AUSTRALIAN DEMOCRATS

Television Broadcasting Services (Digital Conversion) Bill 1998 and Datacasting Charge (Imposition) Bill 1998
CONTENTS

AUSTRALIAN DEMOCRATS

Comments: Television Broadcasting Services (Digital Conversion) Bill 1998

This Bill outlines the Government's policy objectives for the conversion of analogue terrestrial television to digital terrestrial television broadcasting services (DTTB). The Minister for Communications, the Information Economy and the Arts, Senator Richard Alston announced the Coalition Government's digital policy on 24 March 1998. The Television Broadcasting Service (Digital Conversion) Bill (the Digital Bill) and the Datacasting Charge (Imposition) Bill 1998 were introduced into the House of Representatives on 8 April 1998. The Bills were referred to the Senate Environment, Recreation, Communication and the Arts Legislation Committee on 14 May 1998, with a reporting date of 22 June 1998.

The Democrats consider that this Bill is being rushed through the Parliament without time for adequate scrutiny. It should be noted that the Democrats, ALP and Greens opposed this extremely short deadline for inquiry. This report also notes the report of the Senate Standing Committee for the Scrutiny of Bills raised concerns about the imposition of a datacasting levy by regulation [1].

The Democrats accept that the shift to digital technology is inevitable. The conversion from analogue to digital broadcasting provided the Government with a unique opportunity to reassess broadcasting and telecommunications policy without proscribed outcomes. It remains to be seen whether this Bill actually provides this outcome. So, while the conversion to DTTB is inevitable, the Democrats do not support the Government's attempt to fast track this legislation, in its current form, through the Parliament. The change from analogue to digital is the most significant telecommunications development Australia has confronted. It is crucial to get the policy and the legislation right in the first instance.

This legislation raises many more questions about digital terrestrial television broadcasting than it provides answers. This is evidenced in the number of inquiries to be undertaken prior to 1 January 2001 and the number of outstanding issues confronting the Senate Committee.

Rather than being a minority report per se, this report is a general commentary on aspects of the Government's digital conversion policy and on recommendations made by the Committee in its majority report.

Background

Free-to-air television services are currently terrestrial analogue broadcasts, where signals are transmitted via towers and received into homes via antennas in the form of a continuous wave. With digital terrestrial television broadcasting (DTTB) the signal is transmitted in binary code form – or in bits of information. The advantage of this digital data signal is that it can be manipulated, or compressed, allowing a more efficient use of the broadcast spectrum, and a potential for a greater variety of services. Background noise and interference can be easily removed, improving both audio and visual reception. The conversion to digital technology requires conversion of the broadcasting transmission infrastructure and television receivers.

DTTB systems have been designed to operate using the same channel bandwidth as analogue systems to enable integration with the current use of the spectrum. The ABA digital planning specialist group recommended that all current free-to-air stations be granted 7 MHz of spectrum for DTTB transmission [2]. A single DTTB transmitter provides the capacity to send approximately 20 million bits per second (20 mega bits) of data to the home. This signal is sufficient to provide one high definition television broadcast (HDTV) of a sporting event, or possibly two high definition movie channels. The signal is also capable of providing 3 or 4 live sports programs equivalent to current broadcasting quality. It might also be enough to provide up to 6 `talking heads' programs. This capacity to replace a single analogue channel with several other channels is referred to as “multi-channelling”. The equipment which allows the `data pipe' to be manipulated in such a manner is referred to as a “multiplex”. The spare capacity created by digital transmission can also be used to provide captioning, news and market information and other data services. These services (whether in the form of data, text, sound or images) are referred to as “datacasting” services.

On 18 June 1998, the DTTB Selection Panel agreed that the European system (DVB) would be the Australian standard [3]. Apart from the standard and its compatibility with the PAL analogue system, Government policy should remain mindful of the cost of consumer equipment and the ability of either system to achieve well constructed spectrum usage objectives. It is expected that since the decision on the standard has now been made, the costs to consumers will be able to be more accurately determined.

In this context, the Democrats endorse Recommendation 4 of the Committee (Chapter 2, p. 21), that there should be a compatibility of approach for the consumer in standards necessary for DTTB.

