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 Threats to ‘Diversity’ Threats Issues for consideration scenario

1. Lack of clarity and Cross value chain issues consistency in regulation and 1,2,3,6 Should NZ consolidate the regulation of content, distribution and networks policies into a single regulator and / or consolidate the legal basis for media regulation into a single Act (itself consistent with telecoms regulation)? …Should NZ take specific action to define and treat converging markets both in terms of competition law and other areas of jurisdictional overlap? 2. Lack of competition 2,4 Should changes to media ownership (including cross-platform) or foreign in relevant markets investment rules be considered? and diversity in provision (platform, 2,3 Does NZ need to make any policy adjustments to encourage investment and content and services) to ensure the digital broadcasting industries are yielding optimal economic return to NZ (e.g. investment in digital content, infrastructure)? 3. Lack of investment 8 How should NZ approach its Media Literacy programme in a digital age? and consequent lack of innovation in Content digital products and 4 How should NZ ensure availability of diverse content across all platforms- services particularly local content in a variety of genres including drama, documentaries and children‘s? 4. Lack of local content 1,3,6 Are NZ’s rules on advertising appropriate in digital age? - in terms of range, quantity and quality 3,4 Should NZ consider changing its public service broadcasting objectives, structure, approach and / or funding (e.g. increased contestability)? 5. Rise of cybercrime Distribution

7,8 How can the regulator ensure that disadvantaged groups are able to access digital content (e.g. regulation of broadcasters or EPGs to ensure services for the visually impaired, captioned / signed content)? 6. Inadequate 4,7 Should NZ consider regulating the acquisition and/or sale of content rights protection for minors (e.g. consider anti-siphoning regime)? and other vulnerable groups 7. Inequality of access 1,2,4,8 Is NZ’s Copyright framework understood by consumers? Does it work equally to digital services for for rights holders who are individuals / small companies as it does for large, both rural areas and / national or multi-national companies? or disadvantaged groups 2,4 Are the rights to orphan AV works and archives sufficiently accessible?

8. Significant digital Network illiteracy and consumer confusion 1,7 How can NZ ensure the effective use of technical standards to promote fair access and competition? 2,3 In light of the digital broadcasting network monopolies and duopolies, what, if any, open access regimes should NZ apply across different digital broadcast networks? 2,3 What form should the post-ASO spectrum allocation regime take?  

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 A B C Measures to reform the regulatory Measures that update Measures to restructure the regime consistent with economic existing regulatory regulatory regime in line with transformation and national identity arrangements market developments goals

End-to-end Cross value chain issues ‘Sub-packages’ review is required • Regulatory structures – policy, funding, Of measures implementation, monitoring and enforcement

• Consumer education

Content • Diversity of content

• Funding of content

• Preservation of content

Distribution and Network • Access to platforms

• Availability to all New Zealanders

Source: Spectrum Value Partners analysis    7KH IROORZLQJ WDEOH H[SODLQV WKH UDWLRQDOH IRU WKH GLIIHUHQW DSSURDFKHV DQG LOOXVWUDWHVZKDWWKH\PLJKWLPSO\LQSUDFWLFH

Level of change required

Title A Update existing regulatory B Restructure the regime in line C Reform the regime, consistent 12pt arrangements with market developments with economic transformation and national identity goals Key aim • Ensure that existing regulation is • Building on Package A, introduce an • Building on packages A and B, introduce a set consistent and up-to-date across additional set of measures to restructure of measures to counter specific threats to platforms and refresh the regulatory framework, the diversity and availability of digital media in in line with market changes the NZ market2

