Statement of Reasons for Preliminary Decision Transact Cons 53

STATEMENT OF REASONS FOR PRELIMINARY DECISION TO MAKE A TARGET REDUCTION ORDER FOR TRANSACT BROADCASTING PTY LTD IN RESPECT OF THE SUBSCRIPTION TELEVISION SERVICE: NAT GEO ADVENTURE

1. PRELIMINARY DECISION

For the reasons set out below, the Australian Communications and Media Authority (the ACMA) has made the preliminary decision to make a target reduction order for Transact Broadcasting Pty Ltd (the Applicant) in respect of the subscription television service Nat Geo Adventure (the Service), for the specified eligible period of 1 July 2012 to 30 June 2014 (the Order).

2. LEGISLATION

2.1 Subsection 130ZV(1) of the Broadcasting Services Act 1992 (BSA) provides that each subscription television licensee (licensee) must comply with captioning requirements by meeting annual captioning targets that will increase over time in respect of particular categories of subscription television services that are required to be captioned.

2.2 Subsection 130ZY(1) of the BSA provides that a licensee may apply to the ACMA for:

a) an order that exempts from subsection 130ZV(1) a specified subscription television service provided by the licensee in a specified eligible period; or

b) an order that :

i. is expressed to relate to a specified subscription television service provided by the licensee in a specified eligible period; and

ii. for each financial year included in the eligible period, provides that a specified percentage is the reduced annual captioning target for the service for the financial year.

2.3 Subsection 130ZY(3) of the BSA provides that, if an application under subsection (1) has been made for a target reduction order, the ACMA must, after considering the application, either (by writing) make the target reduction order, or refuse to make the target reduction order.

of 4 2.4 Subsection 130ZY(6) of the BSA provides that, before making a target reduction order under subsection (3), the ACMA must,

a) within 50 days after receiving the application for a target reduction order, publish on the ACMA website a notice:

i. setting out the draft target reduction order; and

ii. inviting persons to make submissions to the ACMA about the draft target reduction order within 30 days after the notice is published; and

b) consider any submissions received within the 30-day period mentioned in subparagraph (a)(ii).

3. BACKGROUND

3.1 On 27 December 2012, the ACMA received an application from the Applicant in respect of the Service, seeking an exemptiona target reduction order under subsection 130ZY(1) (the Application).

3.2 The Service contains magazine or documentary style programming based around outdoor adventure, travel and stories involving people exploring the world.

3.3 The Applicant is seeking a target reduction from 40 per cent to 30 per cent for the 2012- 2013 period and from 50 per cent to 40 per cent for the 2013-2014 period (for category A General Entertainment subscription television services).

4. EVIDENCE AND REASONS FOR PRELIMINARY DECISION

4.1 In making the preliminary decision to make the Order, the ACMA considered the matters specified in subsection 130ZY(5) of the BSA in light of the written representations made by the Applicant in the Application and the supporting evidence submitted with the Application.

4.2 The Applicant submitted that the nature of the detriment likely to be suffered if a target reduction order were not made by the ACMA, would be both financial and operational in that the channel would be removed from the Applicant’s range of channel offerings due to excessive financial cost. The ACMA considers that the detriment of loss of the Service by the Applicant is likely, having regard to the circumstances.

4.3 The Applicant stated that the set top boxes used by subscribers to the Service have technical limitations, limiting its ability to provide captions. The majority of the set top boxes used by subscribers to the Service have limited or no closed captioning functionality. The Applicant also advised that having regard to the restrictions on its network, there is no ability to migrate these subscribers to another set top box.

of 4 4.4 The Applicant provided the ACMA with iiNet Group’s Annual Report for the financial year ended 30 June 2012. The Applicant, Transact Communications Pty Ltd and other companies are part of the TransACT group of companies, which are wholly owned subsidiaries of iiNet Limited as of 30 November 2011. The Applicant’s specific financial circumstances are not clear from the information provided, although the ACMA notes that information received from the TransACT group of companies in relation to 2011-12 indicates a profit for the period ended 30 June 2012. The Applicant may have access to funds from the other TransACT companies and/or consolidated iiNet group. The Applicant has also submitted that the Service represents a small percentage of the Transact Group’s (and also the Applicant’s) overall profit, having regard to the number of subscribers to the Service. While the ACMA does not have evidence of the Applicant’s specific financial circumstances before it, the number of subscribers to the Service supports the Applicant’s submission.

