Rules and regulations

It is important to understand the rules and regulations that affect your business to maintain effective operation. Anna Mitchell takes the opportunity to explore the ‘frequency sell-off’ and what it means to users of wireless microphones before diving into the importance of contract law for distributors.

In the first of a series of articles designed to provide pointers on running a successful business InAVate turns its attention on legal issues that affect the audiovisual market.

The first topic we’ve delved into is the sale of frequencies that are being vacated as digital switchover is reached or approached. It looks increasingly likely that frequencies currently used by wireless microphone users will be sold to mobile phone operators for mobile broadband services, leaving wireless microphone manufacturers and their customers to face the hefty cost of equipment replacement. The issue is currently being debated in parliaments across Europe and has sparked active campaigns aimed at protecting the interests of wireless microphone users.

Secondly, a discussion on contract law discovers why it’s so important for distributors to set out the terms of an agreement in an official contract. In the event that disputes do arise we take a look at what to take into account when considering legal action.

The digital dividend
The switch to digital television transmission is currently underway throughout Europe and as analogue television is phased out large swathes of frequencies are being cleared. In most countries these frequencies are being released for sale by means of auction, generating revenues for governments and creating opportunities for providers of services, such as mobile broadband, to move in and occupy the vacant frequencies. But, there’s one problem. In some cases these frequencies aren’t exactly vacant.

Alan March, business development specialist at Sennheiser, has been on the steering committee of the British Entertainment Industry Radio Group (BEIRG) for many years and is involved with the organisation’s European equivalent, the APWPT. He explains that the first main block of frequencies coming up for auction in the UK are 790Mhz up to 862Mhz. ”Estimates vary but I think it’s a fairly common view that 95 per cent of all the wireless microphones and in-ear monitoring systems that are used in this country are in that area of spectrum,” he explains. It’s a worrying statistic that is echoed in varying degrees of severity across Europe and carries huge implications for the conferencing and entertainment industries.

March feels the sale provokes two issues for professional users of wireless microphones. Number one: certainly on new frequency blocks must be provided for the industry. Number two: adequate funding must be made available for the migration to take place.

Taking the UK as an example he says: “The terms that Ofcom, [the independent regulator and competition authority for the UK communications industries] has offered through its last consultation are pretty derisory and they exclude a lot of the professional users that tend to use equipment that is away from the one TV band that has been allocated for radio microphone use, Channel 69. Ofcom’s current proposals are that only people who have got equipment that uses Channel 69 should be compensated and so they are going to harm the most professional user base of wireless systems. Ofcom has made it clear that any further compensation will have to come from the Government.”

On the topic of frequency migration March says the industry has an idea of where future available frequencies might be but cannot be certain until white space maps are produced detailing the frequencies that will be able to be used across the country. That makes the manufacture of new units problematic. “[In the UK] we’ve been told we can expect white space maps in the third quarter of [this] year. But we’ve been told that we would receive them before and so far they haven’t materialised.

“If you talk to the regulator, for example Ofcom, its French equivalent [CSA] or its German equivalent [ULR], they tell you the same story: ‘It’s not about money, it’s about making the most efficient use of the spectrum for the benefit of all the citizens and consumers of the area’. In some sense you can’t argue with that. However, if it ends up with a situation where everything interferes with everything else and nothing works properly then what gain is there for society?

“In Ofcom’s ideal world the 790-862 block would have been cleared of analogue TV broadcasting and there would have been no wireless microphone operators in there. But I think when this was originally planned no one at Ofcom fully understood the sheer quantity of these types of devices already out there and being used on a daily basis.

“As far as 790-862 goes in the UK, it’s kind of done and dusted,” March laments but quickly adds: “However, we’ve got significantly more recognition now than we had at the beginning of this process. For example, we now have a replacement for channel 69, which is channel 38 and, under current plans, there will be a new band manager who will be awarded a package of interleaved spectrum and who will be `obligated' to the PMSE community.”

Looking elsewhere, March says France has already dedicated 790-862 for mobile broadband. Germany is likely to do the same despite ongoing arguments. Spain has just committed as well. However, there are countries that haven’t yet. “The situation is very different in Italy, for example, where they have a lot of broadcasting all over the 790-862MHz band,” explains March. “And who owns the broadcasters in Italy?” he asks. The answer: “Berlusconi.”

Sign on the line
Distribution agreements come in many forms but whatever their scope, however well you feel you know the manufacturer in question or whenever they’re made it’s important to take proper legal advice and draw up an official contract.

It may seem surprising but according to Shaw Stapely, an associate at UK law firm Thomas Eggar LLP, it is quite common for small and informal agreements to just “come into being”. He says: “For whatever reason either parties don’t realise it or don’t want to spend the money on it. They think ‘we’ll be alright, we trust each other, let’s just get on with things’”.

But, Stapely stresses the importance of setting out the terms of the agreement in an official contract. “It will save you time and money if there are any issues or disputes later on. It’s like having a pre-nuptial agreement rather than going through a messy divorce. It is also a lot easier to record the agreement at the beginning anyway. Both parties are talking to each other, they’ll be much clearer on what they intend to do and if any issues do arise then they can deal with it then and there rather than waiting for things to get unpleasant.”

If a contract is not sufficient, or nonexistent, and a manufacturer decides to break the agreement Stapely says the first thing a distributor should consider is what is the potential loss from the breakdown of the agreement. If a claim goes to court then that is what will be considered so if there is no clear loss incurred then it is not worth embarking on expensive legal action. Similarly if you wish to terminate an agreement with a manufacturer, and are not sure whether you have a right to under the terms of your contract, then you must consider the potential loss or risk to their company.

Stapely cites a recent case that reached the High Court in the UK, Jackson Distribution v Tum Yeto Inc. He says it offers useful guidance on factors to consider when looking at exiting a distribution agreement, particularly if there is no formal written agreement in place. The parties agreed, without an official contract, that Jackson Distribution would be the sole distributor for certain goods of Tum Yeto. Two and half years later Tum Yeto purported to terminate the agreement without notice which was contested by Jackson. In absence of a written agreement the court implied a term that the distribution agreement should be terminable on reasonable notice.

The final decision put “reasonable notice” at a period of nine months. Stapely says the factors the court considered to reach this agreement provide a useful checklist of facts to consider when looking to exit a distribution agreement or contest the break up of one.

The checklist:
• The length of the relationship between the parties
• The lack of formal arrangement between the parties
• The extent of Jackson’s early investment
• The percentage of Jackson’s turnover made up of Tum Yeto’s supplies
• That Jackson had agreed not to sell competing products

Stapley concludes: “Ultimately, there is of course no substitute for having a written contract with defined termination provisions and express notice periods

For further reference InAVate has recently covered EN54 in two articles based on interviews with Helen Goddard, from audio consultantcy AMS Acoustics and IC Audio’s Sascha Riedling.

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