Rationale1 • As the market has developed, a number • Markets have converged as ‘content’ • A number of specific market risks exist that of regulations may have become providers deliver product across would result in the New Zealand market outdated platforms and ‘telecoms’ providers developing towards a sub-optimal market - e.g., online content now has a increasingly distribute (and even structure, characterised by lack of competition considerable impact and reach, but the originate) ‘media’ products and services and / or diversity: regulation of the broadband - e.g., linear (‘broadcast’) television - e.g., the market could concentrate down to marketplace does not always reflect programming can now be distributed just a few players, reducing choice this development via terrestrial, satellite, cable, wireless - e.g., a divide could open between services / - e.g., ‘broadcasting’ is defined in a (mobile) or wired (broadband) platforms prices available in metropolitan and rural narrow linear programming sense - e.g. single properties (Shortland Street areas • These need to be reviewed and of a beer ad) may now be ‘repurposed’ - e.g. overseas produced content could come to refreshed for presentation across platforms dominate the digital media environment • These ‘converging’ markets need to be • Government should act to counter these risks if regulated consistently it can General • Update regulatory settings to reflect • Restructure and refresh the regime, • Adopt more positive / pro-active regulatory scope changing technology and market reflecting the convergence between the measures to counter specific risks and threats conditions, removing inconsistencies media and telecoms sectors; in to the industry and correcting existing regulatory particular, look to merge and / or re- - consider such measures across regulatory anomalies (reflecting the principle of scope regulatory bodies and agencies structures, content, platform and network minimal intervention) regulation Note: (2) The “Diversity” scenario, identified in the Research Paper Source: (1) The Research Paper; Spectrum Value Partners analysis 

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 (under Commerce and Fair Trading Acts) • Implement specific media concentration rules that set limits in order to ensure media diversity • Develop a digital media ‘wholesale’ regime that requires providers, aggregators and distributors to work with new entrants across the value chain and that prevents ‘hoarding’ of content assets  %DFNJURXQGFXUUHQWUHJXODWRU\VLWXDWLRQLQ1HZ=HDODQG

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UK • BBC 1 is to increase the volume of its subtitled programming to 100% by 2008 • Other channels must also increase their subtitled output significantly e.g. all channels with >0.05% audience share must offer over 20% subtitling by 2010

France • French programming currently carries comparatively little subtitling, but new regulatory targets have been established and the PSB TF1 is expected to subtitle 100% of its output by 2010

Netherlands • The three PSB channels must increase their subtitling output to 100% by 2008. The six main commercial channels currently subtitle 2% or less, but must reach 100% by 2010

Ireland • Major Irish channels are expected to reach a target of 90% by the end of 2007

Belgium • VRT, the PSB, increased their subtitled output to 50% in 2006 and may increase this further in the future

Canada • Major Canadian channels already subtitle 90% of their English-language programming. Smaller channels are also encouraged to work towards this target

USA • The US has the highest regulatory obligations; in 2006, 100% of programmes produced after 1998 must had to be subtitled (with some exceptions)

Source: European Federation of Hard of Hearing People, Ofcom, CSA, CRTC, NCBI 

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• In a number of countries, regulation of media Examples of independent converged regulators markets has been consolidated under one regulator Market Regulatory body Status - powers have typically either been transferred from a Government Ministry or Australia Australian Independent through the consolidation of previous Communications and converged regulator regulatory structures (e.g. in UK, the Office Media Authority of Communications Act 2002 simplified the structure and reduced the number of UK Office of Independent regulations from 5 to one) Communications converged regulator (Ofcom) • These markets have considered an independent converged regulator enablers US Federal Independent - an objective view of the development of the Communications converged regulator sector, with less risk of being accused of Commission (FCC) taking decisions for political reasons - provision for a dedicated resource focused on media issues Hong Kong Broadcasting Independent - stability and certainty to the sector about Authority regulator (plans to how it will be regulated converge)

Source: Spectrum Value Partners analysis    

 'HFLVLRQVÃZRXOGÃQHHGÃWRÃEHÃWDNHQÃRQÃRIÃWKHÃUHJXODWRUÃJOREDOO\ÃWKHUHÃLVÃDñ Roles and JUHDWÃGHJUHHÃRIÃYDULDWLRQ responsibilities

• More specifically, decision would need to be Duties of broadcast regulators in different countries taken on what specific actions and duties would the regulator be responsible for, e.g. NZ AUS UK Other US Hong Singa- - should the new regulator be involved in EU Kong pore licensing, like the Australian, the US and the UK regulators, or should this function remain with the government? Converged - should access be the responsibility of the regulator 8 9 9 9 9 8 8 new regulator, like in the UK and other EU exists countries? Licensing 8 9 9 8 9 9 9 • The functions of regulators vary between countries, although content standards appear to be the core responsibility of a regulator Spectrum 8 9 9 9 8 8 8 - typically, the converged regulators are also management responsible for spectrum management - similarly, the converged regulators tend to Content 9 9 9 9 9 9 9 be responsible for regulating access to standards broadcasting facilities, which in the past was typically the responsibility of the Advertising 8 8 8 9 9 9 9 telecoms regulator - some regulators also develop and enforce advertising regulations whilst it is the responsibility of independent industry Access 8 8 9 9 8 8 9 bodies in other countries