It is extremely difficult to estimate the costs of conversion from analogue to digital terrestrial television broadcasting. In its submission, the Federation of Australian Commercial Television Stations (FACTS) estimated the costs of conversion for the three commercial networks to be somewhere between $500 and $740 million in capital investment in the initial stages of conversion. FACTS also claim the conversion will add approximately $30 to 40 million to their annual operating costs [4]. The Government has not had these costs independently assessed, but have taken them for granted, basing its policy entirely on these figures. In his personal message, the Minister stated that:

The Government is loaning the free-to-air networks, free of up-front charges, the spectrum required to provide HDTV during their simulcast period…because the networks will effectively have to pay twice their normal transmission costs in addition to the estimated $500 million for new digital transmitters, studios and production facilities. [5]

To receive digital television, consumers will require either a new digital television set, or a set-top box to convert the digital signal back to analogue. The use of a converter box will not improve the quality of the picture but it will eliminate interference such as ghosting and will provide CD quality sound. To receive HDTV, consumers will have to purchase a wide-screen high-definition television set.

As well as receiving DTTB the set-top box will also enable consumers to receive digital cable and satellite services, and connect to the telephone system via a modem. This creates a path for the convergence of telecommunications, television and computing services. This creates an even greater imperative to ensure the digital legislation and the Government's policy allows for new technological possibilities and consumer choice.

Just as the conversion costs are varied so too the cost of equipment to consumers. Accompanying the Minister's announcement on 24 March 1998, the Department of Communications and the Arts stated that:

It is difficult to predict how much sets will cost and the price could fall rapidly once the market is established. Large wide-screen digital sets capable of displaying high definition video will probably cost several thousand dollars, while conventionally sized sets are likely to approach the prices of current sets. The price of set top boxes will depend upon their functionality, but will probably be a few hundred dollars. [6]

But the Australian Consumers' Association [7] predicts the prices of television sets will be much higher, perhaps $15,000 a television set. And this is before consumers have to replace their antennas and video recorders.

Planning Digital Conversion

The Australian Broadcasting Authority (ABA) have been monitoring developments in digital television since 1993 when a specialist group comprising industry and government representatives examined options for DTTB systems for Australia. The final report of the group, Digital Terrestrial Television was presented to the ABA in 1997. The report recommended (amongst other things)

The Government's Decision

On 24 March 1998, the Minister for Communications, the Information Economy and the Arts announced the Government's decision on the introduction of digital television.

The Democrats agree that the Government needs to provide certainty to the broadcasting industry in the conversion from analogue to DTTB. However, we remain to be convinced that the Government has provided the best and most workable model for the delivery of digital broadcasting for the majority of Australian households. From the evidence of several witnesses appearing before the Senate Committee, members of the industry and consumer advocates share the Democrats' concerns. We all agree that the conversion to digital is inevitable and necessary. We do not want to halt the process. Quite the contrary. We are concerned, however, that the Government's policy mandates the technology and its use and in doing so may favour the existing commercial networks, to the detriment of other service providers and consumers.

Precisely because of the number of questions which are unanswered, and the complexity of issues subject to ongoing review, the Democrats endorse Recommendation 5 of the Committee (Chapter 3, p. 29), that all reviews scheduled to be carried out before the year 2001 be undertaken at the earliest possible opportunity.

The Democrats believe that the Australian Parliament should have an overriding concern with these matters, and should therefore have an integral role to play in the processes and findings of the statutory reviews to take place before 2001 and 2005.

The Federation of Australian Commercial Television Stations [9] had put forward a very strong case in support for the Government's legislation, with the exception of the prohibition on commercial stations to `multi-channel' [10]. Indeed, FACTS is almost fatalistic about the need for the legislation to be passed in the Senate prior to the 1998 winter recess, and certainly prior to the next election. They claim that the legislation should pass to enable the commercial broadcasters to more effectively plan their implementation and equipment purchases.

FACTS support the introduction of mandated HDTV, believing it to be the driving factor in the take up of digital receivers amongst Australian viewers. However, they also maintain that eventually, they will need to be able to offer multi-channelling to enhance a station's service to viewers [11]. This underpins FACTS costing and argument for the spectrum loan and provides the legislative framework. At this time it is difficult to know whether the commercial networks will actually provide HDTV services, or overtime, will seek to multi-channel.

