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Broadcasting Services Amendment (Digital Television and Datacasting) Bill 2000

CHAIR —I welcome Mr Stewart Fist to the table. We have before us submission No. 2, your submission. Do you wish to make any alterations or additions to your submission?

Mr Fist —There are a couple of minor points of addition, but I will deal with those as we come to them.

CHAIR —Thank you, Mr Fist. Do you have any comments to make on the capacity in which you appear?

Mr Fist —Yes. I am an independent journalist.

CHAIR —Do you wish to make an opening statement?

Mr Fist —Yes, thank you.

CHAIR —Please proceed.

Mr Fist —The overriding point I would like to make is that a change in technology in the order of the one that we are facing now from analog to digital television really only occurs once in a lifetime. The whole regulatory structure that deals with technology and content is what I would loosely describe as a dog's breakfast. It is based in adhocery piled on top of adhocery, and it tries to solve problems by adding things like anti-siphoning laws and all sorts of technical limitations and by trying to categorise things that do not need to be categorised. It is about time we started to look at an overall plan to pick those things up and to solve them from the foundation up rather than just continue adding these ad hoc changes on top.

There is no real reason why we distinguish in regulatory terms between free-to-air commercial television, pay television, narrowcasting and now datacasting. It is completely ludicrous that we create these categories. We assign the free-to-air people the UHF and VHF spectrum. We say the narrowcasting people must use the old MDS spectrum. We say datacasting is this and pay TV is okay across cable or across satellite but not on UHF. This whole thing is a hotchpotch. To me, we are missing the ideal opportunity to sit down and do some overall planning on the whole thing.

The conversion to digital will involve us in having an interim stage where a lot of these corrections can be made and things can be allowed to evolve. That is a crucial point. I do not see the value in making sudden radical change, mainly because I want to protect the Australian production industry. I think it would be very easy for us to make radical changes to introduce massive amounts of competition now we have got all this channel space. In the process we could kill what has been a very long, hard journey to get Australian film and television production up to the standard that it is. I am in favour of trying to make substantial plans to get this whole thing coherent, getting rid of the artificial divisions, keeping the status quo to a fair degree but without time limits—I find the time limits ridiculous—and then letting the system evolve by itself.

There are a number of things that we have to do which are quite crazy. For instance, in our spectrum planning we are going to end up with far too much radio spectrum for television to ever use. We have got UHF and VHF. The VHF is ideal for other uses, other applications, so television should be occupying the UHF. The best part of the UHF has been hived off for some political reasons many years ago and is not available—that is, channels 12 to 28. It is supposedly being used for air navigation but, if you think about it, air navigation is the one area where you have to have international standards. You do not have local standards. So that is a load of rubbish. That area has been hived off for political reasons because it was a challenge to the VHF television players in the early days.

That gives us a big wad of channels which could be opened up now for digital use so that we get a progressive migration to where we want to go, which is television probably in the UHF bands around cities, with most television being carried on cable. There are a whole series of those things. We have a channel 5A in Australia. The fact that we have this unique 5A blocks us from using one of the low earth orbiting satellite systems which would be highly viable to rural Australia at the present moment. The Orbcom satellites are coming over all the time and we cannot use them because we have 5A.

Also, we have devised our systems with the emphasis on the bigness of the corporations. The whole trend of the last 10 years has been to say that small corporations, small organisations, can quite happily program at certain levels in this whole area. When you break it down, our fundamental arguments here are whether Murdoch or Packer is going to win and which areas. We are dealing entirely with the big corporation mentality when we should be looking at whether the AFL, for instance—the small players—cannot run its own channel. Why does it have to sell to an intermediary? There are a whole range of questions that come out of those things.

I would also say that, although specifically here we are dealing with the spectrum, the use of terrestrial broadcasting, you cannot really divorce that from things that are needed to make the cable systems and the satellite systems work. So I will leave it at that at present.

Senator BOURNE —You mentioned that you think that the bandwidth that would be available would make it impossible to use real, interactive television. Are you saying that because you think you would need a lot more for a back channel to use real, interactive television, or why do you say that?

Mr Fist —We are talking about UHF, VHF?

Senator BOURNE —Yes.

Mr Fist —UHF and VHF have got the advantage of distance so you can transmit from the central site in Gore Hill and cover the whole of Sydney. But that does not mean you can have three million transmitters in homes around the periphery of Sydney transmitting back to the central site. So those parts of the spectrum are very good for one-way output stuff but not for two-way interactivity. You can get your interactivity, though, in other ways, mainly through what is called `always on' telephone systems, and that is what we should have been into years ago, but we have not been. The channel replies to the telephone network from your set-top box or your digital TV set back through the system. So interactivity does not have to be on the same system for the output. It is an asymmetric type of thing.