Source: ACMA and ACCC website, EU website, HKBA website, BSA andComCom website, MDA website, Ofcom, CC and OFT website, FCC, DOJ and FTC website (Mar 07); SpectrumValue Partners analysis        ,QÃDGGLWLRQÃLWÃZRXOGÃQHHGÃWRÃEHÃGHFLGHGÃZKHWKHUÃDQGÃKRZÃWKHÃ Roles for UHJXODWRUÃZRXOGÃEHÃLQYROYHGÃLQÃFRPSHWLWLRQÃLVVXHV competition

• In most of the countries, the converged regulator is also involved in the competition matters1, although it is quite unusual for the regulator to be the ex-post competition authority for the sector: - it seems to be a standard practice for the regulator to be responsible for handling complaints and disputes, or at least there being a statutory requirement for consultation - however, involvement in broader competition issues, including M&A activity, and the degree of involvement, varies

• There are a number of issues for and against this involvement to consider: - a media-specific regulator would have the advantage of understanding the market in detail and having in-depth knowledge of the industry players - to supplement this knowledge, the regulator could then leverage power from more generalist competition authorities as required - however, involving regulator in the competition issues could result in confusion and / or overlap in respective roles and responsibilities of the regulator and the existing competition bodies; and - could diminish the role of the existing competition authority

Note: (1) See the detailed case studies of select geographies in the following pages ACMA and ACCC website, EU website, HKBA website, BSA and ComCom website, MDA website, Ofcom, Source: CC and OFT website, FCC, DOJ and FTC website (Mar 07); Spectrum Value Partners analysis      

 ,QÃWKHÃ8.Ã86ÃDQGÃ)UDQFHÃWKHÃUHJXODWRUVÃDUHÃLQYROYHGÃLQÃFRPSHWLWLRQÃLVVXHVÃ Responsibility EXWÃWKHÃW\SHVÃRIÃUROHVÃDQGÃLQWHUDFWLRQÃZLWKÃRWKHUÃERGLHVÃYDU\ for competition

UK USA France

Policy 2 formulation 1

Monitoring / investigation / advice on enforcement

Enforcement FCC DoJ FTC

1

In the UK and the US the role of the In France, there is a clear regulator significantly overlaps with hierarchy of the responsibilities the other bodies

Note: (1) Substituted by the Department for Business, Enterprise and Regulatory Reform on 28 June 2007 (2) National Telecommunications and Information Administration (NTIA) – part of the US Department of Commerce  Source: Spectrum Value Partners analysis     &DVHÃVWXG\ÃFUHDWLRQÃRIÃDÃVLQJOHÃUHJXODWRUÃZLWKÃFRPSHWLWLRQÃUHVSRQVLELOLWLHVÃ Responsibility LQÃWKHÃ8. for competition

• “[The system] is complicated, but there is no ambiguity. The Acts are clear as to who has responsibility in each case” Ofcom

Ofcom Other bodies, involved in competition issues

• Ofcom was created in 2003 as a regulator of UK •The Competition Commission conducts in-depth communications industries, succeeding five enquiries into mergers and markets upon organisations: reference from another authority, e.g. the Secretary - Oftel (Office of Telecommunications), which of State of the DTI, the OFT, of Ofcom. It cannot was responsible for the telecommunications; launch investigations itself -theITC (Independent Television Commission), responsible for television and •The OFT is the main competition authority; broadcasters; however, in industry areas where there is a regulator, -theRadio Authority, responsible for radio the regulators would take the lead. OFT can still regulation; investigate (esp. mergers), but must take advice - the Broadcasting Standards Commission, from Ofcom responsible for content standards; and - the Radiocommunications Agency, •The Department of Trade and Industry (DTI)1 is responsible for radio spectrum administration responsible for the policies in the broadcasting sector related to “competition issues, management of • As well as ex-ante telecoms regulator, Ofcom has the radio spectrum, legislation which affects the UK the responsibility of an ex-post competition broadcasting industries, and technical standards” authority - this approach it delivers certainty for industry •The Department for Culture, Media and Sport players and avoids any inconsistencies (DCMS) is responsible for setting the policy developing framework for the broadcasting sector, ensuring that - in media, where much regulation is effectively the regulatory framework for broadcasting fosters fair ex-post, the system keeps Ofcom in charge and effective competition - e.g., recently Ofcom has launched an investigation into the pay-TV market, in the wake of the dispute between Sky and Virgin Media, upon request from other broadcasters, incl. BT, Setanta, Top Up TV and Virgin