Conversion Costs

FACTS submit that the overall capital expenditure associated with digital transition may be as high as $750 million over the next five years for metropolitan stations and up to $245 million for regional broadcasters. Simulcast costs of between $30 and $50 million per annum are also estimated, with an all up cost to the industry of approximately $1 billion. FACTS do not detail how these figures are derived. Hambros Corporate Finance Limited provided FACTS with cost estimations, although FACTS believes these have been under estimated [12]. If the industry cannot provide the Committee with a detailed cost estimation, it is difficult to believe these figures. Of this, the network pay a tiny $178 million in licence fees (derived as a proportion of their total advertising revenue). In comparison, the ABA reports that the 15 mainland capital city services earned $2018.2 million in 1996/97, representing 78.9% of the industry revenue. This revenue generated a broadcasting profit of $346.5 million [13]. This is clearly not a fledgling industry.

The ABC estimates digital conversion will cost under $200 million and the national broadcaster offered to partially self-fund conversion by “rationalising property holdings” in line with recommendations in the Mansfield review. However, the Government mistrusted the ABC's estimates, and referred their funding submission to Arthur Anderson Corporate Finance for an independent assessment. AACF found in favour of the ABC's estimates [14]. Despite this, the Government has only provided the ABC with $20.8 million over the next five years [15]. This figure does not include transmission costs, as the ABC uses the National Transmission Network for its terrestrial broadcasting. The Government provides transmission funding for the NTN from a separate budget allocation, which is expected to increase during the simulcast years.

Indeed, the Democrats have information which suggests that the real costs of digital conversion is likely to be a small proportion of the estimated $1 billion identified in FACTS submission, and probably half. Estimates we have received state that the incremental conversion costs will be in the range of $60 to $ 80 million for all three networks on a five capital city basis, and the regionals at approximately $100 to $130 million, making a total of no more than $210 million maximum.

In Australia, the capital costs consist of the main transmitter signals in Sydney, Melbourne and Brisbane, hung off existing towers with new cables and antennae arrays. The purchase of digital equipment is already underway, and has been for some time, under normal studio equipment replacement cycles. From what the Democrats have been able to ascertain, camera and edit suites are largely digital already.

This demonstrates that much remains unclear about the real costs to broadcasters of DTTB conversion, and therefore it requires ongoing investigation. We do not doubt that digital conversion will be expensive, but if FACTS have not calculated their costs accurately, it calls into question the whole basis on which the Government has predicated its digital policy and commensurate legislation.

New Commercial Players

An essential element of the digital package is the moratorium on new commercial entrants until 2008. FACTS submitted this is a crucial component because of the investment commitment required by the existing commercial players and for the maintenance of the quality and diversity of services available to consumers. But is a moratorium on new entrants until 2008 logical? Given the potential for new services to emerge in digital technology, new entrants could add to the diversity of product and services rather than detract from them. Furthermore, it appears likely that new entrants would face the same infrastructure costs as their established counterparts because they would not be granted free spectrum space and would incur fees, taxes and other liabilities. The advertising industry would welcome a new market [16].

ASTRA questions the need to rush the decision on the introduction of DTTB, because there are too many unknowns in policy, legal, technical and economic terms [17]. The Democrats would agree with this assessment. ASTRA's suggestion that a full inquiry looking into these matters be conducted has merit.

The Democrats agree with the Committee that it is essential that the Parliament should be kept closely informed of the progress of digital conversion developments but goes further than Recommendation 6 of the Committee (Chapter 3, p. 30). [18]. The Democrats recommend that a Senate Select Committee be convened to inquire into all digital conversion issues, particularly those issues the Committee was unable to fully investigate, and those which are subject to statutory review. This committee should be convened immediately and have an ongoing interest in DTTB, including all reviews undertaken between now and the final statutory reviews in 2005.

ASTRA further submits that the legislation be amended to

The Democrats support this position. We reject the statement in the majority report that the Explanatory Memorandum seeks to remove any uncertainty by making clear the intent of the legislation [20]. If the policy intention, the prohibition of services and the definitions of other services are contained in the Explanatory Memorandum, they should also be made explicit in the body of the legislation. We would not wish to see a scenario where the courts will have to decide an issue because the legislation did not provide a clear enough framework and therefore operational certainty.

