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Television and the satellite: 1. The story so far

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PAR L L IBRA R — The-Parliament of the Commonwealth of Australia , 4, 40,zawe,!..

Television and the Satellite: 1 The story so far

Current Issues Brief Number 6 1985

Legislative Research Service

Department of the Parliamentary Library

The Parliament of the Commonwealth of Australia


Doug Fraser Education and Welfare Group Legislative Research Service

Legislative Research Service Current Issues Brief Number 6 1985

ISSN 0726-3244

Commonwealth of Australia 1985

The views expressed in this paper are those of the author and do not necessarily reflect those of the Legislative Research Service, or the Department of the Parliamentary Library.

Published by the Department of the Parliamentary Library, June 1985.

Printed by THOMPSON, Commonwealth Government Printer, Canberra

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Television and the Satellite


Few issues in broadcasting policy are straightforward, and few of the simple solutions proposed for such issues prove in the long run to be either simple or solutions in their own right. When the Minister for Communications announced in October 1984 that a policy had been adopted on the provision of commercial television services by satellite to those parts of Australia that currently have no access to commercial television, that policy had the support of both sides of Parliament, as well as that of the Department of Communications, the Australian Broadcasting Tribunal(ABT), large sections of the industry, and (so far as could be ascertained) most of the people likely to benefit from the new services. Such widespread consensus is rare in the broadcasting area, and it is perhaps inevitable that over the intervening eight months, as the full implications of the policy have started to come to light, that consensus has shown signs of dissolving.

This Current Issues Brief is the first in a series of two that attempt to clarify the increasingly complicated policy issues raised by the impact of the satellite on commercial television in Australia. The second paper in the series will explain the issues that currently await a decision, with particular reference to the Regional Commercial Television Scheme (RCTS). This first paper is narrative rather than argumentative, and is intended to bring the reader up to date with developments in satellite broadcasting policy from 1977 up to the middle of May 1985.

Such an account is of more than antiquarian interest. This area of policy has become so confusing that it is hard to understand the current issues unless one has a clear idea of where they originated and how they have developed over the years. The paper goes over some of the ground already covered in an earlier Basic Paper on the subject [1], and in various other documents that have been tabled before Parliament. Some of the events recounted are so recent that nobody will be unaware of them, but there is still some benefit in placing them in their historical context. It is hoped that the paper will be of particular use to new Senators and Members who have not had the opportunity to follow the issues closely until this year.

This account is in some ways a prelude to the Australian Broadcasting Tribunal's forthcoming report on the RCTS, the first part of which is expected to be presented to the Minister at about the same time as this paper appears. Since that inquiry, unlike the author of this paper, has had the benefit of several weeks of public hearings and a wide range of first-hand up-to-date information, it is only reasonable to expect that its findings on matters of fact will supersede some of the information given here.

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Television and the Satellite


The legal structure of Australia's television industry is still the same in all essential respects as that recommended by the Royal Commission on Television in 1953, which in turn derived directly from policies on the development of radio broadcasting that took shape in the 1920s. Under this legal framework, commercial television is seen

as a local service: each market or service area (very broadly defined by the coverage area of a single VHF transmitter) is served by one or more autonomous stations, each independently responsible for producing, acquiring and scheduling a mix of programs and advertising appropriate to the distinctive needs of the community or communities served. This local sector is complemented by a national service, the ABC, which networks a more or less identical schedule of programs to

all parts of Australia, including those communities which are too small to constitute a viable market for an independent service. This last factor was the main consideration which prompted moves to set up a national service as early as 1922.[2]

In practice, the way the commercial sector has developed bears little resemblance to this model. At the national level, the supply of commercial programming (especially high-cost Australian productions) has come to be dominated by three powerful organisations, each based on the common ownership of two stations in the east-coast capital cities, and each backed by the ownership of substantial

interests in the print media. Outside the capital cities, the industry consists of a large number of protected monopolies, each under more or less independent ownership and enjoying legal autonomy in programming decisions. However, the minimal market power of the individual local monopolies, their often inadequate revenue base and the lack of competitive stimulus resulting from their protected monopoly status mean that both their autonomy and their local orientation exist more on paper than in reality.

From the time of the first serious proposal for an Australian domestic satellite system in 1977, the general outlines of its potential impact on the television industry have been universally recognised. On the one hand, it has the unique ability to bring television at a reasonable cost to remote and isolated communities that cannot economically be served under the present arrangements. On the other, it also represented an unprecedented opportunity, and an

unprecedented economic incentive, for national networking - the practice of one station (probably in Sydney) putting together an entire day's schedule of programs and advertisements and relaying it

via satellite for direct retransmission by other stations throughout Australia.E3]

Both these capabilities derive from the most distinctive characteristic of a satellite as a communications carrier: its ability to transmit a high-quality, high-bandwidth signal to an infinite number of points within a radius of thousands of kilometres, at no greater cost than would be involved in sending the same signal over a single route to a single point. It was clear from the beginning that

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Television and the Satellite

this capability was in fundamental conflict with the principle of localism that underlies Australian licensing policy for commercial radio and television.

The possible responses to this development have been generally thought to fall into three broad options:

(i) Allow the Sydney-based networks free rein to make optimum use of the satellite by removing the few existing restrictions on networking and opening up new outlets in regional markets. This would have the effect of destroying localism and the autonomy of the regional operators in program choice and scheduling;

(ii) Preserve the existing structure of

quasi-autonomous regionals by preventing satellite networking. This would mean either discontinuing the satellite project or artificially denying the most efficient and remunerative of its foreseeable applications; or

(iii) Preserve the independence of the regionals as a bloc by encouraging them to pool their resources into a fourth network, using the satellite to serve non-metropolitan markets.

Since these basic facts have been recognised by everyone with even a passing interest in the subject for at least the last eight years, it may seem strange that so little progress has been made over that period in adjusting broadcasting policy to meet the challenges of

the satellite. There is little that is new in the present debate. Not only have the same arguments been reiterated endlessly on either side, but the same few solutions have been put forward again and again with scarcely any variation. If there has been an absence of

political resolve to come down firmly in favour of one or the other option, there has also been - at least until quite recently - a corresponding absence of lateral thinking to come up with new solutions that bypass the opposition between more or less equally unpalatable alternatives.

