Autumn Lectures Series, 5 April 2004.
The broadcasting sector is undergoing a process of sweeping change driven by the advent of new technology, particularly the emergence of digital technologies and the Internet. Although our broadcasting sector appears superficially to be very similar to its counterpart of 10 or 15 years ago, the sector is struggling to come to terms with a wave of very destabilising changes which are likely to change it beyond recognition.
Because broadcasting involves the use of a scarce public resource, spectrum, it is inevitably a highly regulated sector. The political sensitivity associated with the functions it performs, particularly its role in influencing public opinion, increases the attention devoted to the sector by legislators and regulators.
Television plays a major role in the lives of most Australians. We spend a lot of time watching it, we devote billions of dollars of advertising revenue to financing it, and we organise many of our individual and collective activities around it. The primary reason why broadcasting policy is so important and controversial is the fact that television is so central to our lives.
In the near future, Australian households may enjoy the benefits of many more television channels, hundreds of pay TV channels, interactive games, information and shopping through television, Internet via television, and programs playable on demand. The potential explosion in entertainment options and consumer choice which changing technology will engender stretches the imagination. No-one can predict how investment decisions, consumer behaviour and further technological innovation will shape this revolution, but it is clear that the world of broadcasting will look very different in 10 years' time.
Our contemporary challenge is to restructure existing regulatory arrangements to enable technological innovation and consumer choice to drive change, while maintaining the central policy objectives which underpin our society's approach to broadcasting.
In reforming regulatory arrangements to meet the needs of a changing sector, the following core objectives will guide Labor's approach:
1.ensuring that all Australians continue to have access to high quality free-to-air television services, including high quality public broadcasting services
2.ensuring that the subscription television sector can provide high quality products on a sustainable basis to as many customers as possible
3.maximising consumer choice and competition in broadcasting
4.guaranteeing diversity of voice in broadcasting and preventing excessive concentration of ownership
5.maximising Australian investment and employment in the broadcasting sector
6.encouraging rapid innovation and technological improvement to enhance the quality and availability of broadcasting services.
Television broadcasting has been thrown into a certain amount of turmoil in recent years by the advent of digital technologies. The transition from analogue to digital is opening up opportunities for enormous improvements, but also seriously destabilising existing regulatory and commercial arrangements built around analogue delivery systems.
In 1998, with Labor support, the Government legislated a framework for the introduction of digital television into Australia. The key features of this policy included:
·free additional spectrum provided to the free-to-air networks to enable them to broadcast simultaneously in analogue and digital;
·analogue spectrum to be returned to the Government at some point after January 1, 2008;
·a moratorium on any new commercial television licences being issued until January 1, 2007;
·High Definition Television (HDTV) mandated as the required standard for digital broadcasting, with a minimum of 20 hours per week to be broadcast in HDTV by networks from January 1, 2003. The Government later extended this date to July 1, 2003, with both national and international enthusiasm for HDTV remaining very limited. The weekly requirement of 20 hours has been annualised to 1040 hours;
·a ban on multichannelling or using digital spectrum to broadcast more than one signal, imposed on the commercial networks, but not on the ABC and SBS, who are allowed certain genre-specific digital multichannelling;
·additional spectrum for two "datacasting" licences, permitting licence-holders to transmit data in electronic form via television, but not to engage in actual broadcasting.
The clear intention behind this framework is to ensure that the transition from analogue to digital broadcasting is made with as little change to existing arrangements and interests as possible. As such, the model has been widely criticised as entailing excessive protection for the free-to-air broadcasters, and seriously inhibiting innovation and consumer choice. In Britain, for example, the Government chose to license six licence-holders to broadcast four digital channels each, a total of 24 channels. No other nation has mandated HDTV as the digital broadcasting standard, and no other nation has introduced a licence category for datacasting. The auction of datacasting licences ultimately collapsed, as there were no serious bidders for the licences because of the restrictions attached to them.