Senator BOURNE —I think that what is being planned for now is interactivity to be on different systems and probably through, as you say, the twisted copper pair into the home.

Mr Fist —Yes. A copper pair, a wire in the street, is actually always on. It is just the telephone system itself that is not. Your connection exists from your home back to the exchange and can be used to go into the Internet without having to do a dial up at all, so all those sorts of things are possible and have been for many years. It is just this sort of division that we have—you know, `That is telephone; this is broadcasting'—so we never let the two marry unless Telstra owns it. Then they try to marry it.

Senator BOURNE —It is going to happen eventually, though, isn't it?

Mr Fist —Of course. It is happening already around the world.

Senator BOURNE —Exactly. One other thing you say is that one-way datacasting has already failed, like teletext, you mentioned—

Mr Fist —Teletext has been a complete fiasco all around the world. It had almost no take-up except the punters.

Senator BOURNE —But there are other ways to do that, aren't there, like caching, for instance? If you have got a hard disk, say, in your set-top box, one way might be quite useful.

Mr Fist —Datacasting will be a very useful technology in a very limited market. It is not, as it has been portrayed, an alternative system to television. It is like the Internet. It has been portrayed for the last couple of years, until the recent crash, as if that is a new medium which is challenging radio and television. Some of those systems are more likely to challenge radio, actually, than television.

Senator BOURNE —Which has survived very nicely, thank you very much, despite the challenges over many years.

Mr Fist —These systems evolve; they are not revolutionary as the media constantly makes them out. They take many years to evolve and they take social change to be accepted. What Mr Encel was saying this morning I totally agree with. Virtually everything he said I totally agree with.

Senator MARK BISHOP —You having totally agreed with Mr Encel this morning, who was somewhat opposed to the mandating of HDTV, why are you of the view that it is essential that current broadcasters are given the seven megahertz of spectrum?

Mr Fist —Why am I of the opinion that?

Senator MARK BISHOP —That current broadcasters are given the seven megahertz of spectrum?

Mr Fist —Because I do not think we should be defining what they do with the spectrum. It just seems to me that you have got a business which has been very viable and a lot of investment has been made in it and it is a business that is serving a community need. What we are doing is telling it that it has to change its technology, and therefore we should assist it to do that. I am not in there supporting the existing channels; I am just saying it is a business that needs to carry on. It is going to have a hell of a cost burden in the changeover. They are exaggerating, of course, but it is still quite substantial. We should not be imposing restrictions on them in any way at all. We should be assisting them to change over. I do not believe that spectrum should be auctioned; I think that is a ridiculous way of handling spectrum. The other point is that there is also so much spectrum we do not know what to do with it, so why are we saying, `You should not have this'?

Senator MARK BISHOP —What is your view on the government's proposal to essentially restrict what those who are in the datacasting industry can do? It is relatively limited. They are not going to be broadcasters, they are not going to be allowed to come in the back door. Essentially they are going to be allowed to transmit those few items that are categorised as category B program, which I suspect is going to have very limited interest or uptake out there in the marketplace. Do you have a view on this restriction on what datacasters are going to be permitted to do?

Mr Fist —At the present moment I am in agreement with it, that there should be some restriction, otherwise it is just a backdoor opening to another commercial channel. As I said before, I think that could easily be very disruptive. The problem is more fundamental than that, and if you solve the other problems then I have no problem with datacasting; I do not believe datacasting should have any restrictions. So there is need to solve the fundamental problems. Why, for instance, do we say that pay TV must be sold only by multiple channels a month ahead? There is no technical requirement for that whatsoever. I do not see any reason why the pay TV operators are not in the same business as the free-to-air commercial guys and the free-to-air commercial guys are not in the same business as the pay TV people. The only thing it requires, it seems to me, is that they should be required to sell their pay TV programs by the hour, which is what is called impulse pay per view, and any set-top box worth its salt can do that today, and there should not be any advertising in the pay slot. You make those two simple rules and you remove the requirement for separating these two and allow competition to come into the marketplace both ways. Packer then competes with Murdoch and Murdoch competes with Packer in both pay TV and in free to air. We have got ourselves into these holes because we think of pay TV as subscription pay. Subscription is not a requirement for pay TV at all. There are very good pay TV systems that do not require subscription.

Senator MARK BISHOP —In terms of the limited definition of datacasting, do you have a view on that?

