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%Urdgfdvwlqj ,Qtxlu\ 5Hsruw %URDGFDVWLQJ ,QTXLU\5HSRUW 5HSRUW1R 0DUFK Commonwealth of Australia 2000 ISBN 1 74037 156 9 This work is subject to copyright. Apart from any use as permitted under the Copyright Act 1968, the work may be reproduced in whole or in part for study or training purposes, subject to the inclusion of an acknowledgment of the source. Reproduction for commercial use or sale requires prior written permission from AusInfo. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Legislative Services, AusInfo, GPO Box 1920, Canberra, ACT, 2601. Publications Inquiries: Media and Publications Productivity Commission Locked Bag 2 Collins Street East Melbourne VIC 8003 Tel: (03) 9653 2244 Fax: (03) 9653 2303 Email: [email protected] General Inquiries: Tel: (03) 9653 2100 or (02) 6240 3200 An appropriate citation for this paper is: Productivity Commission 2000, Broadcasting, Report no. 11, AusInfo, Canberra. The Productivity Commission The Productivity Commission, an independent Commonwealth agency, is the Government’s principal review and advisory body on microeconomic policy and regulation. It conducts public inquiries and research into a broad range of economic and social issues affecting the welfare of Australians. The Commission’s independence is underpinned by an Act of Parliament. Its processes and outputs are open to public scrutiny and are driven by concern for the wellbeing of the community as a whole. Information on the Productivity Commission, its publications and its current work program can be found on the World Wide Web at www.pc.gov.au or by contacting Media and Publications on (03) 9653 2244. Terms of reference I, PETER COSTELLO, Treasurer, under Parts 2 and 3 of the Productivity Commission Act 1998 and in accordance with the Commonwealth Government’s Legislation Review Schedule, hereby refer the Broadcasting Services Act 1992, Broadcasting Services (Transitional Provisions and Consequential Amendments) Act 1992, Radio Licence Fees Act 1964 and the Television Licence Fees Act 1964 (’the legislation’) to the Productivity Commission for inquiry and report within twelve months of receiving this reference. The Commission is to hold hearings for the purpose of the Inquiry. Background 2. The Broadcasting Services Act 1992 and the Broadcasting Services (Transitional Provisions and Consequential Amendments) Act 1992 govern a diverse range of radio and television services for entertainment, educational and information purposes. The Acts seek to provide a regulatory environment that varies according to the degree of influence of certain services upon society and which facilitates the development of an efficient and competitive market that is responsive to audience needs and technological developments. The Acts also seek to protect certain social and cultural values, including promoting a sense of Australian identity, character and cultural diversity; encouraging plurality of opinion and fair and accurate coverage of matters of national and local significance; respecting community standards concerning programme material; and protecting children from programme material that may be harmful to them. 3. The Radio Licence Fees Act 1964 and the Television Licence Fees Act 1964 seek to recover some of the value inherent in commercial broadcasting licences from commercial broadcasters and provide a return to the public for their use of scarce radiofrequency spectrum. Fees are based on the advertising revenues of commercial broadcasters. Scope of the Inquiry 4. The Commission is to advise on practical courses of action to improve competition, efficiency and the interests of consumers in broadcasting services. In doing so, the Commission should focus particular attention on balancing the social, cultural and economic dimensions of the public interest and have due regard to the phenomenon of technological convergence to the extent that it may impact upon broadcasting markets. 5. In making assessments in relation to the matters in (4), the Commission is to have regard to the Commonwealth’s analytical requirements for regulation assessment, including those set out in the Competition Principles Agreement, which specifies that any legislation which restricts competition should be retained only if the benefits to the community as a whole outweigh the costs and if the objectives can be met only through restricting competition. The report of the Commission should: IV BROADCASTING (a) identify the nature and magnitude of the social and economic problems that the legislation seeks to address; (b) clarify the objectives of the legislation; (c) identify whether and to what extent the legislation restricts competition; (d) identify relevant alternatives to the legislation, including non-legislative approaches; (e) analyse and, as far as reasonably practical, quantify the benefits, costs and overall effects of the legislation and alternatives identified in (d); (f) identify the different groups likely to be affected by the legislation and alternatives; (g) list the individuals and groups consulted during the review and outline their views, or reasons why consultation was inappropriate; (h) determine a preferred option for regulation, if any, in light of objectives set out in (4); (i) examine mechanisms for increasing the overall efficiency of the legislation and, where it differs, the preferred option. 