service providers, in addition to broadcasters and cable operators. The Communications Assistance for Law Enforcement Act The Communications Assistance for Law Enforcement Act (‘CALEA’) requires ‘telecommunications carriers’ to implement specific capabilities in their networks to permit law enforcement agencies to intercept call identifying information and call content pursuant to a lawful authorisation. For this purpose, the term ‘telecommunications carriers’ is defined broadly to include facilities-based BIAPs and interconnected VoIP providers. CALEA establishes both minimum capacity requirements and capability requirements. CALEA does not specify the means by which providers must comply with these capability requirements, but creates a safe harbour for carriers that implement industry standards. CALEA does not grant law enforcement agencies any surveillance authority beyond what otherwise exists under US law. Cybersecurity US cybersecurity policy following the completion of the federal government’s Cyberspace Policy Review has sought to create or enhance shared situational awareness of network vulnerabilities, threats, and events and the ability to act quickly to reduce current vulnerabilities and prevent intrusions; enhance US counterintelligence capabilities and increase the security of the supply chain for key information technologies; and strengthen the future cybersecurity environment by expanding cyber education, coordinating and redirecting research and development efforts, and working to define and develop strategies to deter hostile or malicious activity in cyberspace. Consistent with these goals, the FCC has explained that one of its core objectives is ‘to strengthen the protection of critical communications infrastructure’. In August 2010, the FCC proposed development of a two-year plan to address ‘vulnerabilities to communications networks or end-users and to develop countermeasures and solutions in preparation for, and response to, cyber threats and attacks’ in coordination with other US federal agencies such as the Department of Homeland Security, and the Federal Bureau of Investigation. Online protections for children The Children’s Online Privacy Protection Act of 1998 (‘COPPA’) restricts the ability of website operators to collect personal information from children under 13 years of age. The type of ‘verifiable parental consent’ that is required before collecting and using information provided by children under 13 is based upon a ‘sliding scale’ set forth in a FTC regulation

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United States that takes into account the manner in which the information is being collected and the uses to which the information will be put. While children under 13 can legally give out personal information with their parents’ permission, many websites altogether disallow underage children from using their services due to the regulatory burdens involved. Protection of personal data and privacy The Communications Act protects the privacy of ‘customer proprietary network information’, which includes the date, time, duration and location of a call, type of service used, and other details derived from the use of a telecommunications service. US law also protects the contents of any telecommunications message from eavesdropping, recording, use or disclosure by a third party without a user’s consent. Users of online services enjoy similar protection from eavesdropping or disclosure of their communications. Exceptions apply where access to, or use or disclosure of such information is necessary for law enforcement, which in most cases requires prior approval by a judge. In addition, the NTIA has formed an Internet Policy Task Force to conduct ‘a comprehensive review of the nexus between privacy policy and innovation in the Internet economy’. Already, the Task Force has recommended the adoption of voluntary codes of conduct for service providers, content providers, and advertisers, and raised the possibility of providing the FTC with expanded authority to regulate Internet privacy matters. IV

SPECTRUM POLICY

i

Flexible spectrum use

In recent decades, the FCC increasingly has adopted a flexible approach to defining the uses to which a particular radiofrequency band may be put, or the optimal scope of licence to meet their business needs. For example, the FCC has granted many licensees (but not broadcasters) flexibility to redefine their own service territory, dividing or combining geographically bounded licences, and to subdivide their assigned spectrum and sell or lease a portion to another user. The FCC also has adopted more fluid service definitions, for example, permitting fixed and mobile operations, or terrestrial and satellite operations, in the same band. The FCC has been examining ways to increase flexibility and efficiency in the use of available spectrum resources. It has recognised that one key failing of its spectrum policy is that administrative rigidities historically have prevented more efficient use of this spectrum resources. As a result, the FCC’s spectrum policy has evolved towards more flexible and market-oriented regulatory models. For example, in order to facilitate the development of secondary markets in spectrum usage rights involving terrestrial radiofrequency-based services, the FCC has adopted rules to facilitate two types of leasing arrangements: a ‘spectrum manager’ lease, in which a lessee is permitted to use spectrum subject to the oversight and control of the initial licensee; and a ‘de facto transfer’ lease, in which the lessee assumes many of the obligations of a licensee, and exercises control over its own spectrum operations. The FCC also has examined ways to facilitate unlicensed use of certain spectrum bands, provided that such use does not interfere with licensed operations (if any) in those bands. Among other things, the FCC has adopted rules permitting certain devices to operate

