1. Promote the value of copyright as the bedrock of investment in creativity as well as a key driver of legitimate content services enabling new business opportunities for all stakeholders in the digital value chain and innovative services for consumers.

1.1. The dissemination of content is the common goal of all stakeholders in the value chain from rights holders through to service providers, network platforms and consumers. Whilst the value chain is becoming longer and more complex, our primary objective is for all stakeholders to recognise and respect the intrinsic value of creative content in order to ensure that fair and appropriate returns are paid to rights holders, thus allowing them to continue to invest in further creative works and preserve a sustainable digital ecology.

1.2. With the UK increasingly becoming a knowledge economy and driving forward the ambitions of the Lisbon Agenda, all stakeholders should recognise the economic contribution made by intellectual property. Accordingly, as we make the transition towards a digital market it is important to ensure that the value of content is promoted.

1.3. British Music Rights continues to be extremely concerned about the consumer misconception with respect to music and other content services being free of charge. We believe that there are aspects of corporate social responsibility and good business practice which should transpose themselves fully into the digital arena. None of the stakeholders in the digital value chain can compete with free illegitimate content. So it is in the interests of all to support legitimate services by raising copyright awareness, labelling and signposting legitimate services, issuing consumer warnings regarding illegitimate offerings as well as advertising responsibly. We congratulate OFCOM for including copyright awareness within the scope of its media literacy review and welcome working with OFCOM in this area as a member of its Media Literacy Forum.

1.4. We recommend that OFCOM's work in the telecommunications arena is informed by the Government's cross departmental Intellectual Property Forum, and in particular, by the work of the sub groups examining both business opportunities and education and awareness, whilst examining the progress of the group considering online infringement. Representation on these three forums from various industry stakeholders throughout the value chain is proving to be an extremely constructive way of enabling dialogue between sectoral partners in the value chain who have the common goal of promoting online and mobile content distribution. Consequently, we believe that the work and recommendations of this forum should be closely assessed by OFCOM officials working on the telecoms review.

2. OFCOM should adopt light touch regulation based on competition law and promote interoperability.

2.1. In terms of OFCOM's principles for regulation, we agree with the approach advanced in the telecommunications review in terms of appropriately promoting interoperability - this factor is absolutely crucial to the development of the digital music market.

2.2. We concur with OFCOM's approach in promoting interoperability and in adopting only light touch regulation (as set out in Policy Annex J:10) broadly speaking by the application of existing competition law. The digital content market (online and mobile) is growing rapidly but is still very much in its infancy. As a result there are a large number of different business models being explored offering consumers the opportunity to access music in a variety of different forms and from a range of different devices (see note 1). At one end of the commercial scale, the MCPS-PRS Music Alliance licensed Hutchison 3G for the first ever live web cast of a mainstream concert to mobile handsets whilst at the other end of the scale, niche services and products have been able to capture a small but certain market (see note 2). Furthermore, the convergence between broadcasting and telecommunication as outlined in the strategic telecommunications review will result in increased choice for the consumer and more commercial opportunities.

2.3. Given the need for a market in transition to experiment with different solutions and business models, competition law applied where there are persistent bottlenecks would seem to be the most appropriate means of monitoring the progress of the market at this stage. We therefore endorse policy annex J.10 but would question the need at this stage for the unverified considerations outlined in policy annex J.11 with respect to the application of ex ante regulation where "access to, and the use of key content rights which confer market power on the owner and / or distributor, particularly where rights are tied up for very long periods or there is evidence that competition for rights is ineffective".

2.4. We also believe that it may well be a premature step by OFCOM to recommend using ex ante regulation before fully understanding the wider policy considerations inherent with such measures. We therefore recommend that OFCOM awaits the conclusions of its forthcoming work programmes on Second Generation Broadband and the project on the Evolution of Digital and Multi-Media Platforms in order to gain a more comprehensive overview of the value chain and the full implications of such recommendations. The seminal nature of the telecoms content market and the lack of empirical based evidence to suggest otherwise leaves us to conclude OFCOM should retain its regulatory principles of competition law.

3. Music publishers are successfully working in partnership with the mobile industry through ring tones;

3.1 An indicative example of the value chain is presented by the music publishing industry in the mobile environment. This remains a key potential market for generating revenue and the sector has proved to be flexible towards technological innovation and consumer demands.