The channel provider NGC Network (Australia) Pty Limited separately provided financial and operational information to the ACMA on a commercial-in-confidence basis. This information was considered in light of the Application.

4.5 The Applicant advised that the only feasible means of providing captioning on the Service is to live caption the Service. Evidence was provided of the cost involved by way of a quote for the establishment and ongoing provision of live captioning.

A one off establishment cost (infrastructure such as encoders, network routers and switches at the play out centre, the installation of fibre connection and other hardware required) was estimated at $1,140,000 (whether one or 35 channels are to provide captioning) plus recurring annual costs of $10,200 per channel.

Live captioning the required extra 10 per cent on the Service (being a General Entertainment channel and therefore required to caption 40 per cent of its transmission in order to meet the 2012-2013 captioning target – 30 per cent already being captioned by the channel provider, and 50 per cent to meet the 2013-2014 target) was estimated at $247,000 per year.

The channel provider NGC Network (Australia) Pty provides no live captioning on the Service nor does it purchase captions. It advised that captions are generally not available due to programming being produced by small independent companies who do not offer captioning in their services. In order to prepare captions, the channel provider has to generate captioning files. It advised that these captioning files are generated from a script which is received from the distributors. This script information is entered into captioning software along with other steps in the process, taking approximately ten hours to create and deliver one captioning file.

4.6 The Applicant provided the ACMA with details of the number of subscribers to the Service as at 30 November 2012, on an in-confidence basis. The ACMA notes that it is possible for Page 3 of 4 subscriber numbers to increase if captions were provided on the Service. However, the ACMA considers that making an exemption order is likely to have limited impact on deaf or hearing impaired viewers, or potential viewers, of the Service, having regard to the number of subscribers to the Service and that the Service is provided only in the ACT.

4.7 As to the likely impact on the quantity and quality of television programs transmitted on the Service, the Applicant indicated that if the ACMA does not make the exemption order applied for, that would result in the Service no longer being provided to subscribers. The ACMA accepts the Applicant’s claim. The ACMA will also need to consider claims made by persons making submissions under subsection 130ZY(6) in response to this draft exemption order.

4.8 The Applicant has applied for 16 exemption orders and one target reduction order for seventeen channels (this one) for the eligible period 1 July 2012 to 30 June 2014. These services include Al Jazeera, Australian Christian Channel, Australian Parliament – Committees channel, Australian Parliament – House of Representatives channel, Australian Parliament – Senate channel, Bloomberg, CCTV News, Channel News Asia, CNBC, CNN International, DW TV, Euronews, Eurosport, Eurosports News, EWTN, Fashion TV and National Geographic Adventure.

4.9 The ACMA is satisfied that a refusal to make the target reduction order would impose an unjustifiable hardship on the Applicant. The ACMA notes that the Applicant currently has no infrastructure in place to live caption programs, and that the provision of captioning would impose significant financial costs and would likely result in the removal of the Service. The ACMA also notes the likely low impact on the deaf or hearing impaired viewers, or potential viewers, in making the exemption order, having regard to the subscription numbers for the Service and that it is broadcast only in the ACT. The hardship that would be imposed on the Applicant would therefore not be justifiable in these circumstances.

5. PRELIMINARY DECISION

5.1 Following consideration of the material referred to in paragraph 4.1 above, on 25 January 2013 the ACMA made the preliminary decision, under subsection 130ZY(6) of the BSA, to make the Order for the Applicant in respect of the Service, for the specified eligible period of 1 July 2012 to 30 June 2014.