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United States on a secondary, unlicensed basis in unused broadcast television spectrum, also known as ‘white spaces’. ii

Broadband and next-generation mobile spectrum use

A significant focus of the National Broadband Plan is encouraging the growth of mobile broadband networks, including through access to additional spectrum. The plan recommends allocation of at least 500MHz of spectrum for this purpose. In the past year, the FCC has scheduled auctions of additional spectrum in the ‘AWS’ and 700MHz bands – which can be used for mobile broadband applications – to take place in 2012. The FCC also has identified 120MHz of spectrum that could be reallocated from broadcast television to mobile broadband use, and additional spectrum in other services that could be similarly reallocated (e.g., the 2GHz mobile-satellite service band). This could be accomplished using ‘incentive auctions’, in which current licensees would surrender spectrum voluntarily in return for a share of the proceeds from the auction of that spectrum for mobile broadband use. The FCC may not have sufficient authority under the Communications Act to hold such auctions, absent further action by Congress. iii

Spectrum auctions and fees

Where spectrum is to be assigned to an individual licensee, and more than one party applies to use such spectrum (i.e., mutually exclusive applications are received by the FCC), the FCC may choose from several mechanisms under the Communications Act by which to designate the ‘winning’ licensee. Most new spectrum assigned since 1993 has been licensed through the use of competitive bidding (i.e., spectrum auctions). The statute excludes certain specific types of spectrum licences (international satellite, public safety, non-commercial broadcast, etc.) from the scope of the FCC’s auction authority. The FCC has completed or scheduled over 90 radiofrequency spectrum auctions to date. Proceeds from the auctions go to the US Treasury. V MEDIA i

Regulation of media distribution outlets generally

The regulation of media distribution outlets and content varies depending on the business model and technology being used. As previously noted, Internet-based content delivery is very lightly regulated in the US. More traditional media outlets historically have been regulated more heavily by the FCC. Regulation of content and content providers The First Amendment to the US Constitution guarantees the freedom of speech, and sharply limits the ability of the government to regulate the content of a broadcaster’s programming, or content providers directly. Several decades ago, the courts recognised the FCC’s authority to prohibit ‘indecent’ programming by terrestrial broadcasters, based on the government’s interest in ensuring that scare spectrum rights are used in manner that serves the public interest, and the unique pervasiveness of broadcast media in lives of Americans and their children. It is unclear whether the FCC’s rules remain constitutional in today’s media-rich market.