A variety of reasons can be found for this failure to reach a resolution. One of the most important is a persistent fatalism - a belief that the technology will impose its own imperatives on the industry regardless of any attempts at regulatory intervention. Associated with this view is the belief - mistaken, as will be shown

in the next paper, but nonetheless assiduously promoted by certain vested interests - that commercial television operates in a free market, and that market forces provide the fairest means of resolving the conflicts. There has been an equally persistent view in official circles that none of the basic options is politically feasible, since choosing any of them would cause grave offence to politically

influential interests, and none of the alternatives to them are

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Television and the Satellite

administratively feasible. There is the overriding consideration that any of the options would involve its beneficiaries, at least for the first few years, in enormous expense without any corresponding direct

commercial gains. Above all, there is the traditional reluctance of administrators to make radical changes to the legal framework of the broadcasting system, even though the alternative of preserving the legal status quo is likely to lead to radical changes in the way the

industry actually operates.

To understand this apparent paradox, it is necessary to realise that there are two ways of exploiting the ability of the satellite to deliver a signal over an area thousands of times greater than the maximum coverage area of a single terrestrial television station. The simpler and more elegant (leaving aside considerations of cost and practicability) is direct broadcasting (OBS), in which individual viewers pick up the signal direct from the satellite. The alternative is satellite distribution or satellite proaram services

(SPS), in which the satellite is used to carry programs to receiving earth stations, which then retransmit them to the viewer in the same way as a normal television station. The first is clearly in conflict with the existing legal framework, since it enables the one service to be received directly in a number of service areas, as currently defined. But in the second case, provided all the stations that take the SPS are independently owned, retain formal responsibility for their output and are not contractually bound to retransmit any material carried on the SPS, the present law is not necessarily

contravened even if most or all of their service consists of a straight network feed.

This paradox shows up three fundamental deficiencies in the present Broadcasting and Television Act 1942. The first is •that localism under the existing law is concerned almost exclusively with the ownership of stations. The Act contains few if any effective provisions to ensure independent control by a station of its own programming.[4] The second is that the Act does not even recognise networking, let alone explicitly regulate it. (Regulations to govern networking were foreshadowed by the then Minister in 1981, but never eventuated.) The third is that it applies only to broadcasts, defined as services 'intended for reception by the general public'. An SPS, provided it is not intended to be received directly by any member of the public, escapes this definition, and hence escapes the licensing and regulatory provisions of the Act.

To repeat: none of these observations is a new discovery. They have all been recognised for years. The fact remains, not only that the planning of the satellite system went ahead without any resolution of these fundamental issues concerning its use, but that it went ahead in the clear knowledge that the system would depend on

television to cover its costs. There is little dispute that television program distribution is what the current generation of satellites do best: it is virtually the only widespread application that both needs and can afford to pay for the combination of high

bandwidths and point-to-multipoint capability in which satellites show


Television and the Satellite

the greatest intrinsic advantages over terrestrial communications technology. Thus, the decision to proceed with the satellite - and even more importantly, the decision to operate it as an independent

commercial venture - have tended to curtail the options in broadcasting policy, and it is the imminent launch of the first two satellites, rather than any maturing or resolution of the debate, that will force decisions on the policy issues in the next few months.


Networking does not depend on satellites, and preceded them by many years. In the US, the three dominant commercial television networks have been in operation, using terrestrial bearers, since the early 1950s. Public-sector broadcasters in most other developed countries,

including Australia, have operated extensive networks, again by purely terrestrial means, since the middle of the same decade. The importance of the satellite, at least in Australia, is that it will make a major difference to the economics of networking.

The economic imperative for networking has always been particularly strong in this country. Not only are the majority of individual television markets in Australia very small, but the Australian market as a whole is small in world terms. Australia has

just over five million television homes, while the US, with roughly the same land area, has more than eighty million. Despite this difference of scale, Australian viewers, at least in the largest

capital cities, have access to a range of free-to-air services equal to or greater than that available to the average urban viewer in the US. The size and fragmentation of the national market mean that an expensive program is unlikely to recover its costs in any single local market. If this is true for much imported programming, it is even more true for high-cost Australian programs. Indeed, without guaranteed access to a national market, i.e. prior network sales, it

is unlikely that many of the quality Australian-produced programs carried by commercial television would ever have been made.

The factor that has so far limited the expansion of networking in Australia is the cost of doing so by terrestrial means. Television bearers - the cables or microwaves that carry programs to a station - cannot simply be piggybacked on existing telephone lines: they usually require new construction, different technology, and

sometimes even different routes. A separate bearer, or an extension of an existing bearer, is needed for each market served, and the cost per kilometre is the same regardless of the size of the market. Hence, most of the smaller regional markets cannot provide sufficient

return to justify the construction or lease of special bearers for commercial television. Outside the main interstate corridors, the only way of arranging a live link between a metroplitan and a regional station is to use the protection bearer, i.e. the backup link provided

in case of failure of the ABC's bearer. These are often of fairly poor quality, ,and their availability cannot always be guaranteed at the times when they are needed. Much of the program distribution and

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Television and the Satellite

exchange between these outlying stations takes the form of physical transport of films and tapes, a practice known in the industry as 'bicycling'.

As a result of these economic factors, the networks have confined their formal network organisation to Sydney, Melbourne, Brisbane and Adelaide. Not only do these four markets contain over 60% of the television homes in Australia, but they lie along the most heavily trafficked telecommunications corridor in Australia (the

'Golden Boomerang'), where the existing bearer capacity is generous and of good quality and can be expanded fairly economically should the need arise. There is a clear demarcation between this four-city network market and the remaining regional markets. (Perth is something of an anomaly, since up to now it has had only two commercial stations, though one of these has a formal affiliation arrangement with the Nine Network.) While the networks relay some programming to most regionals, this is mostly confined to news, current affairs and some sport, and takes up only a few hours of airtime each week. Moreover, the regionals do not participate directly in the network structure or network decision-making.

In structural terms, then, the regionals have so far constituted not only a distinct market, but a different kind of market: one in which most program supply still occurs by bicycling, and in which individual stations have a choice of program sources: all

three networks, their own common service company Regional Television Australia Ltd.(RTA), and independent suppliers.