Note: (1) Substituted by the Department for Business, Enterprise and Regulatory Reform on 28 June 2007 Source: Spectrum Value Partners analysis

  Responsibility &DVHÃVWXG\ÃRYHUODSÃRIÃUHVSRQVLELOLWLHVÃLQÃWKHÃ86 for competition

• In the US, the telecoms regulation is not a federal power under the US Constitution. Consequently, telecom regulatory responsibilities are split between federal and state governments and across multiple agencies • US telecommunication regulation is also a mix of general competition laws (such as anti-trust laws) and industry- specific regulation. For these reasons, the US regulatory framework is complex, with some inter-jurisdictional overlap and conflict

FCC – the regulator DoJ and FTC DoC and NTIA

• The FCC has the authority • Further overlap is between the • The United States to approve the transfer of responsibilities of Department of Department of licenses (telecoms and Justice (DoJ) and Federal Trade Commerce (DoC) is the media). It conducts a Commission (FTC): the FTC and Cabinet department of the review of the rules and DOJ have concurrent jurisdiction over United States government conditions of the the review of transactions, although concerned with promoting transaction and may decide each has established expertise in economic growth. One of to approve or deny a certain industries or companies its operating units is NTIA merger. The FCC may • Although both the FTC and DoJ • The National impose restrictions and apply the same Merger Guidelines Telecommunications and conditions. The role of the and employ similar methodologies in Information FCC is sometimes investigations, procedural and Administration (NTIA) is overlapped by the substantive differences exist between the President's principal Department of Justice, the agencies today that can, in a few adviser on which has the final authority transactions, impact the outcome telecommunications and in the ruling of acquisitions • In 2002, the DoJ and FTC signed an information policy issues; agreement to avoid duplicated inter alia, NTIA manages investigation in which an and regulates the Federal investigation by one of the bodies use of spectrum commences only after clearance by the other body

 Source: Spectrum Value Partners analysis     &DVHÃVWXG\ÃDÃFOHDUÃKLHUDUFK\ÃRIÃFRPSHWLWLRQÃERGLHVÃLQÃ)UDQFH Responsibility for competition

CSA – the regulator Competition Commission Ministry

•TheConseil Superieur de • The Conseil de la Concurrence • The Ministrie de l’Audiovisuel (CSA) is an (Competition Commission) is an lÉconomie, des Finances independent administrative independent agency responsible for et de l'Industrie (the authority, responsible for analysing and regulating market Ministry of the Economy, regulating the audiovisual competition. Finance and Industry) is sector in France • The Council does not have the the decision-making • It is responsible for powers to restrict unfair practices, body in the matters of managing and allocating and serves only as an advisory competition. spectrum for radio and board to the Ministre de l'Économie, • The Ministry would television. Since July 2004, des Finances et de l'Industrie. request Competition the regulation of radio and • The 'Conceil de la Concurrence' has Commission’s opinions television services via to consult the CSA on anti- “on all competition matters, alternative platforms competitive practises. on parliamentary bills, on (Internet, mobile networks) draft legislation regulating also falls under the CSA's prices or restricting remit. competition, and on • CSA is in charge of matters relating to monitoring competition in mergers“ the French media market • However, final decisions relating to anti-competitive behaviour are made by the Ministry

 Source: Spectrum Value Partners analysis 

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,QÃPRVWÃFRXQWULHVõPXVWFDUU\¶REOLJDWLRQVÃH[LVWÃZKLOHÃPXVWOLVWà Open access REOLJDWLRQVÃUHTXLULQJÃOLVWLQJÃRQÃ(3*VÃDUHÃOHVVÃFRPPRQ and must-carry

