Meeting the Digital Challenge: Reforming Australia’s Media in the Digital Age
Response to Discussion Paper by Jock Given1 jgiven@unimelb.edu.au
Introduction
It is now more than five years since Australian free-to-air television broadcasters commenced digital transmissions in metropolitan markets. At the time, analogue transmissions were expected to close eight years later. A large amount of VHF and UHF spectrum would be freed up for new uses. The book I published three years ago about this transition concluded: As revolutions go, broadcasting’s digital transformation might be a little slower and a little less socially and economically special than promised, but it’s today’s revolution, the media tussle of this hour. We need to make everything we can of it, while carefully preparing the ground for the next one. Australia has not made the most of digital television and the ground has not been prepared well for future media developments. Digital terrestrial TV has been taken up by Australian households more slowly than pay TV, and much more slowly than DVD, although it is has been cheaper than both. Many standard definition set-top-box models are now available for around $200 or less,2 securing the viewer ongoing access to all DTT services transmitted in an area. The same amount would buy just four months of Foxtel’s digital basic package (excluding connection fee), or three months of basic-plus-one-entertainment-tier. Yet less households have access to DTT after five years than was the case for pay TV.3 Over the
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Jock Given is the author of Turning off the Television: Broadcasting’s Uncertain Future (Sydney: UNSW Press, 2003). He teaches media law in the School of Media and Communications at the University of Melbourne, and is researching a doctoral thesis on wireless pioneer Ernest Fisk, in the Department of History. He was previously Director of the Communications Law Centre, Policy Advisor at the Australian Film Commission and Director, Broadcasting Legislation and Industry Economics in the Department of Transport and Communications. 2 (17 April 2006). 3 Digital Broadcasting Australia estimates close to 1.2 million homes had DTT in December 2005 and that take-up was considerably higher in 2005 than in the previous year: (17 April 2006). In December 2000, five years after Australis pay TV
five years to 2004, the average price of DVD players fell from $1005 to $181. To this needs to be added the cost of buying or renting discs. More than three-quarters of households had a DVD player by mid-2005.4 The transition to DTT is simply not happening in Australia at a rate that supports the view that underpinned the whole digital TV policy—that terrestrial television’s future was inevitably digital, and Australia’s technology-loving population would buy into it whatever it offered. For many, existing analogue services have proved satisfactory so far, especially when supplemented by DVDs. Those looking for and able to afford a wider multichannel experience have found it via cable or satellite. Broadband and portable video devices are increasingly providing further options for those seeking more or different video options. Australia’s transition to DTT is revealing its origins as an initiative of incumbent broadcasters, politically shaped to accommodate existing industrial interests. The technology has not proved as exciting as promised in the hands of broadcasters with as much to fear as gain from its adoption. New services and functionality are limited, and even the most obvious application, a consolidated electronic program guide, is available only in one city. There are three problems: Broadcasters have not been held accountable for all the promises made to justify the favourable regulatory treatment and subsidies paid to support the transition. ‘Same coverage’ and a certain amount of high definition programming were demanded, monitored, and appear to have been largely delivered. More innovative forms of new service and the maintenance of locally relevant programming in regional areas (where broadcasters received $250 million in licence fee rebates) were left to the broadcasters themselves. The original policy placed too many restrictions on those who got access to spectrum, and did not guarantee the presence on the digital terrestrial platform of anyone with both a genuine interest in its success, and the capacity to pursue it aggressively. The policy has not been modified in response to changing circumstances.
The Government’s Discussion Paper does not do enough to address these problems. It starts from the false premise that take-up of digital so far has been ‘primarily a market driven mechanism’. In fact, it has been heavily supported by government, though the measures used have been poorly targeted. It contemplates more incentives, apparently based on a new perception, that analogue free-to-air broadcasters are being frog-marched by government towards their digital demise. The starting point for re-considering policy about the ‘Digital Challenge’ must be the idea that informed the original plan. Free-to-air TV broadcasters were given a wonderful
commenced, there were 1.344 pay TV subscribers: (17 April 2006) 4 (18 April 2006); Eureka Strategic Research, Digital Media in Australian Homes (Sydney: ACMA, November 2005).
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opportunity to migrate their remarkable business model into the digital future. That business model—delivering audiovisual programs of wide appeal, funded by advertising or government, to large audiences—meant that in the second half of the twentieth century, society’s dominant media form was available free-of-charge at the point of reception. This had some disadvantages, but many positive features. It was entirely appropriate that the purveyors of this product be given a chance to adapt their business to digital transmission, alongside others with an interest in offering different kinds of audiovisual experience. Broadcasters have not made the most of that opportunity, although we are now well over half-way into the original timetable. Even more troubling, the Discussion Paper is still focused on micro-management of already available spectrum, and has almost nothing to say about the looming liberation of far more frequencies when analogue television is shut down. The timidity of the preferred options about what to do with existing vacant spectrum suggests a profound lack of conviction in the whole rationale for the analoguedigital conversion.