Three aspects of the economics of satellite use are likely to change this situation. The first is that it costs far more to send signals up to a satellite than to pull them down. This will encourage networks to minimise their costs by operating as few uplinks as possible, so that they are likely to concentrate all their production resources in the one city (unlike the US networks, where different network stations contribute their own segments to the common network schedule). The second is that it is more economical to take a full-time lease of a transponder than to lease only a few hours a day. This will provide an incentive to networks to sell as many hours as possible of their daily schedule to affiliate stations. The third is that it is not possible to buy a single route on a satellite: the one payment gives access to all points within the footprint of the satellite's beam. This means that for the cost of a link to serve • their existing metropolitan stations, the networks will get access to all the regional stations as a bonus.

The last feature means that the most visible impact of satellite networking will fall on the regionals. The debate on the satellite has concentrated on this aspect at the expense of the other major objection to networking: the concentration into a few hands of

control over the programming on all the commercial stations in Australia. To some extent, therefore, legitimate concern over the survival of independent regional stations has served to deflect public attention from the arguably more important issue of the effects of


Television and the Satellite

oligopoly control on the quality of service in the capital cities where the great majority of Australians live.

It is equally arguable that this distortion of the argument has served the interests of the networks, since there are many things about the regionals that are hard to defend. To begin with, there is no disputing the fact that 36 independent stations serving a total of

1.7 million television homes (an average of fewer than 50 000 per station) is not an economically efficient way of providing television. To this must be added the generally held view that at least some of the regionals, including some that serve large and wealthy markets, have made little effort to provide either a quality service or one that is sensitive to local needs. Above all, there is the problem that all regional stations are monopolies; and nobody, whatever their

political sympathies, feels altogether happy about defending private monopoly as a principle.

But perhaps the most important difficulty is that the regionals - with a few honourable exceptions - have not performed, and probably never could perform, particularly well in terms of providing genuine localism. The resources available to the average regional station from its small market are simply not adequate to fund a significant level of local production. Even when it comes to choice of programs produced elsewhere, the average regional does not have enough market power by itself to secure the production or importation of programs that are not already in demand from a great many other stations. It is hardly surprising, then, that there is generally little that is distinctive about the program formats of different regional stations, and that much of their output consists of programs that have already been run by the networks - often weeks or months earlier.

Indeed, doubts have been expressed from the very beginning as to whether localism was an appropriate basis for the provision of television services to non-metropolitan centres. The Royal Commission considered a range of alternatives, including relay stations set up by metropolitan licensees and channel-sharing with the ABC; two of the Commissioners actually submitted dissenting recommendations in favour of arrangements of the latter kind. The fundamental problems with the

concept of localism meant that it quickly became diluted in the process of implementation. The principle that local stations should be owned by local interests has become virtually inoperative over the years with trading in the more profitable licences. The very nature

of a local service was distorted by the decision in the 1960s to allow regional stations to set up translators outside their original coverage areas, with the result that the larger stations have become not so much local as regional in the true sense, serving areas of thousands of square kilometres and communities with quite diverse

needs and interests.

Two recent decisions by the Tribunal illustrate how far the principle of localism has come under strain even before the advent of the satellite. The first was the Foster Report (March 1983), dealing

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Television and the Satellite

with an application by the residents of a small Gippsland community for the licensing of translators to restore their traditional fringe reception of the Melbourne stations, which had been lost following the shift in frequency of ATV from channel 0 to channel 10 and the commencement of a regional translator service. Witnesses made it clear that they did not regard the availability of a 'local' regional service as a satisfactory alternative to the choice of three Melbourne signals, especially as most of the 'local' content on the regional service in fact orginated from an associated station 250 km away on the other side of Melbourne. While the Tribunal had no choice in this case but to uphold the law as it stood, both it and the Minister publicly acknowledged that the case raised broader issues that would not go away. The second case was the Albany Report (July 1984), a remarkable exercise in legal legerdemain in which the Tribunal persuaded itself that a station which took its entire service on relay

from another should continue to be licensed as an independent outlet rather than a translator.

The motives of the networks in seeking domination of the regional market will be discussed in the next paper. For the present, it is enough to say that they realised from the start that such a venture would not be commercially justifiable unless each network had an outlet in every regional market. The original version of their

strategy appeared in an attachment to the Bond Report, an unsolicited document presented to the Government in 1977 by the operating company of the Nine Network. This involved not only the sale of satellite-relayed programs to existing regional stations, but the

licensing of up to a hundred additional commercial stations to serve communities which had no commercial television or only one service. It was proposed that these new outlets be independently owned and in competition with the established regional operators. This tactless approach had the predictable effect of mobilising the political

influence of the regionals, so that the proposal was at first dismissed as politically unfeasible.

The idea lay dormant, or at any rate out of the public eye, for the next three years, while planning of the satellite system conti,nued undaunted. It eventually re-emerged in 1980 as the supplementary licence scheme. This overcame the most obvious objection to the original proposal, in that it freed the regional operators from the threat of competition in their markets. From anyone else's point of view, however, it could be seen as combining

the worst of both worlds. The principle of local monopoly was perserved, while much of the original justification for that monopoly was negated. For not only did the need to operate two services detract significantly from the ability to choose the best programs from three or more competing sources, which has always been the main opportunity for regional operators to devise a program format appropriate to local needs; it also threatened, by imposing an additional burden of hardware, operating and administrative costs on the finite revenue base available to them from local advertising, to diminish the already scanty resources on which they can draw for local


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Television and the Satellite

Two important changes have occurred to the scheme since it was passed into law in 1982. One is the present Government's policy that at competing independent licence should be granted in preference to a supplementary wherever it is economically possible, and especially in cases where the existing licensee holds press or radio

interests in the same district. The other is the suggestion, first raised by the present Minister in 1983 but not yet adopted as policy, that a second supplementary licence or an additional independent licence might be granted in some cases. At the time of writing, this issue remains extremely confused. As will be shown in the next paper, several practical difficulties have arisen with the implementation of the scheme even before the first applications have been heard.

It is unfortunate that the debate on networking should have been allowed to degenerate into a contest between the unspeakable and the unwatchable. For this concentration on the plight of the regionals has concealed the real lost opportunities for localism. It

is the metropolitan stations outside Sydney and Melbourne which have the resources and the audiences to support a significant level of independent production and program acquisition. If they had been encouraged to make the most of these opportunities and take over part of the role of the Sydney-based networks as program suppliers for their neighbouring regionals, it is possible that commercial television might have retained some of the diversity originally envisaged, at the State if not at the local level. But precisely because these stations have long since been absorbed into the national network structure, they are generally overlooked in discussion of the structural impact of the satellite.

