This chapter examines the proposed amendments continued in the bill in
detail. It utilises the evidence presented during the inquiry into the
earlier version of the bill and introduces the new evidence taken during this
inquiry. Readers interested in further detail about the arguments for and
against the bill should also refer to the May 2016 report of the committee
appointed in the previous parliament.
The arguments presented in support of the proposed measures stem from
technological changes and related developments in the media sector. The first
section of this chapter examines these developments. The sections that follow examine
the evidence received by the committee about the provisions of the bill and the
approach taken to reform. The final section of the chapter contains the
Developments in the media sector and calls for reform of the ownership and
This section provides context for the bill by discussing some of the
developments in Australia's media sector that have led stakeholders and
observers to challenge elements of the media ownership and control framework.
It repeats the analysis presented in the May 2016 report in part and outlines new
evidence taken during this inquiry where relevant.
The rationale for the bill is expressed in the replacement explanatory
memorandum (EM). According to the EM, the 75 per cent rule 'does little to
support media diversity as regional viewers essentially receive the same
commercial television programming as metropolitan viewers, due to affiliation
or content supply agreements'. In relation to the proposed abolition of
the 2 out of 3 cross-media control rule, the EM notes that, as the rule
focuses on traditional media platforms, it 'does not take into consideration
the changed media landscape, where consumers access news content from
alternative sources, such as online'.
The technological change that has altered how media content can be
consumed is evidenced by the growing popularity of online content. Online
video-on-demand services provided by international and domestic businesses
distribute products throughout Australia without being subject to the ownership
and control regulation rules in the Broadcasting Services Act 1992
(BSA). For example, the 75 per cent audience reach rule prevents metropolitan
television networks from broadcasting directly to 25 per cent of the
population, however, this does not apply to online content. Southern Cross
Austereo noted that all three metropolitan television networks stream
television programming 'with no regard for the exclusive broadcast licence
areas and regardless of any cannibalisation this may cause to viewing or
revenue in regional licence areas'.
The arrival of Netflix crystallised the growing realisation that the
existing media regulatory framework does not account for the internet. Emeritus
Professor Graeme Turner observed that Netflix's arrival represented the first
time 'a major media intervention in Australia [occurred] that has not gone through
a series of important regulatory gates'.
In addition to online entertainment, the widespread popularity of online
news services is another key development. Australian newspaper businesses, and
other traditional Australian media companies, operate websites used by many
Australians to access news. However, international businesses also provide
online news services, with recent entrants in the Australian market including
local editions of the Daily Mail, The Guardian, Huffington
Post and BuzzFeed. Online newspapers are not covered by the BSA ownership
and control framework.
It is evident that the rise of online services has had a significant
effect on Australia's media sector. In particular, it was highlighted how the
increase in online advertising services is affecting the advertising revenue on
which media companies traditionally relied. Mr Greg Hywood, Chief Executive
Officer, Fairfax Media, stated:
The traditional media companies, including publications like
us, originally had two main sources of revenue. One was classified advertising
and one was display advertising. As we know, over-the-top players have come
into the market—such as REA, SEEK and Carsales—and taken that classified
component which, for Fairfax, was probably 60 per cent to 70 per cent of our
revenue. About another 25 per cent to 30 per cent was display advertising. Most
that is now going to Google and Facebook.
Mr Hywood added that although the 'overall marketing spend in Australia
is increasing', this increase does not outweigh the falling market share of
advertising that traditional media companies are experiencing. The consequence
of this for Fairfax is that:
...we are attempting to invest in Australian media and we are
attempting to provide jobs for journalists, which provides the transparency
that is so valuable to this community, on a smaller and smaller amount of
It was argued that although online media services provide useful
products for consumers, they are not an adequate substitute for a strong,
domestic media sector. Mr Ian Audsley, Chief Executive Officer, Prime
Media Group, explained:
The issue at stake here is the future viability of local
regional content on free-to-air television and the sustainability of
independent regional free-to-air television. Regardless of the increasing
availability of content accessed via the internet, regional Australians
continue to rely heavily on free-to-air television for information and
entertainment. It is fabulous that we can choose to see House of Cards
on Netflix, if we are happy to pay the subscription fee and the download costs,
but it is not telling an Australian story. And The Guardian, Crikey and
SMH.com.au may keep me up to date with what is happening in Sydney and the
world, but it will not tell the residents of Launceston, Mackay or Ballarat
anything about what is happening in their own home town.
