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Monday, 16 October 2006
Page: 109

Mr STEPHEN SMITH (7:57 PM) —I rise to speak in this cognate debate on the Broadcasting Services Amendment (Media Ownership) Bill 2006 and the Broadcasting Legislation Amendment (Digital Television) Bill 2006 on behalf of the Labor Party and representing my shadow ministerial colleague Senator Conroy, the shadow minister for communications.

These bills implement the most significant changes to media law in 20 years. The government would like the public to believe that this legislation is about media reform, but the government’s media plan does not deserve that description. Unlike some commentators, Labor is not prepared to allow the government to slap the label of ‘reform’ onto any old set of changes. The word ‘reform’ requires more than just change. The essence of the word is the notion of improvement in public policy, improvement for the Australian community. The government’s media ownership bill will reduce media diversity, reduce competition and reduce consumer choice. Legislation that facilitates such an outcome cannot be described as reform, and it certainly cannot be described as good public policy.

While the abolition of the cross-media laws may potentially benefit media owners, it offers nothing for the Australian public. The government knows that it is hard to sell increased media concentration as good public policy. This legislation represents the third time in the last decade that the Prime Minister has tried to force these changes through the parliament. This time around the government has tried to sugar coat the plan to repeal the cross-media laws by trying to link it to the new digital television services. In truth, there is no connection between the two.

Australia does not need to sacrifice media diversity in order to enjoy the benefits of the digital age. Countries like the United Kingdom and the United States are rapidly moving to embrace digital broadcasting. Both these countries have strong cross-media laws to promote diversity of opinion. But, in Australia, the Howard government maintains the benefits of digital can only be attained if incumbent media players receive a quid pro quo in the form of the repeal of the cross-media ownership laws. Labor completely rejects this trade-off.

This legislation is being rammed through parliament so that the government plans are subject to only minimal scrutiny and debate. Before I get to the detail of the legislation and its flaws, some comment needs to be made about the process which has preceded this debate, because it says so much about this government’s attitude to media reform. The bills before the House were the subject of more than 12 months consultation by the Minister for Communications, Information Technology and the Arts, Senator Coonan, with the media and the media industry. The government was determined to get a package that accommodated the industry’s interests. In contrast, the interests of consumers, viewers, listeners and readers have been just an afterthought.

For example, the Senate Standing Committee on Environment, Communications, Information Technology and the Arts was given just three weeks to conduct its inquiry into the legislation. The public had just one week to make submissions on the four bills in the package. The Senate communications committee was able to conduct just two days of hearings—more than 30 witnesses were crammed into this truncated timetable. For most witnesses, the opposition senators had just 10 minutes to ask questions. The government’s rush job on this package continued last week in the Senate, where more than 100 pages of amendments and explanatory materials were released during the debate as the government sought to fix drafting errors and appease the concerns of dissidents in its own party room. Debate in the Senate was gagged last Thursday. Many amendments could not even be discussed before the guillotine was applied in the Senate. Members of this House may not necessarily get any better treatment. This is how parliamentary democracy and scrutiny operates under the Howard government.

When you examine the bills in detail, it becomes entirely clear why the government does not want a lengthy debate. The Broadcasting Services Amendment (Media Ownership) Bill 2006 in particular is a deeply flawed piece of legislation. I now turn to the detail of that bill. The Broadcasting Services Amendment (Media Ownership) Bill makes two key changes to the media ownership laws. Firstly, it repeals the specific foreign ownership provisions in the Broadcasting Services Act that relate to commercial and subscription television. Secondly, it repeals the current cross-media laws and inserts new provisions which are described by the government as diversity safeguards. As I will outline in a moment, these safeguards are weak and ineffective.

The key principle that underlines Labor’s approach on media ownership regulation is the need to promote diversity of opinion in the marketplace for ideas. In a democracy, it is important to prevent a concentration of power to influence public opinion. There is no doubt that free and open discussion of ideas and opinions is the lifeblood of a democracy. The point was powerfully made by the Productivity Commission in its review of broadcasting legislation. The Productivity Commission stated:

… the likelihood that a proprietor’s business and editorial interests will influence the content and opinion of their media outlets is of major significance. The public interest in ensuring diversity of information and opinion … leads to a strong preference for more media proprietors rather than fewer. This is particularly important given the wide business interests of some media proprietors.

History shows that media companies have been ruthless in pursuing their commercial interests using their media power. A recent survey of journalists, for example, conducted by Roy Morgan and Crikey clearly demonstrates the capacity of ownership to influence the content produced by media companies: some 48 per cent of journalists, nearly half those surveyed, said they have felt obliged to take into account the commercial position of their employer, 38 per cent said that they have been instructed to toe the commercial line of their employer, 32 per cent said that they feel obliged to take into account their employer’s political position and 16 per cent said they had been instructed to so do. These figures demonstrate why maintaining a diversity of ownership of the most influential media is so fundamental.

