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Broadcasting Legislation Amendment (Digital Radio) Bill 2008

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2008

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

SENATE

 

 

 

 

 

 

 

BROADCASTING LEGISLATION AMENDMENT (DIGITAL RADIO) BILL 2008

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Broadband, Communications

and the Digital Economy, Senator the Honourable Stephen Conroy)



BROADCASTING LEGISLATION AMENDMENT (DIGITAL RADIO) BILL 2008

 

OUTLINE

 

The Broadcasting Legislation Amendment (Digital Radio) Bill 2008 (the Bill) will amend the Broadcasting Services Act 1992 and the Radiocommunications Act 1992 to:

·          extend the deadline for commercial broadcasters to commence digital radio services in the mainland state capital cities by six months to 1 July 2009,

·          remove the requirement for digital radio services to commence in Hobart by the extended deadline of 1 July 2009. Broadcasters in Hobart will have the opportunity to commence digital radio services at the same time as other markets of comparable size, such as Geelong, Newcastle and Wollongong, and

·          retain an option for community radio stations to take up shares in the joint venture companies managing the transmission of digital radio services.

 

FINANCIAL IMPACT STATEMENT

 

The measures contained in this Bill are not expected to have any direct, or indirect, financial impact on Commonwealth revenue.

 

 

 



NOTES ON CLAUSES

 

Clause 1 - Short title

 

Clause 1 is a formal provision and provides that the Bill, when enacted, may be cited as the Broadcasting Legislation Amendment (Digital Radio) Act 2008 (the Act).

 

Clause 2 - Commencement

 

Clause 2 provides for the Act to commence on the day after it receives the Royal Assent.

 

Clause 3 - Schedule(s)

 

Clause 3 is a machinery provision that explains the effect of the single Schedule to the Bill. The Schedule contains amendments to the Broadcasting Services Act 1992 (the BSA) and the Radiocommunications Act 1992 (the RA).

 

Schedule 1--Amendments

 

Broadcasting Services Act 1992

 

Item 1 - Paragraph 8AC(3)(a)

 

Item 1 would extend the deadline for broadcasters to commence digital radio services in the State capital cities by six months to 1 July 2009 (note also, the effect of Items 2 and 3 below in relation to Hobart). 

 

Section 8AC provides, inter alia, the date by which the Australian Communications and Media Authority (ACMA) may declare a specified day to be the digital radio start-up day for a licence area. Paragraph 8AC(3)(a) currently provides that the ACMA must ensure that the digital radio start-up day for a metropolitan licence area is not later than 1 January 2009. Metropolitan licence area means a licence area in which is situated the General Post Office of the State capital cities (note, however, the effect of Items 2 and 3 below). 

 

Item 1 would amend the date by which the ACMA must declare the digital radio start-up day for a metropolitan licence area from 1 January 2009 to 1 July 2009. This amendment provides for a more appropriate commencement time frame for digital radio services in the State capital cities.  It has become apparent that the radio industry will have difficulty in meeting the 1 January 2009 deadline due to, amongst others, the limited availability of transmission equipment installers.

 

Items 2 and 3 - Subsection 8AC(8) (paragraphs (e) and (f) of the definition of metropolitan licence area )

 

Items 2 and 3 would remove the requirement for broadcasters to commence digital radio services in Hobart by the extended deadline of 1 July 2009. The amendment defers the rollout of digital radio services to Hobart by redefining it as a regional licence area (as opposed to a metropolitan licence area ).

 

Hobart is classified as a regional licence area in a number of other contexts, including the rollout of digital television and for advertising market purposes. It has a population base comparable to, or smaller than, other major regional markets, such as Canberra, Newcastle, Wollongong, Geelong and the Gold Coast.

 

Reclassifying Hobart as a regional licence area for the purpose of the digital radio framework will give broadcasters in Hobart the opportunity to commence digital radio services at the same time as other markets of comparable size and provide for the commencement of digital radio in Hobart at a date specified by the Minister under paragraph 8AC(3)(b).

 

Radiocommunications Act 1992

 

Item 4 - At the end of section 109D

 

Under the digital radio framework for the introduction of digital radio services in Australia, eligible joint venture companies (JV company/ies) may be formed by digital radio broadcasters for the purposes of holding a relevant digital radio multiplex transmitter licence and managing the transmission of digital radio services in Australia. Subsections 102C(5) and 102D(5) of the RA prescribe the circumstances in which the ACMA can allocate category 1 or 2 foundation digital radio multiplex licences (DRMT licences) to JV companies. 

 

For the purposes of section 102C (category 1 DRMT licences), the requirements specify that an invitation for shares be extended to each incumbent digital commercial radio broadcasting licensee (the commercial licensee) in the designated BSA radio area and the digital community radio broadcasting representative company (the representative company) where such a company is formed (subparagraphs 102C(5)(a)(i) and (ii) refer).  In accordance with subparagraphs 102C(5)(a)(iii) to (vi), the commercial licensees were to be issued with and hold, in aggregate, seven-ninths of the shares in a JV company and, assuming that the invitation was accepted, the representative company was to hold two-ninths of the shares. 