3.2. The ring tone market has been growing rapidly over recent years. Indeed, Forrester, the US research group, predicts the world market for ring tones could be worth up to $3.5 billion by 2008. In terms of revenue generated for rights holders, in 2003, our member organisations and royalty collection societies, the Mechanical-Copyright Protection Society (MCPS) and the Performing Right Society (PRS) collected in excess of £3 million from the exploitation of members' works as ring tones and it is expected that this figure will increase significantly when the figures for 2004 have been finally calculated (previously £2.5m had been collected for the period 1999-2002).

3.3 Although the percentage of the actual 'sale' for music creators is nominal, ring tones do represent an important and growing revenue stream that we wish to see develop even further in the future.

3.4. We also expect to see the take-off in True tones (real music ring tones, made from original music recordings) as the improvements in mobile technology result in consumers replacing their existing Mono & Polyphonic tones. Unlike the Internet environment, the mobile industry has taken steps to organise interoperability (via the Open Mobile Alliance). However, the threat of piracy looms as these closed networks are increasingly opened up. The latest handsets allows for the simple transfer of MP3 content to mobile devices, thereby bypassing mobile content providers and this threatens to undermine this new revenue stream for rights owners. Although we do support moves towards convergence, these must be accompanied by measures towards adequate security protection.

3.5. Other services in the mobile environment are being developed and new services and business models being set up, such as ring backs which allow mobile phone subscribers to set the music heard by callers whilst they are waiting for the subscriber to answer. As control of the content is retained within the network at all times the threat of piracy is limited. In addition it is a genuinely new area of exploitation so is unlikely to cannibalise other areas of revenue generation. Our member organisations and royalty collection societies, the MCPS and PRS have a joint Ringback scheme approved already in preparation for the launch of these services.

4. How our member organisations have responded to the challenge of online licensing;

4.1. We have extensive expertise on the business application of licensing and rights management in a sector at the vanguard of the digital revolution. Our member organisations responded early on to the challenge of online licensing. The societies developed their first licences for online exploitation as early as 1997 and in 2002 created a dynamic new approach to the licensing of content for online exploitation. The Joint Online Licence (JOL) allows users to clear all the rights they require from composers, songwriters and music publishers by acquiring a single licence. Furthermore, the JOL is broad and flexible enough to allow new businesses to experiment with different business models (download, streaming etc) without having to come back to the collecting societies for a new or revised licence. Our commitment to the online market place is further reflected through the provision of an 8 per cent rate (discounted from 12%) in order to encourage an emerging market to develop.

4.2. We believe that the UK is currently at the forefront of the European online legitimate music market. In excess of 60 companies have been approved for the MCPS-PRS Joint Online licence, covering services as diverse as Internet-based Download Shops and Subscription Streaming sites to the latest Mobile Video Streaming services. However, whilst much of the focus of the last twelve months has been on the rise of the Internet download shops, the revenue currently being generated for rights holders from these services remains modest.

5. Technological security and rights management measures

5.1. Whilst both technological protection measures and rights management information are already being applied in practice (recognising current technological limitations), DRM systems will evolve according to user/consumer demand in the new market place. Business models will develop taking into account the ways in which consumers want to access and use music, e.g. whether they want a subscription based, streaming only service or whether they want a pay per use downloading service; DRM systems will assist right holders in setting and enforcing access and usage rules which will support such services.

5.2. Mobile operators have a well-developed payment infrastructure in place which is accepted by the consumer therefore allowing bolt on DRM systems to contribute to a value chain which properly rewards rights holders for the use of their work, and allows them to reinvest in their craft. As increasingly sophisticated mobile handsets reach consumers and download services become more prevalent, this will have an impact on consumer behaviour.

5.3. In the context of the discussions on DRM's, we are aware of the focus being given to copyright protection which, of course is important to the discussion, but we would also like to see more attention to other areas in the debate, for example, the integration through to the processing of payments to rights holders and interoperability issues.

Notes

1. The latest Digital Music Report (2005) suggest that some estimate that the 50 per cent of the revenue generated by content on mobile phones will be from music www.ifpi.org

2. For example, Trad Tunes http://www.tradtunes.com is a small Scottish based download shop and Internet radio service. In this instance, two enterprising musicians have been able to use the Internet to promote traditional Celtic and roots music.