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Thursday, 20 November 1986
Page: 2644


Senator RYAN (Minister for Education)(6.25) —I move:

That the Bills be now read a second time.

I table a revised explanatory memorandum for the Broadcasting Amendment Bill 1986 and seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows-

BROADCASTING AMENDMENT BILL 1986

This is a historic Bill because it provides the legislative framework for a major expansion of the Australian broadcasting system. Honourable senators will know that Australians living in our mainland State capital cities already have-or in the case of Perth, soon will have-a choice of three commercial television services as well as the two national channels. The five million people who live in regional Australia only have, in the main, one commercial service and the ABC. This is a situation that the Government is no longer prepared to accept; it is inequitable and discriminatory; moreover it is unnecessary.

Accordingly, in 1984 the Minister for Communications announced that the Government placed primary emphasis upon the need to extend regional services and to maximise diversity of choice. After a process of research, consultation and public debate we have now reached the point where we can begin to put flesh on the bones of that policy.

In the Minister's statement to the Parliament of 20 May he set out three strategic goals the Government wants to achieve; firstly, to provide services in most regional areas comparable to those in capital cities, that is equalisation; secondly, to create larger more viable markets in regional Australia through the process of aggregation; and, thirdly, to encourage competition.

Equalisation

After the Department of Communications' 1985 report on future options for the development of commercial television, two processes were identified for moving towards equalisation. The first process was direct aggregation, whereby existing markets (or service areas) were combined in order to provide a sufficient population base for three competitive services. The second process was to utilise a mechanism known as multi-channel services (MCS). This involved allowing existing regional operators to provide two extra non-competitive, services in their existing markets.

Honourable senators will know that either approach necessarily involves structural change on a very large scale. They will also know that managing and financing this large expansion will impose considerable strains upon the regional commercial television licensees who will play the central role in achieving it.

Accordingly, both concepts were exposed to wide industry and public debate. Regional commercial licensees represented by Regional Television Australia (RTA) and the Federation of Australian Commercial Television Stations (FACTS), met with the Prime Minister, with the Minister for Communications and with honourable senators on the Government side on several occasions. Moreover, both individual licensees and a wide cross-section of interested parties have made submissions to the Minister and the Department of Communications. Someone once remarked that in the race of life, you can always back self-interest as a starter. The media reports have often been colourful, but, in fact, there is no single view in the industry. Neither RTA, nor FACTS reflect all licensees' views all of the time, and over the last few months in particular, the industry has demonstrated a flexibility in debate which can only be admired. Interests which took one point of view in 1984, or even 1985, have adopted the opposing view in 1986; moreover they have argued for that view with all the fervour and zeal of the converted. In all of this, the Government has tried to remind the parties of the Government's strategic objectives, and particularly of its concern to encourage competitive markets. The Australian broadcasting industry has been heavily regulated and protected. We are not interested in perpetuating that protection if it works against the interests of regional viewers.

As the Minister announced on 20 May, the Government has decided to adopt the aggregation process and allow the licensees themselves to make the choice between proceeding directly to aggregation in enlarged markets or to provide multi-channel services (MCS) in the licensee's existing service area as an interim step before aggregation. It remains our view that aggregation is the preferred way in which larger and more soundly based competitive regional services can be developed to give regional viewers services like those currently available in the mainland capitals. Aggregation will unlock the competitive dynamism which regional commercial television, despite its many achievements, has so far lacked.

Less Ministerial involvement and Government regulation is attached to the aggregation process than is the case with MCS. Moreover, aggregation represents, for the Government and the industry, one decision point, and importantly, the decision is an industry decision. The scheme provided for in this Bill is, as far as possible, market driven.

The Indicative Plan

The Bill before the Senate provides the mechanisms for achieving the objectives I have outlined above and provides a framework within which the industry drive transition to aggregated competitive services in regional areas is to be achieved. This will result in regional viewers in approved markets having a level of service like that now enjoyed by their metropolitan counterparts.

The Bill provides that the Minister is empowered to publish the `Equalisation of Regional Commercial Television Indicative Plan'. This is the basic strategic planning instrument for the Equalisation scheme. The Indicative Plan will not be a complex document. Firstly, it will specify the regional licences to which the Equalisation scheme is to apply. It does not cover Tasmania, however, as special provisions to cover Tasmania are set out in the Bill.

Secondly, it will specify areas, to be known as `approved markets', which are the expanded markets in which a number of identified licensees will eventually provide, between them, three competitive services. For most regional viewers in Australia this will be by 31 December 1996.

The major means of achieving equalisation is by a process called `aggregation'. This will involve the expansion of a licensees service areas so that licensees who previously had monopolies in their service areas are brought to compete in expanded service areas (`aggregation areas') against other licensees from their Approved Market. The Indicative Plan will specify the aggregation area for each licence.

