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FOXTEL Response to Communication and Media Authority’s Temporary trials of 3D TV and other emerging technologies

Friday, 22 October 2010 This document is Management Pty Ltd’s (FOXTEL) response to the Australian Communication and Media Authority’s (ACMA) ‘Temporary trials of 3D TV and other emerging technologies, released September, 2010.

FOXTEL Contact Details: Peter Smart Chief Technology Officer FOXTEL Email: [email protected] Ph: 02 9813 6666

Adam Suckling Director Policy & Corporate Affairs Email: [email protected] Ph: 02 9813 7593

EXECUTIVE SUMMARY

3D broadcast is an exciting development in television viewing that will provide consumers with new ways of enjoying their favourite programs through a futuristic and immersive television experience. In the interests of advancing ’s digital innovation, FOXTEL does not oppose ACMA’s provision of temporary apparatus licenses to conduct technical trials, in this instance for Free to Air (FTA) operators to conduct 3DTV trials. However strict parameters must be maintained around trials to ensure optimal public benefit is derived from Australia’s finite spectrum asset and to protect consumers from becoming confused around ongoing 3D service delivery. For this reason it is paramount trials are not extended beyond their end date. Prior to commencing trials operators must demonstrate a clear path as to how they will deploy 3D technology both commercially and technically on analogue switch off, within their post analogue switch off spectrum allocation There is no point testing a technology where there is no future plan around how it will be supported spectrally. It is critically important that the 3DTV trials by the FTA networks are not seen, or used, by the networks as part of a strategy to ‘spectrum squat’ or as an attempt to undermine the delivery of the billion dollar digital dividend will receive as part of the restack of the 126 MHz of spectrum that the government plans to auction for the services of the future. In addition, while 3D is an exciting development in television, it should not preclude trialing other technology, such as mobile television, particularly where there is a stronger economic case around its deployment. In this context, FOXTEL makes the following recommendations in relation to temporary trials of 3D TV and other emerging technology: 1. Channel B spectrum being currently used for the 3D technical trials must be returned on Analogue Switch Off to ensure Australia achieves its 126MHz Digital Dividend. 2. Operators must provide a clear path for how technology will be deployed commercially and technically post analogue switch off prior to trials commencing, within their spectrum allocations post analogue switch –off and following the restack. 3. Continuing trials should be conducted in the technical format in which the future technology is most likely to be deployed, which in the case of FTA 3DTV is a ‘Service Compatible’ format. 4. The primary purpose for using spectrum for trialing new technology must be technical, not commercial as outlined in the ACMA’s ‘Applications for Apparatus Licenses for the Trial of New Radiocommunications Technologies – Guidelines’. 5. Spectrum allocated for continuing technical trials must not be granted at the expense of trialing other technology that is more likely to optimise Australia’s public benefit, such as mobile television. 6. Channel A should not be used for temporary 3D trails without consideration of other ‘public good’ broadcast uses, such as broadcast of National Indigenous Television or Australia’s Public Affairs Channel. More generally, concerns that have been raised in the paper around spectrum limitations to support 3D TV, accentuate the need for the ACMA to review the operation of the digital terrestrial broadcast spectrum holistically, similar to the review conducted by Ofcom in the United Kingdom (UK) and as FOXTEL has suggested previously in its response to ACMA’s Five Year Spectrum Outlook 2010 – 2014 and earlier in DBCDE’s Digital Dividend Green Paper. Therefore, FOXTEL recommends that ACMA: 7. Conduct a holistic review into the management and operation of digital broadcast spectrum consistent with the review conducted by Ofcom in the UK to ensure this spectrum is managed with optimal efficiency. In the UK such an approach has increased the capacity of the spectrum 2.6 times. If the networks were to use their spectrum efficiently in Australia they would have sufficient spectrum to provide their SD and HD channels as well as new services such as 3D. 8. to a rational pricing structure for broadcast spectrum to encourage more efficient use. Licence fees should be set on the basis of the amount of spectrum used and its opportunity cost rather than being based on a percentage of advertising revenue.

