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National Transmission Network Sale Bill 1998



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Bills Digest No. 62  1998-99

 

National Transmission Network Sale Bill 1998

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal sta tus. Other sources should be consulted to determine the subsequent official status of the Bill.

Contents

 

 

Passage History

National Tr ansmission Network Sale Bill 1998

Date Introduced:  25 November 1998

House:  Senate

Portfolio:  Communications, Information Technology and the Arts

Commencement:  On Royal Assent

Purpose of legislation

This Bill, together with the National Transmission Net work Sale (Consequential Amendments) Bill 1998, puts in place the necessary framework for the sale of Australia's National Transmission Network (NTN).

Background

On 10 July 1997 the Minister for Communications and the Arts, and the Acting Minister for Fin ance, announced the Government's decision to sell the NTN. The NTN was to be sold through open tender with a target sale date of mid 1998.(1) The two Bills facilitating the sale were passed by the House of Representatives but were not considered by the Senate before Parliament was prorogued on 31 August 1998.

This current Bill contains minor amendments recommended by the previous Senate Committee inquiry into the proposed sale. The amendments extend the access regime to include ancillary services provided by the ABC and SBS and to cover community television providers. Ancillary services include, but are not limited to, services such as closed captioning for the hearing impaired and teletext services.(2)

The National Transmission Network (NTN)

The NTN is a n ationwide network of broadcasting transmission facilities, which operates principally to transmit the radio and television programs of the Australian Broadcasting Corporation (ABC) and the Special Broadcasting Service (SBS). It also provides access to network infrastructure for use by commercial and community broadcasters, numerous radio communications users, various self-help rebroadcasters,(3) and volunteer emergency services.

The NTN, one of the world's largest, began operating in 1923 by transmitting ABC radio programs. In the late 1950s, the network started carrying ABC television programs, and more recently SBS programs.

It operates transmitters on 547 Commonwealth and privately owned sites. The Commonwealth owns, leases or holds an interest in approximately 70 per cent of the total sites, with the remaining sites owned by commercial broadcasters or other third party organisations, with most of whom the Commonwealth has access arrangements ('Reverse Sharing' arrangements).

These sites house approximately 1700 large and small broadcasting transmitters as at June 1997. Of these, approximately 1200 are used to transmit national broadcasting services. The remaining 500 or so are operated by commercial, community and self help groups.

The National Transmission Authority (NTA)

Since 1992 the NTN has been operated by the National Transmission Agency (NTA), which is part of the Commonwealth Department of Communications, the Information Economy and the Arts (the Department).

The NTA is a s eparate cost centre within the Department responsible for the technical planning, operation and maintenance of the NTN facilities. The Government provides direct funding to the NTA for this purpose.

The NTA uses two contractors, Telstra Corporation (Telstra) and Broadcast Communications Limited (BCL), to operate and maintain the NTN.

Telstra is contractually responsible for:

• New South Wales/Australian Capital Territory

• Victoria/Tasmania, and

• Western Australia.

BCL is contractually responsible for:

• Queensland, and

• South Australia/Northern Territory.

The term of the five regional contracts is three years commencing 1 July 1996 with an option for the NTA to extend for one or more further periods of not less than 12 months each and in total not more than three years from the expiration of the contract period (30 June 1999).

Basis of policy commitment

The Government's preferred option is to transfer the NTN to a new company(s) (NTC) which is to be offered for sale. NTC will have contracts in place with the ABC and SBS detailing transmission requirements for existing analog broadcasting and social policy objectives. The contracts will set out the core performance obligations and will be enforceable through contractual remedies.

The Bill also provides for an access regime based on the access regime for the telecommunications industry under Part XIC of the Trade Practices Act 1994 - but specifically adapted to the NTN context. The access regime seeks to guard against any imbalance in negotiating power between a NTC and certain nominated customers (for example, the ABC and SBS). In the absence of agreement between the parties, the Australian Competition and Consumer Commission (ACCC) will be called upon to arbitrate.

The Government anticipates that the sale will enable the national broadcasters(4) to establish a more commercially based relationship with transmission service providers, including greater control over service levels and the planning of new services.

The Explanatory Memorandum attached to these Bills states that Government agencies, including the Treasury and the ACCC, and the ABC and the SBS have been consulted and support the proposed approach. Public consultation on the proposed sale has not been taken.

Press commentary

In August 1996 the press first reported Government plans to either privatise the NTN or to outsource its operations, with Television New Zealand (TVNZ) then emerging as one of the main contenders to purchase the NTN in the event of a sale.(5)

In March 1997 the Sunday Canberra Times reported that up to 110 jobs, most of them in Canberra, would be under threat if the Government decided to privatise the NTN. It was reported that critics described the sale as:

Shortsighted and ridiculous given that one of the frontrunners to take over the NTAs role was a New Zealand Government agency.

The Community and Public Sector Union (CPSU) also condemned the sale in a media release on 16 July 1997. The CPSU said:

…the sale by open tender will attract interest from overseas companies through their subsidiary organisations in Australia such as TVNZ(Aust). Secondly, 120 NTA employees have no idea at this stage regarding their prospects for securing employment with the ultimate purchaser.(6)

Note that BCL, which currently operates and maintains 40 per cent of the NTNs sites, is a division of TVNZ, which is majority-owned by the New Zealand Government.