Mr Fist —It is an exclusive definition, isn't it? It is saying the datacasting is not television. If you are going to allow competitive people to come into the television area, why don't you just do it? If you are going to allow Murdoch to put up another free-to-air channel, why not just do it openly instead of giving him an avenue in through datacasting? That is my objection. It is not that I agree that there should be these limits. I think we should be open and clear up the problems at the foundation and then we do not have these sorts of arguments.

Senator MARK BISHOP —The bill provides for a number of reviews in future years, reviews that, as I understand it, are going to be conducted by the department. Would you favour replacement of those departmental reviews by fully open statutory reviews conducted by and answerable to the parliament, to get all the necessary issues on the agenda for full and open public discussion?

Mr Fist —I am a journalist and I am certainly not a fan of government departments of any kind. I have found over the years that certain sections of what is now the ABA—specifically the Spectrum people—are ludicrous. The stuff that they put out is absolutely crazy, and we all know it. A lot of the things that have gone on in the department over the years have also been crazy. I would hope that the whole system was as open as possible—and not done by the department.

Senator MARK BISHOP —And not done by the department. The national broadcasters—the ABC and the SBS—are going to be denied the ability to multichannel. Are you of the view that the free-to-airs or pay TV would be in direct competition with the services currently offered by the national broadcasters or proposed to be offered if they are permitted to multichannel?

Mr Fist —Again, why are we making a distinction—that is, this group can do it this way and this group can do it another way? I just do not see any reason at all to make these sorts of distinctions. Saying, for instance, that we have to have high definition television, to me has always been crazy. It made no sense from the start. Saying that we cannot have multichannelling on one or more of the channels is crazy too. These things should be marketing decisions made by the organisations themselves. Why are we doing this sort of thing?

Senator MARK BISHOP —I do not know why we are doing it, but we are doing it. The argument that is put to us is that some of the pay TVs and possibly some of the commercials compete for market share with the ABC; hence, if the ABC is allowed to multichannel, that will be further competition and will possibly reduce their revenue base.

Mr Fist —I think that is true.

Senator MARK BISHOP —Do you think that is true?

Mr Fist —Of course. If the ABC gets better, the commercials are going to lose out. That is what we are all saying, but we all hope that the ABC gets better and that that makes the commercials react and probably get better still. That is how the whole system operates. It is no different.

Senator MARK BISHOP —The ABA is going to be given direct powers, as I understand it, to categorise what may be put into category A as opposed to category B programs; hence, what can be datacast and what is exclusively reserved to the broadcasters. I understand that you probably object to that because it is just another regulation or artificial constraint. Do you have a view on the merit of the ABA pursuing that function?

Mr Fist —Not as an interim measure. As long as we are looking at these things as a transition over three or four years, why not use the department? The problem will be solved in a short time anyway. I think we can spend too much time worrying about what to me are quite trivial things in a transition period—as long as we are not embedding into a system that the ABA will have this right forever more. I expect this whole system to be revised within a couple of years anyway, quite frankly.

Senator MARK BISHOP —So you think the whole construct is just so artificial—

Mr Fist —Yes. It has been tottering along for quite a few years—right from 1992 when pay TV was first promoted. It has been tottering all the time.

Senator MARK BISHOP —So, going back to those sets of reviews, you agreed that a statutory review would be preferable? Would you also argue that those reviews should be sooner rather than later?

Mr Fist —I think they should be ongoing. I think we should be trying to devise some coherent plan for the whole area and trying to move towards it through a series of reviews.

Senator HUTCHINS —Mr Fist, when you were talking earlier about datacasting you were saying it was about teletext. I was not sure what you were putting there. Could you elaborate on that for me?

Mr Fist —Datacasting is a vague word and the definition is changing by the week. In the early days, datacasting meant a one-way transmission of information. Now it is often being defined as an interactive service, which is almost the exact opposite of datacasting. `Casting' means to throw out: push technology. I do not know how to argue about datacasting because it depends on who you are talking to and on what day as to what arguments you are hearing. Datacasting should not be used as a backdoor way of setting up a viable commercial channel. If we want to set up a viable commercial channel, we ought to set up a viable commercial channel and not allow these backdoor ways in. But that is only an interim thing until we get the whole thing sorted out. I do not think datacasting, in the end, should have any restrictions at all.

Senator HUTCHINS —You said earlier that teletext was not taken up—

Mr Fist —Teletext has been around for a long time.

Senator HUTCHINS —I thought you were comparing it with datacasting.