ABOUT FOXTEL FOXTEL is Australia's leading subscription television provider and is connected to over 1.63 million subscribing households on cable and satellite through retail and wholesale distribution. FOXTEL strives to ensure our six million viewers find TV they want to watch every time they switch on their television through delivery of more than 200 channels covering news, sport, general entertainment, movies, documentaries, music and children’s programming. FOXTEL commenced distributing its services on cable with 20 channels in 1995, expanding to 31 channels and satellite distribution in 1999 and increased its offering to 45 channels in 2002 following the completion of the FOXTEL‐ Content Supply Agreement. The FOXTEL Digital service was launched in 2004, and FOXTEL is now giving Australian viewers the choice of more than 200 Digital channels. Since its launch, FOXTEL has extended its Digital innovations by adding a raft of new channels and interactive features including additional news, sports and weather applications, as well as FOXTEL iQ, a fully integrated Personal Digital Recorder, launched in 2005. FOXTEL launched its mobile service – Mobile FOXTEL in 2006 which now carries 33 channels and is one of the world’s most substantial mobile offerings. The live broadcast service FOXTEL Live2Air on Virgin Blue was launched in August 2006 and is now available across Australia on the Virgin Blue jet fleet providing 24 channels of live FOXTEL. FOXTEL launched its High Definition service in June 2008 with five dedicated 24‐hour HD channels‐ BBC HD, Discovery HD, National Geographic Channel HD, HD and ESPN HD plus Australian television premiere blockbuster movies available immediately when you want them through the FOXTEL Box Office HD On Demand service. The new generation FOXTEL iQ2 combines HD programming with a huge disk drive and intuitive and easy to use electronic programming guide making it even easier for subscribers to watch what they want and when they want. FOXTEL launched FOXTEL Next Generation in November 2009 which provides customers with: the increased choice of 30 new channels; new navigation features such as iSuggest – which enhances navigation with 200 fresh movie and program suggestions for iQ recording every week – and Record Me – which allows you to record shows directly from an on‐air program promotion; the most comprehensive HD offering in Australia with 15 HD channels; and News Local which provides a dedicated local news service for each major Australian capital city. In 2010 FOXTEL announced a ground breaking partnership with Microsoft to offer around 30 FOXTEL channels over the internet direct to our customers’ television sets via Microsoft’s Xbox LIVE product. FOXTEL and Microsoft aim to launch the new service towards the end of the calendar year. FOXTEL will offer FOXTEL by Xbox LIVE with various packaging and prices and under flexible agreements. FOXTEL will also launch in late 2010 FOXTEL services over the internet direct to FOXTEL customers’ television sets via around 780,000 deployed internet enabled iQ boxes. This new service will be launched towards the end of this calendar year. The service will offer customers even more choice and control over their television viewing, liberating a video store of choice with hundreds of On Demand movies and television programs. FOXTEL was the first Australian broadcaster to broadcast in 3D in conjunction with FOX SPORTS when the Socceroos played New Zealand on 24 May, 2010. In addition, FOXTEL will be the first broadcaster to offer Australians a dedicated 3D channel – FOXTEL 3D – on air from November 2010. Also from November, FOXTEL’s comprehensive HD offering expands to 20 HD channels, including FOXTEL 3D. FOXTEL directly employs around 2100 people and a further 1700 workers are indirectly engaged by FOXTEL in sales and installation services nationally. The FOXTEL Television Centre at North Ryde in is the headquarters of FOXTEL's national subscription television operations and houses FOXTEL’s television studios, broadcast operations and cable and satellite transmission facilities. FOXTEL also operates a national Customer Solutions Centre based at Moonee Ponds in , a purpose built state of the art call centre. FOXTEL is owned by Telstra Corporation Ltd (50%), The Ltd (25%), and Consolidated Media Holdings Limited (25%).