The Indicative Plan will also list pairs or groups of licences which are, under the Bill, eligible for consolidation into one licence.

The Indicative Plan may also specify, as approved markets, regional areas in which there are only two existing licences. In these areas a third service would be provided by means of the issue of a new licence. The creation of this type of market provides some planning flexibility for the creation of new approved markets in future years.

Regional licensees who are not specified in the Indicative Plan as being part of an approved market will be permitted, and encouraged, to adopt multi-channel services in order to provide additional services in their existing service areas.

On 29 July this year the Minister for Communications released a draft indicative plan for public comment. As a result of comments received, the structure of approved markets has been revised and substantially reworked.

The essential criteria which will be applied in the determination of approved markets include community of interest, contiguity, viability, and where possible, avoidance of overlap of State boundaries and time zones.

The Bill also provides for variations to be made to the plan. The power of the Minister to vary the Indicative Plan is primarily to bring further regional licences into the equalisation process and to set new deadlines for aggregation for these licences in the new approved markets. The Minister cannot change arrangements already in place.

In relation to approved markets set in the Indicative Plan, the Bill will require that aggregation be completed by 31 December 1996. Where subsequently approved markets are created under a variation of the Plan, a later deadline can be set for those new markets.

Multi-Channel Services (MCS)

The second mechanism for providing additional services to regional viewers is multi-channel services (MCS). In most approved markets, the licensees may elect, as an interim step, to provide additional services utilising these permits, in their original service areas, before proceeding to aggregation.

Licensees in an approved market will have 28 days from the date of publication of the indicative plan to give the Minister notice whether they wish to proceed immediately towards aggregation or to first provide MCS services in their existing service areas before proceeding towards aggregation.

Where a licensee in an approved market fails to give notice within 28 days, the licensee will be taken to have given notice of an election for aggregation.

If all licensees within an approved market elect to provide MCS then the market will be taken as proceeding towards aggregation by way of MCS.

If any one or more licensee elects to move to aggregation immediately, then the approved market will move directly towards aggregation. This is what has become known as the `one-in-all-in' rule.

Implementation Plan

After the Minister has given notice to licensees of the direction to be followed in an approved market, each licensee is required to submit an implementation plan to the Minister for approval. They have 3 months to do this. If the approved market is proceeding immediately towards aggregation, the implementation plan will set out the stages and timetable proposed by the licensee for the extension of services into the licensee's aggregation area. In the case of licensees utilising MCS, the implementation plan will set out the stages and timetable proposed by the licensee for the provision of MCS in the existing service area. The plan will also set out the stages and timetable proposed by the licensee for the subsequent extension of services into the licensee's aggregation area.

A vital function of the Implementation Plan approval process is the co-ordination of the transition from MCS to aggregation in an approved market.

Licensees in MCS markets may include, in their implementation plans, a proposed timetable for the transition to aggregation prior to the end of 1996. The process must, however, be completed by the aggregation completion date. Concern has been expressed that the powers in relation to implementation plans could be used so as to impose an unrealistically short period for the currency of MCS services before licensees are required to move to aggregation. I want to state that where licensees elect to use MCS services before proceeding to aggregation, the timing of the transition in the approved market would be based on their proposals rather than ministerial preference. This, of course, is subject to satisfactory completion of aggregation by the end of 1996. Further some judgment will be required where the licensees proposed timetables vary substantially.

The flexibility in the provisions allows licensees to put forward a transition timetable which best suits the circumstances of the particular approved market. In this way it allows the process to be market driven, as much as possible, within the constraints of the basic strategy.

When considering a licensee's Implementation Plan the Minister will need to have regard to the Implementation Plans of other licensees within the Market. This is particularly necessary in relation to the transition timetable from MCS to aggregation which must necessarily be co-ordinated for each approved market.

As this co-ordination could involve considerable negotiation between licensees and the Minister, and between licensees, the Bill provides flexibility to the Minister as to how he might approach this task.

If the Minister does not approve the licensee's implementation plan, the affected licensee concerned will be required to submit a second plan. Should the Minister not approve the second plan, the Bill outlines several options. The Minister may again refer the plan back to a licensee; he may refer the matter to the Australian Broadcasting Tribunal (ABT) for consideration and recommendation or, in the ultimate, he may determine the terms of the implementation plan that is to be applic- able to the licensee. The Bill allows the first two processes to be used more than once; the ultimate power of the Minister to determine an Implementation Plan is clearly something that would only be used as a last resort.

If a licensee fails altogether to submit an implementation plan the Bill also permits the Minister to determine an appropriate implementation plan.

The Minister may vary an implementation plan in certain circumstances. This may be on application by a licensee or on the Minister's own initiative. Before the Minister varies a licensee's implementation plan he is required to give each licensee in the approved market notice of any proposed variation and have regard to any subsequent representations made to him. Most importantly, an Implementation Plan cannot be varied to alter the period over which the MCS option can be used in the absence of consent from all licensees in the Market.