• ‘Must-carry’ obligations typically specific certain channels Examples of must-carry and must-list obligations and / or programmes that must be broadcast by certain types of broadcasters or network owners. They are imposed Hong Kong • Domestic FTA TV and radio broadcasters are to ensure that a channel has fair access to a particular subject to must-carry obligations under their important network or platform licence conditions on news, documentary, current - broadcasters subject to ‘must-carry’ obligations are affair, arts and culture programmes and usually those with greatest reach (e.g. PSBs, FTA programmes for children, young persons and broadcasters or pay TV broadcasters of a certain size) senior citizens. - must-carry channels are usually FTA channels (e.g. pay United • The Communications Act empowers the TV broadcasters must carry all FTA channels in Kingdom regulator to set must-carry obligations; Singapore; same in the UK) currently terrestrial transmission networks - “must-carry” may include broadcast quotas and / or provided by NTL and Crown Castle must scheduling restrictions broadcast the digital services of all FTA channels - however, may only involve general obligations to in the UK contribute to an adequate and comprehensive range of • Must-list obligations include the requirement that broadcasting services within their respective licence areas EPG providers give appropriate prominence to (e.g. Australia) the listing and promotion of PSB channels. - applicable in the EU, HK, Singapore, the UK and the US United States • Cable operators with more than 12 channels are • ‘Must-list’ obligations typically refer to specific restrictions subject to must-carry obligations under the and requirements on information provided in an electronic Communications Act: must broadcast a certain programme guide (EPG) of an operator. They are designed number of local commercial TV stations, non- to ensure a channel has ‘fair’ visibility and access to an commercial educational stations and a certain operators channel listing method percentage of unaffiliated commercial - the restrictions may be in relation to equivalent treatment programming and / or prominence of programmes broadcast by the • Satellite broadcasters must dedicate between 4% EPG provider and other broadcasters and 7% of channel capacity for non-commercial - the required information may be in relation to programmes educational or informational programmes. broadcast by PSBs or commercial FTA broadcasters - applicable in Australia, the UK and the US

Source: ACMA website, EU website, HKBA website, BSA website, MDA website, Ofcom website, FCC website (Mar 07); Spectrum Value Partners analysis

 PƒrÃhppr††Ãuh†ÃirrÃ€hqh‡rqÃvÃ‡urÃVFÃhqÃ6ˆ†‡ hyvhÃiˆ‡Ãv‡uÃqvssr r‡Ã r†ˆy‡†Ãqˆrǂà qvssr rpr†ÃvÃ‡r €†Ãphƒhpv‡’ÃhqÃrp‚‚€vp† Lack of open access to the dominant platform could distort the operation of the free market

Regulation Impact

• Sky in the UK offers technical platform services e.g. • There are now over 300 channels conditional access, EPG listings, regionalisation services and on the Sky platform in the UK access controls associated with interactive TV on a ‘fair, • All the channels have negotiated reasonable and non-discriminatory basis’ terms based upon EPG listing - any operator can launch their channels on the Sky charges and platform contribution platform and can obtain an EPG listing charges - in reality, Sky has the flexibility to negotiate favourable commercial terms with individual providers; Ofcom is proposing a fixed charging structure for technical platform - Costs to access platform range from between £100k and £4m pa (due to regionalisation charges). A small channel pays 300k to 500k pa • There are no significant capacity issues in the UK

• Foxtel in Australia is committed to ensuring an ‘open access’ • There are only 2 new channels regime for channel providers and infrastructure operators on which have secured access to the fair, commercial terms on their digital platform. The costs of Foxtel platform as a result of access should be shared equitably between Foxtel and each mandated open access. Foxtel still access seeker only has 100 channels • The ACCC (competition commission) is available for • This is likely to increase as platform arbitration only continues to grow in size, though it • The ACCC has developed a detailed open access cost model would indicate that open access • Whilst the costs of access to the Foxtel platform is not terms are overly onerous publicly available, it is thought to be in the region of $1m pa. Additionally channels have to secure capacity on the satellite

Source: Spectrum Value Partners analysis 

,QWHUQDWLRQDOO\ÃSODWIRUPÃRSHUDWRUVÃDUHÃRIWHQÃREOLJHGÃWRÃFDUU\ÃFHUWDLQà FKDQQHOVÃRQÃWKHLUÃQHWZRUNVÃE\õPXVWFDUU\¶ UHJXODWLRQV Must carry

• In Europe, the Universal Service Directive recognises the ability of Member States to impose or maintain reasonable must-carry rules on network providers under their jurisdiction - article 31 aims to ensure that these rules are proportionate, transparent, and limited to what is necessary