Perhaps more importantly, the simple opposition between oligopolistic networking and monopolistic localism has overshadowed the real opportunity offered by the satellite to bring entirely new players into the industry. For the same benefit that makes the satellite so attractive to the established networks is equally available to new entrants: instant, simultaneous access to the whole national market. The main barrier to the entry of new firms into commercial television (apart from restrictive licensing policy) has been the impossibility of a new station recovering its investment in any single existing market. Similar economic handicaps exist to some extent on the production side with the increasingly institutionalised links between the networks and the established production houses and the first tentative moves toward vertical integration. But judicious use of the satellite as a marketing and distribution tool promises to make such start-up ventures viable by allowing them to spread their

costs over a far greater range of prospective buyers.

In other words, the satellite offers the opportunity for a radical change in the mechanisms used to combat concentration of influence in Australian commercial television. The traditional policy in this area has been based on horizontal or geographic diversity. This policy has arguably failed, and the existence of the satellite will inevitably frustrate further attempts to enforce it. What the

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Television and the Satellite

satellite can bring about is a change in emphasis to vertical diversity: a greater range of choice on a uniform national basis.

Whether this would automatically lead to an improvement in the quality of the product available to the viewer is a more difficult question, which will be discussed in the next paper. But for the moment, this possibility should at least give some comfort to those whose concern is that the commercial television industry should one day become commercial in a real sense.

The sad thing is that the public-interest lobby groups who have so far conducted the main opposition to concentration ignored this factor for so long. The most vocal of them continued to dissipate their energies in an increasingly quixotic campaign to stop the satellite altogether long after this had ceased to be an economically or politically feasible option. By the time they abandoned this endeavour and began to look at the positive ways in which the satellite could further their cause, the debate had passeed them by.


The ability of the satellite to bring television to the outback, and to other parts of Australia that currently receive no service, has been represented from the beginning as one of the major benefits of the system. This is strange when one remembers that OBS, the most

logical means of doing so, was neither technically nor economically viable in 1977. Although the first international plan for OBS appeared at around the same time as the Bond Report, the kind of system on which it was based required a very high-powered satellite of very limited capacity which would have been far too expensive to be a commercial proposition in Australia. No system of this kind yet existed, and none was planned to come into commercial operation for another six to eight years. Many of the components needed for such a system had yet to be developed. Any firm decision to implement a DBS at that stage would thus represent a fairly bold leap into technological uncertainty.

The Task Force set up to examine the Bond proposal nevertheless recommended in 1978 that the Australian system should have a OBS capability for remote-area services. While the technology proposed was less ambitious than that required by the international specification, it was still too expensive and too experimental to

interest the private sector. Hence, there was little or no disagreement with the Task Force's recommendation that the remote-area service be operated exclusively by the ABC.

From the policy-maker's viewpoint, this was a blessing. As already pointed out, OBS presents an unequivocal and unavoidable challenge to localism in a way that satellite program distribution does not. But so long as it remained the exclusive province of the ABC, no policy conflict would arise, since the ABC was never meant to

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Television and the Satellite

be a local service. Nor could it be regarded as disrupting the structure of the industry, given that the ABC has always been seen as complementing rather than competing with the commercial sector. However, as so often before in the history of broadcasting policy, technological progress soon put an end to this comfortable assumption.

Two developments in particular brought DBS within the reach of the commercial sector. One was simply the realisation that satellites were more reliable than had previously been assumed. As originally conceived, the Australian system was to have two satellites

in orbit, but only one was to carry regular traffic. The second was to remain on station purely to provide backup capacity in case the first should fail, while a third was to be kept in reserve on the ground in case either or both of the orbiting satellites should go out of service. But by the end of the decade it was clear from overseas experience that this belt-and-braces approach was unnecessary.

Failures in orbit (as opposed to launch failures) were virtually non-existent within the normal service life of commercial satellites. So provided enough traffic was available, there was no reason why both orbiting satellites should not be put into full revenue service. This meant that a second set of OBS transponders, orginally intended to be

reserved as spares for the ABC, would be practically assured of full-time availability to carry an alternative service.

The other development concerned the actual nature of the DBS technology. The original HACBSS system design of 1978 was intended as the closest feasible approximation to the high-powered specification laid down by the international standard. At around the same time, however, the Canadians discovered, more or less by accident, that direct reception was possible in certain circumstances with an output power from the satellite as little as a tenth of that specified by the

international standard. This led both Canada and Australia to pursue a completely new course of OBS development, now generally referred to as 'medium-power OBS, which not only changed the economics of the service radically, but now threatens to supersede the original high-power concept.

/ The essence of medium-power OBS is that it uses what is basically a normal commercial communications satellite, with a number of transponders of roughly twice the normal output power for direct broadcasting. To provide the stronger signal needed for economical direct reception, these transponders work through more concentrated spot or zonal beams: in the Australian system, for example, four beams or footprints are needed to cover the whole continent, as against only one for most satellite- services. The cost to the service provider is still much higher than for national-beam networking, because a separate transponder is needed to feed each beam, but the less sophisticated technology makes the difference much less significant than in the case of high-power systems, especially if full continental coverage is not required. For the consumer, it means a larger and more expensive earth station - too expensive at present (though

probably not in the future) to be regarded as a normal item of consumer electronics, as was envisaged for high-power systems, but

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Television and the Satellite

still cheap enough to provide a reasonably affordable means of reception where there is no other way of getting television.

It must be pointed out in passing that the Australian HACBSS system differed in one important respect from other medium-power systems developed overseas. Whereas most of the overseas systems are engineered to deliver a single channel of television, and nothing more, HACBSS was designed from the start to provide in one service the

equivalent of the full package of ABC services available in the capital cities - one television channel, two AM radio services and a stereo FM service - and possibly additional services as well, such as teletext or data broadcasting. This decision was to have radical consequences later.

The result of the move to medium-power technology was to make commercial services to remote areas appear a feasible, and possibly even a commercially viable proposition, especially if a different service were provided in each spot beam footprint. As the commercial sector began to take an interest in the unserved markets (for reasons that were not entirely concerned with simple short-term profitability), potential viewers in these areas, who had previously been happy enough at the prospect of getting any television at all, were encouraged to expect commercial services as a right.