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United States In recent years, the FCC has fined stations that aired ‘fleeting expletives’ (incidental words or gestures that are broadcast despite the reasonable precautions taken by the licensee to avoid indecent broadcasting). In July 2010, the US Court of Appeals for the Second Circuit rejected this policy as unconstitutionally vague and overly broad. In June 2011, the US Supreme Court agreed to review the case on appeal. The court’s eventual decision could have dramatic implications for media regulation in the United States. Terrestrial broadcasting Television and radio stations broadcasting video content for free to listeners and viewers via terrestrial radiofrequency spectrum are subject to extensive regulation by the FCC, which has exclusive licensing authority for such stations in the United States. Among other things, the FCC has adopted detailed technical rules governing this type of broadcaster, restricted their ability to air ‘indecent’ or ‘obscene’ programming, imposed political broadcasting and other ‘public interest’ obligations on them, and adopted multiple ownership restrictions. These regulations are largely premised on the idea that radiofrequency spectrum is a scarce resource, and thus the FCC should promote localism, diversity of ownership, and service in the public interest. The FCC also tends to apply the foreign ownership restrictions discussed above most rigidly to over-the-air broadcast services. Subscription media Entities providing electronic media services by subscription – CATV, direct-broadcast satellite (‘DBS’) service, subscription radio, or even subscription over-the-air TV stations – generally are subject to less restrictive content regulation than terrestrial ‘free overthe-air’ broadcasters (‘obscene’ material is prohibited, but not material that is merely ‘indecent’). Because subscribers pay for their service, by definition, arguments that they must be protected from unwittingly accessing ‘indecent’ content are less convincing. Subscription satellite radio providers and multichannel video programming distributors, such as DBS and cable TV providers, remain subject to FCC regulation with respect to their use of radio frequency spectrum and certain other matters. Moreover, terrestrial CATV operators also are subject to franchising by state or local authorities for the use of public rights-of-way. ii Digital switchover In 1996, Congress authorised the distribution of an additional terrestrial broadcast channel to each terrestrial broadcast TV station licensee for digital broadcasting, with the understanding that existing analogue broadcasting channels would be surrendered and reallocated for other users following a reasonable transition. Congress subsequently established 12 June, 2009 as the last day for full-power TV stations in the US to broadcast in analogue. Since that date, all full-power TV stations have been transmitting in digital only. The reallocation of the spectrum thus recaptured from the analogue broadcast service remains a high priority of the FCC, which has stated its intention to maximise the availability of spectrum for broadband communications (such as Internet access) as well as to set aside a band of spectrum for public safety use. Notably, the compression facilitated by digital transmission allows broadcasters to transmit in multiple streams,

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United States or repurpose a portion of their allocated spectrum for non-broadcast use. As previously discussed, the FCC currently is considering whether and how to reclaim some of this spectrum for mobile broadband use, through ‘incentive auctions’ or other mechanisms. iii

Internet-delivered video content

The regulatory status of Internet-delivered video content turns in part on whether it can be considered ‘video programming’ under the Communications Act. This term encompasses ‘programming provided by, or generally considered comparable to programming provided by, a television broadcast station’. Much online video content does not fall into this category, and as such lies outside of the FCC’s jurisdiction. Also significant is the manner and form in which ‘video programming’ is delivered to the viewer. For example, ‘video programming’ may be subject to minimal regulation if it is incorporated into an ‘information service’ by virtue of the use of the Internet or other broadband technologies as a delivery mechanisms. Moreover, the FCC also has identified a category of ‘interactive television’ services – defined as ‘a service that supports subscriberinitiated choices or actions that are related to one or more video programming streams’ – but it has not decided what requirements, if any, should apply to such services. Notwithstanding general uncertainty with respect to the regulatory status of Internet-delivered video content, IPTV services delivered by telecommunications companies have been subject to franchising as ‘cable’ systems under some state and local requirements. In order to expedite competitive entry into the IPTV market, to facilitate competition to entrenched cable TV operators, several states have adopted state-wide franchising, and preempted separate approval requirements in individual municipalities. The FCC encourages rapid approval of competitive franchising requests and has indicated that it may preempt states that do not promptly act on such requests. iv

Mobile services

Consumer demand for access to audio and video programming through mobile platforms is one of the primary drivers of increased demand for mobile broadband access generally. As noted above, the National Broadband Plan aims to free additional spectrum resources for such services. The advent of these services, many of which would not use ‘broadcast’ spectrum, reflects increasing convergence in the communications industry, and could lead to increased pressure to reconcile regulatory frameworks that treat similar services differently. VI