A feature of the MCS permit is that it is granted by the Minister whereas broadcasting licences are issued by the ABT. The Minister may grant an MCS permit consistent with the licensees implementation plan. An MCS permit may be granted for up to 12 months. Its relationship to the head licence in such that if the head licence is transferred to a new licensee then the MCS permit automatically transfers with it. MCS permits do not have separate proprietary interests attached to them. Should at any stage the head licence not be in force then the MCS also ceases. Licensees will be permitted to operate a maximum of two MCS permits in relation to a particular licence.

MCS Permits will be subject to the same broadcasting requirements as commercial licences. They will individually have to provide an adequate and comprehensive service to the service area and will be subject to the normal commercial programming constraints set out in Part IV of the current Broadcasting Act. This includes the requirement to comply with program standards.

An additional requirement is that MCS permit holders will need to obtain ABT approval before they can regularly broadcast programs of the head licence or of another associated MCS permit, that is, it will not be possible for a licensee to `simulcast' without ABT approval. This requirement is based on an existing provision applicable to supplementary licences.

Planning Obligations

The planning obligations accepted by licensees and permit holders in approved markets are contained in the licensee's Implementation Plan.

Licensees will be required to comply with their Implementation Plan as a condition of licence. The ABT will be able to refuse to renew a licence where the licensee has failed, to a significant degree, to comply with the licensee's Implementation Plan. This includes provision of MCS transmissions. The ABT will not, however, be able to refuse to renew a licence on this ground without seeking the Minister's views on the matter and without having regard to any representations that the Minister might make.

The Bill provides for a licensee's performance under his Implementation Plan (with respect to both his licence and his MCS permits) to be investigated by the ABT at the time of the normal cyclical renewal of the head licence. The division of functions between the Minister on planning and the ABT on licensing is maintained by providing that the Minister's representations are necessary before the ABT can refuse to renew a licence on the grounds of non-compliance with the licensee's Implementation Plan.

The same structure is provided for in the Bill with respect to the suspension and revocation of licences. Further, the ABT can, at its own initiative or on receipt of an application, recommend to the Minister that he revoke an MCS permit on the basis of the MCS permit holder's substantial failure to comply with his Implementation Plan.

Programming

The ABT role in relation to programming matters is basically unchanged with respect to licensees. In its simplest sense the process of aggregation only means an expanded service area.

The Bill contains a new provision, however, which is designed to cover the licensee's obligation to provide an adequate and comprehensive service during the period when he is progressively expanding his service:

(i) into his aggregated service area in compliance with his Implementation Plan; or

(ii) by the MCS process whereby he is extending the coverage of an MCS service in his service area in compliance with his Implementation Plan.

In each of these situations the ABT is required to have regard to the Implementation Plan when considering whether the licensee has been providing an adequate and comprehensive service for the purpose of a licence renewal or suspension or revocation inquiry. This provision is intended to act as a protection to licensees. It ensures that they are not required to provide an adequate and comprehensive coverage immediately to the whole area but rather in accordance with the staged process set out in the Implementation Plan.

Consolidation of Licences

In order to allow for the creation of larger markets, the Bill will enable specified pairs of licences, at their option, to consolidate their licences into one licence. These pairs or groups of licences will be specifically identified in the Indicative Plan.

Approved Markets with an Additional Licence

The Bill includes a provision which could enable the granting of additional licences in some specified approved markets. The Bill provides, that an approved market could be made up of 2 services (which may consist of pairs) with the third service being provided through the grant of a new additional licence. As decisions on the desirability of having a third new licence is made as a Ministerial planning decision, the Bill will not allow the ABT to refuse to issue a licence on the basis of commercial viability of existing licences or because the Tribunal concludes that a licence of the nature called for by the Minister should not be issued.

Special Provision Applicable in Tasmania

The Bill makes special provisions concerning commercial television services in Tasmania. Currently both licences in Tasmania are controlled by the one company. It is the Government's intention that a new second service will be introduced as soon as possible in Tasmania. There are two ways to achieve this objective. Firstly, the existing licensee may sell one of the two licences to another operator whereupon each licence will have its service area expanded to include the service area of the other. Alternatively the existing 2 licences may be consolidated into one licence and another licence called for having the same service area as the consolidated licence. If another licence is called for, the Tribunal will not be able to refuse to issue a second licence on the basis of the commercial viability of the incumbent licensee, or on the grounds that it does not consider that another commercial television licence should be issued.

Delegation

The Bill includes a number of miscellaneous provision including one which enables the Minister to delegate his powers in relation to licensees' Implementation Plans to officers of the Department. The relevant clause in the Bill is in standard form but the Minister intends to issue directions on the exercise of delegated powers.

