Market barriers
Regulation
Magna
carta
An action plan to embrace
the digitization of creativity
in the digital single market
The best ideas never age. It may be almost  years since the feudal barons of England created the Magna
Carta, but the unequivocal opposition of this remarkable document to the arbitrary exercise of power
remains highly relevant to every European. In fact, it has never been more necessary.
T
HE SINGLE MARKET became a reality in
 and is generally accepted to be
one of the European Union’s (eu)
greatest achievements. Its main goal is to
promote economic liberties by limiting sovereign member states’ ability to restrict the
free flow of trade in goods and services and
the free movement of capital and labor. However, the Single Market is still a work in pro-
gress, and significant limitations remain.
Even in the year , many barriers still
block the free flow of lawful cultural and
entertainment-oriented digital services
across member states’ national borders. The
European Commission’s (ec) Digital
Agenda for Europe, which consists of 
action points, has been devised to bring the
Single Market into the digital era by
EBR #1 2012 • 51
Regulation Market barriers
The digital Magna Carta needs to be implemented
across Europe as a matter of urgency.
Piracy is the result of a market supply failure.
52 • EBR #1 2012
removing some of these barriers. Digitization is of course not an end in itself, but a
means of contributing to Europe’s economic recovery (adding at least  percent to the
eu’s gdp) by driving competitiveness and
innovation. It would also generate many consumer benefits, ranging from more choices
to better quality and lower prices.
The issue of achieving a vibrant Digital
Single Market (dsm) goes beyond the selfinterest of the established players within media, entertainment and ict wishing to protect the status quo. It is about improving the
supply-side incentives to invest and innovate
in new cultural and entertainment-based
creativity, services and high-speedbroadband infrastructure.
The aim of a dsm is equally about shaping
better demand-side conditions, whether
the demand is for productivity, culture or
entertainment-oriented services. While
Europe is rightly proud of its rich cultural
heritage, there is an obvious and urgent need
to boost productivity growth. Productivity
will play an even greater role in the future,
especially given the current European economic climate. Smart use of ict technology
is fundamental to productivity, which is ultimately not all about raising consumption
but rather a social and political imperative,
because declining productivity would result
in declining living standards.
A vital link between digital productivity
and digital creativity is the presence – and
the mass adoption, not just mere rollout – of
ubiquitous high-speed broadband. Highspeed broadband on its own is not enough;
demand-side drivers need to be in place.
These include economies of scope (expanding digitization of trade in goods and services) and scale (the size of the Single Market);
lower transaction costs; personalization of
services according to individual preferences;
and the establishment of trusted relationships
between creators, innovators and end users.
Another vital but missing link between
digital productivity and digital creativity is
the availability of consumer-friendly legal alternatives to piracy.
To make matters worse, the creative transition to a digital economy has been misportrayed in the media and in policy circles as
being a zero-sum game with only two possible outcomes: the elimination of control,
through piracy – sometimes depicted as unlimited and growing consumer demand for
entitlements; or the perfection of control,
through further strengthening of copyright
protection and enforcement to maintain the
analog Single Market status quo. It is time
to demystify the false zero-sum doctrine and
resolve the market supply failure as the adequate path for the dsm.
PRODUCTIVITY AND CREATIVITY ARE LINKED
If the goal is to achieve sustainable, smarter
and more inclusive economic growth, a
continuous expansion of the digital panEuropean trade in goods and services – for
instance, e-commerce – is essential. It therefore does not make sense to exempt the creative, cultural and entertainment-oriented
markets from the dsm. Exemptions on the
basis of national copyright laws and protection of conventional media practice and licensing have a counterproductive effect on
the dsm.
Why should digital productivity be vigorously pursued but digital creativity exempted from contributing to sustained, smarter
and inclusive economic growth? The simple
answer is of course that it should not. Nor
does it make sense to continue to pursue a
false zero-sum doctrine.
A revision of the current fragmented and
digitally restrictive copyright approach in the
eu offers a unique opportunity for the ec to
lead by example. This is an opportunity the
dsm cannot afford to miss. Through the Digital Agenda, the ec can update the current
state of play in the European digital creative
market by tearing down key structural barriers to making lawful digital content widely available within the eu in an appealing,
timely and user-friendly way.
The ec needs to address some of the fundamental barriers that hinder the possibility to reap and share the digital productivity
and creativity gains that we so greatly need
in the eu. It is time to tear down these barriers and solve the failure of the market to
supply lawful digital content. This failure is
caused largely by three structural barriers:
3 Limited availability of lawful digital con-
Market barriers
