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On 14 March 2006 Senator Helen Coonan, the Minister for Communications, Information Technology and the Arts, announced the Government’s long awaited proposals for media reform. The proposals have the potential to significantly affect the way the media industry is structured and operates in Australia. However, most of them were anticipated and it may be some time yet before any legislative changes take effect.
The Government is seeking comment on the options outlined in the Discussion Paper by 18 April 2006.
Key general implications
While all elements of the reform proposals are significant, particularly for current industry players, some key general implications of the proposals are:
- the relaxation of foreign and cross media ownership and control rules creates opportunities for mergers and acquisitions - likely cross media merger activity may be in metropolitan areas due to the relatively larger numbers of separately owned television, radio and newspaper operators compared to regional areas;
- the role of the ACCC (Australian Competition and Consumer Commission) becomes crucial - the ACCC will be asked to articulate its proposed approach to media mergers and market definition once the reform proposals are settled;
- the potential for new digital services to be delivered over broadcasting spectrum is increased but whether a business case exists remains to be seen.
Outline of proposed reforms
Senator Coonan has emphasised that the purpose of the Discussion Paper and consultation process is to devise a “strategic plan for media reform” that will provide a new regulatory framework that embraces, not resists, digital trends. The Discussion Paper proposes more than 13 sets of reforms - the most significant ones (based on the Government’s preferred options) are outlined below.
Foreign ownership
The Government proposes to remove the current media-specific foreign ownership restrictions in the Broadcasting Services Act and the newspaper-specific foreign ownership restrictions in the Foreign Investment Policy under the Foreign Acquisitions and Takeovers Act 1975 (Cth). Currently, for example, a foreign person may not hold more than 15% of a commercial television broadcaster.
However, the media would continue to be a “sensitive sector” under the Foreign Investment Policy. Proposals by foreign interests to directly invest in the media sector (irrespective of size) would need prior approval by the Treasurer based on an assessment of the “national interest”.
Cross-media ownership
The Government proposes to amend the current cross-media rules to allow cross-media transactions to proceed, as long as there remain a minimum of:
- five commercial media groups in mainland state capital licence areas; and
- four commercial media groups in regional licence areas.
Currently, for example, a person cannot control any combination of commercial television, commercial radio or a newspaper that operate in the same licence area.
Existing limits on concentration of ownership and audience reach would be retained. A media group can only control a maximum of two commercial radio licences in the same licence area, one commercial television licence in the same licence area, and no more than 75% national television reach. Competition rules under the Trade Practices Act will also continue to apply (see ACCC role section below).
The Government’s preference is to enact the cross media and foreign ownership changes with effect from 1 January 2007, although it has raised the possibility that the new media ownership rules will not come into effect until analogue television switch off in 2010-2012.
ACCC role
If the proposals to relax the broadcasting specific ownership and control restrictions outlined above are adopted, the role of the ACCC in any subsequent merger will be a critical one.
The Trade Practices Act prohibits any merger or acquisition that would have the effect or be likely to have the effect of substantially lessening competition in a market. The current Chairman of the ACCC has indicated that the ACCC’s approach to defining media markets may be focused more on the nature of the content and services that are provided to customers, eg classified advertising/programs, rather than their means of delivery.
The ACCC will be asked to articulate its proposed approach to media market definition to provide certainty for market participants.
New digital services
Until the analogue/digital free-to-air simulcast period ends, there are only two unallocated digital channels in the broadcasting services bands available in most licence areas. Rather than allocate these channels to a new commercial free-to-air service, the Government is considering allocating these channels to permit digital broadcasting and related services such as subscription services, narrowcasting, or data services, which can be provided to fixed or mobile receivers.
This approach is consistent with the existing regime under which various restrictions on the type of services that can be provided over this spectrum expire on 1 January 2007. The prohibition on commercial and national broadcasters being able to acquire these licences would remain.
The Discussion Paper suggests that particular obligations may be placed on the operators of these new services. For example, one possible obligation would require the provision of services that would encourage take-up of digital free-to-air receivers. As stated in the Discussion Paper, the benefits of these constraints would need to be balanced against the possible detriment to a sustainable business model for the use of the spectrum.
Analogue switch off
The Government has acknowledged that given current digital television take-up rates, the analogue switch-off date currently set for the end of 2008 is unrealistic. With a view to expedite digital conversion, the Government proposes to develop a Digital Action Plan to set the strategy for managing the switchover. It is aiming for an analogue switchover period of 2010 to 2012.
Multichannelling
The Government proposes that current restrictions on multichannelling by commercial television broadcasters would be removed at the end of the analogue/digital simulcast period. However, the timing for this may be reconsidered if significant changes in the lead up to the analogue switchover favour earlier adjustment. Beforehand, free-to-air broadcasters will be permitted to provide a separate channel in HDTV (high definition television) format.
The genre restrictions on multichannelling by national broadcasters (SBS and ABC) will be removed as soon as practicable, although the Government will continue to monitor local content levels.
New free-to-air commercial television licences
The Government has stated that it will not formally extend the current moratorium on new commercial free-to-air television licences. However, it does not propose to allocate any new commercial television licences in the broadcasting services bands at least until the digital conversion process has been completed. The allocation of commercial free-to-air television licences outside the broadcasting services bands would be decided based on the public interest and these may be available before digital conversion is completed. These services would not be subject to the specific ownership and control provisions relating to services in the broadcasting services bands.
To this end, the Government has stated that it will legislate to transfer the decision-making power for the allocation of new commercial free-to-air television licences from ACMA (Australian Communications and Media Authority) to the Government.
Anti-siphoning
The Government proposes to introduce a “use it or lose it” scheme for events on the anti-siphoning list with effect from 1 January 2007. This scheme would identify criteria against which “use” of an event by a free-to-air broadcaster could be measured and, if the event is not “used,” it could be removed from the anti-siphoning list on the exercise of Ministerial discretion.
The current anti-siphoning list is due to expire on 31 December 2010. The Government intends to review its ongoing rationale before expiry.
In the interim, to the extent that commercial and national broadcasters are able to multichannel, they would be prohibited from televising an event that is on the anti-siphoning list on any new digital channel unless it has already been shown (or is simultaneously shown) on the analogue service.
Please contact us if you have any queries about the proposed changes to the media ownership laws or media issues more generally.