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Broadcasting Services Amendment (Digital Television and Datacasting) Bill 2000

CHAIR —The committee has before it submission No. 32, which it has authorised to be published. Do you wish to make any alterations or additions?

Miss Dyson —No, thank you.

CHAIR —Would you like to make an opening statement?

Miss Dyson —Yes, we would.

CHAIR —Please proceed.

Miss Dyson —Australia is in a unique position, being a few years behind countries like the US and the UK when it comes to digital television. It means that we are in a position to be able to learn from their mistakes rather than to repeat them. The US went for a strategy of high definition television and AC-3, in the mistaken belief that people wanted better picture quality. The FCC's plan to convert US households to digital TV by 2006 is on the verge of collapsing. Recent surveys indicate that 70 per cent of US consumers are not prepared to pay for high definition television sets; and in fact less than 10,000 have been bought to date.

Strategy Analytics in Boston predict that less than five per cent of US households will be watching digital TV by 2005, and the latest indications in the states are that unless they radically change their policy, analog services will still have to be in operation after 2010, and possibly as late as 2015. I quote David Baldwin of the HBO, who said, `Never has so much money been spent by so many people on so few customers.' The information that I have referred to here is contained within Paul Budde's report on digital terrestrial television.

It is widely regarded that the US strategy was a failure. The UK, on the other hand, has adopted a different strategy. They have gone for standard definition television and MPEG. The government have awarded new licences, changed broadcasting rules and focused on offering the public new services. That strategy has been a resounding success.

Sixty per cent of households are predicted to receive digital television in the UK by 2005. The UK is now the world leader in terms of digital television and it is believed that the government will hit their target date to release the analog spectrum—that target date being 2007 to 2009—and have everybody off the analog spectrum and onto digital. There is almost a unanimous belief around the world that high definition television will not take off until 2008 or 2010, if it takes off at all. It has been proved that high definition television is not a driver to digital television take-up; standard definition television and interactive services are a driver to take-up of digital TV, and one only has to look to the US and the UK for that proof. So why, if high definition television is not a driver to take-up, are we even considering it? We propose that this is a political decision which favours the free-to-airs who want to hang on to their monopolies. This is an extremely costly decision for Australia both in terms of the billions of dollars of revenue that is lost and in terms of the disastrous effect that this will have on digital television in this country.

Furthermore, we would like to note that, in determining that the free-to-airs only have to broadcast 20 hours per week of high definition television, that equates to 148 hours per week per free-to-air station that that spectrum is not even going to be used. They are in a position to be able to sit on empty, redundant bandwidth which could actually be gaining a huge amount of revenue. The free-to-airs in this country, as opposed to in Europe, are in a position where they can delay their entry into digital television and the current legislation allows them to do that. We recommend that high definition television be removed from the legislation and that bandwidth be sold. The free-to-airs could still be given enough spectrum for standard definition and interactive services but learn from the mistake of the US and not implement high definition television.

In terms of datacasting, Open TV is the world's largest provider of interactive TV. We have been enabling broadcasters around the world to introduce interactive TV services. Those services include things like games, shopping, news, sport, entertainment, information, banking, email, walled gardens, the Internet, business and financial information. This in the rest of the world is termed interactive television. In fact, our company has gained this world leading position precisely because we come from the television perspective. Models and companies that have focused more on an Internet type solution have not been as successful.

Datacasting is purely an Australian term and it is purely a legislative term. Whereas the rest of the world has all of these services in one sort of big pot of interactive TV, what Australia seems to be trying to do is carve a knife through that and determine that this over here is datacasting and this over there is interactive TV. We believe that the ABA could well be taken up for years in trying to determine between the squabbles, trying to sort out the issues of what genre and who can do what. We believe this is anticompetitive and limits the industry potential in Australia. Australia has a thriving Internet industry and could well have a thriving digital TV industry but, instead, we as a company are seeing New Zealand take the lead. New Zealand is not hampered by this sort of government legislation and to the New Zealand public the message is clear. They know exactly what digital TV is and they cannot wait to get it.