Digital broadcasting provides the basis for three major changes from the world of analogue: better quality reception, interactivity between individual viewers and broadcasters, and more channels. The Howard Government's model was designed to preclude the most significant benefit available from digital, more channels, from eventuating until well into an indefinite point in the future. A series of reviews of specific aspects of the Government's legislation has been provided for in order to examine the outcomes in practice under its digital regime, and consider alternatives for future regulation. The Government is still pondering how to undertake these reviews.
The commercial television networks have defended the Government's regime strongly, although the Seven Network has broken ranks and called for multichannelling to be permitted. This may require the HDTV requirement to be abandoned, because the available spectrum for digital broadcasting cannot easily support both, although improved compression technologies may resolve the problem. Other major media organisations, such as News Ltd. and Fairfax, have criticised the Government's regime as unduly prescriptive and restrictive. However, News Ltd has opposed the Seven Network call for multichannelling to be permitted, arguing that this would further unfairly advantage the free-to-air broadcasters against competition from pay television. The Seven Network has argued it will be hard for free-to-air television networks limited to one channel to be able to effectively compete with a future digitised Foxtel network delivering hundreds of channels.
The other two commercial networks argue that their overall advertising revenue has been static over the past couple of years, and that an increase in channels, either through multichannelling or a new commercial network, would lead to a loss of quality as the same amount of advertising revenue would need to be distributed over more channels. However, the fact that their advertising revenue grew by 25 per cent in real terms during the second half of the 1990s and has surged again recently undermines the strength of this argument. Big increases in the cost of the rights to broadcast major sporting events also suggest that the networks' argument is open to debate.
The commercial networks also argue that as longstanding businesses with a strong track record of delivering quality products they are entitled to some protection from serious disruption accompanying the transition to digital broadcasting. They point out that in the absence of appropriate regulatory arrangements there is a serious risk that most quality content will drift to pay television, thereby seriously undermining the viability of free-to-air broadcasting and disadvantaging the very large number of lower income Australians who are unable to afford pay television.
After resolutely defending the merits of its digital broadcasting regime, the Government is now flirting with the prospect of making major changes. In particular it has signalled an interest in allowing the commercial networks to multichannel and abandoning the HDTV requirement. It is unclear at this point where Government policy is likely to head, but it would appear that its digital broadcasting regime is starting to unravel. Only about 250,000 consumers have purchased digital televisions or set-top boxes which enable analogue television sets to receive digital signals. Without major reform, the Government's digital strategy appears likely to stall. Ultimately, the switchover from analogue to digital depends entirely on the vast majority of households acquiring appropriate digital receivers. Until this occurs, analogue broadcasting will have to continue, and incentives for investment in digital-based innovations such as interactivity will be diminished by the small size of the market.
Conversion to digital is also a critical issue in pay television. Foxtel is currently investing around $600 million to digitise its network, in the wake of a deal with Optus which has left Foxtel as an effective monopoly provider in pay TV, at least at the wholesale content level. This agreement raised many complex regulatory issues regarding access to the Foxtel network, access to content, and the prospect of Foxtel becoming a digital gatekeeper. These issues have largely been addressed through the prolonged and complex process of ACCC approval of the Foxtel-Optus deal.
All of these issues have an impact on the future of the cross media and foreign ownership rules. Labor has steadfastly opposed the Government's attempts to abolish these rules, but we do accept there is significant scope for reform. Relaxing foreign ownership restrictions would be likely to facilitate more competition and diversity in media. Similarly it is difficult to see why ownership of music radio stations is an important issue in protecting diversity of public debate and information. The Howard Government has taken an all or nothing approach to its legislation on these issues, effectively precluding any prospect of negotiation with Labor. The fact that it ultimately rejected an amended bill which abolished foreign ownership restrictions and significantly liberalised cross media ownership shows that the Howard Government is beholden to the major media proprietors, who would not accept this outcome.