It needs to be stressed that many of these expectations were based on misinformation. It is clear in retrospect that the satellite was greatly oversold in the country in the course of the debate as to whether the system would proceed at all. As a result, grossly

inaccurate beliefs about the cost and capabilities of the present generation of satellite technology gained currency. Many rural dwellers appear to have imagined that once the satellite was up, they would only need to set up an ordinary television antenna on the roof

to 'get the same range of services available in the capital cities. Others, though aware of the need for a special earth station, believed that a HACBSS earth station would also give them access to the telephone network, the flying doctor and other two-way services. So entrenched have these misconceptions become that subsequent attempts by the present Minister to dispel them were interpreted in some quarters as a deliberate reversal of policy. These false expectations not only coloured public awareness of the issues but also created a sense of urgency for governments to authorise some kind of commercial service, even if it was not yet justified in terms of need, economic viability or the capabilities of the technology.

The first attempt to set up such a service was justifiably cautious. The only obvious way of avoiding disruption to the existing regulatory structure was to operate the service in such a way that it did not have to be licensed: in other words, to run it under government auspices. A task force set up in the Department of Communications to investigate the issue recommended such an arrangement late in 1981. Known officially as the Satellite

Broadcasting Development Project, and unofficially as HACBSS-2, it was

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Television and the Satellite

to consist of a single service in each footprint, parallel to HACBSS, with a composite program format drawn from commercial stations operating within each footprint, the 58S, public radio and television,

and educational and community-service programmers. While the exact ownership and financial arrangements were not specified, it was clear that the service, though it would carry some advertising, was not intended to be a commercial service in the normal sense. It was

explicitly conceived as a short-term experimental project, intended to explore rather than pre-empt future options for DBS licensing, not only for remote areas, but for the whole of Australia.

The Satellite Broadcasting Development Project came to nothing, chiefly because the commercial interests refused to co-operate. The networks were still committed to their original scheme of regional translators for a nationally networked service. The regionals, confident that their political influence would be enough to rule out such a threat, saw no point in devoting any of their resources to a costly experiment that had no long-term future and only promised to disturb the status quo. Their preferred response to the problem of the unserved areas was to extend the size of their

individual markets by setting up translators outside their existing service areas.

In the policy vacuum that followed, it came gradually to be accepted that any commercial service provided to the remote areas would be a conventional licensed service. The consensus among the regionals and their supporters - slow to develop, and as yet mostly

abstract - was that if OBS was involved, the service would have to be provided not by any one station, but by a consortium of the stations operating within each footprint. Such an arrangement would be a logical extension of the growth of small-scale networks within the regional sector.

Apart from the metropolitan networks, the only opposition to this consensus came from a start-up company called Television Australia (Satellite Services) Ltd, the brainchild of a former ABC executive who been largely responsible for the planning of HACBSS. Television Australia's proposed service was essentially a private-sector copy of the Satellite Broadcasting Development Project. It was to involve a similar composite program format, serving all four footprints with significant regional variations, and carrying a high proportion of special public-interest programming. The service was to be funded in part by viewer contributions, though it was stressed that these would be purely to cover the costs of local delivery hardware, while program and satellite costs would be covered by advertising. This, the company argued, meant that the service would not be a subscription service in the true sense - a distinction that was lost on many people and wilfully ignored by others. The proposal was

attractive in many ways, and drew significant support from its potential customers, but eventually foundered on the company's inability to convince anyone in authority that its ambitious format would be commercially viable.

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Television and the Satellite

In the meantime, changing technology had once more altered the picture. Constant improvement in the performance of receiving earth stations, encouraged in part by the imminent commencement of medium-power DBS services in the US and Canada, had reached the stage

by 1983 where many people believed that it would be possible to offer DBS of a sort without resorting to the full HACBSS specification. At this point, the networks changed tack. Their new proposal was that they should relay their programs through the national beam, but using the more powerful transponders. (The design of the satellite had been

altered in 1982 to allow this - partly, it would seem, as a precaution to ensure that a use could still be found for the spare transponders if no second DB5 had been authorised by the time the second satellite was launched.) They argued that this stronger signal could be picked

up directly by anyone who set up a dish somewhat larger than the HACBSS earth station, but still cheap enough to be reasonably affordable. In this way, they claimed, they would be able to serve the remote markets, not as a properly licensed service, but by an extension of the established practice of 'fortuitous' or 'incidental' reception, whereby viewers outside the official service area of a station are allowed to pick up its signal if they are lucky enough to be able to receive it.

This proposal was not, on the whole, received sympathetically. At the government level, there was concern not only about its practical impact on the structure of the industry, but also over the more strictly legal implications of a station providing a

regular service to people well outside the designated service area to which it is legally accountable (or, from another perspective, of an unlicensed SPS reaching the public directly).

On a more practical level, there was and remains considerable controversy about the cost to the viewer of this means of reception. Reliable estimates are hard to obtain because nobody in any part of the world has yet had occasion to manufacture an earth station designed for individual reception of satellite television signals of this strength in this frequency band. (The networks point to the

growing practice in the US of people setting up their own backyard dishes to poach cable television programs relayed on normal low-power, wide-coverage ,transponders, but the analogy is not a helpful one, as most American satellites operate in a different frequency band which

allows somewhat easier reception.) Each of the networks has produced its own estimate of the cost of such an earth station; not only are all their estimates generally regarded as optimistic, but it is significant that they have at times varied from one another by a factor of three or more. Another consideration is that anyone who wanted to pick up the ARC as well as the commercial service would need to buy two dishes, one for each type of signal.

Given these problems, it is a tribute to the persuasive powers of the networks and their associated press interests that their proposed 'solution continues to this day to be regarded as one of the only two feasible options for remote-area service. With this change of approach and the demise of the original Television Australia

- 15 -

Television and the Satellite

proposal, the terms of the debate on this question became frozen in the same way as that concerning networking.


An air of unreality surrounded these developments until the latter part of 1983. The uncertainty caused by the possible introduction of cable and subscription television overshadowed the satellite for most

of 1982, while the change of government brought a new uncertainty by reopening the question of whether the system would proceed at all. Only in July 1983 did the present Government confirm its commitment to the system, and even then the arrangements for its ownership remain in doubt. The widespread support within the Government for full public ownership led to speculation that the eventual ownership arrangements would give the Government more effective control over broadcasting

uses of the system than would have been possible under the commercial structure previously envisaged.