This trying to define what is TV and what is not is a mistake and could lead into dangerous waters. What happens when the consumer can get television on the mobile? Is that datacasting or is that television? What happens when the consumer can get these sorts of services on the television which is in the bus using the single frequency network? Is that television or is that datacasting? What about in the car? Is that television or is that datacasting? We also believe that this will open up one of the bloodiest media battles that we have seen so far. We would like to propose this be called the battle of the EPG. Legislation has not ruled on the EPG—on who owns it and under what circumstances. The EPG in interactive television terms is the pot of gold. It is the most widely used interactive television application.

In terms of sound, Open TV are very much pro MPEG. If a broadcaster is in a position where it can decide and choose between AC-3 or MPEG it means that there are interoperability issues. What we mean here is that a datacaster could be promoting a set-top box which is using MPEG whereby the consumer believes they can receive services from a free-to-air network also on that same box and the broadcaster may well be in a position where they use AC-3 only and the customer cannot receive this.

In terms of the set-top boxes, there is no legislation. Again this gives potential for the consumer to be exploited. There needs to be interoperability between set-top boxes, otherwise we will see the consumer needing one box for television, one box for datacasting and one box for pay TV.

On a final note, I was recently at a conference where Stewart Prebble from On Digital spoke. This is from the UK. He said, `High definition television is irrelevant; create reasons for people to take up digital TV; most of all, keep it simple and keep it cheap.' It is a shame that Australia is not going to adopt such a strategy. That completes our statement.

Senator BOURNE —You have mentioned interactivity and talked of Britain. How do you achieve that? Is it done with caching, with a back channel?

Miss Dyson —There is a back channel. In some cases it is a cable return if it is cable television, or it is a telco return if it is satellite or terrestrial.

Senator BOURNE —Do you do any caching?

Miss Dyson —Yes, we do a certain amount in the set-top box.

Senator BOURNE —Do you have a hard drive to restore onto?

Miss Dyson —Not yet, not currently, but there are hard drive boxes about to be deployed.

Senator BOURNE —I noticed that you mentioned also the EPG. Do you have a view on the British legislated rules for EPGs?

Miss Dyson —The situation was different in that regard. Because the different free-to-airs came under the banner of On Digital, On Digital controlled the EPG in that environment. The user, therefore, can navigate between the different free-to-air broadcasters and the different services available by a 1EPG. So, in other words, because they have come under one banner, that is how they have enabled that to happen. Under our current legislation, we have no idea how that will work. In fact, how you seem to be determining what is datacasting and what is interactive TV seems to refer to what we would call a virtual channel or an enhanced program. A virtual channel is something that sits, if you like, outside of the programming environment. Under that circumstance, you seem to be saying that anything that is a virtual channel comes into datacasting territory, in which case the EPG could be seen as coming under that territory because it is a virtual channel.

Senator BOURNE —Surely though you could make simple rules for EPGs for Australia that would clarify it—based, I think, on those British rules. That is, things like if you are showing one free-to-air, you should show all free-to-airs. You cannot show two, or something like that, or just one. You could show just your own, but you could not show somebody else's and not everybody else's.

Miss Dyson —That is correct, yes.

Senator BOURNE —Even if you just put that in, it would be a good start for Australian television. I think there are ways to actually put that down.

Miss Dyson —It would be a start, yes.

Senator BOURNE —So you are recommending that EPGs are something that should be looked at in this legislation, well and truly?

Miss Dyson —Yes.

Senator BOURNE —You say that the interoperability is obviously a really big problem; you do not want pancake boxes, as we have seen or feared in the past?

Miss Dyson —Yes.

Senator BOURNE —The set-top box you have is able to do everything?

Miss Dyson —It is not so much a set-top box that we have. We port our software into a whole range of different set-top boxes. So there are a huge number of set-top box manufacturers—in fact, nearly all of them—who have our software ported into their box. So it is not a question of really our set-top boxes, but rather it is creating a common denominator so that the consumer is protected. It might be that you take then the lowest common denominator and say, `Well, that is the minimum that must be within that set-top box.'

Senator BOURNE —Then you would put standards within the set-top box if you wanted to have more than that? So, for instance, everybody has to have the minimum, and then you can put in this standard as well, plus this standard, plus this standard?

