SCL Policy Forum Report

January 2, 2007

The most recent in a trend of discussions on the regulation of the Internet was held on 26 and 27 October 2006 within the offices of Herbert Smith in London.  The ¡¥think-tank¡¦ event, sponsored by the SCL together with the Centre for IT & Law at the University of Bristol, and the UK Economic and Social Research Council¡¦s eSociety Programme, met in order to examine the state of the interface between theoretical approaches to Internet regulation and its practical application, with the former aspect (theoretical) being dealt with on day one of the conference and the latter (practical) being dealt with at the subsequent day¡¦s proceedings.  A multitude of views were offered by the speakers who ranged in origin from the purely academic to the entirely practice based, thus enabling as comprehensive a discussion as possible to be heard.

As expected, the most prominent thread weaving its way throughout discussions was the fact that there has been a significant change within recent years on the regulation of the Internet, most notably the shift between government regulation to a more decentralised form of control. So what is so wrong with traditional methods of regulation?  Strict command and control regulation ignores the interests of the objects, it fails to stimulate creative activities and can ultimately lead to the increasing problem of forum shopping, searching for those regimes which are more favourable. 

The Internet, however, is not like many other ¡¥entities¡¦ and the difficulty in regulating the Internet in particular was raised by Professor Wolfgang Schultz of the Hanz-Bredow-Institut in Germany.  The consensus was that some form of regulation is required for the sake of the development and success of the Internet.

This naturally led to suggestions on the most suitable successor model for regulation.  The two most popular suggestions being the much discussed models of self-regulation and co-regulation.


Several advantages of self-regulation were put forward, with reference being made to its efficiency and its problem-orientated and flexible approach to matters. These perceived advantages, however, were set off against an equal number of downfalls – little or no legal legitimacy arises from self-regulation, there is a lack of accountability and self-regulation can sometimes lead to unfairness. However, perhaps most concerning is the fact that relying on a purely self-regulating model very often results in legal uncertainty and fragmentation of the law.

Co-regulation – The Best of Both Worlds?

Co-regulation is a further regulatory model which merited consideration by the delegates. It is claimed that it provides the benefits of both systems – those of pure state regulation and those of self-regulation.   In other words, it is a fusion of public and private interests. 
The links to pure state regulation aspects include:
 achievement of public policy goals
 the inclusion of a legal connection – by law etc
 the State using regulatory resources.

The non-state component includes:
 the creation of specific organisations, rules and processes best equipped to deal with matters
 regulation being performed by the addressees themselves.

Outwith the topic of Internet Regulation, there are several areas where co-regulation exists successfully.  These were discussed by Professor Schultz including, specifically, the protection of minors in Australia and Germany.   By drawing upon the experiences of co-regulation within these jurisdictions, it was possible to broadly outline the main pros and cons to this alternative ‘hybrid’ approach. 

The main claimed advantages of co-regulation tended to include a more appropriate division of work between the state and industry, but this was counteracted by claims of a lack of transparency, and non-state regulation being used as a smokescreen.  Furthermore, experience shows that certain conditions must be fulfilled in order for it to work:
 a pre-existing regulatory culture
 incentives for co-operation and enforcement
 the state must be willing to reduce its regulatory power significantly
 states’ resources must be available to influence the outcome of the non-state regulatory process.

A Decade Out of Step- Problem or Opportunity?

Although there was much discussion on the types of regulation which would be most suited to this particular field,  an interesting alternative emerged from Professor Jeremy deBeer, a professor in Intellectual Property Law from the University of Ottawa, Canada. With the intriguing title of ‘Digital Copyright Regulation in Canada: Leading or Lagging?’, Professor deBeer provided examples to demonstrate the fact that, in Canada, the development of the Internet has evolved not by state control, self-regulation or even co-regulation.  A system of minimal or nil regulation has taken precedence.  While, chronologically, Canada has been lagging in regulating, this slow uptake has enabled Canadians to engage in debate and discussion on the best course of action which many other countries have not been able to do.

Furthermore, and most importantly, the P2P industry in Canada is declining notwithstanding the fact that there is a lack of regulation legislation.  Instead, industry has introduced its own alternatives, perhaps most notably with the introduction of Itunes etc. In addition, it now appears as though there is more opportunity for independent Canadian musicians.   In this respect, the hands-off approach has been of some benefit.

It was also outlined that there is evidence from those jurisdictions which heavily regulate Internet use which clearly suggests that anti-circumvention legislation has not proved to be of any significant detriment to illegal online copyright etc.

Symbiotic Regulation

It is apparent that regulation is not as simple as making a law. Instead, one must look at the overall picture.  The approach of ‘symbiotic regulation’ was outlined by Dr Andrew Murray. It involves taking a closer look at the role of the regulatee.  Perhaps the answer is to map what people expect along with what governance can provide to them (within reason!).  In a way this approach is analogous to co-regulation in that the interests of both parties are taken into account in order to try and provide the best possible outcome. The example of music downloads is an appropriate example.  Incentives must be provided if people are to choose to pay for music downloads from sites such as Itunes. This can be done by way of lowering prices or providing added value etc. Such an approach would almost certainly lead to an increase in the possibility of adherence to the regulations, thus resulting in less regulatory failure.

In order for any regulation to be effective, it must be based on the correct business model. It is often the case that the current business model is not understood properly or the understanding of the policy-makers as to the correct business model is so very often completely out of date.  This is especially true of the Internet. The business models for online services are highly dynamic and evolving rapidly. As Chris Reed suggests, comprehensive regulation should not be attempted until the business models have slowed down their evolution. A fine example of this mistake being made in practice involved the E-Signatures Directive.  This Directive was introduced before the business models settled down and, as a result, may have actually inhibited the general purpose of e-signatures instead of actually encouraging the development of e-signatures as originally intended.


It is clear that the Internet has many options for the path it intends to follow in the future.  Some, clearly,  are far more appealing than others. However, some are untested and untried in the highly dynamic online world and therefore the question arises: is adoption worth the risk?

On a personal note, I believe that more incentives must be provided in order for any system to work effectively.   It is clear that a heavy handed approach is not effective, one only has to look at the experiences of Canada to see that minimal regulation has not led to it being perceived as a feeble player in this area.  Instead it appears as though so much less time, effort and money has been expended in getting to the same outcome as is currently being experienced in many heavy handed regulatory regimes.

Co-regulation appears to be the foremost approach in the shift from strict legislation which has occurred in the past 10 years. The path of self-regulation now looks to be deserted and co-regulation is cautiously being encouraged, particularly in the Audio-Visual and Multimedia Services Draft Directive.  I can see no reason why this new approach will not succeed so long as there is a balance of the fundamental rights of all parties.   However, as always, whether this will be the case or not remains to be seen!

Euan Faulds is at Boyds Solicitors LLP, Glasgow: