This chapter considers the evidence received from stakeholders regarding
the bill. Evidence received on the need for reform and the approach to reform
as reflected in the bill is discussed first, followed by stakeholder views on
the proposed abolition of the two media rules and the new local content
requirements. The committee's overall findings are outlined at the end of this
The case for reform and the overall approach taken
The evidence received from media companies and many other stakeholders
during this inquiry generally acknowledged, in principle, the case for
repealing the 75 per cent audience reach rule and the 2 out of 3 cross-media
control rule. However, in what way this reform should be achieved divided
stakeholders. The committee heard compelling arguments as to why the proposed
changes need be enacted as soon as possible. Conversely, other stakeholders
argued that these reforms should only be pursued as part of a broader reform
package. Accordingly, a significant amount of evidence received by the
committee actually goes to matters that are not included in the bill.
This chapter outlines the evidence received about whether the proposed
reforms should be pursued now and the opposing position that the proposed
changes should be delayed so that certain other changes stakeholders consider
desirable can be considered.
Arguments for reform based on the
The regional television broadcasters Prime Media Group, Southern Cross
Austereo and the WIN Network were the most vocal in expressing support for the bill.
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that the existing media ownership laws are outdated and act as a brake on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
Mr Audsley indicated that the sustainability of the affiliation model the
regional networks operate under within the current media control and ownership
framework is questionable. He explained:
The original television model is one of very high
infrastructure costs: an affiliation model which is seeing programming fees
paid to metropolitan networks escalating and a more challenged media market
with increased competition from unregulated media. To exacerbate these
problems, metropolitan affiliates are now streaming their signals, containing
advertising, into our licensed markets. This is the same material that we pay
Fairfax Media is 'strongly supportive' of the proposed abolition of the
75 per cent reach rule and the 2 out of 3 cross-media control rule,
provisions of the Broadcasting Services Act 1992 (BSA) that Fairfax
described as being 'out of date in a modern global media environment'.
Technology and consumer demand have revolutionised the
consumption and distribution of all forms of information and entertainment well
beyond the present legislative regulation as to make it irrelevant and
The BSA does not even recognise the internet let alone the
proliferation of internet based delivery systems such as SVOD, TVOD, IPTV or
audio subscription services nor the impact of global search engines like Google
or social media sites such as Facebook and Twitter. Overseas online publishers
such as The Guardian, Daily Mail and The Huffington Post
are creating limited local Australian content and are not subject to the BSA
regulations, operating purely as online businesses.
Like Fairfax, the Ten Network noted that the current legislation predates
modern media platforms, such as the internet and subscription TV. Ten argued that
the current legislation adversely affects the ability of Australian media
companies to compete with global companies that operate in Australia without being
subject to ownership and control restrictions. Ten submitted:
When the media regulatory framework was enacted the 'princes
of print and the queens of screen' operated across three defined, easily
regulated, and highly influential platforms: printed newspapers, free-to-air
terrestrial television channels, and free-to-air terrestrial radio stations,
which were limited in number.
In today's fully converged media market where someone in
Perth can watch video embedded in an online news article on a Sydney news site,
or watch a drama program on a television set in a lounge room in Adelaide that
has been streamed over the internet by a US broadcaster without any employees
in Australia, these traditional platform-based regulatory restrictions are
Calls for broader reform
3.7 Although they recognised that aspects of the media ownership and control
framework are outdated, some stakeholders questioned why other parts of the
framework are not being reformed. For example, News Corp Australia advised that
although it supports the passage of the bill in its current form, it would have
preferred a 'holistic approach to media reform' that resulted in the removal of
all five media ownership and control rules, rather than just two.
Similarly, Nine Entertainment Co provided 'conditional support' for the repeal
of the rules 'as a path to reform'.
The Australian Subscription Television and Radio Association (ASTRA)
submitted that it is 'not opposed in principle to the reforms contained in the
bill'. However, it also argued for 'a whole-of-industry deregulatory agenda'.
ASTRA submitted that the reasoning used to support the bill applies 'equally to
the subscription TV industry'. It explained:
The same upheavals in the competitive landscape and the same
financial pressures cited by the government as driving the reforms in this bill
apply equally to the subscription TV industry. Subscription TV faces the same
pressure on advertising revenue and fragmentation of audiences as...
[free-to-air] broadcasters, and has to compete with the same largely
unregulated overseas competitors, but faces the added challenge of price
pressure from other subscription providers.
The submission from the Institute of Public Affairs (IPA) also called
for broader reform. It argued that the regulatory regime should be
competitively neutral and 'approach the regulation of communications
technologies on a functional basis, rather than on the grounds of their
In calling for broader reform, media companies and organisations
outlined the various matters that they would like the government to consider.
The Ten Network's submission described the bill as 'an important first
step in dismantling a set of regulations that are making Australian media
companies less competitive in a global, converged media market'.
Ten 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.
Nine Entertainment Co, Seven West Media and the Ten Network also called
for the removal of television licence fees.
Ten submitted that commercial free-to-air broadcasters are required to pay a
licence fee equal to 4.5 per cent of gross revenue'.
Ten argued that the continued imposition of licence fees is inequitable given
that free‑to-air networks are:
...now competing directly for viewers and advertisers against
billion dollar global internet companies that are exempt from local media
regulation, don't pay television licence fees, pay minimal corporate tax
despite taking billions in advertising revenue in this market and, in some
cases, don't have a single local employee.
Mr Tim Worner, Chief Executive Officer, Seven West Media, explained that
Seven West Media seeks 'broad reform that could truly empower free-to-air
broadcasters to meet what is an increasing pace of change that we are facing'.
Mr Worner identified the removal of the licence fee as the most important
'by far' of the possible reforms that could be pursued.
Since this evidence was received, licence fee relief has been announced.
On 3 May 2016, as part of the 2016–17 Budget, the government announced that
licence fees for commercial television and radio broadcasters would be reduced
by approximately 25 per cent, applicable from the 2015–16 licence period.
The Minister for Communications also announced that further reductions in
broadcasting licence fees will be considered.
The anti-siphoning list was also identified by some submitters as requiring
reform. ASTRA argued that the anti-siphoning scheme 'impairs the operation of
the market for 1900 sporting fixtures each year'.
Mr Bruce Meagher from Foxtel told the committee that since 'the advent of new
streaming and other services it is very obvious that the regime does not apply
to anyone other than subscription television'. He argued that the list is
discriminatory 'in the sense that it applies only to Foxtel, effectively'.
Mr Meagher explained that under the current framework:
...there would be nothing to stop one of the global streaming
companies coming in and, for example, paying over the odds and buying the whole
of the Australian Open tennis tournament out from underneath the free-to-air
broadcasters and charging whatever they wanted for people to view that. The
list does not protect against that.
Mr Maiden from ASTRA advised that the subscription industry supports
'incremental reform' of the list.
The incremental reform sought was outlined by Mr Meagher, who stated that
Foxtel accepts an anti-siphoning list of some form will continue to exist to
cover events 'that are truly iconic'.
Whether the definition of broadcasting used for regulatory purposes
needs to be updated was also discussed. On this matter, Mr Chris Berg from the
I very rarely watch television, but I still watch the ABC,
because I have a computer plugged into my television where I load up iview or 7.30
or something like that, and I watch it. Is that broadcasting? It is done by a company
called the Australian Broadcasting Corporation, but I am streaming it live or
on a computer connected to what calls itself a television but is actually a
Associate Professor Margaret Simons, a board member of the Public
Interest Journalism Foundation, argued that to confine the term broadcasting 'to
something which is delivered over the broadcasting spectrum is ridiculous,
really'. To illustrate how the definition of broadcasting may no longer be
appropriate, Associate Professor Simons recounted an occasion when she led a
class of students who toured a metropolitan news network. Associate Professor
In the feedback in the class afterwards, one of my students
said, 'It's so quaint—they think everybody's sitting there watching the six o'clock
news.' Of course, it is...largely people over 50 who are watching the six o'clock
news. These students have already consumed that news content and have expressed
their opinion about it on social media. Some of that will have been aggregated
into a live blog on The Guardian and so on. So, to say broadcasting
service means something delivered over the airways in that traditional way—if
we take that sort of approach to thinking about what we should and should not
do in media regulation then we are condemning ourselves to redundancy very
Should the measures in the bill be
pursued at this time?
Some media organisations expressed concern 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 Media was one of the main proponents of this argument. Seven
West advised the committee that it 'has neither sought nor opposed changes to
media ownership rules'. However, it submitted that:
In the debate around changes to media ownership rules, we
have consistently warned that if these are addressed without knowing what other
regulatory changes might be considered by the government, we are likely to find
that there are quid pro quos down the track.
Other stakeholders countered these arguments. Mr Grant Blackley, the
Chief Executive Officer of Southern Cross Austereo, maintained that there is an
'urgent need' for the reforms in the bill to progress. He told the committee:
There is a level of urgency upon a segment of the market in
media called regional television, and I can say that, without the scale that we
have with radio, we may not have a television business, because we lean on the
resources within our radio sector to support television, not vice versa.
I think there is an urgent need to address these considerations first and
foremost...I have spent the best part of 30 years in media and I can assure you
that there has not been meaningful legislative change that I can recall in the
sector in that term. So one must start somewhere.
Mr Greg Hywood, the Chief Executive and Managing Director of Fairfax
Media, offered a similar perspective:
We just have this opinion: let's get cracking and get
something done now. We are not against further consideration of further
reform—not at all.
Although the bill is focused on two specific media control and ownership
rules, it is possible that other reforms are under consideration. Mr Richard
Windeyer, a first assistant secretary at the Department of Communications and
the Arts, noted that the government has indicated 'this is not the end of reform'.
This is the opportunity and proposal we have at the moment
but it certainly does not preclude other things happening.
Stakeholder views on the proposed abolition of the 75 per cent audience reach
rule and the 2 out of 3 cross-media control rule
The preceding paragraphs considered the evidence received about the
overall approach taken to reform, as indicated by the proposals contained in
the bill. This chapter now turns to the evidence received about the
specific provisions in the bill, starting with the proposed repeal of two of
the five media control and ownership rules in the BSA.
It is instructive to recap the positions of the major market
participants here. As indicated in the previous section, three businesses
involved in regional television (Prime Media Group, Southern Cross Austereo and
the WIN Network) and Fairfax Media support the repeal of the 75 per cent reach
rule and the 2 out of 3 rule without equivocation. Ten Network supports the
repeal of the two rules, although it would like to see further reform including
the repeal of the remaining three rules and the removal of licence fees. Seven
West Media called for broader reform.
Nine Entertainment offered 'conditional support' for the removal of the
two rules as proposed in schedules 1 and 2 (see paragraph 3.7), however, this
support is linked to the local content regulation proposals in schedule 3: Nine
Entertainment argued that the repeal of the control and ownership rules should
not result in 'additional regulation with regard to local content.
Other stakeholders also submitted their views on the abolition of the
two media control and ownership rules. The NSW Farmers' Association
acknowledged that the current regulatory regime 'does not account for the
contemporary media landscape'. However, NSW Farmers noted that 'the traditional
media platforms are the most powerful in the bush because data coverage is not
universal...[and] it is often inconsistent when it is available'. NSW Farmers'
views on the abolition of the two media control and ownership rules are also
influenced by the proposed new local content requirements, which are discussed
in the next section. The NSW Farmers' Association acknowledged that 'there may
be merit' in the bill's objective of 'pursuing a more sustainable industry
through economies of scale'. However, it argued that this 'will only work for
regional programming if the quotas/points systems mean something and the rules
Other submitters offered support for the abolition of the rules if other
measures to promote quality journalism are considered.
The following paragraphs will consider the evidence received
specifically about the abolition of the two media control and ownership rules.
The first section will consider the 75 per cent audience reach rule in
isolation, followed by the 2 out of 3 rule and evidence received about the
likely effects of the abolition of both rules on diversity in the sector.
75 per cent audience reach rule
Of the two media control and ownership rules that the bill would repeal,
the abolition of the 75 per cent reach rule received the largest amount of
unqualified support. Among others, the Media Entertainment and Arts Alliance
(MEAA), Prime Media Group, Southern Cross Austereo, and the WIN Network all
support the abolition of the 75 per cent reach rule. The following extract
from Southern Cross Austereo's submission provides an overview of the arguments
generally made against the continued existence of the rule:
The 75 per cent audience reach rule creates an artificial
construct which prevents operation of a national free-to-air television
business. Instead a broadcaster must enter into an agreement or number of
agreements (an affiliation agreement) to ensure their programs are broadcast
free-to-air to all Australians.
This results in the regional broadcasters in effect acting as
broadcast re‑transmitters for the metropolitan networks.
With changing viewer habits and levels, revenue resulting
from this re‑transmission is under pressure. After payment of costs of
government licence fees, affiliation costs to purchase the content and the cost
to transmit across large expanses of Australia country, the viability of the
regional re‑transmission business model is severely challenged.
MEAA emphasised that the 75 per cent audience reach rule 'should be
On the basis of the bill before the committee being the only option for
Professor Ricketson, a professor of journalism at the University of Canberra,
advised that he supports the repeal of the 75 per cent audience reach rule. He
...this part of the existing legislation has been superseded by
the advent of streaming video on demand technology, which has enabled
television networks to stream their content to more than 75 per cent of the
population prescribed in the Broadcasting Services Act.
Professor Jock Given from Swinburne University advised that he is 'reasonably
relaxed about the proposed removal of the 75 per cent reach rule'.
The Prime Media Group argued that, since the Parliamentary Joint Select
Committee on Broadcasting Legislation recommended the abolition of the rule in
2013, the case for its repeal 'is now more pronounced'. This is because of,
among other things, the entry of international 'giants' such as Netflix, local
on-demand services, the online catch-up services offered by the ABC and SBS,
and the live online streaming of metropolitan free-to-air broadcasts
'potentially into all Australian households'.
In particular, Prime noted that the online streaming of metropolitan broadcasts
demonstrates why the reach rule should be repealed, as these online streaming
do not include any local regional news;
do not include local regional advertising;
do not include any local community service announcements; and
are not subject to the Commercial Television Industry Code of
Practice (because they do not meet the definition of 'broadcast').
In addition to the video-on-demand services and online streaming of
metropolitan broadcasts, Prime added that the regional television industry is
facing several other 'significant structural challenges', including:
a reduction in the size of the regional advertising market (Prime
advised that the regional television industry has encountered a loss of $65
million in combined advertising revenue in the past three years);
a decline in actual audience numbers year-on-year 'with the
aggregated markets of Queensland, northern and southern NSW and Victoria losing
6.9 per cent of the total audience, a decline of 10 per cent for
aged 25–54 and a fall of almost 15 per cent in the audience for people
aged 16-39'; and
affiliation fees payable by regional broadcasters to metropolitan
networks that increase each year.
Although the abolition of the 75 per cent rule was largely supported by
submitters, Seven West Media questioned the arguments put forward for repealing
the rule based on challenges faced by regional broadcasters. Seven West Media
highlighted how Seven Queensland, which is owned by Seven West Media but
managed as a stand-alone operation, is a regional broadcaster with a high share
of advertising revenue and a popular local news program.
The NSW Farmers' Association also expressed some misgivings about the
proposed abolition of the 75 per cent audience reach rule. It noted
that, following the bill's enactment, consolidation in the commercial
television sector would be subject to the Competition and Consumer Act 2010
(CCA). NSW Farmers stated that 'we have often found that in thin markets,
competition law has been a weak tool'.
The ability of the CCA to promote diversity in the media sector is discussed
later in this chapter.
2 out of 3 rule cross-media control
The proposed abolition of the 2 out of 3 rule attracted more debate than
the 75 per cent reach rule. The following paragraphs will outline the
principal arguments presented by stakeholders in support of repealing the rule,
followed by the evidence received regarding the potential implications for
diversity, competition and quality of journalism.
Arguments in support of repealing
the 2 out of 3 rule
Prime Media Group, Southern Cross Austereo and the WIN Network support
the repeal of the rule. WIN Network, for example, argued that the 2 out of 3
rule 'is as outdated as the 75 per cent audience reach rule'. Although the aim
of the rule is to protect diversity of voice, WIN argued that in effect 'all it
is doing is constraining the three traditional mediums of TV, radio and press'.
The 2 out of 3 rule simply does not make sense in 2016 with
hundreds of media platforms and independent voices spanning Australia without
The WIN Network also highlighted how the existence of the 2 out of 3
rule presents challenges for its business to organise itself in the most
efficient way, capitalise on regional growth opportunities and invest in 'media
assets that need scale'. WIN continued:
In a challenged regional media environment, having the
potential to merge with or acquire a regional radio network and a regional
newspaper publisher would provide the opportunity to bulk up and be better
placed to defend ourselves from much larger, often foreign owned media
organisations. At a time when organisations, some with market capitalisation
multiple times that of the Australian Television industry combined, are free to
infiltrate Australian markets unrestricted, the 2 out of 3 cross media control
rule restricts the ability of the Australian media to bulk up and compete more
effectively with such organisations.
Ms Annabelle Herd from the Ten Network, which also supports the repeal
of the 2 out of 3 rule, 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
noted 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.
Fairfax Media is another supporter of the abolition of the 2 out of 3
rule. It argued that repealing the rule would benefit consumers. Fairfax
The removal of the 2/3 rule would provide media owners the
opportunity to explore amortising their investment in local content across
multiple channels thereby improving the economics of such an investment. From a
consumer perspective, this would lead to more high quality content being made
available than would otherwise be possible.
In support of this argument, Fairfax stated that the 'the ability of
traditional media companies to invest in creating this content is being
increasingly eroded', with newspapers and free-to-air television 'losing
advertising revenue share to internet‑based media platforms'. Fairfax
argued that the below chart (Figure 3.1) 'demonstrates the inequity of
continuing to apply ownership regulation to the three traditional formats...when
the media market has drastically changed and their combined share continues to
Figure 3.1: Australian
advertising market, 2009 to 2018 ($billion)
Note: Digital advertising
figures for newspapers and consumer magazines have been excluded from each
segment's totals, as they are included in the internet advertising figures.
PricewaterhouseCoopers, Entertainment and Media Outlook 2014–2018;
reproduced in Fairfax Media, Submission 11, p. 2.
Implications for diversity,
competition and quality of journalism
In reviewing this bill, a key consideration is the likely effect of the measures
on diversity in the media sector. Market participants and other interested
stakeholders differed in their views on this issue.
Fairfax submitted that the benefits associated with the removal of the 2
out of 3 rule 'would not come at the expense of media diversity given how
drastically the media market has changed since the 2/3 rule was enacted'.
The restrictive nature of the current legislation impacts
adversely not only on the Australian media industry but importantly on consumer
choice, affordability and diversity.
Despite some agenda-driven claims to the contrary, Fairfax
Media believes the repeal of the current legislation will increase the
diversity of information sources. Existing media operations will be afforded
the opportunity to expand services across a wide range of media platforms and
consumer choice will be increased.
Fairfax and the Ten Network also argued that the current arrangements
limit the ability of Australian media companies to access scale and attract investment.
Ten suggested that the current laws therefore threaten the ongoing
viability of a strong Australian voice and diversity in the market.
Ms Herd from Ten added that the bill could potentially 'allow the Ten board to
have access to other sources of capital and scale that we do not have at the
moment', which would help Ten to invest in innovation and content to compete
with the international businesses.
Fairfax argued that the current laws not only restrict investment
opportunities for Australian media businesses, but have resulted in 'active
disinvestment in the sector', which has implications for the quality of
journalism. Fairfax stated:
Disinvestment has very real consequences for quality
journalism of the standard that Fairfax Media provides. The scale of journalism
and standard of reporting that Australian consumers presently enjoy from
Fairfax Media requires an investment environment that encourages it, not
Associate Professor Margaret Simons, a board member of the Public Interest
Journalism Foundation, argued that diversity remains a concern. Associate
Professor Simons explained:
More outlets does not necessarily mean more journalists on
the ground. And while the new digitally based players are indeed providing
local content if you look at national content, they are not touching state
parliaments and regional and country areas.
Some stakeholders called for the pursuit of a different approach to
supporting diversity in the sector. The CEO of MEAA, Mr Paul Murphy, emphasised
that 'the starting point for any discussion of media law reform has to be
acknowledging the clear public interest in having a diverse range of reliable
sources for news, information and entertainment'. Mr Murphy told the committee
that although the proposed reforms 'have some merit', the bill is 'focused
almost exclusively on consolidation of the old analog world to the exclusion of
anything to do with building opportunities offered by new platforms'.
Accordingly, MEAA does not support repealing the 2 out of 3 rule 'until some
further system reforms are advanced that address the need for plurality in our
The Public Interest Journalism Foundation argued that, although the
restrictions on mergers and acquisitions in the BSA are outdated, the
government has a continued responsibility to 'ensure a diverse range of sources
of news and information for all Australians'.
Dr Derek Wilding, who works on media and communications industry issues
at the University of Technology, Sydney, argued that regulation of the media
sector should be designed 'to not address "diversity" per se, but the
things diversity seeks to protect—most importantly, accuracy, fairness and
privacy, as well as localism—while helping to shore up Australian
newsgathering'. Dr Wilding submitted that this approach 'necessarily involves
an acceptance of the repeal of the 2 out of 3 rule as well as the 75 per
cent audience reach rule, encouraging a shift to cross-media standards of
practice in the gathering and presentation of news and analysis and a
streamlined, industry-based system to administer them'.
Dr Derek Wilding told the committee that he believes the current media
landscape 'is worth supporting' with respect to news and analysis. Dr Wilding
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.
In any event, the Ten Network stressed that the 75 per cent audience
reach rule and the 2 out of the 3 rule should be repealed simultaneously.
According to Ms Herd, industry stakeholders had not argued that the 2 out
of 3 rule is 'serving a purpose'. Ms Herd concluded:
There does not seem to be any different level of urgency for
getting rid of the reach rule than the two-out-of-three rule. They are both
equally redundant and equally overtaken by technology. Given that, it would be
crazy to do one without the other.
Application of competition law and role of the ACCC
As noted in Chapter 2, section 50 of the CCA prohibits mergers and
acquisitions that would result in a substantial lessening of competition. The
ability of this test to take into account the unique features of the media was
questioned. In particular, the Public Interest Journalism Foundation argued
that, in the absence of sector-specific regulation, the policy objectives associated
with the media sector cannot be met by the substantial lessening of competition
test in the CCA.
Professor Julian Thomas, a board member of the Public Interest
Journalism Foundation, explained that the Australian Competition and Consumer
Commission (ACCC) 'is properly preoccupied with the efficiency of media markets'.
Professor Thomas added:
The ACCC's remit does not extend to the public and civic
function of journalism, and they have never pretended that it does. But that is
what we are concerned with here, because we think that independent
journalism—and journalism more broadly—has a vital part to play in the proper
functioning of our democratic process as well as its importance in the economy
to enable markets to form and to make sure that businesses can communicate with
Dr Wilding commented that his concern with the reliance on competition
law is that it would focus on the number of separate operators. He emphasised
that a relevant concern should be 'whether you have companies that are able to
invest in employment of journalists and the development of news gathering
The ACCC, which administers the merger and acquisition provisions of the
CCA, was questioned about its role in assessing acquisitions in the media
sector. In particular, the ACCC was asked about the relationship between
the substantial lessening of competition test that the ACCC applies when
assessing mergers and acquisitions, and the concept of diversity in the media
Mr Rod Sims, the Chairman of the ACCC, explained that the substantial
lessening of competition test has three components: 'one is price, two is quality
of service and three is almost diversity really'. Mr Sims stated that, in his
view, the overlap between the substantial lessening of competition test and
diversity in the media sector 'is strong'.
...in media, because much of the content is superficially free,
in the sense that it is free to air or radio, I think the question of the
diversity of voices—to pick up your news, current affairs and opinion—would be
a relevant criteria...Whether the [substantial lessening of competition] test...meets
people's needs for diversity is of course a subjective matter, but potentially
the main thing we would be looking at is diversity but through the lens of
substantial lessening of competition.
Should the bill be passed, the ACCC Chairman advised that he expects
'diversity of content available would probably be an even more important
consideration' for the ACCC when it reviews an acquisition in the media sector.
Mr Sims also responded to concerns that the competition law may not be
as effective as specific media ownership and control rules. Mr Sims observed,
for example, that the 5/4 minimum voices rule in the BSA:
...is potentially much less restrictive than I think the merger
laws would be. You could have three different radio station owners, one newspaper
and one television, which means you might allow the three television stations
to merge. Whereas under the competition provisions I am pretty sure we would
not allow that to happen. I think the competition test is probably a more
rigorous one in that sense, because we see a media market but we also see,
within that, television markets, radio markets and newspapers. Of course
they overlap but I suspect our provisions would have more effect on the number
of voices than the five players in a market rule.
Mr Sims also remarked that the removal of the two ownership and control
rules could, potentially, enhance diversity. He stated:
You have got a two-out-of-three rule. You have got a 75 per cent
reach rule. [Abolishing the rules] clearly will lead to some merger activity
and therefore some form of consolidation. But, with all the overseas players
coming in and the wide range from which people can get content, removing
artificial constraints on the local players could, as I say, allow them to be
stronger players. They could leverage their journalism better. We were saying
earlier that it could even enhance the role of the journalist. I do not think
there is a one-to-one relationship between some consolidation that might occur
and diversity. If we have got very strong overseas players who are
leveraging marginal content in Australia and you have got hamstrung local
players, you could find the removal of these rules gives us stronger local
players, and that might actually ultimately enhance diversity.
Officers of the Department and Communications and the Arts also
emphasised that diversity in the sector would be protected by the three
remaining media ownership and control rules. The minimum voices or 5/4 rule,
for instance, provides a 'diversity floor' that will remain.
Stakeholder views on local programming requirements
This section outlines the views expressed in submissions and by
witnesses about the proposed local programing requirements in schedule 3.
The importance of meaningful local content for people living in regional
areas was emphasised by Mr Derek Schoen, the President of the NSW Farmers'
Association. Mr Schoen told the committee:
It is vitally important to maintain local content in delivery
of media services to country areas. It is a little bit like if I went to go to
Sydney I would find the news there very alien to me. And if you came to Corowa,
I am sure you would find the media that we dish out fairly alien to you. It is
vitally important that the content is applicable to the audience that is going
to receive it.
However, some submitters questioned the need for the proposed amendments
in schedule 3. The IPA is one such submitter; it provided the following
reasoning in support of its views:
The fact that there are stakeholders that benefit from the
current regime and may lose those benefits if the regime changes does not
demonstrate that the current regime is in the public interest. Local content
has never been cheaper to produce and it is possible that local content
requirements are crowding out alternative entrepreneurs in this space.
After all, the demand for local content is not infinite. The
government has not demonstrated that there is a clear market failure in local
content provision that would establish the case for the current regime, let
alone an increased regulatory burden after a given ownership change.
Nine Entertainment Co is 'greatly concerned' by the proposed additional
local content requirements that would follow a trigger event. Nine submitted:
It is curious that the additional quotas only come into
effect where there is a change of ownership, therefore suggesting that no
genuine market failure exists and therefore no public policy requirement for
these additional quotas.
Nevertheless, the majority of submitters expressed support for, or did
not comment on, the proposal for additional local content requirements to
accompany the abolition of the media control and ownership rules. For example,
MEAA considered that the proposed extension of local content requirements
following trigger events 'is a necessary and desirable change'.
The specific approach taken in the bill was also endorsed; for example,
the WIN Network supported two key aspects of the provisions, namely that:
the increased local content requirements would apply only after a
trigger event occurs; and
a transitional timetable of six months would be provided for
licensees to reach the new quota.
Although the local programming requirements were supported by submitters
overall, some specific aspects of the provisions were queried. The following
sections explore this evidence.
Quantity and quality of local
content following the proposed amendments
The methodology used for the new local content requirements was
questioned. Seven West Media submitted that 'the new local content requirements
will not maintain current levels of local news, much less increase them'. It
noted that, based on the most recent figures available, 'many regional
broadcasters in aggregated licence areas comfortably exceeded the proposed
'increased' local content levels of 900 points per six week period'. In
addition, Seven West suggested that the new three point category for
locally produced material could result in reduced local content overall, as the
extra point for certain local news could allow a regional broadcaster to reach
the minimum level of content required more quickly if three points are provided
for certain local news rather than two points.
The committee's public hearings provided an opportunity to examine the potential
consequences arising from the addition of a three-point category. At the
committee's Canberra hearing, the regional broadcasters argued that the
proposed inclusion of a three-point category for local content would not lead
to a reduction in local content. In response to concerns about the possible
effects of the proposed new points system, regional broadcasters emphasised the
amount of locally produced content that is currently broadcast and the reasons
why they produce this content. For example, Mr Ian Audsley, Chief
Executive Officer, Prime Media Group, advised that Prime exceeds the point
system obligations 'dramatically'. He added:
...we have committed to a local news bulletin in Western
Australia, where we had no licence requirement to do it, says that we are not
looking to cut back the amount of local content. We would much prefer to
produce more local content.
Mr Andrew Lancaster from WIN Network provided the following
From a practical perspective,
if you as a broadcaster are going to go to the trouble of putting a
cameraperson or a journalist and a cameraperson into a market to capture that
footage to be locally relevant, why would you give it a reduced amount of time?
It is good content. If you are going to invest in the capturing of that content
to get that video content, you would not reduce the amount of minutes or the
amount of time over a period that you aired that content. It does not make
Mr Grant Blackley from Southern Cross Austereo added that, in his view,
the 'the advent of the three-point system acknowledges the value of the content
produced to local communities'. He suggested that the existence of a
three-point category 'provides an incentive for us to produce more, because we
will achieve a higher threshold in that regard'.
Concepts and definitions relied on
in the bill
The NSW Farmers' Association recommended that the bill be amended to
ensure 'that the character and quality of "local" content within a
regional licensee's area is maintained following any future merger'.
The concepts of 'local area' and 'material of local significance' also
attracted some comment. As noted in Chapter 2, it is intended that these terms
will be defined by the local programming determination made by the Australian Communications
and Media Authority (ACMA).
Ms Jennifer McNeill from the ACMA explained how the two concepts relate to each
other and the approach that the ACMA is expected to take when formulating
definitions for the purposes of the bill. Ms McNeill stated:
Material of local significance currently is defined by
reference to local areas. The ACMA, under the current arrangements, has had to
develop a determination describing what a local area is. We would need to do
the same thing under these new arrangements. My expectation is that we would
take, as a starting point, the current approach to local areas, but we would
necessarily publicly consult on whatever approach was proposed. In general
terms, local areas correspond with major population centres within licence
areas. In determining what amounts to a local area, we are likely to have
regard to population, population density and commonality of interest—these
sorts of things.
The Prime Media Group raised two issues related to the concept of
'control'. The Regulation Impact Statement explains that the media ownership
framework is based 'on the concept of "control", not ownership per
se'. For instance, a person with company interests exceeding 15 per cent is
'regarded as being in a position to exercise control of the company'. In
addition to holding company interests, there are other situations where a
person may be regarded as being in a positon to exercise control.
The mechanism for determining whether a person is in a position to exercise
control of a licence, a company or a newspaper for the purposes of the BSA is
outlined in schedule 1 to the BSA.
The first matter raised by Prime is its view that an interest exceeding
15 per cent in a regional commercial television broadcasting licence
is 'unlikely to yield any "consolidation", "additional
scale" or "efficiency", and clearly is not the intention of the
bill as outlined in the EM and second reading [speech]'.
That is, Prime argued a change in ownership which led to a person owning 15.1
per cent of Prime 'would not necessarily yield synergies or efficiencies'.
Prime suggested that a more appropriate threshold would be based on
actual control without reference to the 15 per cent deemed control threshold
Part 3 of schedule 1 to the BSA. Prime argued that paragraphs 2(1)(d) and (e)
of schedule 1 to the BSA provide a more appropriate methodology for determining
The second matter raised by Prime was that the concept of control is
'not two‑way'. That is, the definition of a trigger event only refers
to a person who starts to be in a position to exercise control of a regional
commercial television broadcasting licence'. If a regional
commercial television broadcasting licensee starts to exercise control of a
metropolitan commercial television broadcasting licence, the increased local
programming requirements for affected regional commercial television
broadcasting licensees would not be triggered.
The Department of Communications and the Arts was questioned about the
two issues raised regarding the concept of control. In relation to whether
changes in deemed control should result in a trigger event, Dr Simon Pelling, a
first assistant secretary at the department, commented that this is an issue
for the minister that the department will 'need to consider further'.
Nevertheless, Dr Pelling added:
...if you start to play around with the definition of control
in the Broadcasting Services Act, which has been well established over many
years and around which all sorts of structures have been set up, there is some
associated risk that would need to be thought through. For example, if you went
from 15 to 50 per cent then the threshold would be suddenly much different. At
the moment there are a number of media players who operate at round about the
15 per cent level, so they have a reasonable shareholding but they are not
actually in control of the company. They could suddenly increase their
threshold if you took it up to 50 per cent unless you did some strange thing
which said 'only applies in this circumstance but not in that circumstance'. It
would be, to my mind, quite complex as to how you would actually apply that.
The department also responded to the evidence received highlighting that,
as currently drafted, the concept of control used in the bill for a trigger
event is not two‑way. Dr Pelling again noted that whether the
government would amend the bill is a matter for the minister, however, he
advised that the department's view is that, in a situation where a person who
controls a regional licence starts to control a metropolitan licence, it is not
intended for this to be immune from causing a trigger event. Dr Pelling
explained that his understanding of the government's policy intent is 'a focus
on the formation of a group, not on whether it is one or the other which drives
the process'. He stated:
The broad intention here is that where groups form which go
over the 75 per cent control rule, no matter who initiates it, the key
issue is that the group is formed and then that constitutes the trigger event.
In that sense, whether a regional broadcaster controls the rights of a
metropolitan broadcaster or a metro broadcaster has the rights of a regional
broadcaster should not necessarily be the key issue.
In response to a question on notice, the department subsequently
acknowledged that the definition of a 'trigger event' in proposed new section
61CV 'would not include changes in control where a regional broadcaster came to
be in a position to control a metropolitan broadcaster'. As a result, 'the
additional local programming obligations in proposed sections 61CW and 61CX
would not apply'. The department advised that it considers this a technical
error and it will seek authority from the minister to amend the bill.
The concept of 'control' that the bill relies on is not new, it is used for
all of the media control and ownership rules in the BSA. The concept of control
is also not straightforward, however, it establishes that a person who has
company interests exceeding 15 per cent is to be regarded as being in a
position to control the company. The committee notes the argument that such a
circumstance may not provide significant efficiency and scale benefits for
Based on the evidence before it, however, the committee has not
recommended that a different test for control should be used for the bill. 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 compliance challenge.
Nevertheless, the committee draws the evidence received about deemed control to
the government's attention for further consideration.
The committee also notes the argument that the bill, as currently
drafted, would not impose additional local broadcasting obligations in a
situation where a regional commercial television broadcasting licensee starts
to be in a position to exercise 'control' of a metropolitan commercial
television broadcasting licence. The Department of Communications and the
Arts has advised the committee that this is a drafting error, and the
department will seek authority from the minister to amend the bill.
The committee recommends that the government consider whether schedule 3
to the bill should be amended to provide that, if:
a person is in a position to exercise control of a regional
commercial television broadcasting licence; and
the person starts to be in a position to exercise control of a
metropolitan commercial television broadcasting licence; and
immediately after that event:
the person is in a position to exercise control of two or more
commercial television broadcasting licences; and
the combined licence area populations of those licences exceed
75 per cent of the population of Australia;
that event is also a trigger event for each
of those licences that is a regional commercial television broadcasting licence.
