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Ian McGill
Ian McGill, Partner, Communications, Media & Technology Group, Allens Arthur Robinson
Allens Arthur Robinson have made available a publication entitled DTV reviews 2004-05 which provides an introduction to the reviews and a history of the legislation and some source materials.
The document is available on the AAR web site, and includes links to much of the underlying material. We will update that site as the reviews develop, and would be grateful for any feedback on how we could improve the materials available.
I have only two key points today
First, the digital tv reviews must be seen with the benefit of historical hindsight, and an appreciation of the quid pro quo structure of Australian media regulation.
Each review issue is part of a complex web of benefit and burden or obligation, and one thread of the web should not be examined in isolation from issues linked to it. The enmeshing of these issues is part of the ongoing tension between Government's numerous policy objectives, including competitive neutrality between different media delivery platforms or infrastructure, and the irrepressible force of the market and developments in technology.
Second, in responding to the reviews whatever side of the debate one is on, a useful intellectual framework is to consider each issue in the current reviews from the perspective of not only historical origins, but also public policy:
- for example, competitive neutrality
- for example, the National Competition Policy Principles that regulation that restricts competition to achieve policy outcomes should have a clear social benefit that outweighs the costs of restricting competition.
History
History is important for lots of reasons, not the least that history explains the present, and provides insights for the future.
The history of the matters the subject of the Digital TV reviews includes the following key facts:
· the pay television industry was borne following at least a decade of strenuous opposition from the commercial broadcasting incumbents, and at least 3 expert reports recommending that Australia have pay television
· it was nearly still born, and bore the scars of the then Government's entirely mistaken view that satellite delivered pay television licences A, B and C would launch a new industry: some of those costs were embedded in the industry for many years (eg expensive studio deals)
· no pay tv industry representatives of the quality of ASTRA were able to influence regulatory outcomes such as the 10% drama expenditure condition, the anti-siphoning rules and prohibitions on carrying advertising
· digital spectrum loans of a full 7 megahertz to commercial broadcasters were justified initially on the promise of HDTV and eventually modified to a quota of HDTV combined with must carry SDTV;
· the anti-siphoning rules and the rugby league wars that followed, and particularly the settlement of that war, forever changed the media landscape by giving the leading commercial broadcaster, the Nine Network, a strategic shareholding in FOXTEL, the most successful (in terms of subscribers and consumer recognition) subscription television operator in Australia.
· in many respects the open television industry have failed, and continue to fail, to cooperate to drive digital forward, which must have been a key promise supporting the loan of the 7 mghz of spectrum in the first place. I think I am correct in saying that the only industry EPG for open broadcasting is that provided by digital 44 as part of a digital datacasting trial.
· digital pay television started with satellite and now includes cable from March 2004. I can say from personal experience that the FOXTEL digital service, including its EPG, which is interactive, is brilliant.
I wanted to talk about quid pro quos. Often this is seen as something given as compensation: in Australia's media industry, particularly its structrure, often a benefit was conferred by regulation but at the cost of a burden imposed by another regulation.
Benefits and burdens were conferred across media sectors or within media sectors depending upon the issue.
A good example of the quid pro quo across media sectors was the ridiculous genre restrictions imposed on datacasting licences. The burden borne by those licences (remember the auction that was cancelled) was matched by the benefit conferred on the open broadcasters by the moratorium on further entry. The relaxation of the genre restrictions on datacasting licences must be relevant to the continuation of the FTA moratorium and must be considered together and indeed are grouped together.
Further examples of quid pro quos are in the slide (now attached):
For example, if the moratorium is lifted on a fourth open network, we can expect a strong argument that Australian content regulation should be modified to recognise the increased competitive pressures on the open broadcast industry, particularly reduced advertising revenue after short term one off effects.
The prohibtion on multichanneling was to protect the fledgling subscription industry, and to recognise the burdens associated with its birth and its road to profitability. The point is this: no review can sensibly review multichanneling without also reviewing the burdens that continue to be imposed on the subscription industry, particularly antisiphoning. If a protection is to be released so must its corresponding burden.
So my message is that probably all of the matters the subject of the digital review are considered in isolation at your peril. Each provision subject to review has not only a history, but a where a benefit was conferred on either the subscription or open broadcasters, the Government imposed a quid pro quo.
So, whatever side of the debate you are on, if you are supporting the status quo or arguing for change, think about the implications for your business of the continuation or removal of other regulation.
A framework for submissions
Identify the relevant policy that underpins the matter the subject of review, and consider the provisions which are related to it, and their respective histories. Have markets changed? Has technology marched on?
Competitive Neutrality
The principle of competitive neutrality is that similar services are regulated similarly. If they are not then investment decisions are distorted or biased as a result of regulations.
In introducing the 1998 legislation that underpinned the introduction of digital services, one of the objectives was to seek competitive neutrality between commercial and national broadcasters, the subscription tv sector and other communications sectors.
By this I take it that the Government did not intend that the regulation of digital television would of itself advantage one sector of the media industry over another. If open broadcasters and subscription broadcasters are in different markets, regulation should not give one a leg up over the other. However, if they are in the same markets, then equally both should be regulated in a similar way.
A suggested framework for submissions
From time to time the ACCC is worth listening to. Its report to Senator Alston on Emerging Market Structures in the Communications Sector is compulsory reading for anyone filing a submission in the review.
I am assuming that no one seriously contends that the Australian media industry should be sheltered work shop, immune from competition.
Equally, we need to recognise that industry protection, and the costs that may go with that may confer benefits on consumers.
Perhaps a sensible approach, consistent with the National Competition Principles, is that the burden should be on those arguing for continued regulatory restrictions on open and subscription broadcasting to demonstrate that the benefits of the relevant restriction outweighs its costs, and that the policy objectives cannot be achieved by using a less restrictive means.
For example, if free spectrum granted to the open broadcasters is made available to the open broadcasters for subscription television, then this would offend my principle of competitive neutrality: no pay tv provider gets its access to spectrum (whether on satellites or cable) for nothing. Further, I would imagine the benefit of a restriction on the provision of pay tv on free spectrum, which must be the continued development of a new sector in the Australian media landscape, must outweigh the costs imposed on the open broadcasters of implementing a pay television business.
To download Ian McGill's powerpoint presentation click here.
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