CONCLUSIONS and OUTLOOK

The implementation of the National Broadband Plan will continue to be the driving force in US communications regulation for the foreseeable future. In doing so, the FCC is likely to continue its efforts to repurpose certain spectrum for mobile broadband use. This approach is likely to generate conflict between wireless service providers and incumbents. The FCC will need to reconcile these competing interests, while deciding whether and how to ensure that incumbents are compensated for the value of their lost spectrum assets. Universal service and intercarrier compensation reform is likely to occupy both the FCC and Congress over the coming year. In implementing reform, the FCC will

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United States need to balance a number of competing policy interests within a heavily politicised environment. Regardless of how the FCC moves forward, there will be winners and losers. For this reason, and given the amount of money at stake, these issues almost inevitably will occupy the courts as well. Looming over the horizon, the possibility remains that Congress will substantially modify the FCC’s authority with respect to broadband services through a significant amendment (or even a rewrite) of the Communications Act. Such action could provide the FCC with the authority that it needs to regulate the provision of Internet access services, while shoring up the unsure foundation of existing regulations (e.g., of net neutrality and VoIP services). Even in the absence of such action, the FCC is likely to attempt to expand the scope of its authority to regulate such services – at least until that attempt is affirmatively checked by Congress or the courts.

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Appendix 1

About the authors

Myria Saarinen Latham & Watkins LLP Myria Saarinen is a partner in the Paris office of Latham & Watkins LLP. She has extensive experience in IP and IT litigation, including Internet and other technologyrelated disputes. She is very active in litigation relating to major industrial operations and is involved in a broad range of general commercial disputes. She has developed specific expertise in the area of privacy and personal data, including advising clients on their trans-border data flows, handling claims raised by the French Data Protection Authority and setting up training sessions on the personal data protection framework in general and on specific topics. She has also expertise on crossborder issues raised in connection with discovery or similar requests in France. Ms Saarinen is also active in the corporate governance and compliance areas and assists clients in drafting and implementing grant of powers, delegation of liability and other compliance schemes. She is active in firm management, serving on the ethics, technology and privacy and security committees of Latham & Watkins. Jean-Luc Juhan Latham & Watkins LLP Jean-Luc Juhan is a partner in the corporate department in the Paris office of Latham & Watkins LLP. His practice focuses on outsourcing and technology transactions, including business process, information technology, telecommunications, systems and software procurement and integration. He also has extensive experience advising clients on all the commercial and legal aspects of technology development, licensing arrangements, web hosting, manufacturing, distribution, e‑commerce, entertainment and technology joint-ventures. Mr Juhan is quoted in Option Droit & Affaires 2011, Legal 500 EMEA 2011, Legal 500 Paris 2011 and he notably ‘focuses on ICT’ and ‘assists French and international users, financial institutions’, ‘on many cases’.

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About the Authors Zahra Rahvar Latham & Watkins LLP Zahra Rahvar is an associate in the Hamburg office of Latham & Watkins LLP, practising in the firm’s corporate department. She is a graduate of Bucerius Law School in Hamburg and has been a scholar of the German National Academic Foundation. Dr Rahvar wrote her doctoral dissertation on the topic of press freedom under the influence of media convergence. During her legal studies, she worked as a research associate at the Chair of Public Law and Comparative Law under Professor Michael Fehling, mainly in the field of media, environmental and administrative law, and also spent a fair amount of time abroad as an exchange student at, inter alia, Yale University, Minnesota School of Law and Paris II, under the Tulane Law School summer programme. Simon Berry Latham & Watkins LLP Simon Berry is a partner in the Hong Kong office of Latham & Watkins LLP and a member of the corporate department. Mr Berry has extensive experience in regulatory law. His practice also focuses on a broad range of mergers and acquisitions, reorganisations, post-acquisition integration and corporate finance transactions involving regulated entities such as banks, insurance companies and financial institutions. His experience in regulatory matters includes licensing and advisory work covering a wide range of regulated activities including securities, commodities, futures and other derivatives, asset management and proprietary trading including offerings of investment products, outsourcing, e-commerce-related issues, data privacy, Internet securities trading and e-banking matters. He has advised on the acquisition and disposal of a number of licensed entities as well as members of stock exchanges, futures exchanges, clearing companies and other regulated entities. His experience in mergers and acquisitions includes takeover offers, sales and purchases of businesses and companies, direct investments, private equity, joint ventures, mergers by legislation, schemes of arrangement and other commercial agreements. He has also advised on transactions involving television companies and radio broadcasting companies. Vi Vi Chow Latham & Watkins LLP Vi Vi Chow is an associate in the Hong Kong office of Latham & Watkins LLP and a member of the corporate department. Her practice focuses on advising banks and financial institutions on regulatory and compliance issues such as licensing matters, selling restrictions, disclosure issues and marketing of securities under Hong Kong’s securities regulatory regime. Her experience in the corporate finance area includes advising on acquisitions from the Hong Kong law perspective, public offerings, and compliance matters for listed companies in Hong Kong.