• In most cases, as illustrated below, must-carry rules are not limited to Public Service Broadcasters only

• Typically, ‘must-carry’ regulations are applied at the national level, though there are notable exceptions - in Belgium, the must-carry rules are developed by regional authorities, separately for Flanders, Wallonia and Brussels - in Germany, must-carry regulations are developed on the State (Land), rather than Federal, level

Type of channels outlined in the ‘must-carry’ regulations for cable carriers

Channels Netherlands Spain UK Germany France Belgium

National Y Y Y Y Y Y Public

National can be Private included N Y Y Y Y by local regulator

Local Y Y Y Y Y Y Public

In deciding appropriate must-carry measures, New Zealand would have to decide - what services should qualify for must-carry rules -who would be able to nominate the must-carry services -whether there are also ‘must-pay’ rules Source: Spectrum Value Partners analysis

 )UHHÃFDUULDJHÃIRUõPXVWFDUU\¶ FKDQQHOVÃLVÃVSHFLILHGÃLQÃDÃQXPEHUÃRIÃFRXQWULHVà ZLWKLQÃWKHÃUHJXODWRU\ÃIUDPHZRUN Must carry

• In the Netherlands and France, the regulations require the operators to carry the ‘must-carry’ channels for free - in France, cable operators must carry five channels (2 commercial and 3 public) on analogue free of charge; DTH operators must All must-carry channels provide retransmission of the public channels and the European have to be carried free-of- FTA cultural channel and bear the costs associated with the charge retransmission, including transport and broadcasting (e.g. cost of satellite transponder capacity) - in the Netherlands, cable operators have to carry seven must- carry programmes free of charge 

•In Belgium, programmes of local public-interest broadcasters of the Flemish community (one per locality) must be carried without Some must-carry channels payment have to be carried free-of- •In Germany, the Open Channels for local community events have to charge be carried free-of-charge 

Source: Spectrum Value Partners analysis

,WÃLVÃXQXVXDOÃIRUÃSODWIRUPÃRSHUDWRUVÃWRÃSD\ÃQDWLRQDOÃFKDQQHOÃSURYLGHUVÃ Must carry / IRUÃWKHLUÃFRQWHQW Must pay?

Overview of commercial arrangements for carriage of national public and leading commercial channels

Country Type of FTA channel Channel pays No one pays Cable operator pays

Netherlands Public (NOS) Y (cable) Commercial (RTL, SBS) Y

Spain Public (RTVE) Y (cable) Commercial (Antena3, Tele5, non- Y encrypted programmes of Canal+) UK Public (BBC) Y (cable1) Commercial (ITV1, Five) Y

Germany Public (ARD) Y (cable) Commercial (RTL, ProSiebenSat1) Y

France Public (France Télévisions, arte) Y (cable & DTH) Commercial (TF1, M6, Canal+1) Y

Note: (1) In the UK, satellite operator Sky was charging the major FTA channels, ITV and BBC, for the carriage; however, in the UK, DTH platform is not subject to “must-carry” rules Source: Spectrum Value Partners analysis

 &DQDGDÃLVÃWKHÃRQO\ÃFRXQWU\ÃUHYLHZHGÃZKHUHÃQHWZRUNÃRSHUDWRUVõPXVWÃSD\¶ Must carry / IRUõPXVWÃFDUU\¶ FRQWHQWñ EXWÃWKLVÃSD\PHQWÃGRHVÃQRWÃJRÃWRÃWKHÃFKDQQHOV Must pay?

• Cable television and satellite operators must ensure that the majority of the broadcasting services are devoted to the distribution of Canadian programming services General rules • Broadcasting distribution undertaking with more than 2000 subscribers must contribute at least 5% of their gross annual broadcasting revenues to the creation and presentation of Canadian programming 

• Cable television operators must carry programmes of the public broadcaster, local and  regional stations and educational programmes, as well as some local programming • With the exception of small cable companies, all broadcasting distribution undertakings must Cable operators contribute a minimum of 5% of their gross annual revenues derived from broadcasting activities to contribute to the creation and presentation of Canadian programming. The CRTC also provides incentives to cable companies so that a portion of the 5% contribution can be devoted to the production of ‘local’ expression for the communities they serve  • Satellite operators must carry programmes of the public broadcaster and of at least one affiliate of each national television networks licensed on a national basis, as well as some Satellite (DTH) local programming operators • DTH distributors must allocate the entire 5% programming contribution to an independently- administered production fund 