For Labor, the principle of promoting diversity of opinion dictates a different policy response in relation to cross- and foreign media ownership restrictions. Labor supports the changes to the foreign ownership rules that are contained in the bill. This is a position that the Labor opposition has consistently maintained since 2002. There is already substantial foreign investment in radio, newspapers and television. Foreign investment offers the potential to introduce new players into the market and increase media diversity. In contrast, the bill’s proposal to repeal the cross-media laws will facilitate a massive concentration of media ownership.

Of course, the government claims that it understands the need to protect diversity. It argues that its package does contain safeguards to prevent excessive concentration of ownership. But any close analysis of these safeguards shows them to be completely inadequate. Let me start with the so-called voices test. Under this test, a media merger will not be allowed to occur unless there will remain a minimum of five media voices in metropolitan markets and four in regional Australia. For the purposes of this test, a voice is a commercial television licence, a commercial radio licence or a newspaper that is sold in the relevant area at least four days a week. It also includes a media group that has a combination of those assets.

The government has never provided any satisfactory explanation as to why it thinks that five and four are acceptable numbers, other than that it wants to allow scope for firms to reap economies of scale—in other words, the voices test is designed to facilitate media mergers. It is not intended to prevent a substantial consolidation of the industry. To appreciate this fact, it needs to be remembered that there are currently 12 owners of the major commercial media in Sydney. There are 11 owners of the major commercial media in Melbourne, 10 owners in Brisbane, eight in Perth and seven in Adelaide. In 19 major cities in regional Australia, there are six or seven owners.

The so-called five-four rule is, frankly, just a recipe for increased concentration and less diversity. This fact became so obvious that last week the minister was compelled to announce that the five-four test would be supplemented by a two out of three rule. The two out of three rule would prevent proprietors from owning newspaper, radio and television assets in the same market. While some members of the government have claimed this as a great concession, in reality it offers little additional protection for media diversity.

In both metropolitan and regional markets, a person in control of a newspaper and a television station would still be able to exercise an unhealthy degree of influence. For example, in my home state of Western Australia, in its capital city of Perth, a person who owns Channel 7 and the West Australian would have a tremendous capacity to influence the political debate. Under the two out of three rule, it would still be possible for the number of owners to fall from six to four in regional markets and five in the state capitals. The proposal does nothing to protect diversity in the 17 regional markets where there are only five commercial voices.

It is important to note that the voices test takes absolutely no account of the relative influence of a media organisation. Under the voices test, a media conglomerate composed of Channel 9 and the Sydney Morning Herald counts as one voice, as does a small radio station like 2KY. A music or TAB station is given the same weight as Channel 9. This is plainly absurd. The voices test does not represent a serious attempt to prevent a concentration of ownership of the most influential media assets.

The other claimed safeguard in the package is the ACCC’s power to examine media mergers to determine if they substantially lessen competition under section 50 of the Trade Practices Act. However, both the Productivity Commission and leading competition lawyers have cast doubt on this claim. The question of whether a merger breaches the Trade Practices Act is critically dependent on the definition of the relevant market. Historically, the ACCC took the view that the print and electronic media operate in separate markets. For this reason, it argued that the merger of newspaper and television assets would not give rise to competition issues.

More recently, the current Chairman of the ACCC stated his belief that there is now a broader media market and that section 50 could apply to cross-media mergers. Mr Samuel’s view has, however, been challenged by the leading law firm Phillips Fox. Last November, Phillips Fox stated:

... commercial television, newspaper and radio are not likely to be in the same market for merger analysis ...

The firm went on to state:

No competition cases in Australia or in the rest of the world (where technology is often more advanced than Australia) have yet accepted that the traditional market definitions should change ...

Other lawyers have questioned the capacity of the ACCC to identify a market for news and opinion, given that these services are typically not priced. Peter Armitage, the competition partner at Blake Dawson Waldron, has described the ACCC’s approach to defining news markets as ‘fairly speculative, brave new world territory’.

Ultimately, it will be up to the Federal Court to decide the issue. As we saw in the case of AGL’s purchase of Loy Yang Power, it is quite possible for the Federal Court to approve a merger that the ACCC believes is anticompetitive. As well, in its report on broadcasting, the Productivity Commission stated:

It is clear that the Trade Practices Act as it stands would be unable to prevent many cross-media mergers or acquisitions which may reduce diversity. It is also clear that the adoption by the ACCC of a broader definition of the media market would not adequately address the social dimensions of the policy problem, and would be open to legal challenge.

This view remains compelling. Labor believes the preservation of media diversity in this country should remain the responsibility of this parliament rather than the courts. So it is clear that the so-called diversity safeguards that the government has talked about—the voices test, the two out of three rule and the ACCC scrutiny—are all deeply flawed.

This House should be in no doubt about what will happen if the government’s cross-media ownership laws are passed. Merchant bankers, stock brokers and equity markets are already salivating over the prospect that the parliament will unleash a takeover frenzy. There will be a massive concentration in the ownership of the most influential media in Australia. It will become harder for diverse voices to be heard. There will be fewer journalists to report on stories of local interest. There will be fewer investigative journalists to hold members of parliament and industry to account.