If the proposed changes are enacted, consolidation within the commercial
television sector would be possible, subject to the Competition and Consumer
Act 2010 and other relevant laws. The EM notes that this would allow
'greater scale in operations, thus allowing commercial broadcasters to compete
in an environment where audiences can readily access premium content online'.
Mr Audsley argued that 'without some form of consolidation you are going
to see less and less local information and less and less diversity in the voice
from regional Australia'. This is because the current economic circumstances
regional media companies face will mean that, over time, their finances will
not allow continued investment in local content.
The Australian Competition and Consumer Commission (ACCC) has also
observed that the 75 per cent audience reach rule and the 2 out of 3 rule
appear to be outdated as a result of technological change. As the May 2016
report on the earlier version of the bill discussed, the ACCC's views on this
were informed by the review it completed in 2015 of a transaction involving the
Ten Network and Foxtel.
The ACCC's chairman, Mr Rod Sims, noted that streaming activities by the
free-to-air (FTA) networks made it difficult for their activities to be
contained by the 75 per cent reach rule. Mr Sims also noted that 'had there not
been a 75 per cent reach rule, it is possible that other buyers could have met a
more competitive outcome than the one we ended up with'.
Notwithstanding the evidence regarding the financial challenges some
media companies are facing and the view that certain aspects of the media
ownership framework are obsolete due to technological change, the continued
influence of Australia's traditional media companies is evident. Mr Tim Worner,
Chief Executive Officer, Seven West Media, noted that '[o]ver 70 per cent of
Australians exclusively rely on free-to-air television for their news, their
sport and their entertainment content'.
Professor Michael Fraser, former director of the now-closed Communications Law
Centre, University of Technology Sydney (UTS), cited this figure when he stated
that the 'influence of the mainstream media should not be underestimated'. He
While it is the case that many people, especially younger
people, now obtain their content—including news and current affairs—online,
much of that is parasitic on the mainstream media and is recycling content
which others have invested in the production and distribution of.
Professor Fraser added that although there are online sources, 'we are
still in this transitional phase where people rely on the mainstream media'.
Similarly, Professor Rodney Tiffen made the following observation:
Technological enthusiasts and others will talk about what is
likely to be in two decades time and then assume that that is what is now and
there is no transition period needed. For the next decade free-to-air TV will
continue to be the main way that people get their news and most of their
entertainment. Also even things that seem to be from elsewhere, like the
internet...are often dominated by the existing mainstream media.
Although there is an expectation that the availability and popularity of
online content will continue to grow, Professor Fraser argued that 'we will
still need to ensure that there are mainstream providers of news and
information which are regulated, so that the public has confidence in the
professionalism and journalistic standards of fairness and accuracy in
mainstream media'. To illustrate his point, Professor Fraser commented:
If you go online to any site, you do not know whether it is a
dissident in Beirut or somebody in Glasgow pretending to be a dissident in
Beirut—you take your chances. But we need to have confidence in a regulated
mainstream. That is why I connect these two issues intimately. The question
of diversity of sources must be linked with the standards that apply to the
professional level of their production—especially fairness and accuracy.
Emeritus Professor Graeme Turner also emphasised that online news platforms
differ from the news reported by traditional media organisations. He provided
the following comments on a key difference between the two services:
In accord with its fundamental role in the democratic state,
broadcast journalism provides news and information to the whole of the nation
and aims to do so via reasonably inclusive representation of the range of
opinion within the community. The typical news blog, though, has a very
different social and political function. These are smaller, more targeted sites
and they speak to a niche market, to a network of users rather than to a broad
public, so they are under no obligation to be fair or inclusive in their
perspectives, to acknowledge in what they say the existence of a variety of
points of view or to maintain the rigorous commitment to accuracy and integrity
required of the broadcast media. And so, while in aggregate it might seem as
though we have a much more expansive and diverse media sphere now, it is not in
the aggregate that they are consumed; rather, consumers access a very small
selection of these media outlets where what they receive can actually be the
opposite of diversity.
Professor Tiffen warned against abolishing regulation based solely on
arguments that technological change has made regulation unnecessary. Professor
It seems to me that there is a sort of intellectual nihilism
that says, 'Given the scale of changes, no government can hope to regulate
properly.' I note that the first time I heard this argument was by
representatives of News Corp, as it then was, in the early 1990s who said, 'Now
that we have got satellite, all national regulation is passe.' So they are a
bit of a broken record on this. With every technological change they say that
regulation is no longer pertinent.