Pros and cons

The Government maintains that the sale of the network will provide both the Commonwealth and the national broadcasters with a range of benef its. These benefits may be summarised as follows:

• the decision removes the Commonwealth from an activity, which can be undertaken by the private sector

• proceeds gained from the sale will be used to further reduce the level of public debt interest payme nts, and

• the national broadcasters will be able to establish a more commercially based relationship with transmission service providers, and will have greater control over service levels and the planning of new services. (7)

Law firm Gilbert and Tobin have identi fied a number of legal challenges surrounding the sale of the NTN: They include:

• review of site tenure interests for over 550 sales, including exotic forms of State Crown grants

• negotiation and settlement of transmission services contracts for the ABC and SBS before sale. The more complex issues around which these negotiations have revolved include performance and coverage standards and specifications

• negotiation of contracts between the Government and the ABC and SBS respectively. These deal with the vexed issue of the funding to be provided to the ABC and SBS for transmission services

• the nature of the access regime based on the access regime under the Telecommunications Act but specifically adapted to the NTN context

• unusual environmental issues (eg protection of biodiversity) which have arisen, and

• novel as well as mainstream native title and heritage questions have had to be reviewed and resolved in the process of vendor due diligence.(8)

Main Provisions

The Bill consists of seven Parts. Part 1 contains the commencement and definition provisions.

Part 2 - Sale of the National Transmission Network

Clause 7 allows the Minister to determine that any identified network facility, which is a fixture on non-Commonwealth land, is deemed to be severed from the land and vests in the Commonwealth. Without this provision, a landowner upon whose land a transmission facility is situated could arguably claim ownership of such a facility through the common law rules concerning affixation of things to land.

Clause 9 is the operative provision, which provides for the vesting of assets and liabilities (including rights and obligations under contracts), in the new NTC.

As is usually the case, the vesting which occurs under clause 9 is free of any stamp duty or other tax which would otherwise be payable ( clause 10 ). The stamp duty exemption does not extend to the duty payable on the ultimate transfer of shares in the NTC to the purchaser.

Part 3 - Access to Services

Part 3 applies, with some modifications, the access regime established for telecommunications to broadcasting services. The access regime for telecommunications is set out in Part XIC of the Trade Practices Act 1974 (TPA).

Part XIC of the TPA provides for the declaration by the ACCC of 'declared services'. Carriers who provide declared services are required to comply with certain 'standard access obligations' in relation to those services. The terms and conditions on which those standard access obligations are provided is a matter of negotiation between the parties. Part XIC of the TPA provides a number of solutions where the parties cannot reach agreement on terms and conditions.

Part 4 - Restrictions on transfer of assets

Clause 18 requires the NTC (or its successor) to obtain the Minister's approval before transferring any asset originally used by the NTA. This provision is intended to maintain core performance obligations and to test the financial or commercial viability of any proposed transferee.

Part 5 - Transmitter licences

At present, the Commonwealth, in its capacity as provider of transmission services, holds the national broadcasting service (NBS) licence under section 100 of the Radiocommunications Act 1992 . The National Transmission Network Sale (Consequential Amendments) Bill 1998 amends section 100 to provide that an NBS licence may only be held by the ABC, SBS or the Commonwealth, rather than the NTC.

Clause 19 is a transitional provision, which allows for transmitter licences currently held by the Commonwealth to be transferred to the national broadcasters.

Part 6 - Powers and immunities of NTC or declared successor

This part authorises a NTC or a declared successor to carry out maintenance on facilities similarly to other participants in the communications industry.

Part 7 - Miscellaneous

Clause 22 allows the Minister to declare a person to be a declared successor to the NTC.

Clause 24 provides the Commonwealth, a NTC or a declared successor with immunity from certain State/Territory laws in respect of construction and maintenance of transmission sites.

The remaining provisions of this part are administrative in nature.

Endnotes

1. Arthur Anderson Corporate Finance were contracted as business advisers for the sale process. Sydney law firm Gilbert and Tobin were engaged to provide legal ad vice.

2. The reference to 'analog' in the definitions section of the Bill is intended to make it clear that the access right for ancillary services is limited to services embedded in an analog broadcasting signal even though the signal for the secondary co mmunications service or services may be in a digital form.

3. Under the Broadcasting Services Act 1992 certain members of the public are permitted to re-transmit free-to-air broadcasts if they live in remote areas and areas of poor reception. For the purposes of this Digest, they are called 'rebroadcasters'.

4. ABC and SBS.

5. Brewster, Deborah., 'Privatisation, contractors loom for ABC transmission authority', The Australian , 15 August, 1996, p.21.

6. O'Loughlin, Sally., 'Union condemns sale of National Transmission Agency', Media Release , 16 July 1997.

7. The Department of Communications, the Information Economy and the Arts web site at: http://www.dca.gov.au , under the heading 'Sale of the National Transmission Network'.

8. Gilbert and Tobin web site at : http://www.gtlaw.com.au/gt/news/recent/.

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Contact Officer

Ross Kilmurray

4 December 1998

Bills Digest Service

Information and Research Services

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