There is no logical basis for the changes that the government has proposed. Even the explanatory memorandum to the bill states plainly that the benefits of cross-media ownership reform are ‘unclear’. During the consideration in detail stage, Labor will seek to amend the bill to prevent the repeal of the cross-media ownership laws, and I will circulate amendments to that effect in due course. This will provide this House with one last opportunity to protect media diversity in this country.

Before I move on to discuss the Broadcasting Legislation Amendment (Digital Television) Bill 2006, I want to spend a few moments dealing with the arguments that the cross-media laws are out of date or that they are holding back our media companies or our media industry. We have often heard in this debate that with the emergence of new technology, like the internet and 3G phones, the cross-media laws do not matter anymore. This simplistic argument confuses diversity of platforms with diversity of content. As James Hooke of Fairfax told the Senate committee, the mere fact that someone can watch Dancing with the Stars on a mobile device is not diversity.

The traditional media players have moved quickly to dominate the new media. Sites owned by News Ltd, PBL, Fairfax and the ABC account for 85 per cent of the hits on Australian news websites. While the minister was running around last week saying that the emergence of YouTube demonstrated the need to change media ownership laws, the ACCC has delivered a more sober assessment. Mr Samuel told the Senate committee:

... the internet is simply a distribution channel. It has not shown any significant signs at this point in time of providing a greater diversity of credible information and news and commentary.

It is important to remember that the legislation restricting cross-media ownership is not something that is unique to Australia. I recently read the report of one analyst who said that the cross-media provisions were an ‘anachronism’ and that ‘Australia needs to catch up with the rest of the world’.

The fact is that the previous Labor government did not invent the idea. A range of countries, including the United States, the United Kingdom, France, Japan, Germany, Austria, Slovakia, Korea and the Netherlands, have all seen fit to implement restrictions on cross-media ownership to protect their media diversity. It should be noted that many of these countries have media markets that are far more diverse than our own.

Another claim we regularly hear is that the cross-media laws are holding back innovation or investment. In fact, it is just the opposite. As leading academic Jock Given has noted, the cross-media laws are driving diversity, not constraining it. Fairfax is not stuck in print. Its website offers video news, bulletins and podcasts of journalists like Alan Kohler. Radio stations like 2GB offer transcripts, video news and audio downloads. Channel 9 is not stuck in TV. Through the Ninemsn website it offers plenty of text and audio.

The argument that the industry cannot grow without media mergers just has no foundation. The Australian media industry is tremendously profitable. There is no suggestion that the sector requires the ability to enter into cross-media mergers to remain viable. Mr Beecher, one of the owners of Crikey, for example, told the Senate committee:

In the past year, profits in the media industry were higher than ever before. This is a booming industry.

The average profit margin of public companies in this country is around 15 to 17 per cent—that is, $15 to $17 in every $100 of revenue is profit. The media industry average is 24 per cent.

Contrary to the claims of the government, there is also no basis to believe that the cross-media laws are in any way inhibiting investment or innovation in the Australian media. To even a casual observer of the media landscape, it is apparent that the cross-media laws have not prevented traditional media companies from investing in a range of new media opportunities including the internet, subscription TV and mobile phones.

I would now like to briefly address the Broadcasting Legislation Amendment (Digital Television) Bill 2006. Back in 2000 the government set a target to achieve switchover to digital broadcasting by the end of 2008. It has been clear for some time that there is no way that this target will be met. The policies that the government has pursued for the last five years have clearly failed to rapidly drive take-up. According to industry data, only around 20 per cent of households have purchased the necessary equipment to receive digital free-to-air broadcasts. The minister has been forced to postpone the start of digital switchover to some time between 2010 and 2012.

The slow take-up of digital is an important issue for consumers and the Australian economy. When we reach the point that analog broadcasting can be switched off, huge amounts of valuable spectrum will become available for other uses like new TV stations or wireless broadband. At present the government spends $50 million a year paying for the analog broadcasts of the ABC and SBS. This is clearly money that could be better spent on programming and content.

The digital television bill contains a number of measures which relax the current regulatory regime. Labor welcomes the measures in the bill that will increase the appeal of digital television to consumers. Measures like lifting the genre restrictions on the ABC and SBS and the decision to allow some form of commercial multichannelling should stimulate consumer interest. However, the regulatory regime for digital television remains very restrictive. No sport that is on the antisiphoning list will be permitted to be shown on commercial multichannels. For two years commercial broadcasters will only be able to multichannel in high definition. The new channel A will offer such a narrow range of programming that there are strong doubts about whether it will be viable. The new channel B is most likely to be used for mobile TV and consequently will have no impact on take-up in the home.

Under the government’s proposal, free-to-air broadcasters have little or no incentive to aggressively drive the transition to digital. Labor will support the digital television bill because it does contain several measures that over time will increase the effectiveness of digital television for consumers. However, Labor is not convinced that the government has come up with a model that will allow Australia to begin to switch off by 2012. This should have been the real focus of the media reform debate. In this respect, Labor will announce further measures to address this issue in the run-up to the next election.