In the event, these expectations were confounded. The Government opted for ownership by a publicly owned company, with partial Telecom shareholding, but allowed it the same commercial freedoms as a private company. Indeed, the Satellite Communications Act 1984 imposed a legal obligation on Aussat Pty. Ltd. to operate

commercially, with only the most circumscribed of public-interest requirements. The management of the company has since carried out this obligation aggressively.

The most important practical consequence of this decision for broadcasting concerned the allocation of transponders. It had originally been intended that the ABC and the commercial OBS should each have two transponders on each of the first two satellites. This would have meant that in each footprint, both services would come off

the same satellite, so that the same dish would pick up both. But with Aussat left free to decide the allocation of transponders on purely commercial grounds, the possibility arose that viewers might have to take the two services from different satellites, separated by eight degrees in orbit. Because the angle of view of a HACBSS dish is much narrower than this, reception of both services would require two dishes, a special and much more expensive kind of dish with two focus

points, or an even more expensive dish with automatic tracking capability to enable it to be pointed at either satellite as required.

Worse still, since commercial allocation of capacity effectively meant first come, first served, there was a real danger that the networks would take three of the four spare transponders, leaving none available for a second OBS. Indeed, it was commonly believed that the networks' desire to use the high-power transponders stemmed from just such a pre-emptive motive rather than any genuine interest in serving remote viewers.

This last problem has been alleviated to some extent by Aussat's announcement in 1984 that the third satellite would also be put into service, possiblj as early as June 1986. Although it now

- 16-

Television and the Satellite

appears certain that the capacity will be available to carry a second OBS, the question of allocation remains. Unless the ABC gets four of the medium-power transponders on the first two satellites, the introduction of HACBSS in two of the four footprints will be delayed for a year at the least. If, as seemed likely until recently, the networks put in the first bids for three of the four remaining medium-power transponders, the second OBS will have no choice but to wait for the third satellite. This makes it virtually inevitable that the two OBS services will be delivered from different satellites, unless the

networks choose not to take up the option of medium-power capacity at this stage.


By the end of 1983, the issues had ceased to be hypothetical. The regionals, believing (rightly or wrongly) that their influence on policy had diminished with the change of government, and seeing the control of the satellite consigned to a body with no brief to respect

anything but the ability to pay, finally began to realise that they would need to come up with a firm, viable service proposal rather than an in-principle stand. The networks, faced with the growing likelihood that the third satellite would be put into service, saw

that it might no longer be possible to gain a pre-emptive monopoly of the remote markets by the simple expedient of buying up all the satellite capacity. With the launch of the first satellite little more than eighteen months away, both sides began belatedly to flesh out their options.

In November 1983, the Minister announced the first elements of the Government's policy on the use of the satellite by broadcasters. Satellite program services were defined as such for the first time: they were not to be licensable, but there was a requirement that they be encoded to prevent unauthorised reception. Commercial DBS was ruled out as an option for the time being - a blanket exclusion which does not seem to have fully reflected the Government's intentions with regard to remote-area services.[5] Any regulation of SPS was to be applied not to their provision, but to the uses made of them by licensed broadcasters. A decision on the nature of this regulation, together with the arrangements for serving remote viewers, was referred to a public inquiry to be conducted by the Australian Broadcasting Tribunal.

The Satellite Program Services Inquiry, in spite of its circumscribed terms of reference, was recognised as the most important and wide-ranging investigation of the commercial broadcasting system since the Green Report in 1976. It was acknowledged by all parties, except the networks and the Federation of Australian Commercial Television Stations (FACTS), that the real issue involved was not SPS as such, but networking. The proceedings were complicated, however, by the evidence which quickly emerged that few of the interested parties had thought through their positions. Broadcasters and public

interest groups alike revised their evidence repeatedly in the course of the Inquiry. A Perth station which had originally been the most


Television and the Satellite

outspoken advocate of strict controls on networking reversed its position completely in the last weeks of the Inquiry after signing a new affiliation contract with the Nine Network. Even FACTS (whose view was that the Government had no business to be taking an interest in any of the issues under consideration) failed to reach a consensus on the remote-area question before the end of the Inquiry.

The most interesting feature of the Inquiry was that the major public-interest lobbies, having at last acknowledged the inevitability of the satellite, now turned their attention to the opportunity it presented to reform the structure of the industry. The Tribunal was disposed in any case to favour a structural solution,

since past experience had convinced it of the futility of much direct regulation, and it saw little prospect of handling an additional burden of complex regulatory responsibilities with its already overextended resources. Three main structural options emerged:

(i) Vertical separation. This option was supported by Communication Action, a coalition of public-interest groups co-ordinated by the Australian Consumers' Association. Its underlying principle was that no one person or company should be allowed to control both a

station and an SPS. Networking and broadcasting should be separate businesses, in different hands. Thus, if the existing network interests wished to continue in the business of networking, they would need to divest themselves of their Sydney and Melbourne base stations.

(ii) The split-market option. This arrangement, proposed by the Australian Film Commission, would formally divide the Australian television market into separate metropolitan and regional markets. The existing

networks would remain, but would only be allowed to operate in their four traditional capital-city markets (and possibly Perth as well). They would not be allowed to sell programs directly in any other market.

Independent program supply companies would be authorised to buy programs from the networks and resell them at an economic price to stations in other parts of Australia.

(iii) The Distributed Network option. This solution was devised at the last minute by a member of the Tribunal's Inquiry staff. The Tribunal regarded this approach favourably (though it did not actually recommend it, as most media reports suggested). It meant formally recognising the existence of the

networks and their dominant role in the national market, but restructuring them to reduce the influence of the Sydney and Melbourne stations and their owners. The networks were to be given legal status as non-

profit-making consortia, with member stations in the

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Television and the Satellite

five capital cities contributing equal shares of the equity, enjoying equal votes in all network decisions, and paying equal prices in proportion to the size of their potential audiences for all network programs.

(The legislative means by which this arrangement was to be enforced were not specified.) In order to prevent de facto concentration of influence within the consortia, the ownership provisions of the

Broadcasting and Television Act were to be amended to prohibit any person from owning a prescribed interest in more than one metropolitan station.