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About the Authors HIROKI KOBAYASHI Latham & Watkins Gaikokuho Joint Enterprise Hiroki Kobayashi is a corporate partner of Latham & Watkins Gaikokuho Joint Enterprise in Tokyo. He advises on Japanese legal issues relating to a variety of areas of transactional practice, including corporate law and various government regulatory matters. He handles a number of cross-border M&A matters in collaboration with Latham & Watkins attorneys in other offices, and counsels clients on M&A transactions conducted under different business practices. His recent experience includes an acquisition by Turner Broadcasting System, Inc. through its Japanese subsidiary Japan Entertainment Network KK of Japan Image Communications Co Ltd, a licensed operator of multiple TV channels, and a sale by Liberty Global of its US subsidiaries holding shares in Jupiter Telecommunications, Japan’s largest cable television operator, to KDDI. Mr Kobayashi has spoken on the topic of privacy in cyberspace at a meeting of an academic society of computer scientists. Mr Kobayashi is admitted to practise in Japan and New York and is a member of the Dai-ichi Tokyo Bar Association and the New York State Bar Association. He is a native speaker of Japanese and fluent in English. TIM JOHNSON Latham & Watkins Gaikokuho Joint Enterprise Tim Johnson is a transactional associate in the Tokyo office of Latham & Watkins Gaikokuho Joint Enterprise. His practice involves a wide range of corporate and finance matters. He has experience in representing private equity firms, international corporations and financial institutions. Prior to joining Latham, he served as a law clerk to the Honourable I Leo Glasser and the Honourable Steven M Gold of the United States District Court for the Eastern District of New York. Mr Johnson is admitted to practise in New York. He is a graduate of Carleton College and the University of Virginia School of Law. TOMOHIKO KAMIMURA Latham & Watkins Gaikokuho Joint Enterprise Tomohiko Kamimura is a transactional associate of Latham & Watkins Gaikokuho Joint Enterprise in Tokyo. His practice focuses on corporate and finance matters, including general corporate matters, employment law, mergers and acquisitions, joint ventures and banking. He also has experience in intellectual property litigation. He has represented a number of Japanese and international technology and telecommunications companies on Japanese regulatory matters. Mr Kamimura is admitted to practise in Japan, and is a member of the Daini Tokyo Bar Association. He is a native speaker of Japanese and fluent in English. Omar Shah Latham & Watkins LLP Omar Shah is a partner in Latham & Watkins’ London office. He advises clients in the media and communications sector on antitrust and regulatory issues and represents them before UK, EU and other regulatory and competition authorities, courts and tribunals. His experience includes acting for a UK broadcaster in an Ofcom investigation into licensing of digital terrestrial television; acting for a major UK telco in an Ofcom investigation