POLICY CONTEXT As a finite public asset, spectrum allocated for commercial purposes should be managed in a way that enhances Australia’s prosperity through supporting new industries, products and jobs of the future. Regrettably successive governments have not managed spectrum optimally and in the case of broadcast spectrum, the principle beneficiaries have been commercial broadcasters and their commercial interests, not the Australian public. Over a long period broadcast spectrum, which is a critical public asset, has been poorly managed, meaning: less investment, innovation and jobs as well as stopping Australians from enjoying new channels and products produced from robust competition. Large amounts of spectrum have been locked‐away to protect the broadcasters – undermining Australia’s productivity and GDP. Because FOXTEL pays a market rate for spectrum it is motivated to optimise its bandwidth to support growing customer demand for new services including channels, products and HD and 3D broadcast. Through digital multiplexes and advanced compression technologies such as MPEG 4/DVB‐S2 up to six HD services are supported on FOXTEL’s satellite transponders/multiplexes. FOXTEL strongly supports the Government’s decisions to release 126 MHz of broadcast spectrum as the digital dividend and auction off spectrum in the second half of 2012. This is a big step forward in managing Australia’s scarce spectrum asset more efficiently, for the benefit of Australia’s prosperity through supporting industries, products, services and jobs of the future. However, FOXTEL is still concerned there has not been greater consideration to ensure spectrum is efficiently utilized, some of which are manifested in the approach for issuing temporary licenses for 3D TV trials.

FUTURE OF 3D & FOXTEL 3D is an exciting development in television viewing that will provide consumers with new ways of enjoying their favourite programs through a futuristic and immersive television experience. Since FOXTEL’s inception it has been at the fore of television innovation in Australia, providing consumers with choice and control over their television viewing through twenty‐first century digital technology and diversity and variety in quality programs. FOXTEL made Australian television history earlier this year, when it broadcast the Socceroos’ last home match before the 2010 FIFA World Cup Live in 3D on Monday, May 24 from the Melbourne Cricket Ground. FOXTEL will launch the first dedicated 3D channel on November 1, 2010 that will broadcast movies, sport and documentaries in 3D pictures. The sports component will be a mix of live events from FOX SPORTS and ESPN featuring NBA, College Football, XGames and Wimbeldon Tennis.1 FOXTEL did not rely on or subsidise public spectrum to conduct 3D trials prior to its May 24 broadcast. In fact FOXTEL did not perform any on‐air platform testing prior to its 3D broadcast on May 24. Trials were conducted in a laboratory using a range of display devices and transmission equipment to perform a simulated end to end trial.

PARAMETRES FOR TECHNICAL TRIALS While FOXTEL is not opposed to using available spectrum for technical trials, such as 3D, strict parameters must be established to ensure Australia’s finite spectrum asset is being used at optimal efficiency. A number of concerns and recommendations are outlined below particularly in relation past and continuing 3D TV trials.

Spectrum used for the technology trials must be returned to the Digital Dividend on analogue switch off. FOXTEL strongly supports the Government’s decisions to release 126 MHz of broadcast spectrum as the Digital Dividend and auction off spectrum in the second half of 2012 where the market should be permitted to decide what services go onto the spectrum. Therefore, Channel B spectrum currently being used for 3D digital trials must be returned to make up the 126MHz Digital Dividend when Analogue Switch Off occurs.

1 FOXTEL Announces Dedicated 3D Channel and New Channel Line‐up, September 20, 2010, Press Release, FOXTEL website, accessed October 12 2010, http://www.foxtel.com.au/about‐foxtel/communications/foxtel‐announces‐ dedicated‐3d‐channel‐and‐new‐channel‐line‐u‐94874.htm FTA operators must provide a clear path for how technology will be deployed commercially and technically. Prior to commencing trials operators must demonstrate a clear path as to how they will deploy 3D technology both commercially and technically on analogue switch off, within their post analogue switch off spectrum allocation and following the redeployment of 126 MHz of BSB spectrum for the new wireless broadband services of the future. Spectrum is a finite public asset, therefore any trials can not be undertaken with the presumption that additional spectrum will be provided free or on a subsidised basis.