Finally, Emeritus Professor Turner argued that the fundamental premise
of broadcasting regulation has not changed, despite the technological and market
developments that have occurred. He stated:
Since the airwaves are a limited public resource, those
exclusive few who have been licensed to use them as commercial enterprises have
public as well as commercial obligations. The regulatory regime is there to
balance the interests of the public against the commercial interests of the
Schedules 1 and 2: Proposed repeal of two media ownership and control rules
The above section presented the rationale given by the government for
repealing the 75 per cent audience reach rule and the 2 out of 3 cross-media
control rule, as well as the evidence received by the committee about
developments in the media sector that have implications for the effectiveness
and relevance of these rules. The following paragraphs discuss the evidence
received about the two specific rules and the overall approach taken by the
government to reform.
75 per cent audience reach rule
The issues presented by the application of the 75 per cent audience
reach rule were clearly articulated by the regional broadcasters. Mr Ian
Audsley of the Prime Media Group explained that, through the affiliation model,
Prime Media, Southern Cross Austereo and the WIN Network broadcast the three
major metropolitan networks into regional Australia. Although local news is
produced, overall '[n]o more than three per cent of the content is local'. Mr
So the same voices that are running the media in Melbourne,
Sydney, Brisbane, Adelaide and Perth are the same voices that you hear out in
In addition, it is not possible for the regional networks to acquire
popular content for themselves. Mr Grant Blackley, Chief Executive Officer,
Southern Cross Austereo, explained that 'no local nor US entity of scale and
note would sell a regional-only window'. Accordingly, Australian-wide rights
are purchased by Seven, Nine or Ten.
This commercial reality and the terms of the affiliation arrangements
restrict how regional broadcasters can broadcast the content acquired from the
metropolitan networks. Mr Audsley explained:
Under the affiliation model, we purchased, for a substantial
amount of money, the right and the ability to broadcast their programs and sell
advertising in the breaks. We cannot seek out the additional revenue streams
that they are able to exploit, we cannot stream the content to our regional
audiences, we cannot provide a catch-up TV service, we cannot do deals with
Facebook and Twitter, we cannot sell programs or the format rights to those
program to other markets and we cannot do deals for product placement in
programs to generate additional revenue for our businesses. All of these things
are the domain of the networks.
Mr Audsley concluded that the regulatory framework for FTA television
'was put in place before paid TV came to Australia and before the internet
existed...[and] is self-evidently well past its use-by date'.
Professor Tiffen stated that the 75 per cent reach rule 'is not just
outdated; it never made sense'. He explained:
The logic of TV programming, in all its fundamentals, has
always been about national networking. Preserving 25 per cent for others to own
did nothing for media diversity and little for localism, so I would think that
it is well and truly time for that provision to be knocked back or dispensed
2 out of 3 cross-media control rule
The WIN Network argued that the 2 out of 3 cross-media control rule
'is as outdated as the 75 per cent audience reach rule'. Although the
aim of the 2 out of 3 rule is to protect diversity of voice, WIN claimed
that in effect 'all it is doing is constraining the three traditional mediums
of TV, radio and press'.
Ms Annabelle Herd from Ten Network Holdings argued that because the rule
is 'so technologically obsolete' in that it focuses on three traditional
platforms, if the rule remains in place 'inevitably people are just going to
get around it'. Ms Herd observed that if the weekly newspapers stop printing
physical copies of their newspapers and moved their publications entirely
online, they would no longer be subject to the rule.
Mr Greg Hywood, Chief Executive Officer, Fairfax Media, commented that,
since the previous inquiry, the 'pervasive and increasing influence of the
giant global search engines and social media platforms on the Australian media
industry' has been an issue receiving increasing attention. Mr Hywood stated:
From Fairfax Media's point of view, the extent to which these
organisations, based offshore, are diverting advertising revenue away from and
undermining Australian media companies that invest in local content and
journalists and which pay taxes is one of the prime justifications for
abolishing the current two-out-of-three restriction. This artificial and
outdated restriction is a disincentive to investment in the Australian media and
a severe brake on our ability to compete against global competition.
According to Mr Hywood, removal of the 2 out of 3 rule would be
beneficial as, in the face of declining revenues and the implications of this
for supporting journalism and local content, companies could consider
restructuring to achieve a better financial result. He explained:
...if you are restricted at amortising your content to just a
small range of available platforms, it restricts your ability to monetise that
content effectively or to its maximum. So what we are asking for is the
optionality. That does not mean, necessarily, that free to air and Fairfax get
together, but it does provide us that option if that improves the economics of
our business. We are really just asking to be able to make that choice, if it
is economically viable and to the advantage of our businesses, so that we can
invest in journalism.
When questioned whether the abolition of the 2 out of 3 rule could
potentially lead to a loss of media diversity, Mr Hywood commented:
That horse bolted years ago. I mean there is not anybody that
has access to the internet that cannot access instantaneously a range of
diverse opinions. I do not just mean social media which have not been
filtered. I mean that, if you want to get a perspective on an economic
development, you can go to a range of offshore publications of the highest
quality to get those perspectives. Everybody does that in terms of their modern
media mix, and that is to be encouraged. No-one is saying that that should
change whatsoever. We are not asking for protection at all. We are just asking
for some liberation.
During the inquiry conducted in the previous parliament, Dr Derek
Wilding, who works on media and communications industry issues at UTS, argued
that regulation of the media sector should be designed 'to not address
"diversity" per se, but the things diversity seeks to protect'.
According to Dr Wilding, this includes 'accuracy, fairness and privacy, as well
as localism—while helping to shore up Australian newsgathering'.
Dr Wilding stated that he believes the current media landscape 'is worth
supporting' with respect to news and analysis. He concluded:
I am in favour of repealing the two-out-of-three rule if it
helps support the transition of print media companies into converged news
gathering organisations in a landscape where we have at least three strong
local commercial players.
Professor Tiffin supported the abolition of the 2 out of 3 rule 'as long
as the four/five rule remains in metropolitan areas'.
Professor Tiffin observed that 'in some very small areas, three different media
may not be viable, especially with the collapse of regional daily newspapers'.
Overall, he is of the view that the abolition of the rule 'will have a negative
effect on media concentration, but it is a very negligible media effect'.
Professor Tiffen added:
It is likely that, as local newspapers in particular decline,
the two-out-of-three rule is going to become hard to work. I think media
diversity is terribly important. If anything, this will go against media
diversity, but only in a very minor way.
Some stakeholders, however, expressed stronger reservations about the proposed
abolition of the 2 out of 3 rule. Emeritus Professor Graeme Turner argued that
the rule 'remains a rational and justifiable means of limiting concentration
and protecting diversity notwithstanding the media's technological
convergence'. He added:
I think it is marginally pro-competition and I am not
convinced that the structures it addresses—that is, the existing corporate
structures—are necessarily impacted by the digital revolution. If one applies
the public interest test, I think there is an argument that the existing
industrial configurations are preferable to the likely outcomes of the abolition
of the rule in terms of both the maintenance of diversity and limiting media
Professor Turner added:
The arguments made in support of the bill are largely
directed towards removing from broadcasters restrictions that other media
provers do not have to observe. I understand and accept that argument, but I
think it is also true that broadcasters have a different role in relation to
the state than most of their competitors. Not everybody gets to operate a
television licence, and that opportunity involves a more onerous set of
obligations because of the national importance of the service being provided
and the fact that each licensee enjoys protection from the full force of free
market competition. So it is vital that regulation establishes a viable
operating environment for these businesses, but regulation should also ensure
that the interests of the public are not sacrificed.
Professor Turner concluded that, with respect to diversity and
concentration, he is of the view that 'the industrial configurations that we
have now' are preferable to the structure that could result following
acquisitions enabled by the bill. He added:
The result of those acquisitions would be to concentrate
media power more than it is at present. I am trying to be fairly objective
about it by saying that I can see the argument for it and I understand why
that would be argued for, but, on balance, my view is that the public interest
test would say, 'Probably not. It probably isn't advisable at this point to do
Implementation of reform
As noted above, the idea of abolishing the 75 per cent reach rule
largely received unqualified support. The proposed abolition of the 2 out of 3
rule received some strong support, but also mixed feedback from other
observers. Where stakeholders differed in their views significantly, however,
is with respect to the overall approach that should be taken to reform.
Stakeholders that strongly support
the changes and their timely implementation
The regional television broadcasters (Prime Media Group, Southern Cross
Austereo and the WIN Network), Fairfax and Ten Network Holdings strongly
support repealing the two control and ownership rules. For example, Mr Ian
Audsley, the Chief Executive Officer of the Prime Media Group, told the
committee that these three networks are 'in unanimous agreement that the
existing media ownership laws are outdated and act as a brake on regional media
being able to organise itself in an economically efficient manner'.