The Satellite Program Services report is probably the most detailed and perceptive study of commercial television ever made in this country. Most of the observations made in this paper have their origin somewhere in its 700 pages. While few of its conclusions came as news to informed observers of the industry, the weight of evidence

it accumulated, and in particular the persistent (if sometimes leading) questioning of witnesses by the Chairman of the Tribunal, gave substance to what might previously have been regarded as no more than suspicions or allegations. Perhaps the only new conclusion to emerge from the report was how far the networks had already achieved effective domination of the national market through their control over program supply. The effect of the satellite would simply be to add a new layer of vertical integration, by adding control of distribution to their existing control of production and supply.

For all its value as a research and policy document, the report was deficient in one vital respect: it made no

recommendations. Given the failure of so many of its earlier initiatives, and especially the rejection of the detailed recommendations of its earlier report on cable and subscription television, the Tribunal saw no point in committing itself to policy advice which could only antagonise the industry with which it had to deal on a day-to-day basis. It was further discouraged by the limited nature of its terms of reference and the belief that any effective

measures which it might recommend would not be politically saleable. As a result, after a delay of eight months, the essential decisions were thrown back into the hands of the Government.


At the same time as the questions of satellite use were referred to the Tribunal, the Minister commissioned a second inquiry into the policy of localism. This concept, despite having been the fundamental basis of licensing policy for over half a century, had never been formally adopted as policy by any Government or examined in its own right. The inquiry was to be carried out by the Department of Communications under the chairmanship of Mr James Oswin, the former Secretary of the Department of the Media who subsequently served a term on the Tribunal and has since remained with the Department as an unattached First-Division officer.

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Television and the Satellite

The reasons for the calling of this second inquiry are still obscure. Although the two bodies were tackling the issue from opposite ends, there was no doubt in anyone's mind that the fundamental issue was the same. This led to the curious situation of two inquiries reporting to the same Minister on the same subject, originally with the same reporting date, ostensibly operating

independently of each other in buildings less than a hundred metres apart. The possibility that the two inquiries would present the Minister with conflicting recommendations at the same time (as had happened two years previously with the Cable and Davidson Reports) is unlikely to have escaped the minds of those responsible for the decision.

To a degree, that is what happened. The result of the review was something of a foregone conclusion. Over seven hundred submissions were received, nearly all in favour of localism. The great majority of these were pro-formas distributed somewhat

indiscriminately by the regional operators. (Submitters in this category included the Ballarat Anti-Fluoridation Association, the Wagga and District Arthritis and Rheumatism Group, and the Yarrawonga branch of the Right to Life Association.) Nevertheless, the weight of submissions, for all its deficiencies as a test of public opinion, was enough to show the existence of widespread continuing support for the concept of localism, at least among what could loosely be described as community opinion-leaders in country districts. This made it inevitable that the inquiry would report in favour of a continuation of the policy.

Although the two inquiries had maintained a cautious liaison, there was no evidence of co-ordination in their findings. In contrast to the Tribunal, the Localism Review made extensive recommendations. Regrettably, they took little account of the changes that had taken place over the last ten years. Measures which might have had some effect, such as local content quotas, were rejected without a satisfactory explanation. The supplementary licence scheme, which had caused the Tribunal so much concern, was accepted uncritically. The general thrust of the recommendations favoured an in-principle reaffirmation of the same assumptions that had governed the licensing scheme since 1953. While it was accepted that the system might need to be tinkered with at the fringes, the report was dominated by the belief that the solution to present concerns lay in a return, by simple governmental fiat, to the state of affairs that had existed in the mid-1970s.


The Government now found itself deferred nine months previously. expected to relieve it of some straightforward policy decision, (

and the other had recommended not as unresolved as they had been satellite was now less than a year

facing the same choices it had Of the two inquiries which had been of the opprobrium inherent in a me had recommended nothing useful, ling at all. The dilemmas remained

for the last seven years. The


-20 -

Television and the Satellite

Of the two major issues, that of the remote areas appeared less controversial at the time. One of the few points on which the SPS and Localism reports concurred was that the networks' incidental reception' scheme should be rejected. This was hardly a breakthrough - since nobody but the networks had ever really cared for the idea -but it was a start. Indeed, the very dearth of remaining options was an advantage in political terms. With the apparent demise of Television Australia's original proposal, there seemed to be no choice

left but that which came closest to preserving the status quo, and which the Opposition now claimed to have supported while it had been in government. This was that the stations within each footprint should jointly offer a free-to-air package in OBS or quasi-OBS mode parallel to HACBSS. This concept accordingly became policy in October

1984 under the new (and somewhat misleading) title of the Regional Commercial Television Scheme (RCTS).

To say that a policy existed is perhaps too kind. While there was now a commitment in principle, many of the details that one normally expects to find in a developed policy had still to be worked out. These included the exact regulatory and ownership arrangements, how the new scheme was to be made compatible with the existing

licensing system, and the all-important issue of whether a service of this kind could be commercially viable. In view of the short time still available, these questions were referred back to the Tribunal with a directive to do what had originally been asked of it: to come

up with firm policy proposals.

The Tribunal's brief was unprecedentedly wide. Not only did it need to determine the administrative framework for the new service: it was simultaneously required to decide the successful applicant for each of the four footprint licences. In contrast to the SPS inquiry,

its terms of reference imposed few restrictions. Existing licensees, including metropolitan licensees, were entitled, individually or in consortia, to apply for an RCTS licence, subject only to a general caution against undue concentration of media ownership. The Minister made it clear that even the Melbourne and Sydney network stations were free to apply, though their.proposals would receive more sympathetic consideration if they related to States other than those in which they already operated.

When legislation to authorise the new class of licences (now known as Remote Licences) came before Parliament in May 1985, its provisions remained very broad. Controls which are spelt out in the Act for other types of licence - e.g. on transfer of ownership,

interests held in other kinds of licence by a remote licensee, the number of remote licences in which one person may hold an interest -were left to the discretion of the Tribunal. The only controlling provision was that the Tribunal was required to take into account 'any relevant government policy statements' - a means of allowing the Government to endorse or vary the Tribunal's policy recommendations before the licences were granted.

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Television and the Satellite

As pointed out at the beginning of this paper, what appeared at the time to be a straightforward decision soon proved to conceal immense complications. The ramifications of the scheme fall outside the scope of this narrative, and will be explored in detail in the next paper.