6. In undertaking the review, the Commission is to advertise nationally, consult with key interest groups and affected parties, and release a draft report. The Government will release and respond to the final report produced by the Commission within six months from the date it is received. PETER COSTELLO (Reference received on 5 March 1999) TERMS OF V REFERENCE Disclosure of interests The Productivity Commission Act 1998 specifies that where a Commissioner has or acquires an interest, pecuniary or otherwise, that could conflict with the proper performance of his functions during an inquiry he must disclose the interest. Stuart Simson has advised the Chairman of the Commission that he holds or has interests in shares in the following companies: • John Fairfax Holdings; • West Australian newspaper; • Telstra; • Cable and Wireless Optus; and • News Corporation Mr Simson is a director of Simson Media Pty Ltd which is a shareholder in, and manager of Artsim Pty Ltd, a business that develops new media content and products. The other shareholders of Artsim are Artist Services Pty Ltd and Macquarie Bank Limited. Artsim: • publishes a website that has received funding support from Telstra Multimedia and Telstra has an option to purchase equity in this website; • produces programming for a daily business television program shown on Sky News. The Australian newspaper provides some office facilities and funding to help produce the program and receives promotional support. Sky News provides facilities to assist with the production of the program; • is a shareholder in, and manager of Sportsview.com.au Pty Ltd which publishes websites for AFL clubs; • has an agreement to supply content to AAP Information Services; and • has an interest with Ericsson Australia in a business that manages multimedia content. VI BROADCASTING Contents Terms of reference IV Disclosure of interests VI Contents VII Abbreviations XVI Glossary XIX PART I EXECUTIVE SUMMARIES 1 Key messages 2 Overview 5 Summary of recommendations 33 PART II THE NEED FOR CHANGE 45 1 Reviewing broadcasting regulation 47 1.1 Regulating broadcasting 47 1.2 This inquiry 48 1.3 The Commission’s approach 50 1.4 Objectives of Australian broadcasting regulation 52 1.5 Australia’s broadcasting regulators 57 1.6 Broadcasting policy principles 58 2 The structure of Australian broadcasting 61 2.1 Consumption of media services 61 CONTENTS VIIII 2.2 Sectors of the broadcasting industry 74 2.3 Financial structure of broadcasting services 93 2.4 Profitability of broadcasting 96 2.5 Conclusions 103 3 Convergence 105 3.1 The nature of convergence 105 3.2 Convergence: a closer look 110 3.3 Towards policy convergence 122 PART III AUSTRALIAN BROADCASTING INDUSTRIES 125 4 Advertising’s role in broadcasting 127 4.1 Expenditure on advertising in Australia 128 4.2 The economics of Australia’s advertising market 132 4.3 Role of advertising in Australia’s evolving media 140 4.4 Conclusion 145 5 Australia’s audiovisual production industry 147 5.1 Types of audiovisual production 147 5.2 World market for audiovisual programs 150 5.3 Australian audiovisual market 154 5.4 International competitiveness 165 5.5 Australian government assistance to film and television production 169 PART IV OPENING UP THE SPECTRUM 175 6 Managing Australia’s broadcasting spectrum 177 6.1 The role of broadcasting licences 177 6.2 Managing broadcasting spectrum 179 6.3 Licence fees 185 6.4 Spectrum access 188 6.5 Pricing broadcasting spectrum 193 6.6 Allocating broadcast spectrum 202 6.7 Improving spectrum management 209 6.8 Improving spectrum licensing 218 VIII BROADCASTING 6.9 Conclusion 219 7 From analog to digital 221 7.1 What is digital television? 222 7.2 The current policy framework 229 7.3 From analog to digital television 233 7.4 A new regulatory framework for digital television 244 7.5 Towards digital radio 259 PART V DIVERSITY, CONCENTRATION AND COMPETITION 263 8 Structural diversity in Australian broadcasting 265 8.1 Structural diversity 265 8.2 National broadcasters 268 8.3 Community broadcasters 275 8.4 Indigenous broadcasters 282 8.5 Subscription television broadcasters 291 8.6 Narrowcasters 295 9 Concentration, diversity
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