Part 1: A Roadmap to Digital Conversion
The policy emphasis now must be on adapting the structure of access to spectrum for digital applications, and the uses allowed, to encourage services that will inspire consumers to buy the equipment needed to receive them. It is entirely inappropriate that further incentives be considered for broadcasters to do the things they have already been generously supported to do. On the contrary, broadcasters, and not just electronics manufacturers and retailers and government, need to be held accountable for digital take-up. It is also inappropriate to contemplate large programs of direct support for consumers to acquire digital receiving equipment. Economic models that suggest large net benefits from such a program massively underestimate the efficiency losses from forcing consumers into otherwise unwanted purchases of equipment at a particular point in the product development and enhancement cycle. There are far too many variations in digital receiving equipment for it to be productive for government to make decisions on behalf of more than a very small number of consumers about what kind of basic equipment they should buy. Standard definition receivers would not give access to the high definition signals which were supposed to be a vital part of the rationale for the upgrade. Receivers without personal video recorder capabilities lack one of the most useful features of the new technology. The possible use of MPEG4 for some new digital services means MPEG2 receivers will not give access to all services. It would be a sad start to the possibilities of the all-digital TV world if some artificial timetable for reaching it, derived largely to keep pace with other countries, was reached only by compulsorily equipping a large number of consumers with entry-level, low-functionality receivers.
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Part 2: Enabling a Digital Environment
2.1 New Services on Spare Spectrum and Other Platforms
Fourth network moratorium There should be no constraints on authorising additional commercial television services. Commercial television faces an increasing range of competitors for its audiences and advertisers. Although additional networks would further fragment the revenues of existing licensees, the range of non-television competitors means it is no longer credible to argue that a fourth network, alone, is so big a threat to the economics of commercial TV that it should be opposed as a matter of public policy. Further, refusing to authorise further networks requires a legal definition of the type of service that will be rejected. This unduly constrains the activities of the new users of digital transmission capacity which the Discussion Paper seeks to encourage, and which are so important to the attractiveness of DTT to consumers. The Discussion Paper’s references to ‘conventional commercial television’ and ‘traditional television services’ ignore the large changes to program formats and schedules throughout the history of television (eg. the growth of live sport; the decline of live entertainment; the growth of infotainment and reality TV and the decline of the miniseries and movies over the last 15-20 years). It encourages a perception of free-to-air television as a heritage media form to be preserved, not an adaptive one whose constant evolution could be stimulated by the possibilities of digital transmission. It is completely inappropriate to transfer the power to grant television licences from ACMA to the government. This fundamental change to Australia’s media regulatory processes is included in the Discussion Paper without any rationale. The government’s 2004 election platform said merely ‘The issuing of commercial television licences has historically been a matter for the government of the day.’5 Why a practice put in place shortly after World War 2 should be equally appropriate for ‘21st Century Broadcasting’ is not explained. When this policy was put in place, licences were awarded after a qualitative review of the merits of competing bids. Once granted, they were subject to a serious process of periodic review whereby there was a real possibility that they would not be renewed if performance was inadequate. This all changed in 1992. Commercial television licences are now awarded by price-based allocation, a highly inappropriate process for direct government involvement. The much more limited grounds on which renewal can be refused, or revocation undertaken, mean licences are now much more secure commodities than those handed out in the 1950s. They are very close to perpetual franchises. Lessons have been learned about communications regulatory processes since the 1950s. The separation from both industry participants and central government of telecommunications regulatory functions and spectrum allocation have been among the most important changes. They reflect the now widely accepted principle of independence
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21st Century Broadcasting, The Howard Government Election 2004 Policy, p. 12.
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in authorising the use of public resources. This is fundamental to the Rule of Law and due process, which underpin investment confidence in a modern economy. Australia has been an active and principled supporter of these ideas in international trade forums. The Discussion Paper’s proposal would disrupt the careful balance of planning and licensing responsibilities without adequate justification, and contradict the ‘convergence’ of radiocommunications and broadcasting regulation that ACMA is supposed to be a response to, by creating yet another distinction in the way spectrum is allocated for different purposes. Regulation for the 21st century would be replaced with a discredited 1950s process.