Mr Audsley described the bill as being 'a very positive first step in media
reform, which is needed in a rapidly-changing media environment'.
Ten Network Holdings argued that ultimately all five media ownership and
control rules should be repealed, with mergers and acquisitions in the sector
subject to competition law requirements only.
Nevertheless, Ten supports proceeding with the bill in its current form—Mr Paul
Anderson, Chief Executive Officer, Ten Network Holdings, explained:
...there is a risk that, if these bills do not go through, then
nothing happens. As we said before, this is incremental reform, so we think it
is a good thing, but we also support further holistic reform, if that is the
Prime Media Group, Southern Cross Austereo, the WIN Network, Ten Network
and Fairfax argued that the repeal of the 2 out of 3 rule should occur at the
same time as the repeal of the 75 per cent reach rule. Accordingly, those
stakeholders argued against the possibility of splitting the bill to pursue the
repeal of the less controversial 75 per cent reach rule and delaying or not
proceeding with the repeal of the 2 out of 3 rule. Ms Annabelle Herd from Ten
Network Holdings stated:
The point about not splitting these two issues is: why would
you split them? I certainly have not heard an argument from anybody about what
the two‑out-of-three rule is actually doing right now to protect
diversity. It applies to some printed newspapers, it applies to television
channels that broadcast over terrestrial spectrum and to radio stations that
broadcast over terrestrial spectrum. How is that protecting diversity when most
of the media industry is now cross-platform and is comprised of different
channels to market that go well beyond the ones I mentioned in the BSA? Where
is the argument in favour of keeping two out of three?
Similarly, Mr Anderson stated:
In this environment with its wealth of evidence of the
growing force of the foreign big-ticket players, it is blindingly obvious that
these pre-internet era laws are now achieving the opposite of what they were
intended to do. They are now working against a strong, viable and diverse
media sector, and they must go. We do not support splitting the bill so only
the reach [rule] will pass. Splitting the bill and allowing some media
companies to benefit from regulatory reform while leaving others constrained
will potentially leave those still regulated worse off than under the status quo.
Other views on the changes and the
approach taken to reform
News Corp Australia expressed support for the bill being passed without
amendment, although it noted its preference for reform that is more
Seven West Media expressed concerns that, although the reforms contained
in the bill have merit, enacting them now may reduce the likelihood that other
reforms will be pursued in the near future. Seven West also argued that the
legislation effectively would allow one transaction to occur as other rules,
such as the 5/4 rule, would remain. Its submission to the previous inquiry
Removing the 2 out of 3 rule with no corresponding
consideration of the minimum voices impacts in effect allows for only one major
national deal to occur. Once the number of voices in Adelaide reaches the
permitted minimum of 5, there are no further deals of this scale permitted.
Mr Worner, Chief Executive Officer, Seven West Media, stated that:
...holistic reform is what is required to help our industry compete
with global competitors, who are simply not playing on the same playing field
that we are. They are playing with a different set of rules. This bill on its
own does not address that. It may be of use to one or two players for one or
two deals, but it does not do anything for our entire industry.
...if we are going to make changes, they should assist the
entire industry, not one or two players. We have a situation here where an
entire industry is in peril. If we want a situation where Australia basically
becomes an outer suburb of Los Angeles, that is what we are heading towards.
Whenever we get the chance to shine a light on the inequality of what is
occurring, we have a responsibility to do that—and that is what we are doing.
ASTRA (the subscription television industry association) advised that it
is 'not opposed in principle to the reforms contained in the bill', but
noted that the subscription television industry faces similar pressures to
those faced by the companies directly affected by the bill. The anti-siphoning
list was identified by ASTRA and Foxtel as requiring reform, although commercial
television broadcasters opposed this.
During the inquiry conducted in the previous parliament, Nine
Entertainment Co, Prime Media Group, Seven West Media and Ten Network Holdings
called for the removal of television licence fees.
In particular, it was noted that the fee of 4.5 per cent of gross
revenue is 'by far highest free-to-air television licence fee in the world'.
Since that evidence was received, the government announced as part of
the 2016–17 Budget that licence fees for commercial television and radio
broadcasters would be reduced by approximately 25 per cent, applicable from the
2015–16 licence period. A bill to give effect to this commitment was introduced
in September 2016.
