30 April 2012

Convergence Review

The 81 page report of the Australian Government's Convergence Review is now online.

The Review features 31 recommendations, some of which differ from those in the report of the Finkelstein Review released last month and several of which resemble those in a litany of reports highlighted in Nick Herd's Networking: Commercial Television in Australia (Strawberry Hills: Currency House 2012).

The need for a new approach

1. The policy framework for communications in the converged environment should take a technology- neutral approach that can adapt to new services, platforms and technologies.
a. Parliament should avoid enacting legislation that either favours or disadvantages any particular communications technology, business model or delivery method for content services. 
b. The focus of legislation should be on creating a sustainable structure within which a new independent communications regulator can apply, amend or remove regulatory measures as circumstances require.
2. There should be no licensing or any similar barrier to market entry for the supply of content or communications services, except where necessary to manage use of a finite resource such as radiocommunications spectrum.

3. Large enterprises that provide professional content services to a significant number of Australians should be expected to continue to:
a. have proposed changes in ownership scrutinised 
b. meet community expectations about standards applicable to the content they provide c. contribute in appropriate ways to the availability of Australian content.
4. These enterprises (which would be called content service enterprises) should be identified by the following criteria:
a. they have control of professional content they deliver 
b. they meet a threshold of a large number of Australian users of that professional content 
c. they meet a threshold of a high level of revenue derived from supplying that professional content to Australians.
The thresholds for revenue and users would be set at a high level so that only the most substantial and influential entities are within the category of a content service enterprise.

5. The appropriate threshold levels of revenue and of users should be determined following a review of relevant media enterprises by the new communications regulator. The appropriate threshold levels should be reviewed periodically by the regulator.

Media ownership

6. Media ownership and control rules should promote a diverse range of owners at a local and national level.
a. Ownership of local media should continue to be regulated through a ‘minimum number of owners’ rule. The existing ‘4/5’ rule should be updated to take into account all entities that provide a news and commentary service and have a significant influence in a local market. The new communications regulator should be able to provide an exemption from the rule in exceptional circumstances, if it is satisfied that a transaction will provide a public benefit in a specific local market. 
b. The new communications regulator should have the ability to examine changes in control of content service enterprises of national significance. It should have the power to block a proposed transaction if it is satisfied—having regard to diversity considerations—that the proposal is not in the public interest.
7.The following rules should be removed and replaced by a ‘minimum number of owners’ rule and a public interest test:

  • the ‘75 per cent audience reach’ rule
  • the ‘2 out of 3’ rule
  • the ‘two-to-a-market’ rule
  • the ‘one-to-a-market’ rule.
Content-related competition issues

8. The new communications regulator should be empowered to instigate and conduct market investigations where potential content-related competition issues are identified.

9. The new communications regulator should have flexible rule-making powers that can be exercised to promote fair and effective competition in content markets. These powers should complement the existing powers of the Australian Competition and Consumer Commission to deal with anti-competitive market behaviour. These powers should only be exercised following a public inquiry.

Content standards

10. There should be a technology-neutral and flexible approach to media content standards.
a. The new communications regulator should be responsible for all compliance matters related to media content standards, except for news and commentary. This will include the responsibility for administering the new national classification scheme proposed by the recent Australian Law Reform Commission review. An independent classification board would be established as part of the organisational structure of the new regulator to undertake specific classification functions. 
b. An independent self-regulatory news standards body operating across all media should be established by industry to enforce a media code aimed at promoting fairness, accuracy and transparency in professional news and commentary.
i. Content service enterprises should be required to be members of the news standards body, which should be established and adequately funded and resourced by its industry members.
ii. As it is in the public interest that such a body be appropriately resourced, the government should make a financial contribution.
iii. News and commentary providers that are not content service enterprises should be encouraged to join the news standards body.
iv. The news standards body should have credible sanctions and the power to order members to prominently publish its findings.
v. The news standards body should be able to refer to the new communications regulator instances where there have been persistent or serious breaches of the media code. The new communications regulator should also be able to request the news standards body to conduct an investigation.
c. The new arrangements outlined at paragraph 10(b) should be implemented in stages and the co-regulatory broadcasting codes in relation to news standards should not be repealed until the communications regulator is satisfied that the new self-regulatory arrangements are working effectively. 
d. Content service enterprises should also be subject to:
i. children’s television content standards, where appropriate 
ii. other content standards made by the new communications regulator where there is a case for regulatory intervention, with the starting point being the matters covered by the existing co-regulatory codes made under the Broadcasting Services Act 1992.
e. Content providers that are not of sufficient size and scope to be classified as a content service enterprise should be encouraged to opt in to content standards applying to content service enterprises, or to develop their own codes.
11. Where the new communications regulator is responsible for approving and enforcing content standards, it should have:
a. discretion to approve industry codes or adopt its own standards 
b. discretion to determine the most effective and efficient complaints and investigation procedures 
c. direct enforcement powers in response to a breach of codes or standards 
d. a graduated range of effective remedies to ensure compliance.
12. The new communications regulator should also:
a. certify whether complaints systems, privacy controls and other measures in self-regulatory industry codes meet best practice standards 
b. work with industry to provide transparent information to content users about what they can do to control access to content, building on government programs to educate consumers about media and digital literacy 
c. set technical standards that assist content users in managing access to content (such as parental locks or age-verification systems).
Australian content: screen

13. The quotas and minimum expenditure obligations applying to the free-to-air and subscription television sectors should be repealed and replaced with the uniform content scheme set out in recommendations 14 and 15.