In the medium term, the advent of digital technologies is likely to alter the face of broadcasting as we know it. Personal video recorder systems will allow consumers to play programs at times which suit them rather than the listed time and may enable them to screen out advertisements. Interactivity will dramatically expand the uses to which television can be deployed. And the growth of video-streaming over the internet as direct competition for television is likely to affect the commercial viability of all existing broadcasting systems.
For Australia's commercial television broadcasters to survive and prosper, it is essential that they adapt to the prospect of such changes. Their approach to the advent of digital broadcasting has been very protectionist and rather unimaginative. In essence it has involved moving from analogue to digital with as little change as possible.
Commercial broadcasters eventually will need to rethink their business. If they allow themselves to be constrained by the analogue television model which has changed very little in almost fifty years, their prospects are decidedly gloomy. If on the other hand, they focus on the core value they add and reorient the way that value is delivered, there is no reason why they should not continue to be dominant players on the Australian media landscape for many more years.
Our TV networks are essentially aggregators of electronic content. They connect one group of people, content creators, with a much larger group, viewers. Their contribution consists of organising, arranging, promoting and funding that content and enabling viewer choice to be fulfilled.
Like all intermediaries, their role is threatened by the powerfully disaggregating effects of the Internet and digital technologies. Yet if they adapt to these changes, they are still ideally positioned to remain very powerful and lucrative businesses. Connecting content creators with audiences will still be a vital part of media and entertainment, and those who have traditionally played this role in the analogue world must start favourites in the race to dominate the market in the new world.
These changes will present different challenges for the ABC and SBS. The ABC in particular faces a significant medium-term threat to its relevance as a television broadcaster.
One vital role of ABC television is to serve a diverse array of intermediate sized audiences. Such audiences are usually too small to command time-slots on commercial television, but can number in the hundreds of thousands. Quality current affairs, religious programs and classical music are examples of content which the ABC currently delivers for such audiences. Political satire, indigenous issues, rural programming and some alternate music genres are other examples. In effect, the ABC fills a lot of gaps which are left by the inevitable one-size-fits-all programming strategies of the commercial networks.
Changing technologies will eventually make such audiences commercially viable, and may lead to commercial broadcasters gradually squeezing the ABC out of the market. This has already occurred in premium sport, where changing market dynamics have pushed the ABC out of sectors it once thrived in like football and cricket. If it becomes economically viable to broadcast high quality classical music programs, commercial broadcasters will do it, and spend money on programming which is not feasible for the ABC.
Local content rules will also come under enormous pressure from changing technologies. The inability of the Government to effectively regulate Internet pornography is an early sign of the difficulties likely to arise in local content regulation. If Internet based broadcasting flourishes, it will be very difficult to employ quotas as a means of guaranteeing local content.
This is where the renewed relevance of the ABC, and to a lesser extent SBS, will be found. If we are to guarantee a substantial amount of local content in Australian broadcasting, and ensure that we continue to have a healthy and vibrant local industry, direct Government funding through the national broadcasters will be vital. Our longer term goal must be to revitalise the "Australian" in Australian Broadcasting Corporation.
ABC television in ten or twenty years time will be very different, but just as important to our society. The ABC will become the primary means by which we broadcast our own stories to ourselves, and ensure that our unique Australian identity continues to be reflected on our television screens. It will broadcast on numerous channels and through several technologies. It may commission and sell local content as well as broadcasting it. The ABC's changing role is likely to require greater, not lesser, levels of public funding.
These changes will not be upon us in the near future, but they will happen eventually. Our challenge is to build a new regulatory and funding framework which is relevant to contemporary technology and circumstances but which does not unduly inhibit the opportunities offered by new technologies and business models. All of the issues, I have canvassed are connected to each other. They should not be addressed in isolation. A Labor Government will address these issues in a strategy to be announced prior to the election which will enable Australia to move beyond the crumbling mess of the Howard Government's digital television regime and achieve the objectives for future broadcasting which I have outlined.