New digital services on broadcasting spectrum The two reserved frequencies should be allocated as soon as practicable in 2007 for new digital services. In line with the comments made above about the fourth network moratorium, the government should not attempt to prescribe the forms of service that can or cannot be offered. The main priorities, however, should be to ensure, first, that entities with a substantial interest in existing television services, including multichannel services, should be excluded from bidding for these frequencies. This would include Foxtel, Austar and Optus, and their major shareholders, notably Telstra, PBL and News. Otherwise there is a real risk that the same players who dominate the now profitable pay TV platforms will also dominate a restructured DTT platform. UK experience shows the advantages for digital TV take-up of having real competition between the cable, satellite and terrestrial platforms. The exclusion of powerful existing players would be consistent with the approach taken to the allocation of frequencies for digital mobile telephony in the late 1990s.6 Though excluded from bidding directly for the spectrum, these entities would be able to supply channels and other applications to the successful applicant. Second, once these incumbents have been excluded from bidding, it is reasonable to allow a new entrant to acquire both sets of new frequencies in an area. This would provide one digital-only player with the capacity and incentive to drive significant developments on the DTT platform. The ‘roadmap’ process, conducted in conjunction with the ACCC, could consider what, if any, access these incumbents should have to vacated analogue spectrum once it becomes available. Third, one of the two new sets of frequencies should be made available subject to the sub-allocation of a portion of the data rate for any community television channel in the area. This would overcome one of the peculiar and unfortunate by-products of the existing digital TV policy, that viewers acquiring digital receivers lose access to the existing analogue-only community channels.
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See ‘Competition and Market Development’, in Alasdair Grant (ed) Australian Telecommunications Regulation: The Communications Law Centre Guide (Sydney: UNSW Press, 2004), p. 226-8.
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Fourth, the allocation of the two reserved frequencies must be for clearly limited durations, as set out in existing legislation. This will ensure the decisions are revisited at a point in the future that allows for security of investment over a reasonable period, and prevents the creation of a new population of virtually perpetual spectrum incumbents. New services on other platforms The power to grant commercial television licences outside broadcasting services bands spectrum should not be transferred from ACMA to the government, for the reasons given above in relation to broadcasting services bands spectrum licences. The 1950s television licence allocation policy which the government’s election commitment seeks to replicate did not envisage government allocation of licences for television outside the broadcasting services bands.
2.2 Expanding Service Options for Existing FTA Broadcasters
Multichannelling Commercial and national broadcasters should be able to introduce full multichannelling as soon as possible. The rationales for the existing restrictions—to protect pay TV from digital terrestrial multichannel competition and to sustain the business model preferred by some commercial TV operators—were never good ones. Pay TV is now profitable and commercial operators interested in exploring digital terrestrial multichannel possibilities should not be constrained by those who are not. High definition television The HD/SD simulcast requirement should be removed, effectively allowing free-to-air broadcasters to run one multichannel in high definition in advance of digital switchover. Anti-siphoning The rationale for anti-siphoning rules, to ensure universal access to events of national importance, is still sound in an environment of minority take-up of multichannel pay TV and other means of viewing these events. In practice, there has been a significant migration of live sports programming to pay TV, together with a large expansion in the total amount of live sports accessible to interested viewers with the capacity to pay for it in the home or at the many external venues which screen it. The likely 4/4 weekly freeto-air/pay split of AFL matches under the new rights agreement from 2007, as opposed to 5/3 under the existing agreement, is one example of the migration. The anti-siphoning rules need to be seen as a device for managing and responding to the transition from one dominant mode of viewing events of national importance to another, or others. The composition of the list and the methods of administering it should be
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monitored constantly. A ‘use-it-or-lose it’ scheme sounds conceptually appropriate, but is difficult to judge in the absence of detailed provisions. A more fundamental review of the scheme in advance of digital switchover is essential.
2.3 Media Ownership and Control
Foreign ownership This submission does not oppose the proposed changes but notes that the case for them is greatly overstated. There are currently few restrictions on foreign participation in Australian media companies. Those that exist have limited impact, and their removal is unlikely to produce a wave of new foreign entrants, increasing the capital available to Australian media businesses or the overall diversity of Australian media ownership, especially without the allocation of any new commercial TV or radio licences: Newspapers: Two-thirds of major daily newspaper circulation is already in the hands of the foreign-controlled News Limited. It is most unlikely that new titles would be started. If, for example, a new foreign player acquired Fairfax, it would simply replace one set of owners with another. Free-to-air television: The Ten Network already has the Canadian CanWest involved as the holder of the largest economic interest in the network. The Government will not allow any new commercial television services. Pay television: All the main players have substantial foreign shareholders. Although there are limits on foreign ownership of pay TV licensees, there is no prohibition on foreign control. It is most unlikely that new foreign operators will launch new pay TV operations. They can already supply wholly foreign channels to the operators. Telecommunications: The Government has indicated that it will not change the existing limits on foreign investment in Telstra. There are no limits on foreign investment in other telecommunications companies.