Regional Broadcasters

Regional broadcasters are defined in two groups – multi-station regional and solus-station regional broadcasters. This makes regional broadcasters quite different from their metropolitan counterparts, and worthy of separate consideration.

Regional broadcasters have higher transmission costs per viewer than metropolitan broadcasters and require more relay stations and more transmission towers to cover a wider area. This results in higher infrastructure and operating costs. Most do not have the resources to produce their own programs, apart from local news and current affairs, and purchase their product from networks, or from overseas broadcasters. In aggregated markets, licensees have an affiliation agreement with one of the major networks to provide most of their programming. Licence fees are lower for regional broadcasters, reflecting the lower advertising revenues they receive.

When aggregation of markets commenced, it imposed additional costs for the installation of additional transmission equipment to broadcast throughout a larger region. Licensees in aggregated market received assistance in the form of licence fees subsidies, a waiving of national transmission network fees and sales tax exemptions on purchases of UHF equipment. The assistance lasted in general, for a six-year period [21].

The regional broadcasters are requesting the same assistance in the transition to DTTB, with special attention afforded to solus markets. The Communications Law Centre noted that “we should remain open to the possibility that the most appropriate and cost-efficient technical way to offer digital television services to regional and remote Australia…might not be the same as that for metropolitan Australia” [22].

The majority report recommends that the Government should consider the granting of special licence rebates over a period of eight years to regional broadcasters to assist them with some of their digital conversion [23].

The Democrats consider a licence fee subsidy more appropriate than a full licence fee rebate. In relation to Recommendation 8 of the Committee (Chapter 5, p. 44), the Democrats agree that regional broadcasters face differences from their metropolitan counterparts. However, the Democrats would prefer regional broadcasters to be provided with subsidised access to NTN facilities.

High Definition Television (HDTV)

The Australian Consumers' Association (ACA) believes mandating the broadcasting of HDTV is neither desirable nor sustainable. They predict that HDTV will fail because the equipment will be too expensive and consumers will opt for increased services rather than enhanced picture quality. For those who can only afford the set-top boxes, this will certainly be the case, because analogue televisions will not be able to broadcast programs of HDTV quality.

The ACA in evidence suggested that the `use it or lose it' provisions of the Bill might require strengthening.

“And be prepared, because in three years' time the inquiry will be told `Oh, but we have invested all this money in it. Even if only three households bought those [HDTV] sets, we need to continue to have that spectrum'” [24]

Further, the Democrats doubt the regulator's resolve to implement such a drastic punishment for a breach of spectrum use. A more appropriate penalty may be monetary, together with the loss of the 7MHz of spectrum to an amount capable of broadcasting a standard digital television channel.

Australian Content Standards

When announcing the digital conversion package on 24 March 1998, the Minister stated that “the current stringent local content requirements which apply to analogue commercial free-to-airs will continue to apply in the digital environment.” [25]

Ordinarily, the Democrats would applaud the Government's insistence that free-to-air broadcasters broadcast material which reflects Australian values and Australian culture. However, the recent High Court decision in the Project Blue Sky case, disallows the ABA's right to give preference to the broadcast of Australian programs [26]. This renders the content provisions of the Broadcasting Services Act meaningless, unless there is a legislative response to the issue.

The majority report states that the Media Entertainment and Arts Alliance (MEAA) endorses the Government's position on Australian content, because the “Bills contemplate a regulatory framework that would ensure high levels of Australian content on DTTB, a position the Alliance endorses [27]”. This quote, however, is not in context. The MEAA states that the High Court

“calls into question the Government's ability to protect the most critical plank of the broadcasting system…[because] the current Australian content standard was unlawful…[and]…makes a mockery of the concept of Australian content” [28].

The MEAA therefore submits that the offending section of the Broadcasting Services Act, section 160 (d) be deleted, in order that the integrity of the content standard is restored. This is essential if the Government's commitment to Australian content standards is to be realised.