Mr Fist —Datacasting was teletext until a few years ago. Datacasting now could encompass things like some of the Internet services. There is ADSL down telephone wires. There are coaxial cable services, too. Everyone wants to be in datacasting. Someone just paid $155 million for an FM licence. He did not pay that for a radio station; he is hoping to be into datacasting as well. He is hoping to be able to take those channels and split them up in the future. There was $2.8 billion, supposedly, for the third generation spectrum. That is a datacasting operation. Datacasting is going to be everywhere. Any digital system is going to be able to datacast one minute and pay television the next to varying degrees, depending on the bandwidth. Why do we try to limit it to this tiny nowhere area? This does not make sense.

Senator HUTCHINS —You said that it is a backdoor way to allow for another television station to come on line. In your opinion, if this were opened up, would there be more than one television station coming on line?

Mr Fist —I would imagine that there would be, progressively, over a period of time. You would get niche channelling as well. We have to move into it slowly, though, and watch what happens to the Australian content. That is really what I am saying. We should have a plan for opening this up. It seems to me that the obvious way is to let the pay TV boys into free-to-air and the free-to-air into pay to let them compete so that you have not actually destroyed the financial pool of either of them. Then lay Australian content regulations on both of them. You can only really do that if you remove this definition of pay TV as being subscription only. As soon as you get to the impulse pay TV, the two can be blended. Channel 9 can be showing free-to-air, advertising supported, from seven to nine, and from nine to 10 it can go into a scrambled pay TV operation. That does not matter if there are a whole lot of channels around.

Senator HUTCHINS —My colleague Senator Bishop asked you about the free-to-airs having what some people call a bonanza with the spectrum access per X amount of years. Could you elaborate on that? You had a view that they should be able to do that.

Mr Fist —They should get their channels for free. They have additional costs. They are being forced to change over from a working system. It is hard to find an analogy, but any other business would be encouraged to keep going and to simulcast. It makes sense to encourage simulcasting for a period which is going to involve them in twice the transmission costs, conversion costs and all of those sorts of things in order to maintain their businesses. It would be ridiculous to impose on them a spectrum charge when they have all of these other costs and they are doing it for the public benefit.

Senator HUTCHINS —I cannot think of any other industry being overtaken by technology that is ostensibly being protected from that technology. When candlesticks came in, no-one had six years to isolate or quarantine candlestick makers.

Mr Fist —We are talking about two different things. I am not saying that they should be protected from future competition. I am saying that the existing stations should get the extra channel in order to digitise during the simulcast period, and they should get it for no cost. They should not have to bid for it at auction. To me, that channel should be in the low UHF range—in the 12 to 28 range—rather than where they are doing it, so that we can get a transition to this new era.

I forgot to mention one thing that illustrates one of the problems that no-one has faced. The Productivity Commission has just ignored this whole problem. I do not care what anyone says: there is masses of spectrum. We do not know how to use it. We are restricting the use of spectrum for reasons other than technical. In Australia, we use seven-megahertz PAL systems. Most of the rest of the world—especially Europe, where the innovations in our form of digital television are coming from—use eight megahertz. They use wider channel bandwidths. No-one, to my knowledge, has suggested that we ought to do something about transferring our system so that it matches the European ones, the eight megahertz ones. It makes sense to me that we should be shifting into this 12 to 28 slot, which has a vacant chunk of spectrum. We should be taking our digitals in there and, probably, making them at the eight-megahertz spacings. Again, we get a way of transferring to more of a world standard rather than sitting out here with our seven megahertz. The seven to eight megahertz thing is not a dramatic thing, but it is going to put us at a disadvantage in the future with a whole range of things that might come along.

CHAIR —That is a very interesting point. I have never heard anyone suggest that before. Why have we gone to seven megahertz?

Mr Fist —We went to seven megahertz in the early days. The American standard uses six megahertz. The European standard is PAL—some of them were seven; a lot of them changed over to eight. Eight megahertz is basically the standard over there now. Some other parts of the world still use seven, like we do. But the key designers of equipment in the PAL tradition are going to be using eight megahertz. That lets you get an extra channel in if you want to multiplex, or it lets you get an HDTV channel and a standard definition channel into the one multicarrier.

CHAIR —What are the cost implications for the people involved in going to eight megahertz? Does it mean all the equipment would be unusable afterwards?

Mr Fist —If we go over to eight at the time we change over to digital, there are no cost implications at all. Probably, there is a slightly lower cost.

CHAIR —I presume you are saying by implication that, if at some subsequent point we change, there will be a higher cost.

Mr Fist —I am fairly technical but not that technical. I really would not know, but I would imagine the answer is yes. The main problem there is the channel plan. If you are butting each channel up against another, you cannot suddenly go from seven to eight at any stage without wiping channels out and shifting people around. If you are going to do it, you do it now.

CHAIR —But one of the features of digital is that you can use bits of the spectrum, the seven megahertz, to transmit different standards of digital television, so standard might need only two megahertz whereas high definition would need seven or six, we are told.