tent through “windowing” (selling and reselling products over time using various
channels, for example the film industry using cinemas, home video, rentals, cable,
video on demand, and free-to-air broadcast) and territoriality
3 Technology-specific copyright and licensing conditions limiting or delaying innovation of new services
3 Unreasonable transaction costs making
digital content unnecessarily more expensive.
THE DIGITAL MAGNA CARTA
Tearing down these structural barriers
should be the goal and purpose of a Digital
Magna Carta. As in the original document
from , the Digital Magna Carta should
introduce a pan-European “digital equivalence” liberty principle that decisively challenges and limits the arbitrary use of monopoly powers by economic rights holders
over digital content. It should also form the
basis of guiding enforceable eu-wide policy
directions. These policy directions must ensure that creative and entertainment-based
digital services and related transactions can
take place without legislative restrictions by
other member states (such as national copyright law), any commercial conduct (such
as windowing or other technology-specific
licensing terms) over any electronic distribution channel and without the artificial imposition of any additional inequitable requirements or restrictions discriminating
the digital choice.
The European Digital Magna Carta should
include, but not necessarily be limited to, the
following actions:
Ensuring the principle of technologyneutral licensing by mandating an “anywhere, anytime and any device” exploitation right which is not specific to distribution, technology or device. This right
should be combined with remuneration
based on actual and identifiable privatesphere consumption, rather than potential consumption and reach.
Ensuring the principle of technologyneutral exhaustion, or the first-sale principle for creative works extending to
digital/electronic formats, thereby prohibiting and abolishing any statutory
windowing provisions. Also, abolishing
discrimination against legal premium
video-on-demand services released in
competition with cinema-release windows – for example, mandating a digitally available first-release window option.
Ensuring a simplified and efficient crossborder licensing and collective rightsmanagement regime for creative works
such as tv, film and music.
Ensuring technology-neutral fair-use/
copyright exception provisions that can
enable the proliferation of pan-European
private “cloud” content such as tv, film,
music, e-books and services, thereby ensuring that contract law and technical
standards cannot be allowed to override
statutory exceptions, such as fair-use regimes or private copy exemptions, in ways
that would limit the ability of lawfully acquired content to shift format, place or
device within the private sphere.
As in the case of the original document,
the Digital Magna Carta should establish a
digital equivalence liberty principle that
should decisively challenge and limit arbitrary use of the monopoly powers of economic rights holders. Fragmented and digitally restrictive copyright laws and conventions are today exploited by economic rights
holders – as opposed to creators – to extract
monopoly rents from consumers. To counter this, the Digital Magna Carta should
assure fair, reasonable and non-discriminatory terms and conditions for lawful digital
exploitation of creative works and facilitate
the proliferation of lawful digital creative
services across the eu.
It took time for the significance of the original Magna Carta to be fully appreciated. The
Digital Magna Carta, on the other hand,
needs to be recognized and implemented
across Europe as a matter of urgency. Such
a document would carry symbolic as well as
practical value. It would stand as a visible
commitment to completing the integration
of European markets. It would symbolize the
development of digital equivalence liberty
principles not only in the eu but eventually
also elsewhere. Above all, it would draw a
line between the past – the adherence to the
zero-sum doctrine often associated with biased questioning of digital creative transition – and the future, with the commitment
to solving the digital market supply failure.
Which policy-maker would not be proud
to be associated with such a charter? ●
Regulation
References

European Policy Centre , Digital Single Market, http://
www.epc.eu/dsm/

McKinsey Global Institute, “Beyond austerity: A path to economic growth and renewal in Europe, October ”

Ericsson Business Review issue No. , “Fighting piracy –
the smart way”, http://www.guardian.co.uk/media//
nov//economist-profits-digital-subscribers, and http://
www.tennessean.com/section/OPINION/

International Federation of the Phonographic Industry (IFPI):
Digital Music Report .

Josh Lerner: “The Impact of Copyright Policy Changes on Venture Capital Investment in Cloud Computing Companies”

European Broadcasting Union (EBU): Modernizing Copyright,
, http://www.ebu.ch

Economic Impact of Copyright for Cable Operators in Europe,
, http://www.cableeurope.eu

EU Study: Legal Analysis of a Single Market for the Information Society. Draft Report October 
AUTHOR
▶ RENE SUMMER
is Director of Government
and Industry Relations at
Region South East Asia &
Oceania, Ericsson. His expertise is in media, content, copyright and convergence.
He is also General Manager of Government Affairs
for Ericsson in Australia and New Zealand, responsible for spectrum, telecom and media/content regulation. Summer is a member of the Board of Directors of the Internet Industry Association in Australia.
([email protected])
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