The Committee notes that the Government is awaiting the findings of the ABA's inquiry into the Hight Court's decision. However, the ABA's powers in relation to its review of content standards are limited. The ABA cannot determine if the legislation should be changed, but must create a standard which complies with the High Court's findings. In this regard, there are no guarantees that the ABA can continue to give preference to Australian content standards. The most important aspect of this debate is that Australian content standards do not fall. This issue is therefore integral to the Bill.

Datacasting

Datacasting is defined in the Bill by reference to the definition of a broadcasting service in the Broadcasting Services Act. It is a service other than a broadcasting service that delivers information (whether in the form of data, text, speech, images, or in any other form). The delivery of these services is in the broadcasting services band, and is a service not of a kind specified in regulations.

While not wanting to limit new technologies or the advent of new services within a digital broadcasting environment, the Democrats do not believe it is appropriate to wait for the review in 2001 to determine the adequacy of the definition of datacasting.

The number of unclear areas in the definitions of both datacasting and broadcasting might not make the operation of the Bill workable in the first instance.

Multi-channelling

It is unclear whether the legislation will be adequate to prevent defacto multi-channelling, or actual multi-channelling, despite assurances that commercial networks will not be permitted to provide multi-channel services. The phrase “under regulations the program is treated as incidental and directly linked to a program that is broadcast simultaneously by the licensee” is ambiguous. The Explanatory Memorandum states that the regulations could for example “permit different visual representations of the same event, filmed within the confines of the event, such as the ability to view the event from different camera angles” [29]. This may be too broad. The term `event' also implicitly defines a program type – like live sport – but the actual program may not be live, may not be a sports program, or even an `event'. A lifestyle program, for example, might provide an enhanced service in the form of a shopping guide, or other linked video content. Although not intended by this definition, in practical terms this may amount to multi-channelling.

The Democrats' Position

The Australian Democrats have serious concerns regarding the policy environment in which the decisions about DTTB are being made.

The Government's policy framework for the conversion from analogue to DTTB is based on assumptions derived from analogue broadcasting. The decision to mandate HDTV and not allow new entrants until 2008 exemplifies this. The ban on the entry of new broadcasters may have the effect of further concentrating media power, limiting the diversity of content and the possibility of the introduction of new and innovative services. This requires further and ongoing investigation.

Despite the vital importance DTTB has for the broadcasting future, there has been very little public debate on the issue. It is incumbent upon the Government to ensure that all consumers are made aware of the importance of the introduction of DTTB, with the policy objectives being clearly stated and open to critique. This should occur before the introduction of legislation, rather than after it through a piecemeal review process which pads out the legislation through regulation and other subordinate instruments.

FACTS have argued that its members require 7MHz of spectrum to allow them to provide HDTV, which they believe, is the type of broadcasting service which will be attractive to consumers. This claim is dubious at best. The UK has adopted a multi-channel environment, and it appears likely that the United States, who have not mandated HDTV, will also allow multi-channelling. While commercial broadcast licences are conditional on them not providing multi-channel services, there should be other enforceable penalties for breaches, following investigations by the ABA. It would pay the Government to remember that the commercial free-to-air broadcasters are not the custodians of the spectrum or of broadcasting policy. They, like all other broadcasting service providers, are users of it, and subject to regulation.

The Democrats support the proposal to allow the national broadcasters (ABC and SBS) to multi-channel. The Government should make this determination with some urgency, in order that the national broadcasters can plan their spectrum use and equipment purchases.

We are also of the opinion that the national broadcasters' statutory independence may be overridden by the requirements of the Bill firstly, to have the ABA draft and screen implementation plans and secondly, in having to broadcast HDTV. For example, under their respective Acts, the ABC and SBS are able to determine their own content standards, spending under their budget appropriations, and finally in the types of programs they produce and broadcast. The same conditions should apply under DTTB regimes.

The community broadcasting sector should be better recognised by the Government. The sector requires the same consideration for planning as the commercial and national broadcasters. The Democrats are concerned that the community sector appears to be marginalised from this debate, as the transmission of a community channel is incumbent on a datacaster [30], rather than being allocated spectrum space in its own right.

Because digital technology allows for the compression of data, current single-service providers (single television channels) can become multi-service providers (multi-channel providers, datacasters, etc). This in itself is a matter of great public interest, with important consequences for consumers in terms of how these services are offered, accessed and regulated.