14. Content service enterprises that meet defined service and scale thresholds should be required to invest a percentage of their total revenue from professional television-like content in the production of Australian drama, documentary or children’s content or, where this is not practicable, contribute to a new converged content production fund.

15. The government should create and partly fund a new converged content production fund to support the production of Australian content.

16. Premium television content exceeding a qualifying threshold should attract the 40% offset available under the Producer Offset scheme. This will bring premium television content in line with the current rate of offset available for feature film production.

17. Interactive entertainment, such as games and other applications, should be supported by an offset scheme and the new converged content production fund.

18. The following transitional arrangements should apply for commercial free-to-air and subscription television broadcasters until they are included within the uniform content scheme:
a. For commercial free-to-air television broadcasters:
i. The existing 55% transmission quota that is imposed on each broadcaster’s primary channel should continue. 
ii. There should be a 50% in Australian sub-quota content obligations for drama, documentary and children’s content to reflect the two additional channels each broadcaster currently operates that do not attract any quotas.
iii. The broadcasters should be able to count Australian content shown on their digital multichannels towards meeting the expanded sub-quota obligations. 
iv. The existing 80% for Australian-produced advertising on each broadcaster’s primary channel should be maintained.
b. For subscription television providers:
i. The 10% minimum expenditure requirement on eligible drama channels should be maintained. 
ii. A 10% minimum expenditure requirement should be placed on children’s and documentary channels.
Australian content: radio

19. Australian music quotas should continue to apply to analog commercial radio services offered by content service enterprises and be extended to digital-only radio services offered by content service enterprises.

20. Music quotas should not be applied to occasional or temporary digital radio services.

21. Given the evolving state of internet-based music services, quotas should not be applied at this time.

Local content: television and radio

22. Commercial free-to-air television and radio broadcasters using spectrum should continue to devote a specified amount of programming to material of local significance.

23. A more flexible compliance and reporting regime for television and radio should be implemented for the obligations set out in recommendation 22.

24. The current radio ‘trigger event’ rules should be removed.

Public and community broadcasting

25. The charters of the ABC and the SBS should be updated to expressly reflect the range of existing services, including online activities.

26. While Australian content quota obligations continue for commercial free-to-air television broadcasters as a transitional measure, quotas should also apply to the public broadcasters.
a. The primary ABC channel should have a 55% Australian content quota consistent with the obligation on commercial free-to-air television broadcasters. 
b. Reflecting its multicultural charter obligations, the SBS should be required to target half this amount (22.5%).
Spectrum allocation and management

27. There should be a common approach to the planning, allocation and management of both broadcasting and non-broadcasting spectrum that includes:
a. a market-based pricing approach for the use of spectrum, and one that provides greater transparency when spectrum may be used for public policy reasons 
b. spectrum planning mechanisms that explicitly take into account public interest factors, and social and cultural objectives currently reflected in the Broadcasting Services Act 1992 
c. ministerial powers to reserve and allocate spectrum to achieve policy objectives considered important by the government and the Australian community, including public and community broadcasting, which have contributed to the diversity of the Australian broadcasting system 
d. certainty for spectrum licence holders about licence renewal processes.
28. Existing holders of commercial broadcasting licences should have their apparatus licences replaced by spectrum licences to enable them to continue existing services. In addition:
a. as broadcasting licence fees will be abolished with the removal of broadcasting licences, the regulator should set an annual spectrum access fee based on the value of the spectrum as planned for broadcasting use 
b. commercial broadcasting licensees should have the flexibility to trade channel capacity within their spectrum.
29. The new communications regulator should allocate channel capacity on the sixth planned television multiplex (known as the ‘sixth channel’) to new and innovative services that will increase diversity. The use of capacity on the sixth multiplex for the distribution of community television services should continue. Existing commercial free-to-air television broadcasters and the ABC and the SBS should be precluded from obtaining capacity on the sixth multiplex.

Implementing the new approach

30. The Review’s recommendations should be implemented in three distinct stages:
a. Stage 1: Stand-alone changes that can be achieved in the short term should be made to policies, programs and legislation, including the public interest test that will apply to changes in control of content service enterprises. 
b. Stage 2: New content services legislation should replace the Broadcasting Services Act 1992 and existing classification legislation. 
c. Stage 3: The reform of communications legislation should be completed to provide a technology-neutral framework for the regulation of communications infrastructure, platforms, devices and services.

31. The new communications regulator should be established in time to implement the new regulatory arrangements recommended for stage 1, and assume the remaining functions of the Australian Communications & Media Authority at the conclusion of stage 2 of the implementation process outlined in recommendation 30