Miss Dyson —Yes.

Mr Ivanchenko —Just to respond to one of your first questions about whether we have a back channel on interactivity, et cetera, the way Open TV has approached interactivity is that we actually form another part of the broadcast stream. So a back channel is not actually necessary for interactivity. With the idea that we have always approached it from television, as far as we are concerned, it will always be television and there may be a convergence of the other facilities that are available to be included. The methodology is then approached that the set-top box is capable of recognising—in the way it does now—that we have a video track, we have an audio track and there is also an interactive track. That interactive track is then loaded; it may be cached, if necessary, if it is large enough; and it is played with some type of functionality.

If that type of functionality then requires further information that is not available in the broadcast, it is at that point that you may end up requiring a back channel to provide services. So basic financial channel information or a weather service does not require a back channel, because we can have a list of countries and cities, et cetera, loaded. I say, `I would like to know the weather in Wollongong. Show me Wollongong,' and it comes out of the broadcast. It is the same in the stock ticker example: `Show me the current stock price for BHP. That sounds pretty good. I think I'm going to buy some.' At that point, I need to introduce the back channel—to actually execute the transaction.

Senator BOURNE —Fair enough. What would your back channel be?

Mr Ivanchenko —Whatever is appropriate for the term. We do not see the need to specify what format that back channel can take. One of the concerns we have overall is that we feel too many things are being stipulated at an early stage when we do not even know a lot of the directions in which things are going to go in the future.

Senator BOURNE —So it does not really matter whether it is a twisted copper pair with a modem or—

Mr Ivanchenko —Who cares?

Miss Dyson —That is correct.

Mr Ivanchenko —The AC-3 argument on audio is another good example. Today, a popular standard is AC-3. We have Dolby digital and a whole pile of other things. What is going to be released tomorrow, nobody knows. The base thing they are all built around, however, is a basic MPEG stream, the raw digital data stream. We have one format that is being proposed by the datacasters. They are saying, `No, we don't want AC-3.' We are getting some of the free-to-airs specifying, `Yes, we think AC-3 is important.' We could end up in a situation where the one box is capable of decoding both situations but not the audio—so you buy your box for your datacasting services, but it cannot interpret the free-to-air audio. This is opposed to the other situation, where we are currently getting more and more people at various price points buying specified pieces of equipment for their home for audio—prices ranging from a couple of hundred dollars up to the many thousands—for things exactly like AC-3 decoders. They are the people who are going to target and want those services. Why would they want to use the AC-3 decoder that comes in a set-top box—all it has done is add a couple of hundred dollars to the box—when, if they are truly prepared to pay that type of money for AC-3, they are paying a lot more for it anyway and they do not want to use the cheaper version? All it has done is drive up the price of the box.

Senator MARK BISHOP —Miss Dyson, I did not quite follow the discussion you were having with Senator Bourne concerning the EPG. What are you proposing?

Miss Dyson —Just that there should be some legislation as regards the EPG. Currently, there is none. You could effectively have a situation where one datacaster makes an alliance with one free-to-air to say, `We'll put your information on there, but we won't put that of another,' and so on.

Senator MARK BISHOP —What is wrong with that?

Miss Dyson —The consumer loses out yet again.

Senator MARK BISHOP —But if one commercial operator wants to advertise a particular product—

Miss Dyson —It is not just the advertising of the product; it is the program information.

Mr Ivanchenko —To understand a little bit about an EPG, the EPG is the base structure of a set-top box that allows you navigation through all services that are available via that box. The information held within an EPG is part of the core construct that is broadcast as part of digital television. The objective, then, is that—when you first boot a set-top box—the core menu that is presented to any user always comes back to that core EPG. The person who controls that EPG can control what is viewed. Not only that, they can direct people. You can also then use it to go a step further and track what people are watching if that is what you want to do.

Miss Dyson —It is a little pot of gold.

Senator BOURNE —Potentially.

Senator MARK BISHOP —So you want an open slather as to what is in the EPG but regulation by government?

Miss Dyson —Yes.

Proceedings suspended from 6.19 p.m. to 7.36 p.m.

[7.37 p.m.]