Fair Use, Italian Constitution Make For a Balanced Multimedia System

By Dom Serafini

Several countries –– including Italy and the U.S. –– are looking, once again, to reform their radio-TV systems. For this proposal, I’d like to borrow an innovative element from the Italian Constitution (which was created in 1947) that, together with the “fair use” doctrine (developed in the U.S. in 1984), could help develop adequate rules for regulating a sector that digital and Internet technologies have rendered otherwise unfair for all concerned.

It is interesting that most countries tend to deregulate all sectors at their national levels, but strive to bring strict rules at the international level through the World Trade Organization (WTO). Even though we all favor international trade, WTO rules, by and large, tend to favor companies in dominant positions, thus rendering them unfair and anti-competitive.

In this proposal to reform radio-TV systems, Italy is often taken as a point of reference, and here follows the detailed version of my general proposal, first published in the Financial Times on June 30, 2006.
In a digital world globalized by the Internet, for a country such as Italy to be unprepared for the future challenges posed by the Internet, is paramount to losing control of its own destiny, or falling prey to more advanced foreign systems.

In the digitalized Internet era, one can no longer refer to a radio-TV or even an “audiovisual” system but, rather, to a “multimedia” system.

In the digitalized Internet age, reforming the Italian (or any other country’s) multimedia system — as a means of making it more fair, more respondent to the needs of its citizens and to society as a whole, more competitive on the international level, more technologically advanced and more modern — will inevitably mean reducing some rights of the physical and juridical entities involved.

Regulations (i.e. the imposing of limits) from a media industry born and raised under analog rules and then revolutionized by digital and Internet technology will inevitably clash with at least two Italian constitutional rights: Article 3 (not imposing social and economical obstacles), and Article 21 (freedom of expression).
In the digitalized Internet age there is a need to refer to “fair use,” because there is no other way to absolutely protect the rights of everyone involved.

Article 41 of the Italian Constitution could be used to strengthen the “fair use” concept. Article 41 states that: “Enterprises cannot operate against the social good.” Regulations should be created for this purpose to balance:
1) Technological developments.
2) The market’s needs.
3) The needs of the consumer-citizen.

Private economic enterprise should remain free, but it may not be carried out against the common good. Laws should establish the rules so that public and private economic activities may be directed and coordinated toward social ends.

The following Five Natural Laws of Convergence (that will then have to be reconciled with the concept of “fair use”) should also be used to better understand the challenges of the future multimedia system:
1) All information can be converted to digital form, which is subject to convergence.
2) Convergence is the basis of multimedia and eliminates the distinctions between means of communication.
3) The nature of convergence renders difficult the imposition of rules and regulations created by man.
4) Convergence follows its own natural laws.
5) Convergence is independent of the borders of the State.

Any multimedia system (which now has a worldwide range) reformed using the current audiovisual or radio-TV system (which is analog: i.e., linear) as a basis, would be born obsolete.

Based on what has been stated above, the following plan to reform any country’s –– but specifically Italy’s –– multimedia system is centered on a few preliminary considerations:
- One cannot regulate the past.
- Digital and Internet technologies, now ubiquitous, render old rules obsolete.
- Reform must be undertaken with a long-range vision, taking into account those multimedia providers — in addition to the so-called brick-and-mortar ones –– that operate in a virtual world.
- Public (State-controlled) multimedia services are indispensable for the future of Italians in Italy and abroad.
- In an era of globalization, the public state multimedia services need to promote "Italy, Inc." throughout the world.
- It’s important to also regulate the distinctions between public and private multimedia services.
- Domestically, public multimedia services cannot siphon off financial resources from commercial services. Abroad, public multimedia services can operate commercially.
- Public multimedia services have to stimulate national technological innovations and help increase the quality and quantity of Italian-made content.
- The role of a public multimedia system is rendered more important as a result of the multimedia financial model evolving toward a pay-as-you-go system. It is important for society not to exclude those with fewer means.
- The commercial multimedia system should be divided into four main and distinct independent components: transport, content, advertising and service.
- Dominant positions, monopolies, duopolies and cartels have to be avoided at all costs.
- Competition has to be stimulated, encouraged and fostered.
- A prolific national industry of content providers and an advanced system of transport and service should be created.
- Operators (in the transport, content and advertising arenas) who only operate at a local level should be assisted and stimulated.
- Print media needs to be safeguarded.
- There is no difference between providers of content online, in print or in an audiovisual format. A printed barcode near an article in a newspaper, for example, could, once scanned by a cellular phone, bring the visual part of the article to a cell phone.