In most media sectors—including commercial radio, pay TV channels (as opposed to pay TV operations), internet service provision, film, television and electronic games production, distribution, cinema exhibition, music recording, book publishing—there are no foreign ownership restrictions to remove. Overseas companies have large interests in all these sectors and dominate many. Cross-media transactions The proposed changes are a recipe for further concentration, not greater diversity in the Australian media. They will encourage media companies to think about acquisition rather than innovation, about consolidation of old media rather than creativity with new, about buying their way into a cross-platform future, rather than using the exciting technologies already available to them, which are untouched by cross-media restrictions—broadband and mobile (telephones and portable audio and video devices).
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The availability of these technologies means the cross-media restrictions are now encouraging, not constraining innovation. An example is Fairfax’s use of video clips, accessible through its website. It is most unlikely that its newspapers would be exploring this so energetically if they were part of a bigger group that already controlled a specialist video outfit, such as a TV network. Reality and infotainment TV shows demonstrate the capacity for cross-platform applications through contractual arrangements, rather than common ownership. Indeed, the choice of cross-platform partners is more likely to be competitive where program-makers’ decisions are not effectively compelled by common ownership. Because of the limited coverage of the cross-media rules, they have not prevented two of the three commercial TV networks having large magazine interests, or pay TV providers having interests in telecommunications, notably mobile and broadband access. The cross-media rules are not imposing any significant restraint on media companies genuinely interested in to exploring new creative possibilities in the convergence of media forms. The risk of serious further concentration in Australia’s media is real. A minimum of five commercial media groups would allow the number of groups in the major markets, roughly, to halve. In the main regional markets, currently served by three commercial TV licensees, two commercial radio providers and a daily newspaper, the limit of four commercial media groups would allow a single entity to control a TV station, two radio stations and the newspaper, effectively creating a monopoly of the main outlets of local news and information. This is unacceptable, even in an environment where established media outlets are being supplemented by important new online sources of information and opinion. New media access is still well below the near universal household penetration of free-to-air broadcasting;7 the news sites which are most accessed are those controlled by established media operators;8 and much of the news content in new media comprises reformatted versions supplied by the established companies or, in the case of pay TV, overseas channels. The trends used by the opponents of cross-media rules to justify their removal are real enough—declining use of the three regulated media, the popularity of cross-platform media experiences, increasing availability of alternate sources of information and opinion, increasing audience/user involvement in the creation and distribution of content. But the policy change needs to be argued on its own merits. A clear case needs to be made not that the world has changed since the cross-media rules were passed, but that the world will be better if they are now removed. It will not. At best, the opponents of the
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Two-thirds of Australian households had internet access in mid-2005 [25% broadband, 40% dial-up]. 78% had a DVD player and 24% subscribed to pay TV. Free-to-air television was watched every day by 73% of Australian households. Two-thirds of pay TV households watched every day. Around half of households with DVD players used them less than once a week: Eureka Strategic Research, Digital Media in Australian Homes (Sydney: ACMA, November 2005). 8 The Top 10 news and information websites in the week ending 10 July 2005 included five controlled by News Interactive [news.com.au, Herald Sun, The Australian, Daily Telegraph, Fox Sports], two controlled by Nine [National Nine News and Ninemsn Weather], two controlled by Fairfax [SMH and The Age], and one controlled by Australia’s Number 2 telecommunications carrier [OptusNet News].
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rules argue that the likely detrimental results, partly conceded in the proposed additional protections for local content and radio program formats, are not large. Australians know their media is already too concentrated. The Australian Survey of Social Attitudes 2003 found that 81% of Australians either agreed or strongly agreed that media ownership in Australia was too concentrated among a few rich families.9 The impact of ownership, and the commercial interests of owners, on content is plain, demonstrated recently by the Bulletin’s commemorative issue following the death of Kerry Packer, and documents in Channel 7’s case against the AFL, Nine, Ten and Foxtel, revealing undertakings given by media companies to support and promote the sport rather than ‘bag’ or ‘demonise’ it.10 Ownership diversity does not guarantee a diversity of content and viewpoint. But further concentration in the ownership of Australia’s media will have an inevitable result. Halve the number of owners in the major centres and the diversity of outlook and viewpoints, especially on issues where the proprietors have a direct interest, will be greatly reduced. Regulator’s role If there is to be a ‘minimum number of media groups’ requirement, it should be administered by the ACCC. ACMA’s enforcement powers should be enhanced as proposed. Timing If changes are to be made to the ownership and control regime, they should be linked to the end of the simulcast period, not to the automatic changes to the regulatory framework in 2007.
18 April 2006
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Gibson, Wilson, Meagher, Denemar and Western, Australian Social Attitudes: The First Report (Sydney: UNSW Press, 2005), pp. 232-3. 10 Guarantees from Nine about editorial coverage; marketing support from News Ltd newspapers; ACP to support the AFL and run minimum four stories a year to promote growth and development: Jeni Porter, ‘Soccer chief denies any attempt to silence critics’, The Age Sport, 9 November 2005, p. 7.
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