The ACMA's ability to enforce
As noted in Chapter 2, licensees affected by a trigger event would be
required to provide two reports to the ACMA on compliance with the local
broadcasting requirements. The first report would cover the first 12-month
period that commences six months after the trigger event, and the second report
would cover compliance during the subsequent 12-month period. The bill also
includes record-keeping requirements.
Representatives from the ACMA discussed the proposed compliance arrangements
during their evidence to the committee. Ms McNeill explained that the local
content obligation persists beyond the two years during which licensees are
required to 'proactively report on compliance'. Ms McNeill added that,
following the two-year reporting period, the record-keeping obligation 'would
equip the ACMA either to respond to complaints that it received or to
proactively undertake some kind of an audit program if there were indicators
that that were an appropriate course of action if there were widespread
concerns about compliance'.
The committee received evidence that indicated support for the ACMA's
proposed role in relation to the local programming requirements and its ability
to monitor compliance with the provisions. Representatives from MEAA told the
committee that it considers the proposed provisions in relation to the ACMA's
role are adequate. They also noted that the planned review of the operation of
the bill would allow any issues related to whether there was reasonable monitoring
The NSW Farmers' Association questioned why the compliance reporting
requirement is intended to expire. Ms Jamie Lovell from the Association
remarked that the limited compliance reporting requirements mean the additional
local programming obligations effectively cease within three years.
In its submission, the NSW Farmers' Association argued that, if a trigger event
is met, the ACMA's role in enforcing local content requirements is 'more
important than ever'.
The Department of Communications and the Arts was questioned about the
approach taken to the compliance reporting requirements. Mr Richard Windeyer,
a first assistant secretary at the department, told the committee that the
drafting approach reflects the government's intention not to 'impose more
burden on industry than necessary'. Mr Windeyer added that the two-year
reporting period enables the ACMA to review compliance 'in the early stages'. Following
...there are the tools like the record-keeping rules and the
normal activity of the ACMA...which kick in and, if that initial reporting
indicates a need for particular interventions, then there are things like the
record-keeping rules that can continue to be used to gather data. The point is
that the normal range of activity powers—investigative capacity and ability to
monitor and get information from the industry, which the ACMA has at its
disposal—remains, and that that continues to be an appropriate way to grapple
with the measures in this bill and other aspects of the industry.
On face value, the reasoning put forward by some submitters that the
compliance reporting requirements should extend beyond two reports has merit.
However, the committee is mindful that reporting requirements are a clear
example of a regulatory burden on business. The committee is also aware that,
in other areas of broadcasting regulation, there have been efforts to move away
from regular reporting requirements to a complaints-based approach.
The intent of the reporting measure is to enable the ACMA to be
satisfied that a licensee is properly complying with the local content
obligations before the reporting obligation ceases.
If the ACMA is concerned by the content of either compliance reports provided
after a trigger event, or if it has received complaints that are worthy of
investigation, the record-keeping requirements provided for in the bill enable
the ACMA to pursue the matter after the reporting obligations cease.
As it is not clear that the regulatory burden associated with extending
the reporting requirements will result in better regulatory outcomes, the
committee has not recommended amendments to the reporting requirements.
The 75 per cent audience reach rule and the 2 out of 3 cross-media
control rule focus on the traditional media platforms of commercial television,
commercial radio and newspapers. These platforms continue to attract large
numbers of consumers. However, it is clear that the current regulatory framework
ignores key features of the contemporary media environment, including
subscription television, online video streaming services, Australian-based
online-only news sources and the ease of access to international news sources. The
75 per cent audience reach rule and the 2 out of 3 cross-media control rule
are not required for a modern regulatory framework. The committee
considers there is a compelling case for repealing these two rules.
The committee also supports the proposed local programming requirements
that are contained in the bill. Although there is evidence that regional commercial
television broadcasting licensees exceed their local programming requirements
and that there is a commercial incentive for providing this content, the
strengthened obligations will ensure that residents of most regional areas will
have access to local content.
The committee recommends that the bill be passed. Before concluding this
report, however, the committee will respond to the market participants in the
media sector and other interested observers who argued that the reforms in this
bill do not go far enough.
The inquiry provided an opportunity for market participants to advocate
for further changes they consider are necessary. The committee acknowledges the
calls for further reform and is confident that the government will continue to
tackle remaining areas of media reform in a carefully considered and methodical
way. However, the committee rejects criticism that the bill is pursuing
'piecemeal' reform. It is important to emphasise the broad agreement in
the industry that the two media control and ownership rules targeted by the
bill are outdated. An opportunity is available in the near future to make
valuable changes that will improve the regulatory landscape while protecting
local content. Reform is a continual process, which the committee is confident
does not end with this bill. Indeed, further reforms are being implemented by
the government, such as the recent announcements as part of the 2016–17 Budget
that licence fees for commercial television and radio broadcasters will be
reduced by approximately 25 per cent, and that further licence fee relief will
Subject to restoration of the bill to the Notice Paper of the
House of Representatives, the committee recommends that, after due
consideration of Recommendation 1, the bill be passed.
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