Nevertheless, in submissions to this inquiry, calls for licence fee
relief continued. In its additional submission, Nine argued that changing
ownership rules prior to addressing licence fees that, in its view, are
'onerous and unfair', potentially would 'distort the market and have unintended
consequences'. According to Nine, all media reform proposals should be
'deferred until the issue of licence fees is addressed'.
Despite the planned reduction in licence fees from 4.5 per cent of gross
revenue to 3.375 per cent, Ten argued that Australian commercial FTA television
networks will still 'pay more than any other free-to-air broadcasters in the
world'. Ten's view on this outcome is as follows:
That is about 3½ times more expensive than the closest
market, Singapore, and 115 times greater than the US, where broadcasters pay
0.06 per cent of revenue. In the UK, broadcasters pay 0.18 per cent of revenue,
which covers spectrum access and a licence fee. Given the similarities that
exist between here and the UK, particularly in relation to the content
obligations imposed on broadcasters, we strongly believe that the UK is the
single best and most fitting model for us to apply here. On that basis, we
should be paying no more than 0.2 per cent of gross revenue.
In support of its call for licence fee relief, Seven West Media argued
that past cuts have been used for local content. Ms Bridget Fair from Seven
West Media explained:
Up until 2009 we were actually paying around nine per cent of
gross revenue in licence fees, and that was cut to 4½ per cent by the
Rudd government. We have tracked the expenditure across the industry of
where those licence fees have gone and can demonstrate that it has been
ploughed back into content and reinvestment in new delivery platforms to make
sure that we remain competitive. It is a little early to say—just a few months
on—where the one per cent or the 25 per cent cut of the 4½ per cent that went
through in the May budget has gone, but...we can absolutely demonstrate...that
there is far and away a reason for us to reinvest in our business and that we
have done so.
In its updated submission, ASTRA responded to the arguments for licence
fee relief. ASTRA argued that further licence fee changes should 'only be
considered as part of a comprehensive package of deregulatory reforms'. In
particular, ASTRA argued that licence fees should not be reduced 'without a
corresponding reduction in the privileges and protections from competition that
FTA television networks have amassed over decades'.
Whilst Australian licence fees are high by international
standards, this is no accident. Australian FTA television licence fees reflect
the value of unusually significant protections and privileges enjoyed by the
major broadcasters, rendering invalid any comparison with fees paid by their
In exchange for paying licence fees, Australian FTA
broadcasters enjoy a legislated ban on competition, guaranteed access to
broadcasting spectrum and the world's most protected position for the
acquisition of sports broadcast rights.
These strange protections and privileges simply do not exist
to anywhere near the same degree in any of the jurisdictions referenced by FTA
broadcasters in their international comparisons, a fact which renders those
Other stakeholders also questioned the view that the reforms proposed in
the bill should be viewed as a lower priority than, or contingent on, licence
fee reductions. My Greg Hywood from Fairfax Media stated:
...the two main issues here are around really to accept the
existence of the internet. The current legislation does not even acknowledge
the existence of the internet, because it was essentially drawn up prior to
that. Our view is really that the two-out-of-three rule and the reach rule are
the two fundamental issues. Issues around licence fees and others are really up
for free-to-air televisions to talk about, and governments have to make a
judgement about the level of protection that the free-to-airs have through
antisiphoning and what that is worth financially. So I would not see that as a
principal issue; that is just a commercial arrangement. The two key principles
are the two-out-of-three and reach...
Others commented that stakeholders who criticise the bill because it
represents what they consider is 'piecemeal' reform were, by promoting licence
fee reductions as the most pressing issue, also seeking piecemeal reform.
Professor Fraser, who has other views on the regulatory approach that
should be applied to the mainstream media to ensure diversity of voices,
but who nevertheless supports the bill, noted that media reform in general in Australia
could be described as piecemeal. He explained:
I feel, and I think the community feels, cynical about
political horsetrading with powerful media interests, and that has meant we
have always had these small, piecemeal approaches taken.
Schedule 3: Local programming requirements
Schedule 3 to the bill would insert a new Division 5D in Part 5 of the
BSA establishing new local programming requirements for regional commercial
television broadcasting licensees. The proposed new local programming
requirements will apply additional local content requirements to regional
commercial television broadcasting licences that are affected by a 'trigger
event'. The trigger event is where, 'as a result of a change in control, a
regional commercial television broadcasting licence becomes part of a group of
commercial television broadcasting licences whose combined licence area
populations exceed 75 per cent of the Australian population'.