For the question of what to do about networking, there were not even any superficially simple solutions. If anything, the SPS Report had added to the Government's difficulties by arguing - sometimes cogently, sometimes speciously - against the effectiveness of most of the measures that had so far been proposed. The response to the Report was muted. In part, this was due to the absence of recommendations; in part, to its length and complexity. But the main reason was that the major media groups found it convenient to run dead on the issue. While they may not have liked what they read, the networks did not feel threatened by a report containing no recommendations that were likely to be implemented. It was the best outcome they could have expected, short of outright endorsement of their plans. The less the public knew about its contents, the better for them.

Following the Minister's very qualified endorsement ('Mr Duffy said that the Report was not easy to read because it dealt with a complex and technical subject i),[6] the Report languished for several months in the Department of Communications. For the remainder of 1984, intense lobbying concentrated on the issues of the remote areas and access to the medium-power transponders, which the networks saw as crucial to giving them a de facto monopoly of the satellite program distribution market. During this period, a number of public conflicts emerged between the Minister and sections of his Department over such issues as the encoding of SPS and the urgency of extending additional choices of commercial television to rural markets.

In February 1985, the Minister announced a new investigation of the issues raised by the SPS and Localism Reports. This time it was not a. public inquiry but a special task force within his Department known as the Forward Development Unit. The Unit was given four months to report. Its brief included satellite networking and OBS. (This was the first occasion on which the Department had publicly used the latter term in connection with the first generation of AUSSAT.) The Secretary of the Department subsequently stated that:

The study will not recommend options or argue for particular policies ... It will discuss the implications of adopting particular systems for Government policy.

The end result of the study will be a report ... which will identify options for structural change.[7]

Two things about this investigation are worth mentioning. The first is that it by-passed the Division of the Department which is

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Television and the Satellite

officially responsible for policy on new communications technologies, specifically including OBS. Instead, the Forward Development Unit was set up within another Division which looks after existing services, and which is known for its openness to representations from the industry. The second is that its terms of reference include

'equalisation of services'.

The concept of 'equalisation' implies that everyone in Australia, regardless of where they live, should have access to the same range of services (though not necessarily to the same services). It is generally interpreted as referring specifically to three commercial television services, a construction which may have something to do with the fact that it was first coined by the networks. The concept represents a radical departure from traditional licensing policy, and could have equally radical practical implications if implemented in the short-term. It will be discussed in detail in the next paper. For the present, it should be pointed out that the equalisation issue is one on which differences of opinion

are known to exist between the Minister and the Department. As late as April this year, the Minister continued to maintain that equalisation was a long-term option.[8] The networks and sections of the Department see it as an option for the immediate future. Its inclusion in the terms of reference of an urgent policy study suggests that the latter view may have prevailed.

The Forward Development Unit is not expected to report before the end of June, but the two factors just mentioned give some indication of its likely outcome. When cautious administrators are faced with difficult choices which involve the risk of offending powerful interests, they usually take one of two courses. One is to reproduce the status quo. The other is to deregulate. Informed press speculation at the time of its establishment suggested that the Forward Development Unit would follow the latter course. A recent speech by the Minister appears to confirm this speculation.[9]

Thus far it has been possible, with minor violations of chronology and some glossing over of details, to confine this account within the ..frameworkof a fairly straightforward linear narrative. From this point on it ceases, at least for the present, to be a feasible option. While the story so far may seem complex enough, the real complications are only now emerging. They are wide-ranging and disparate, and their implications extend into the future over different time-scales. It is proper to discuss them in a different format, and this will be done in the second paper in this series.

May 1985



1. Fraser, D., 'The Domestic Communications Satellite (Revised Version - August 1983'. Basic Paper No. 13, 1983, Department of the Parliament Library, Canberra, 1983.

2. Australian Broadcasting Tribunal, Satellite Program Services paragraphs 10.4-10.20.

3. Strictly speaking, this is not the only possible form of networking. In many other countries, networks carry a common schedule made up of segments or individual programs supplied by different stations within the network. This common schedule may

or may not involve the relay of advertisements. The term 'network' has also been used loosely in Australia for many years to describe commercial arrangements between stations for the joint purchase of programs or the joint sale of airtime to advertisers;

in this sense, it does not imply any arrangement for the distribution of program material in real time. The form of networking described here is the one that is considered most likely to arise in this country, given the geography and economics

of the Australian market. Similar operations in the US and Canada are known there as Isuperstations'.

4. Most of the references to 'control' in the Act refer to commercial control (direct or indirect) of the licensee company. The exception is section 92A(1)(c), which gives a definition of control exercised by means of control over programming. However,

lawyers are generally sceptical about the practical force of this section with regard to networking. See ABT, Satellite Program Services, paras. 2.239-2.247.

5. One possible explanation for this is a simple confusion of terminology. For reasons that are not clear to the lay observer, the Department of Communications has consistently refused to acknowledge that HACBSS is in fact a DDS.

6. Minister for Communications, Press Release No. 84/55, 21 July 1984.

7. Mr R.B. Lansdown, speech to FACTS seminar, February 1985. Reported in Australian Financial Review, 26 February 1985.

8. Hon. M. Duff, M.P., National Press Club luncheon address, April 1985.

9. Hon. M. Duffy, M.P., speech to FACTS seminar, 28 May 1985.

Other Current Issues Briefs recently published by the Legislative Research Service


No. 1

No. 2

No. 3

No. 4

No. 5

No. 6


No. 1

No. 2

No. 3

No. 4

No. 5

Leigh, M., 'Brunei - Independence for Whom?'

Lamour, C., 'Affirmative Action: The US Experience and Australian Proposals to Combat Sex Discrimination'.

Newman, G. and Klason, A., 'New South Wales Elections, 1984 (Preliminary Results)'.

Baxter, E., 'Surrogate Mothers - The Legal Issues'.

Panter, R., 'A Chronology of In Vitro Fertilisation: Australia, January 1983 to August 1984.

Castle, M., 'A Summary of Legislation Relevant to the Impending Election'.

Brown, G., 'A Short Guide to Nuclear Weapons and Warfare Terminology'.

Beyer, M., The World Sugar Market and Prospects for a New International Sugar Agreement'.

Marker, A., 'Industrial Robots in Australia: An


Makirda, S., 'The Coup in Sudan: Internal and international Implications'.

Angley, J., 'The New South Wales Doctors' Dispute'.

If you wish to receive copies of any of the above publications please contact the Publications Officer, Department of the Parliamentary Library, Kurrajong Annex, Barton ACT 2600, or phone 72 7551.