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About the Authors into consumer broadband pricing; acting for a leading provider of electronic programme guides in securing UK licensing from Ofcom; representing various telcos in securing merger control clearance from the Office of Fair Trading, the European Commission and other regulators for several transactions; and defending a major advertiser and provider of online music services in an investigation by the Advertising Standards Authority including subsequent judicial review proceedings in the High Court. Gail Crawford Latham & Watkins LLP Gail Crawford is a partner in the London office. Her practice focuses primarily on technology, intellectual property and commercial law and includes advising on technology licensing agreements and joint ventures, technology procurement, data protection issues and e-commerce and communications regulation. She also advises both customers and suppliers on multi‑jurisdictional IT, business process and transformation outsourcing transactions. Ms Crawford has extensive experience advising on data protection issues including advising a global corporation with operations in over 100 countries on its compliance strategy and advising a number of US e‑Commerce and Web 2.0 businesses as they expand into Europe and beyond. She also advises online business and providers of communications services on the impact of the UK and European restrictions on interception and disclosure of communications data. John P Janka Latham & Watkins LLP John P Janka is a partner in the Washington, DC office of Latham & Watkins LLP, where he is chair of the communications practice group. For over two decades, Mr Janka has counselled international telecommunications operators and ISPs, content providers, investors and banks on a variety of regulatory, transactional and controversy matters. His experience includes the purchase, sale and financing of communications companies, the procurement and deployment of communications facilities, global spectrum strategies and dispute resolution, the provision of communications capacity, content distribution, strategic planning, and effecting changes in legal and regulatory frameworks. His clients include satellite, wireless and other terrestrial communications companies, video programming suppliers, information service providers, television and radio broadcast stations, and firms that invest in and finance these types of entities. Mr Janka has served as a United States delegate to an ITU World Radio communication Conference in Geneva, and as a law clerk to the Honorable Cynthia Holcomb Hall, United States Court of Appeals for the Ninth Circuit. Mr Janka holds a JD degree from the University of California at Los Angeles School of Law, where he graduated as a member of the Order of the Coif, and an AB degree from Duke University, where he graduated magna cum laude. Jarrett S Taubman Latham & Watkins LLP Jarrett S Taubman is an associate in the Washington, DC, office of Latham & Watkins LLP, where he represents providers of telecommunications, media, Internet and other

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About the Authors communications services (and their investors) before the Federal Communications Commission (FCC), state public utilities commissions and various courts. Mr Taubman assists clients in implementing strategies to facilitate the development of favourable regulatory policy, structuring transactions and securing required regulatory consents, and ensuring ongoing compliance with complex regulatory requirements. Much of his practice involves the navigation of the complex legal and policy issues raised by the advent of broadband services. Mr Taubman also represents both communications and non-communications clients before the Committee on Foreign Investment in the United States (CFIUS), a multi-agency group with the statutory authority to review and block proposed investments in critical US infrastructure from non-US sources. Mr Taubman received his JD from New York University School of Law, a master’s degree in public policy from Harvard University Kennedy School of Government, and a BS from Cornell University School of Industrial and Labor Relations. LATHAM & WATKINS LLP 53 quai d’Orsay 75007 Paris France Tel: +33 1 40 62 28 43 Fax: +33 1 40 62 20 62 [email protected] [email protected] Warburgstrasse 50 20354 Hamburg Germany Tel: +49 40 4140 30 Fax: +49 40 4140 3130 [email protected] 18th Floor, One Exchange Square 8 Connaught Place, Central Hong Kong Tel: +852 2912 2500 Fax: +852 2912 2600 [email protected] [email protected] 99 Bishopsgate London EC2M 3XF United Kingdom Tel: +44 20 7710 1000 Fax: +44 20 7374 4460 [email protected] [email protected]

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About the Authors 555 Eleventh St, NW Washington, DC 20004 United States Tel: +1 202 637 2200 Fax: +1 202 637 2201 [email protected] [email protected] www.lw.com LATHAM & WATKINS GAIKOKUHO JOINT ENTERPRISE Marunouchi Building, 32nd Floor 2-4-1 Marunouchi, Chiyoda-ku Tokyo 100-6332 Japan Tel: +81 3 6212 7800 Fax: +81 3 6212 7801 [email protected] www.lw.com

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