The predecessor committee's report discussed the proposed measures in
schedule 3 in detail. Witnesses who participated in this subsequent inquiry
also expressed support for the measures. For example, Professor Michael Fraser advised
that he welcomed the proposed amendments in schedule 3 as 'a step in the right
direction', although he argued that more attention needs to be given to
'providing incentives for local news and current affairs and also more
incentives for Australian cultural productions to make them commercially viable
in a global marketplace'.
The phrase 'a step in the right direction' was also used by Emeritus
Professor Graeme Turner to describe schedule 3.
As the measures received wide support during both inquiries and the government
adopted the committee's recommendation about a drafting issue, discussion of
schedule 3 in this report is limited to two specific issues raised during this
inquiry. The previous report provides further information about the
amendments and particular stakeholders' views on them.
In its latest submission, Prime reiterated its concerns about the
definition of a trigger event and the concept of control that it raised during
the previous inquiry. Prime is of the view that a test based on actual control
as opposed to deemed control should be used. Prime stated:
...there should be no reference to a 15% 'deemed control'
threshold because a 15% interest in (or 'deemed control' of) a regional
commercial television broadcasting licence is unlikely to yield any 'consolidation',
'additional scale' or 'efficiency' that will benefit the business operations of
regional broadcasters, and clearly is at odds with the intention of the Bill as
outlined in the EM and Second Reading of the Bill on 1 September 2016.
Prime also outlined concerns about a potential scenario where a trigger
event occurs due to the acquisition of shares, however, the acquisition is not
sustained. Prime provided the following explanation:
...in the case of all publicly-listed media companies,
including Prime, the Bill does not contemplate what happens if the threshold is
reached by a person or a company taking a 15% interest in a listed company on a
"particular day" (the words used in the Bill)—which would technically
give rise to a Trigger Event—but then the very next day, week or month
afterwards, a person or a company reduces their shareholding to 14.9%.
The proposed mechanism will introduce a level of uncertainty into the
business operations of regional broadcasters. It is likely to cause confusion,
has the potential to adversely affect vulnerable regional media companies,
leaving them susceptible to manipulation and facing a further regulatory burden
without any additional scale, efficiency or consolidation having been achieved.
After expressing concerns about the 'ambiguities and loopholes' that the
current rules may provide, Emeritus Professor Tiffien argued that 'it would be
better to specify allowable share holdings rather than slipperier concepts like
The committee notes that the concept of 'control' and Prime's concerns
regarding the use of the deemed control threshold were discussed in detail in
the May 2016 report on the earlier version of the bill. That report
The concept of control should cover all relevant scenarios
where a person may be in a position to control a broadcasting licence. The
committee also notes that the local content requirements provide minimum
local content obligations intended to ensure the availability of local content
in most regional areas. In light of the evidence that the regional broadcasters
provide content in excess of the obligations, it is not apparent that a trigger
event caused by a change in company interests of 15 per cent would present a
The committee appointed in the previous parliament did not recommended
any changes to the test for control relied on by the bill, although it drew the
evidence received about deemed control to the government's attention for
This committee maintains the view of its predecessor on this matter.
Regarding Prime's concern that the bill does not differentiate between
trigger events caused by a short-term transaction and sustained acquisitions,
the committee again notes that the bill seeks to provide minimum local content
obligations and the evidence before it is that regional broadcasters exceed
these obligation. Stakeholders often prefer for every foreseeable scenario to
be addressed specifically in legislative proposals. However, to avoid overly
complex legislation, a balance between precision and simplicity needs to be
struck. Given the limited consequences that appear to arise should the scenario
outlined in Prime's evidence eventuate, the committee does not consider the
bill needs to be amended in response.
Regional media consumers
The NSW Farmers' Association highlighted how the media needs of many
residents in regional Australia differ to residents in metropolitan areas.
The Association explained:
We noted that a lot of submissions took as assumed that the
media landscape had changed substantially for all Australians, and therefore
that the old style of media ownership did not have the same reach or importance
We would like nothing better than for regional NSW to be part
of the digital age—but sadly communications in the bush are more 19th Century
than 21st. As a consequence, and as we have made clear in our submission, the
media landscape has not changed substantially for regional Australians, yet.