Basic rules for the commercial multimedia sector
1) A multimedia operator must choose to operate in a specific field: transport, content, advertising or service.
2) The transport operator must be able to use all technical means of transport (i.e., electromagnetic waves, cable, telephone lines, etc.).
3) The transport operator cannot operate or have interests in a sector with fewer than two operators. In the case of a monopoly (e.g., satellite), the operator cannot enter other fields.
4) The transport operator must acquire content from multiple sources at market rates.
5) The advertising representative must choose the field in which to operate, from those listed above.
6) The financial agreements for content can be stipulated only:
a) Between the transport operator and the content provider.
b) Between the content provider and the advertising     representative.
7) Acquisitions of content from abroad for domestic distribution should also benefit the domestic product (but no quotas should be imposed).
8)In terms of foreign sales, subsidies for national productions should be offered for: supporting marketing costs and as tax exemptions.
9) An operator cannot have exclusive relationships (e.g., the content provider cannot have exclusive deals with the advertising representative and/or with the transport provider).
10) Multimedia operators cannot have criss-crossing financial participation (e.g., transport cannot have full or partial ownership in content operations and vice versa).
11) The distributors of content with material support (DVD, Flash Memory, etc.) fall under the "operator of transport" category, in that wide distribution is, in effect, a form of transport.
12) An aggregator (buyer of content from multiple providers with the intent of bulk reselling to transport operators) is, in effect, a distributor, and falls under the content provider category.

The State-owned multimedia system
1) RAI, Italy’s State-owned multimedia operator must remain public and should be financed through mandatory subscription fees, by State subsidies, and by sale of content and services abroad.
2) RAI must furnish multimedia services both for Italians living in Italy and abroad.
3) RAI is permitted to be involved in transport and production of content and services in Italy, but not on behalf of third parties. Content production on behalf of third parties is only allowed abroad.
4) RAI’s aim is not to generate profits. Any profits must be reinvested.
5) To create a buffer between RAI and politics, its board of directors has to be nominated by an executive committee, itself nominated by institutional figures (e.g., the President of the Republic, the President of the Chamber, President of the Senate, the Prime Minister, unions, etc.).
Acting as a buffer, the executive committee will nominate the 12 members of RAI’s board, who will then select a chairperson among themselves. The board will appoint RAI’s Director General (DG) and the DG will appoint the various division heads.

Service Providers
Given that operators of ISPs (Internet Service Providers), Web pages (non-material support systems) and distributors of DVDs or other material support (such as Flash Memory) are, in effect, both in the transport and content fields, their services need to be regulated as services and receive fair protection but, at the same time, not harm other multimedia operators.

It must also be noted that ISPs often use transports that they don’t own and that, because of “links,” they also have access to content that they don’t own.
- Transport providers can use Web pages only as “business cards” and sales points, but not to offer their own content.
- The content provider can use the Web only as a “business card” and sales point, but not for transport (P2P distribution, downloading, streaming media, consumer sales).
- An ISP cannot become a content provider (otherwise it becomes a transport provider) and cannot produce content.
- Companies that operate in the data storage field cannot operate in the field of transport or in that of content production.

Ratings services
The agency for ratings services must be equally owned by all components of the multimedia system: transport, content, RAI, service companies and the advertising community.

Contrary to any other services, it is preferable that the ratings agency remains a monopoly. This is for several reasons, including:

1) Competing ratings services could result in data that can be manipulated.

2) In a competing environment there is the possibility that one of the services could become a dominant leader – but without the control of all interested parties.

3) A single service can offer a standardized operation.

Editors’ note: An expanded version of this story by the same author, will be available as a book this fall, published by Lupetti Editore in Milan, Italy.