Department of the Parliamentary Library Parliamentary ~ Research Service AItt-!l AUSTRALIA & !lJ>J»~~E<{(t~ BACKGROUND PAPER No. 221994 Pay Television .. 1 .~: .. : .+.:..\ / ' ISSN 1037-2938 Copyright Commonwealth of Australia 1994 Except to the extent ofthe uses permitted under the Copyright Act 1968, no part ofthis publication may be reproduced or transmitted in any form or by any means including information storage and retrieval system, without the prior written consent ofthe Deparunent ofthe Parliamentary Library, other than by Members ofthe Australian Parliament in the course of their official duties. Published by the Deparunent of the Parliamentary Library, 1994 Dr Kim Jackson Social Policy Group 28 November 1994 Parliamentary Flesearch Service Background Paper No.22 1994 Pay Television Telephone: 06277 2416 Facsimile: 06 277 2407 This paper has been prepared for general distribution to Members ofthe Australian Parliament. Readers outside the Parliament are reminded that this is not an Australian Government document, but a paper prepared by the author and published by .the Parliamentary Research Service to contribute to consideration of the issues by Senators and Members. The views expressed in this Paper are those ofthe author and do not necessarily reflect those of the Parliamentary Research Service and are not to be attributed to the Deparbnent of the Parliamentary Library. CONTENTS Summary i Abbreviations and Glossary .............................. iii A Brief History ..................................... .. I Means of Delivery ................................... .. 2 Legislative Basis 3 Licensing 4 The Satellite Licences 4 Other Pay TV Licences 6 MDS Licences 7 International Satellite Services .......................... .. 8 The ABC and Pay TV ................................ .. 9 Telecom and Pay TV ................................. .. 9 PMT Consortium .................................. .. 9 Cable Services 10 . Pay TV and Competition Policy 11 Content Regulation 14 Australian Content ................................... 14 Siphoning ......................................... IS Program Standards ................................... 17 Broadband Services and Pay TV 17 The Future of Pay TV 21 Major Players 21 Commercial Prospects :............................... 22 Policy Issues 25 Bibliography 26 Appendices Appendix 1 Table comparing the Regulation of Subscription Television Services Appendix 2 . The list ofevents for S.115 ofthe Broadcasting Services Act (the "anti-siphoning list") I I I I I I I I I I I I I I I I I I I I I I Pay Television Summary This paper describes the current· situation regarding pay TV in Australia. Although it contains a brief history of the issue, it does not attempt to analyse or describe the administrative and policy developments that have occurred over the last fifteen years. Instead, it concentrates on events of the last year or so, as well as likely developments in the near future. The history of pay TV is characterised by delay and difficulty: successive. Governments postponed the service and when the decision to introduce it was finally made, the administrative procedures established for the task proved inadequate. However, the lack of any strong or persistent demand from consumers for pay TV meant that there was little or no political cost for these delays. The push for pay TV has tended to be from the top down rather than the bottom up, and the debate has been between competing bureaucratic, commercial and. political interests. Public agitation has tended to be restricted to the issue of siphoning - the possibility that existing free-to-air sporting .coverage will shift to pay TV. Although legislative action has averted this threat, there· are a number of questions still surrounding the administration of the "anti-siphoning" provisions. Now, with the dawn of broadcast pay TV imminent, there is still much confusion over many aspects of the service and the debate shows. no signs of slackening. On the technical side, it is by no means clear what will be the dominant mode of delivery: satellite, cable, microwave or even the humble telephone line. The satellite service was given a head start but with each delay this advantage diminishes. Telecom's cable network is expanding steadily throughout the nation's suburbs and rival cable rollouts have also been proposed. The expenditure on these networks will be huge, and it remains a moot point whether the benefits of competition will outweigh the costs of duplication. The introduction ofpay TV was seen as ail opportunity for new local players in the Australian media and this expectation was fulfilled with the awarding of the satellite licences to Australis and .Continental Century. Yet these companies have required heavy financial backing from US cable operators and more and more the focus of interest is on the hardy perennials of the Australian media and communications scene: Packer, Murdoch, Telecom, Optus, Fairfax and the ABC. With the increasing role of the established media operators, questions of competition policy have come to the fore. These include the possibility of market dominance by the existing broadcasters and the dangers of vertical integration inherent in Optus and Telecom's involvement in both carriage and content. The recent statement by the Minister for Communication and Arts on the access requirements for the cable networks, and the dramatic response by Optus, have highlighted the importance of these issues. It would appear 11 Pay Television unlikely that Optus' withdrawal from cable infrastructure will be long-lived, as they would forfeit the inside running on the eve of the deregulation of telecommunications and the development of broadband services. It now seems that pay TV will be the first cab off the rank on Australia's information superhighway - the optical fibre network that will eventually bring the full range of broadband services to Australian homes. These are the communication services involving video, sound, text and data (either singly or in combination) that can be delivered at high volume through the use of digitisation and compression techniques. It is still unclear if the demand for these services will justify the cost of the superhighway. The commercial prospects for the pathbreaker, pay TV, are not encouraging in the short-to­ medium term. The large number of rival services with high-priced and incompatible hardware, the regular announcements of postponed services, the relatively high instalment and subscription chargesand a dearth of attractive and/or new programming will engender confusion and wariness amongst potential consumers. The new few years should see a shakeout in the industry, particularly amongst those providers relying on satellite and MDS systems. In the long term the greater carrying capacity, better quality of transmission and the telephony revenue provided by cable would appear to give it the advantage in the battle for the pay TV market. I Pay Television iii Abbreviations ABA . Australian Broadcasting Authority ABC Australian Broadcasting Corporation ADSL Asymmetric Digital Subscriber Line BSEG Broadcast Services Expert Group CTS Cable Television Services Pty Ltd MDS Microwave Distribution System PMT Packer Murdoch Telecom SMA Spectrum Management Agency TPC Trade Practices Commission Glossary Broadband Services: a range of communications services that use still or moving video, images, sound, text and data singly or in combination. Broadcasting services: transmitted services intended for the general public, irrespective of the means of delivery or whether free-to-air or pay TV. Cable television: television services that are carried to the household by a cable. Carriers: organisations responsible for the distribution oftelecommunications signals. Common carriers are those with a responsibility to provide a basic service to all who wish to use it. Digital compression: a process that reduces the amount of data to be stored or transmitted. Digitisation: the reduction of information to a pattern of Is and Os or on and off signals. Equalisation: the policy ofproviding three commercial television services to most areas in Australia. IV Pay Television Information superhighway: optical fibre network capable of delivering broadband services to the household linking together telecommunications, broadcasting and computer services. Interactivity: the capacity that allows the user of a service to reply to and sometimes control the iQ.formation source. Microwave distribution system: one-way communication system"using the microwave frequencies. Multimedia: integrated video, audio, text and graphics in digital form. Narrowcastingservices: transmitted services whose reception is limited by /~. being targeted at special interest groups, or being provided to limited locations or for a limited period. Optical fibre: a thin glass fibre used to transmit light and capable ofcarrying large amounts of information. Radiated television: television services that are broadcast over the air. Satellite footprint: a geographic area in which reception of a particular satellite signal is possible. Siphoning: the transfer oftelevision programs from free-to-air stations to pay TV. Subscription television: television services that require the payment of a subscription (pay TV). Transponders: a device on a satellite that can recei ve, amplify and transmit signals. Video-on-demand: a form of pay TV in which the viewer will be able to stipulate a particular program (usually a movie) at a time oftheir own choice. Pay Television