Continuing trials must be conducted in the format that the future technology is most likely to be deployed. Current trials and the proposed continuing trails use a ‘Frame Compatible’ format. However, international experience strongly supports a ‘Service Compatible’ format to deliver the highest quality terrestrial 3DTV with optimal spectral efficiency. A Service Compatible format operates by adding additional information to a standard HD framework that is only decoded by a 3DTV. This allows regular viewers to watch their program of choice, without the need for 3D audiences to retune or broadcasters to using substantially more bandwidth. A recent survey conducted by the European Broadcasting Union found over half of terrestrial broadcasters would prefer the adoption of a Service Compatible format and Arqiva, UK Digital (DTT) manager is progressing trials.2 Therefore, FOXTEL questions why technical trials continue to be conducted in a Frame Compatible format when this is unlikely to be the format with which 3D technology will be eventually deployed. It would make more sense to conduct the trials in a Service Compatible format and if necessary, wait until the requisite technology exists to conduct additional trials.

The primary purposes of using valuable, scarce, publicly owned spectrum for trialling new technology must be technical. ACMA’s ‘Applications for Apparatus Licenses for the Trial of New Radiocommunications Technologies – Guidelines’ state: ‘Scientific licences may only be issued for trials of new radiocommunications technologies that primarily relate to trialing of technical functions. However, trials may include incidental market testing or testing of other aspects of the technology such as performance testing to develop, prove and apply new technology.’3

2 Clover J, July 6 2010, Broadcasters prefer Service Compatible 3D format, Broadband TV News website, accessed October 14 2010, http://www.broadbandtvnews.com/2010/07/06/broadcasters‐prefer‐service‐compatible‐3d‐ format/ 3 Australian Communications and Media Authority, February 2010, Dealing with Applications for Apparatus Licenses for the Trial of New Radiocommunications Technologies – Guidelines, Australian Government, ACMA website, accessed October 13 2010, http://www.acma.gov.au/webwr/aca_home/publications/reports/info/trials_new_technlgy_guidelines.pdf It would seem as the Service Compatible format is the preferred technical method for 3D terrestrial broadcast, continuing trials in the Frame Compatible format is purely market driven. Media commentary from 3D trial participants supports this case: ‘Channel Nine, and the Australian Rugby League have united in a world first for Australian viewers – the ’s coverage of this year’s Harvey Norman will be the first sporting event ever to be broadcast live in 3D on free‐to‐air television.’4

Spectrum allocated for technical trials must give preference to technology that is most likely to optimise Australia’s pubic benefit. ACMA outlined in its own Principles for Spectrum Management that spectrum must be allocated to the highest value use or uses and that when this occurs public benefit will be maximized.5 While 3D is an exciting development in television, it should not preclude trialing other technology, such as mobile television, particularly where there is a strong economic case around its deployment.

Channel A should not be used for 3D trials without consideration of other ‘public good’ broadcast uses. The Paper raises the suggestion that the seventh channel (Channel A) which is currently being used for community broadcast to be made available for continuing further 3D trials given limited spectrum availability. FOXTEL is opposed to this suggestion given trials are principally commercial in nature, not technical and there are arguably other uses of greater public benefit. Given 3D television is still in its infancy and there are only a limited number of consumers with 3D television sets, there is arguably far greater public benefit in continuing to use this spectrum for community broadcast or alternatively temporary broadcast of other ‘public good’ broadcast such as National Indigenous Television (NITV) service or Australia’s Public Affairs Channel (A‐PAC) and FOX SPORTS News channel. FOXTEL has proposed in its response the Government’s Digital Dividend Green Paper on the Digital Dividend that this block of spectrum must be managed efficiently as a multiplex – in which case it could support the broadcast of at least five separate channels.