 

For the purposes of section 102D (category 2 DRMT licences), the requirements include that an invitation for shares be extended to each incumbent commercial licensee in the designated BSA radio area , the representative company (where formed) and each national broadcaster (subparagraphs 109D(5)(a)(i) to (iii) refer).  In accordance with subparagraphs 102D(5)(a)(iv) to (viii), the commercial licensees were to be issued with and hold, in aggregate, five-ninths of the shares, the representative company two-ninths of the shares, and each national broadcaster one-ninth of the shares in the JV company.

 

However due to the tight fiscal environment, and in light of the decision to extend the compulsory start date by commercial radio broadcasters, the Government deferred funding for the community broadcasters to participate in digital radio to the 2009-2010 financial year. This prevented the representative companies from subscribing for shares in the JV companies when they were formed in 2008. Once formed, the JV companies are not obliged to make further share capital available to the representative companies. 

 

Item 4 seeks to extend to the community broadcasting sector the option of taking up shares in the JV companies.  This will give the community broadcasting sector the opportunity to participate in the management of the transmission of digital radio services in Australia through its shareholding in the JV companies.           

 

Item 4 would insert new subsections 109D(3) to (5) into section 109D of the RA. Section 109D of the RA sets out the licence conditions for a foundation DRMT licence for a designated BSA radio area .  The conditions relate to the ownership of shares in the licensee company (i.e. the JV company).

 

New subsection 109D(3) would include a new licence condition for the licensee company of a DRMT licence.  The new licence condition would only apply where there is a representative company formed in accordance with section 9C of the RA for the designated BSA radio area (new paragraph 109D(3)(a) refers).

 

Under this new licence condition, the representative company may make a written request that the licensee company issue the representative company with shares in the DRMT licensee company (new paragraph 109D(3)(b) refers).  The representative company’s request must be made either before the digital radio start-up day for the designated BSA radio area or within 12 months of the relevant digital radio start-up day (new paragraph 109D(3)(c) refers). A representative company can only make one request under paragraph 109D(3)(b) subject to subsections 109D(4) and (5) (noted below).   

 

The new licence condition is only intended to benefit those representative companies that did not receive shares in connection with an invitation under whichever of paragraph 102C(5)(a) or 102D(5)(a) applied in relation to the original formation of the licensee company.  Therefore, only those representative companies that do not hold, or have never held, shares in the relevant licensee companies are entitled to make a request to be issued with shares pursuant to new subsection 109D(3).

 

The receipt of a valid request from a representative company would trigger the operation of new paragraphs 109D(3)(e) to (i).  Within 30 days of the representative company’s request, the licensee company must, by notice in writing, offer to issue the representative company two-ninths of the shares in the licensee company (new paragraph 109D(3)(e) refers). The offer must be open for at least 120 days and the shares offered to the representative company must include the same rights and restrictions (if any) that attached to the shares acquired by the existing shareholders in the licensee company (new paragraph 109D(3)(h) refers).  This ensures that the shares offered to a representative company under this subsection are in the same class as the shares issued to existing shareholders.  Any offer of shares that is not equivalent to two-ninths of the shares in the licensee company will not be a valid offer for the purposes of new subsection 109D(3).     

 

New paragraph 109D(3)(i) sets out a pricing formula for determining the offer price per share.  A licensee company must not issue shares to a representative company for a price in excess of the amount worked out using the formula. The intention of new paragraph 109D(3)(i) is to ensure that the representative company pays no more than the price the existing shareholders paid for their shares in the licensee company.  However, the pricing formula would also incorporate any subsequent shares issued (if any) since the initial share offer (along with the price paid for those shares) and the time when the subsequent share offer is made to a representative company in accordance with the new licence condition. 

 

For example, if 900 shares (i.e. the pre-offer shares ) were issued upon formation of the JV company at a total price of $900, the maximum issue price per share, therefore, would be $1.00. However, if, subsequent to the initial issue of shares (but before an offer of shares was made in accordance with new subsection 109D(3)), a licensee company issued a further 100 shares to existing shareholders at a price of $1.50 per share, the total price of pre-offer shares would be $1050 and the total number of pre-offer shares would be 1000.  In this particular scenario, a licensee company could not transfer the shares to a representative company for more than $1.05 per share.        

 

If a licensee company does not make an offer that conforms with new subsection 109D(3), the representative company is entitled to make another request for shares as if the first request was never made (new subsections 109D(4) and (5) refer). 

 

In accordance with section 113 of the RA, a licensee company’s non-compliance with new subsection 109D(3) would amount to an offence (unless the licensee company had a reasonable excuse) (subsections 113(1) and (2) refer).

 

Item 5 - At the end of Division 3 of Part 3.3

 

Item 5 would insert a new section 113A in the RA.  This section is a constitutional safety net which ensures that if new subsection 109D(3) (Item 4 refers) results in the acquisition of property from a person other than on just terms, the Commonwealth would be liable to pay reasonable compensation to that person (new subsection 113A(1) refers).

 

A court of competent jurisdiction may determine the amount of compensation payable (if any) where the Commonwealth and the compensation seeker have failed to agree on an amount (new subsection 113A(2) refers).