Therefore, the old style media platforms (newspaper, radio and television),
still have strong penetration in the regions—regional internet remains very
poor in comparison with urban populations. Regional NSW (most of which is an
'aggregated market' under the terms of the Bill) continues to suffer from
substandard data coverage making traditional media platforms in many areas just
as powerful as they have ever been.
Emeritus Professor Tiffen submitted that he supports 'the need for
strengthening of local programming requirements in regional areas especially if
media ownership becomes more concentrated'.
However, Professor Tiffen called for regulation that provides further support
for local production and services in regional areas for both television and
As we move towards national and global generation of
services, there is still a need to ensure local windows of programming.
In theory, what have been called hyper-local services are now
possible, but in practice these are often precarious, unfunded projects of
inconsistent standards and reliability.
The regulation should ensure in television and radio that
national players have to support local windows of programming.
On the text of the bill itself, specific concerns about the definition
of 'local' were expressed. The NSW Farmers' Association submitted:
...we fear that the definition of 'local' may shift as the
'footprint' of a broadcaster increases as the result of the repeal the '75 per
cent audience reach rule'. The additional requirements for local content upon
exceeding the 75 per cent are meaningless if 'local' is not effectively
The NSW Farmers' Association recommended that the bill be amended to:
ensure the Australian Communications and Media Authority (ACMA)
has 'clear responsibilities in terms of effective compliance activities in
regard to policing "local" content'; and
ensure 'that the character and quality of "local"
content within a regional licensee's area is maintained following any future
The NSW Farmers' Association also recommended that consumer protections
in 'voice and data in telecommunication are upgraded to ensure that regional
people have equal access to both voice and data'. After it noted that the
Productivity Commission is currently conducting an inquiry into the future
direction of a universal service obligation in the telecommunications market,
the Association recommended that consideration of the bill should be delayed
until the Productivity Commission's inquiry is compete and the government has
responded to its findings.
The committee shares concerns about the ability of regional consumers to
access adequate telecommunications services and notes that improved data
capabilities will help regional media consumers engage in the online media
environment. As the NSW Farmers' Association recognised in its submission, the
Productivity Commission is currently undertaking an inquiry into the
telecommunication's universal service obligation. The committee awaits the
Commission's report with interest, however, it does not accept that the bill
should be delayed until that inquiry is finalised.
The committee also notes the concerns about the character and quality of
post‑merger local content and the ACMA's ability to 'police' compliance
with the local programming requirements. The bill provides for a review of the
local programming requirements to commence within two years following the
commencement of the additional obligations. Rather than responding to concerns
relating to the obligations that may not eventuate, the committee considers
that any demonstrated issues with the operation of the local content
requirements can be examined as part of that dedicated review.
This inquiry has provided a further opportunity for senators to consider
this important bill. The committee reiterates the finding of the committee that
examined the earlier version of the bill in the previous parliament; namely,
that the bill be passed.
The media environment has changed significantly since the 75 per cent
audience reach rule and the 2 out of 3 cross-media control rule were
introduced. It is clear that both rules are now outdated and do not
meaningfully contribute to media diversity. Certain printed newspapers and FTA television
and radio broadcasters are covered by the rules, yet national newspapers, news
websites, subscription television and radio services, and various online entertainment
platforms are not. Despite the 75 per cent audience reach rule,
affiliation agreements and online streaming provide essentially the same
content throughout Australia.
Technological developments and related changes to consumer preferences
have made the 75 per cent reach rule and the 2 out of 3 rule redundant. The
rules now act to restrict certain media companies from restructuring their
operations to allow them to better compete with other entities, including
international internet and media behemoths. No compelling argument to the
contrary was presented to the committee.
The issues that were raised by industry stakeholders, such as licence
fees and the anti-siphoning list, are in the committee's opinion separate to the
matter of media ownership and control. Although the government should carefully
consider the merits of these arguments, the reform measures contained in the
bill should not be delayed further in preference for a comprehensive reform
package. Despite calls for other matters to be examined and different views on
how reform should proceed, there is broad agreement among stakeholders and
other interested parties that the two media control and ownership rules
targeted by the bill are outdated. With this knowledge, it would be
irresponsible to leave these technologically obsolete rules in force while
other potential changes are developed and debated—their continued existence can
only inhibit the industry participants from adapting efficiently to the
significant changes in the media environment that have occurred.
The committee recommends that the bill be passed.
Senator David Bushby
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