TRANSMISSION AND RECEPTION OF 3D IMAGES The Paper canvasses two methods of transmitting 3D images, both Frame Compatible and Non‐Frame Compatible, where the Australian trials have taken place in the Frame Compatible format.

4 http://channelnine.ninemsn.com.au/article.aspx?id=1045700 5 Australian Communications & Media Authority, Principles for Spectrum Management, October 2010, Australian Government, ACMA website, accessed October 13 2010, http://agencysearch.australia.gov.au/search/search.cgi?query=spectrum+management+principles&collection=age ncies&form=simple&profile=acma Confusion between Non­Frame Compatible format and Service Compatible format, and the preference for the ‘Service Compatible’ format for 3DTV. FOXTEL notes there is some confusion in the marketplace in the terminology and range of formats for 3D broadcast, in particular confusion between Frame Compatible, Non‐Frame Compatible and, ‘Service Compatible’ format. The Service Compatible format is increasingly the preferred method for 3D broadcast in the United Kingdom and Europe, and likely to be the eventual format adopted in Australia. The Service Compatible format operates by adding additional (DELTA) information to a standard HD 2D framework. This DELTA information is only decoded by a 3DTV. This allows regular viewers to watch their program of choice, without the need for 3D audiences to retune or broadcasters simulcasting the content thus using substantially more bandwidth.6 A similar approach was taken with colour television transmission where ‘colour television would not have got off the ground if the picture wasn’t able to be viewed on legacy black and white sets’7. The Non‐Frame Compatible format does not carry the signal within the standard HD frame, meaning it must be carried on a separate channel as ‘DELTA’ data within each of the FTA multiplexes. For this reason the Non‐Frame Compatible format is spectrally less efficient than the Service Compatible format. While the Frame Compatible format does carry the 3D signal within the existing HD framework it needs a dedicated channel to pass through the non‐service compatible image and requires conversion at the display device for it to be viewed in 3D, which may deliver a lower resolution 3D than the Service Compatible format. As an illustration, the technology director of the Group (DTG), the industry association for digital television in the United Kingdom, remarked ‘Frame Compatible can address existing HD STBs and TVs and is a very quick means for broadcasters to deliver 3D to the consumer ....the downside is that because each image is compressed by half of the horizontal resolution viewers are getting a lower resolution of 3D’8.

MPEG 4 receiver ‘compliance’ growing organically; 3D compliance likely to follow suit. The Paper raises a concern around take up of MPEG 4 compatible TV sets and the barrier this poses for high compression DVB‐T2 technology. FOXTEL notes, the latest digital switchover tracker indicates 74% of households are now ‘digitally ready’.9 Of these 74%, 72% have converted with a digital TV set.10 Nearly all TV sets sold on retail floors are MPEG 4 floor compliant. Given Australian’s appetite for new technology and the speed of take up of digitally integrated TV sets (~five point growth over the last quarter), household MPEG‐4 compatibility will not be a barrier for FTA transmitting 3D services through a Service Compatible format. Nine Network acknowledged at the conclusion of its 3D trial that they were ‘able to conclude that a larger than expected number of HDTVs already have MPEG‐4 reception capability’ and that this was

6 Clover J, 2010, Broadcasters prefer service compatible 3D format 7 Foster B, Senior Technology Consultant at Futuresource Consulting in Pennington, A, September 29 2010, Labels: 3D Codecs and Format, TVB Europe 8 Pennington, A, September 29 2010, Labels: 3D Codecs and Format, TVB Europe 9 Digital Tracker: Summary Report for Quarter 2, April to June 2010, Digital Switchover website, accessed October 15 2010, http://digitalready.gov.au/media/Digital_Tracker_Summary_Report_Qtr2_2010.pdf 10 http://digitalready.gov.au/media/DigitalTrackerReport_Qtr_2_2010.pdf, pg 32 ‘obviously good news supporting the prospect of a future migration from MPEG‐2 to the more efficiency MPEG‐4 video compression format’.11 While technical standards might play a role in driving take up of 3D compliant television sets, like MPEG4 capability and its inclusion in the technical specification, it is likely take up will happen organically through consumer demand, without the need for mandated standards.