There is also an ongoing debate in South Africa, whether ‘must carry / must pay’ rules should be introduced

Source: Spectrum Value Partners analysis; The Australian Film Commission, REVIEW OF AUSTRALIAN CONTENT ON SUBSCRIPTION TELEVISION, 2003    7KH WZR IROORZLQJ H[KLELWV SURYLGH EDFNJURXQG LQIRUPDWLRQ RQ WKH W\SHV RI UHJXODWRU\PHDVXUHVXVHGWRHQVXUHDFFHVVWRSUHPLXPFRQWHQW VXFKDVNH\VSRUWLQJ HYHQWVRUPRYLHV LVQRWH[FOXVLYHWRGRPLQDQWSODWIRUPRSHUDWRUV   2XWVLGHÃRIÃ1=ÃWKHÃUHJXODWLRQÃRIÃSUHPLXPÃFRQWHQWÃJHQHUDWHVÃVLJQLILFDQWÃ Premium SROLF\ÃGHEDWHÃZLWKÃDÃUDQJHÃRIÃUHJXODWRU\ÃDSSURDFKHVÃDGRSWHG content

Examples of Regulatory Interventions in Premium Content

Intervention Description Examples

Non • Restrictions on rights holders • UK – EU forced breakup of FA Premier League rights into 6 packages Exclusivity selling to a single buyer / • Italy – Sky Italia forced to give up exclusive rights to Serie A football as selling a single package condition of merger

Distribution • Obligation to wholesale • UK – BSkyB obliged to wholesale premium channels on retail minus rights / premium and basic channels price basis  wholesaling to other pay TV operators • Italy – Sky Italia must make premium and basic channels available to rival operators

Limit on • Limit contract lengths for • Spain/UK – Length of contracts must not exceed 3 years contract terms sport and movies rights to • Italy – Movie output deal contracts reduced in length  allow other operators opportunities to enter market

Restrictions • Operators prohibited from • Italy – Legge Delega will prohibit exclusive purchase of rights to on bundled locking up rights which they platforms which the buyer does not operate contracts do not intend to use • Australia – New ‘use it or lose it’ legislation introduced 

Platform • Operators only permitted to • Italy – Sky Italia prohibited from owning exclusive rights beyond DTH specific hold exclusive rights on their own platform

Option to • Rights owners have option to • Italy – Rights owner can unilaterally terminate (without penalties) their terminate terminate distribution ongoing contracts with Sky Italia agreements without penalties

Listed events • Regulator lists key sporting • Australia – Anti-siphoning legislation gives FTA operators first refusal events which must be shown on 11 key sports FTA • Spain – Key sporting events must be shown FTA e.g. La Liga • UK – Events such as Olympics and World Cup must be shown FTA Source: Spectrum Value Partners analysis

 

&DVHÃ6WXG\Ã5HJXODWLQJÃIRUÃQRQH[FOXVLYLW\ÃRIÃSUHPLXPÃULJKWV Premium  content • BSkyB’s 13 year monopoly of Premier League Case study – EU breaking up FAPL football rights has been a key driver of pay-TV take-up • The European Commission announced a probe FAPL 2005-8 rights into the FAPL auction in 2001 to investigate breaches of competition law Gold - in 2003, the FAPL auctioned 4 tiered packages to enable rival bids, but all were acquired by BSkyB, with a highest bid of $1.024bn. BSkyB then offered to sub-licence 8 games but no Silver party matched the reserve price agreed by BSkyB and the EC - the Commission remained unhappy and for the Bronze Bronze 2007-10 rights, following extensive negotiations with the European Commission, new rules were agreed. The FAPL sold the rights in 6 packages of 23 games each; no FAPL 2007-10 rights one party could win all six. Setanta acquired 2 of these, effectively ending Sky’s monopoly over rights Package A Package C Package E • This season … - consumers can watch live FAPL matches on the Setanta sports channel for £9.99 per month on Virgin Media, Top Up TV and BT Package B Package D Package F Vision as well as BSkyB - By comparison, to access FAPL on BSkyB the minimum subscription fee is £34.00 per month (as it can only be accessed when bundled with other channels) Source: Spectrum Value Partners analysis; TV Sports markets, press reports, company websites



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