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Ian McGill

Ian McGill, Allens Arthur Robinson

In discussing the regulatory structures, I will be analysing at the structural level, focussing on content, the provision of conditional access or access control, and the provision of carriage.

We will start with a copper wire, which in terms of the technology is streaming through to ADSL. There are no regulatory requirements under the Broadcasting Services Act here. The Minister helped us all by originally stating that streaming on the Internet ought to be regulated, and then backtracking very, very fast, after he took some expert advice and some political advice, to clarify this under the Section 61C determination. Of course the fact that you needed a determination at all raises more profound issues, though I don't propose to go into that.

So if you're a content provider on the Internet, and you're wanting to provide the interactive content that I refer to, then obviously there are industry codes that apply. Schedule 5 of the Broadcasting Services Act, which applies to all the naughty stuff, is what I call the 'take down notice regime'. The Telecommunications Act applies, which I have put there quite deliberately. The content service provider rule structure outlined in this Act applies here. The Act provides a beautiful definition of what a content service provider is, but there are no rules. Though there is clearly the ability to formulate rules.

Then you get into the HFC network. There are only two: the SingTel network (is it called SingTel yet?) and the Telstra network. I think the regulatory analysis here is the same as for the copper wire. Except that we are talking digital here, which means there is potential for ACCC access rules to apply. I say 'potential', as there is potential for them to apply also to set-top units. They would certainly apply conditional access functionality embedded in the set-top units.

I don't think it has ever been suggested (though somebody can correct me), but these rules don't apply to subscriber management type services or play-out centres, or to all of the infrastructure and support that you need to run a pay TV or interactive entertainment type of business.

When you get into near video-on-demand, you do require a licence because near video-on-demand is effectively a broadcasting service. The true video-on-demand is a point-to-multipoint service, and so it would appear that no licence would be required under the Broadcasting Services Act. So that type of interactive content, which is true video-on-demand, shouldn't require a licence.

Then we get to digital transmission using what are called the 'broadcasting service bands', which is that part of the radio frequency spectrum that the Australian Broadcasting Authority (ABA) is given responsibility for allocating. That in particular includes the digital spectrum allocated to the free-to-airs, and also the remaining spectrum that will be allocated for datacasting.

Structural regulation has been interposed here. If you're a commercial television operator, then you can't be a datacasting operator until the moratorium period expires. And certainly, if you're a commercial television operation, you can't be a subscription television operator using that spectrum. So that's what is called a structural regulation to the carriage service provider.

As far as the future content service provider industry is concerned, you're limited, as I understand this spectrum, to providing enhancements. So if you're in the business of providing interactive television, you can provide enhanced services, or you can provide electronic programming guide-type technology.

Limited multichannel content is permitted. Some of it is traditional television, or actually almost all is what we would regard as traditional television content. I don't think that when the commercial broadcasters talk about multichannel they are really talking about interactive. But I may be wrong on that.

Next we get to datacasting content, which nobody wants to hear about because it is all irrelevant. It has highly regulated genre restrictions, including anti-avoidance provisions, which would prohibit you from delivering a datacasting service that looks like commercial television.

And then you have digital transmission on the non-broadcasting services bands. This is the bits of the radiofrequency spectrum that are allocated by the Australian Communications Authority, not the Australian Broadcasting Authority. So this includes satellite spectrum. It also includes the spectrum that Steve Cosser has bought, the local wireless loop spectrum that Rob Nicolls earlier adverted to. The datacasting genre restrictions don't apply to this spectrum.

There is no reason today why Foxtel or Optus couldn't commence a BSkyB business. The reason they choose not to do it is because there are obvious asymmetries between the potential of their satellite offering and their analogue offerings on the analogue cable. That is the most profound issue that the pay TV broadcasters face at the moment: upgrading to digital.

Otherwise, if you are dealing with the non-broadcasting services bands, the analysis follows pretty closely with what was earlier indicated as applying to the HFC cable.

Now I will move onto ideal future regulation. It would help lawyers, as I think it would help all of us, if we had one set of legislation, and perhaps it would also be helpful if we had one regulator. It would be helpful if there was some coherence. It would be helpful if we could set out some regulatory aims which were broadly along the lines that a consumer ought to be able to receive world class interactive content. There shouldn't be a regulatory reason why people don't get world class interactive content. It is not for government to dictate what it is that consumers ought to buy.

One potential business outcome, which does involve a hell of a lot of government intervention, is that we persuade the free-to-air networks and the pay TV operators (satellite or cable) to form a joint venture company, or a joint venture entity. We'll just call it 'Platform Co'. There would be agreement amongst them on what standards ought to apply to the set-top box or set-top unit that will deliver the sort of content that we are talking about. There would also be agreement on the subsidy for the provision of that set-top box into the field.

The way 'Platform Co' could fund a capital expenditure programme, by way of example, could be through the box being sold at a subsidised price, coupled with monthly subscription or payment. Even if the monthly subscription was $10 or $20 a month, if you got $20 a month, that's $240 a year, and within about three or four years you have pay-back on the original investment. 'Platform Co' doesn't really have to worry about that if it structures itself appropriately, because it can form a sort of entity that could securitise that income stream, and just go to one of the nice friendly banks that we have in this country and just borrow the whole lot. It would have to be a tax partnership, because there would be losses in the early years of that venture, though that is comparatively easy to do.

The relationships or the contracts between 'Platform Co' and the content service providers would be relatively simple, whether they be free-to-air or pay TV. I would say let the market take care of that, and the government can stay out of it. How 'Platform Co' decides it is going to deal with the recovery of the subsidy by the various service providers that want to come onto the box, is a matter for commercial negotiation. Government, or regulation, should only get involved with the establishment of 'Platform Co' if the market doesn't provide a solution.

It is clear though that in balancing the incentives on the one hand, and freedom of access on the other, the market is not working.

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