SPECTRUM REQUIREMENTS AND AVAILABILITY The ACMA’s paper addresses future spectrum requirements and availability and identifies that it is not currently possible to transmit the 3D broadcast in addition to the two SD and one HD services currently over the same multiplex.

By optimising capacity of FTA multiplexes through new technology and market based pricing mechanisms 3D can be accommodated in FTA digital broadcast allocations. In the near future through improvements in digital technology, such as encoders and DVBT2/MPEG 4 transmission, and adopting a Service Compatible 3D broadcast format, it is highly possible FTA operators could deploy 3D technology as part of the suite of services on their own dedicated multiplexes. Similar challenges are being faced internationally. In the United Kingdom terrestrial HD services are supported by a shared multiplex. While there is currently not any room to support a 3D service on the HD multiplex, it is estimated by 2012 with encoder improvements this will be a distinct possibility.12 If FTA operators were to pay a market rate for spectrum, there would be a greater incentive to invest in technology to ensure its optimisation, including upgrading encoders to twenty first century broadcast standard.

Holistic review of digital broadcast spectrum needed to ensure it is being managed to optimal efficiency similar to that conducted by Ofcom in the UK. However, rather than considering these issues of trialing new technology and supporting new broadcast formats in isolation, the operation of the digital terrestrial broadcast spectrum should be considered holistically. FOXTEL has previously outlined its concerns in its responses to the DBCDE’s Digital Dividend Green Paper13 and ACMA’s Five Year Spectrum Outlook 2010 ‐ 201414. Once Digital Switchover has happened, the new approach will leave the broadcasters with 224 MHz of spectrum. If Australian broadcasters adopted the efficient broadcasting approach being implemented in

11 Nine Network Australia, 3D Trial #1: Report to the Australian Communications and Media Authority, August 30 2010, ACMA website, accessed October 13 2010 12 Clover J, August 25 2010, BBC unready to commit to 3DTV format, Broadband TV News website, accessed October 15 2010, http://www.broadbandtvnews.com/2010/08/25/bbc‐unready‐to‐commit‐to‐3dtv‐format/ 13 FOXTEL Response to DBCDE’s Digital Dividend Green Paper, February 26 2010, FOXTEL website, accessed October 20 2010, http://www.foxtel.com.au/cms/groups/webcontent/@fox/@corporate/@dotcom/documents/webcontent/p_023 292.pdf 14 FOXTEL Response to ACMA’s Five Year Spectrum Outlook 2010 – 2014, September 3 2010, FOXTEL website, accessed October 20 2010, http://www.foxtel.com.au/cms/groups/webcontent/@fox/@corporate/@dotcom/documents/webcontent/p_039 110.pdf the UK they would be able to increase the capacity of their remaining spectrum substantially, providing room to transition to new technologies such as DVB‐T2/ MPEG4. In the UK, once MPEG 4 and DVB‐T2 transition is complete it is estimated spectrum efficiency will increase by 2.6 times.15 This would allow more bandwidth to support trials for new technology such as 3DTV along with supporting ongoing 3D services. FOXTEL believes that the ACMA should commence a review of the broadcasters’ use of the remaining spectrum along the lines of the review that Ofcom completed into facilitating efficiency in the use of Digital Terrestrial Television (DTT) spectrum. It is FOXTEL’s view the digital terrestrial broadcast spectrum would be better operated as a managed multiplex, where the benefits include: 1. Ensuring a better consumer experience and driving digital take up through improved functionality, such as Electronic Programming Guides, through the exchange of Service Information (SI). 2. Reducing household disruption as customer would not have to retune their television sets following the spectrum restack as television sets will automatically retune. 3. Providing bandwidth to transition to new technologies such as MPEG 4/ DVB‐T2, and support new services such as 3DTV.

15 Ofcom, 2008, Digital Television: Enabling New Services: Facilitating Efficiency on DTT