Ownership and Control

In regard to ownership and control the Bill introduces a new constraint by providing that a person may not acquire a prescribed interest in more than one licence in a single approved market. This provision reaffirms the competitive objective underpinning the Bill.

If problems arise between now and when the Bill is enacted in relation to attempted transfers or licences which would conflict with the ``one to a market rule'', then the Government will have to consider introducing further amendments to remedy the situation.

I should also point out that the government has the so called `two station rule' under consideration at the moment. In addition, Department of Communications has recently prepared a report on the general ownership and control provisions of the Broadcasting Act. This Report is also being considered by Government and major revision to this area of the Broadcasting Act could well result.

Supplementary Licences

As the Minister indicated in his statement of 20 May 1986, provisions relating to supplementary television licences will be repealed by way of this Bill, however, those relating to supplementary radio licences will be retained.

Localism

I briefly want to address some specific issues that have received some publicity.

Among these issues has been the claim that aggregation will lead to loss of what is known as local content or localism. This claim needs to be put into perspective. Latest data available from the Tribunal indicates that over recent years local programming by regional stations runs at an industry average of about 7%. Some stations are of course better than others. The vast majority of programs, however, are taken from the major networks. If localism is important to local viewers, and an inherent part of regional TV viewer preferences, then the competition introduced by aggregation will encourage localism. It will ensure that the licensee/operator who fails to provide local content will suffer a loss of viewers with its attendant commercial consequences. Larger service areas provided through aggregation will also provide the opportunity for forward-looking licensees to expand and develop regional content to serve a range of population centres. Given the consequent need for additional production, service and sales staff in a wider range of cities and towns, this will not decrease employment opportunities, but increases them.

Commercial Viability

A second major point at issue has been the question of regional stations having their commercial viability adversely affected by of aggregation. Historically, the regional stations have been highly profitable, with a low level of commercial debt and a high price/earnings ratio, compared to other industries.

An independent consultant engaged by the Department of Communications has formed the opinion that with a modest 4% per annum real increase in advertising revenue stations would be able to meet their commitments under the Indicative Plan.

Financial Implications

As an incentive to licensees to implement aggregation the Government has decided to exempt from sales tax UHF television transmitters purchased specifically for equalisation before 1991. It is estimated that the cost of revenue foregone by this provision will be approximately $13 million in 1986 prices. Additionally the Government has agreed to rebate a percentage of licence fees paid by licensees to the Commonwealth over the period required to implement aggregation. Expected revenue to be forgone is estimated at some $22 million. The foregone revenue is likely to be made up, at least in part, by increases in licence fees arising from increases in revenue earned by licensees as a consequence of the equalisation policy. A co-ordinated capital works program is being undertaken to upgrade Commonwealth transmitting stations to accommodate equalisation and two other major programs, the ABC Second Regional Radio Network and clearance of Band II television channels. For equalisation alone, expenditure of $16 million will be required on capital works over a six year period. This will be offset, however, by the ongoing economic rents levied on licensees sharing Commonwealth transmitting stations.

Total costs to the Commonwealth for equalisation are estimated to be of the order of $60 million over the period until 1996. Honourable senators will be aware that as a result of consultations with television industry groups, the Minister for Communications, on behalf of the Government, agreed to the Bill being amended during passage through the House of Representatives. These amendments do not alter the substantive purpose or provisions of the Bill but accommodate concerns and clarifications of the regional licensees as to the mechanical and administrative processes inherent in the Bill. The Minister for Communications has outlined the nature of these amendments during debate on the Bill in the House of Representatives on 17 November 1986.

In concluding I wish to take the Senate back to November 1983 not long after this Government came to office, when the Minister for Communications first spelled out our intentions in the area of broadcasting policy. He said then: `The Government's primary concern is to see that radio and television services reach the people who want and need them. The day has long since passed when broadcasting services could be regarded as luxuries. Virtually all Australian homes have both radio and television, and people now regard the opportunity to choose between a range of services as their basic right. While we always have to be constrained by consideration of cost and good management, the Government's intention is to see that they get that choice.'

Those were not idle words. This legislation paves the way for a fundamental restructuring of Australian commercial television, and that restructuring is directed towards giving the five million Australians who live in regional areas a choice of programs. Almost three years to the day from my original speech on equalisation, I am proud to commend the Bill to the Senate.

TELEVISION LICENCE FEES AMENDMENT BILL 1986

Consequential amendments are required to the Television Licence Fees Act to provide for the aggregation of revenue of existing licences and MCS permits for fee calculation purposes.

The Bill also provides for the making of regulations to give effect to the Government's decision to allow a rebate on licence fees paid to the Commonwealth by licencees involved in aggregation as outlined in my second reading speech on the Broadcasting Amendment Bill 1986.

I commend the Bill to the Senate.

Debate (on motion by Senator Kilgariff) adjourned.