The Democrats are concerned with several aspects of this legislation, particularly the amount of legislation which is subordinate. The legislation as it is currently drafted is extremely general, and offers more of an overall framework for the implementation of the Government's policy decision. Ongoing obligations and review decisions are to be determined within regulations and other subordinate instruments. Delegated legislation removes the Parliament's ability to fully debate issues, or to amend legislation because it can only be allowed or disallowed. Issues as important as those subject to statutory review should be contained in legislation.

The Bills circumscribe what can be done with the spectrum, which is itself an important public resource. It limits the entrance of new players, and therefore new technological possibilities. It may also impact on notions of media diversity and plurality, which are issues of concern to all Australians.

The implementation of DTTB requires some crucial safeguards including:

The Democrats believe the Government needs to think more carefully about this legislation before it is passed. Television is not a luxury. It is an essential service, and therefore crucial that the Parliament pass legislation reflecting its importance. The Democrats remain to be convinced that the Government has got it right. Even the Committee remains in doubt on many of the areas subject to review. These very important issues should not be left to ministerial discretion.

Senator Lyn Allison

Democrat Senator for Victoria

Senator Vicki Bourne

Democrat Senator for New South Wales

 

Footnotes

[1] Senate Standing Committee for the Scrutiny of Bills. Alert Digest No 6 of 1998. 13 May 1998.

[2] Australian Broadcasting Authority. Digital Terrestrial Broadcasting in Australia. 1997

[3] Digital Terrestrial Television Broadcasting (DTTB) Selection Panel. Digital Television System Recommendation, media release under Federation of Australian Commercial Television Stations (FACTS) letterhead, 18 June 1998.

[4] Federation of Australian Commercial Television Stations (FACTS). Submission No. 2, 2a.

[5] Senator Richard Alston. Digital: a personal message. 24 March 1998, p. 2.

[6] Department of Communications and the Arts. Digital Q & A. 24 March 1998.

[7] Australian Consumers' Association, evidence before the Committee, Hansard p. 163.

[8] Australian Broadcasting Authority. Digital Terrestrial Television Broadcasting in Australia, 1997, p. 98 and 25 respectively.

[9] Members are the metropolitan commercial stations, regional aggregated markets, and smaller markets consisting of 1 or 2 commercial stations. There are also 3 remote area commercial stations, delivered by satellite.

[10] Federation of Commercial Television Stations (FACTS). Submission No.2, Executive Summary, p. 2.

[11] FACTS, ibid, p. 4.

[12] FACTS, ibid, p. 9

[13] Australian Broadcasting Authority (ABA). ABA Update, No 62, February 1998.

[14] Arthur Anderson Corporate Finance. Evaluation of the ABC's Digitisation Strategy March 1998.

[15] Budget Papers 1998

[16] Australian Association of National Advertisers. Digital Broadcasting Position Paper, February 1998, p. 8.

[17] Australian Subscription Television and Radio Association (ASTRA). Submission No. 14, section 6.

[18] Recommendation 6 states that DoCA and the ABA provide a report to Parliament by the end of 1999 on the status reached on any review yet to be completed.

[19] Ibid

[20] Committee report, paragraph 2.8, p. 9.

[21] Bureau of Transport and Communications Economics. Australian Commercial Television 1986-1995: structure and performance, Report 93, p. 49.

[22] Communications Law Centre, Submission No. 10.

[23] Recommendation 7 (Chapter 5, p. 44).

[24] Ms Bun, Australian Consumers' Association, in evidence, Hansard, p. 170.

[25] Senator Richard Alston. Media Release: Digital: a new era in television broadcasting, 24 March 1998, p. 4.

[26] Project Blue Sky vs the Australian Broadcasting Authority [1998] High Court of Australia. 24 April 1998.

[27] Media Entertainment and Arts Alliance. Submission No. 25, p. 2.

[28] Ibid

[29] Explanatory Memorandum, p. 24.

[30] See clause 56 of proposed Schedule 4 to the Broadcasting Services Act. Under the statutory review of 2001, the regulatory arrangements relating to “the digital transmission of a community television service, free of charge, using spectrum in the broadcasting services bands allocated for use for the provision of datacasting services” is to be undertaken. Television Broadcasting Service (Digital Conversion) Bill, 1998, p. 42.