By Gerald E. Oberst Jr

Providing capacity to broadcasters is a core business for most satellite operators, especially in Europe. Thus, a recent decision by European courts on whether a transmission of digital, near video-on-demand interactive service qualifies as broadcasting is important, because it sets the kind of rules that apply to the service.

European regulations distinguish among electronic communications (generally transmission facilities and not contents), "information society" services (interactive services supplying individual demands) and broadcasting (providing content to the public). The lines between the two latter categories are not as clear as could be, and the recent decision involving Dutch programmer Mediakabel BV versus the Dutch Media regulator (Commissariaat voor de Media) shows some murky areas.

This decision was issued on June 2 by the European Court of Justice (the equivalent, for our purposes, of the U.S. Supreme Court). Lower national courts asked the European Court to answer whether Mediakabel’s Mr. Zap Filmtime service was a broadcasting or an information society service. If it was broadcasting, then quotas for European content and other broadcast rules would apply. If it was an information society service, then different rules would come into play, with no content quotas.

Mediakabel argued that Filmtime was an information society service because subscribers could chose their own pay-per-view options. To view a film from the Filmtime catalog, a subscriber would place an order using a remote control or telephone, giving a personal identification number and receiving an individual key for one or more of the 60 films offered each month. Mediakabel maintained to the regulator and to the courts that Filmtime was not a television program service under European Union laws because it was accessible on individual requests.

The Dutch national court acknowledged that Filmtime resembled both an information society service, being accessible on individual demand, and a television broadcasting service, since Mediakabel selects the films to be made available and determines the frequency and schedules of the broadcasts.

The European Court looked closely at the legislation defining both services and held squarely that the pay-per-view service fell into the broadcasting category. At the outset, the Court held that European television broadcasting could not be limited to services with no element of individual demand, because that approach would exclude subscription services from the definition of broadcasting. This is a notable difference from U.S. law, where the Federal Communications Commission long ago defined satellite subscription services to fall outside the scope of broadcasting.

The European Court also held that the law on information society services could not be used to carve exceptions in broadcasting laws, since the former was not intended to amend the broadcasting laws. Thus, there is not necessarily a clean break between the two laws. Instead, the Court held that a near video-on-demand television service, even if it is accessible only to a limited number of subscribers, cannot be regarded as being provided on individual demand because the provider selects the programming and the broadcasting times.

One questionable element of the European Court’s decision is that it constantly referred to the "television service" and the "broadcaster" when analyzing Filmtime, which seemed to assume the answer to the basic question it was being asked in the first place. And if Filmtime is a television service and Mediakabel is a broadcaster, then Mediakabel must reserve a majority of programming time for European films.

That important issue was a part of the decision, because the lower courts asked the European Court whether the difficulty of applying quotas might preclude classifying Filmtime as a television service. To that question, the Court said essentially "tough luck" — the scope of the law cannot be made contingent on possible adverse consequences.

The European Television Without Frontiers Directive that establishes the quotas, however, provides that they apply "where practicable." There is no indication in the decision that the parties involved in this Mediakabel case argued that the service could be excluded from quotas because it would not be practicable to apply them to pay-per-view service.

Nevertheless, the court also said that the quotas do not actually mean that anybody has to watch the programing. Mediakabel knows its overall transmission time, and thus, can comply with the obligations to reserve a majority of time for European works, whether anybody orders it or not. By contrast, in Canada for example, rules on satellite broadcasting literally require that each subscriber receives a preponderance of Canadian programming, even for pay-per-view service.

The Mediakabel case did not involve a satellite transmission, but all the same it is important to the industry for setting guidelines on the definitions and regulations its major customers face in Europe. Moreover, European policy makers are in the midst of reviewing how to amend broadcasting rules to apply to new technologies and services. Thus this very recent interpretation of interactive service versus broadcast service could have special significance as possible amendments and new approaches are discussed throughout the next year.

Gerald E. Oberst Jr is a lawyer in the Brussels office of the Hogan & Hartson law firm.