Mr Fist —Yes, but that is within the multiplex, within the cell. The problem I am talking about here is that there are sevens butted up against each other. If you want to use equipment which has an eight span or has an eight requirement, then you have to redo your whole channel plan and shift everyone in the future to accommodate it. It does not really matter for the internal use whether you are using seven or eight; it is just how much bandwidth you have to play with. Our system will be a dynamic system in the future so that it can go from being one that is seven or eight wide down to whatever you want, with up to eight VHS sort of quality channels within that one multiplex.

CHAIR —I suppose this is what I am fishing and searching for: are you implying that, if the Europeans are on eight megahertz, European digital equipment might not be useable in Australia?

Mr Fist —In most cases, especially in the early stages, they will make it both seven and eight. Because they are a manufacturing and selling technology area, they tend to try to do both. It is hard to come up with a clear indication of what would be a problem. But I imagine that, in the future, there will be requirements that come out in the eight area rather than in the seven.

Senator TCHEN —Mr Fist, I came in late so you might already have covered this point. But can I ask: what are your qualifications in telecommunication broadcasting? From reading your submission and also listening to you, I find there is a lot of knowledge and a lot of good sense—and those two things are not always the same thing. I am curious about what your background is in telecommunications.

Mr Fist —In telecommunications, absolutely no formal training whatsoever. My training actually is as an optometrist.

CHAIR —That probably gets you clear vision!

Mr Fist —That is what got me very interested in HDTV in the early days, and I could not see any rational reason why we would want it.

Senator TCHEN —It is another case of a gifted amateur, I am sure. I cannot find the exact spot, but I get the impression that you describe the system we have at the moment as somewhat confusing because of the history of developments, because of the industry developing in particular ways, so it is not ideal. In here, you describe perhaps a future that you are looking forward to, with broadcasts being carried entirely by cable in the city area.

Mr Fist —I would imagine that it is inevitable in the future because the systems you get are so much better when you have cable. If you have cable and you have reasonable cable rules—which include a `must carries' rule so that it carries everything—and also a cheap basic cable service instead of just the premium service we have now, you will get everyone connecting anyway. Then you will not have the shadow problems and you will not have to allocate a whole range of transmitters just trying to fill the shadows, and all of those sorts of things that are consequences.

Senator TCHEN —Yes, I understand that. Cable is obviously a more sanctified environment with transmission.

Mr Fist —Yes, but it will eventually go fibre optic to the home or to a small group of homes, yes.

Senator TCHEN —But to get to that stage, I think you agree that there have to be multi-step changes.

Mr Fist —Sure, evolutionary changes.

Senator TCHEN —Given that, can I ask you whether, in your opinion, the proposed bill would be a step in the right direction?

Mr Fist —No, I do not think it is a step in the right direction. I think it is, to a very large degree, establishing the status quo, which is better than trying to put in place a revolution at this stage. That is my argument. I do not see it as positive, but I do not see it as negative either.

Senator TCHEN —But you said you find yourself in broad agreement with many of the government's proposals.

Mr Fist —That is what I mean by that. There has been a strong argument that they should have been charged for all the extra spectrum, that there should have been a whole lot of competition suddenly introduced into the market. I am saying that I do not think that is wise as a sudden thing. I think it has to be evolutionary.

Senator TCHEN —Can I put it another way: you find it acceptable in a not perfect world.

Mr Fist —I find certain parts of it acceptable. I do not find acceptable the time limits being placed on things. I do not really see why you have to protect anyone from competition for the length of time they are being protected.

Senator TCHEN —Or the opportunity to carry out evolutionary changes.

Mr Fist —I have spoken before about that. There are ways to introduce competition into free-to-air and pay TV without crippling either side financially, and that is to allow them both to compete in each other's area.

Senator TCHEN —When television broadcasting and radio broadcasting all go into cable, what are we going to do with the airwave?

Mr Fist —I would imagine that there are about 10,000 different things that people will think of. Australia has fewer problems with spectrum than with any other part. It is just that it is patently obvious that cities are better served by cable, country is probably better served by UHF—peripheral areas—and remote areas are probably better served by VHF. So you design the system that works for the problem. You do not do the blanket thing and say, `Free-to-air has to be in these channels here. Pay TV has to be this way.' You do not do it that way. That is what is wrong about the whole system.

Senator TCHEN —Thank you, Mr Fist.

CHAIR —Thank you, Mr Fist, for appearing today. You have a great capacity for lateral thinking and interesting points of view. It is always interesting to have you as a witness.

Mr Fist —Thank you.

[2.23 p.m.]