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Wednesday, 29 April 1987
Page: 2191


Mr DUFFY (Minister for Communications)(3.47) —I move:

That the Bill be now read a second time.

The purpose of this Bill is to amend the Broadcasting Act 1942 in order to repeal the thirty-year-old two-station rule governing the ownership of commercial television and replace it with firstly, a 75 per cent reach rule which will allow persons to hold prescribed interests in any number of commercial television licences so long as the combined population of their service areas does not exceed 75 per cent of the Australian population; and, secondly, limits on cross- ownership between television and newspapers; and television and radio within the service area of the related commercial television licence.

The Bill includes other provisions which maintain the two-station rule for persons who hold prescribed interests in commercial television licences utilising multi-channel service-(MCS)-permits in regional areas specified as approved markets pursuant to the Broadcasting Amendment Bill 1987, the equalisation Bill. That Bill has, I regret to say, just been rejected in the other House. That does not mean, however, that the Bill needs amendment. It just means that those clauses which are dependent upon clauses of the equalisation Bill will remain passive until such time as the equalisation Bill is passed. It is the Government's firm intention to introduce the Bill again to give effect to its equalisation policy. Equalisation is complementary to the ownership and control changes included in the Bill currently before this House.

The Government does not intend to sit back and let the viewing public of Australia, and the viewing public of regional areas in particular, suffer a poorer level of service-a poorer level of service maintained by legislation which will keep smaller monopolistic markets. Such a regional market structure can only inhibit the growth of Australia's television industry to maturity. It is surprising-might I say curious-that those opposite-those who purport to advocate free enterprise-can, in relation to the television broadcasting industry, adopt such a protectionist and monopolistic attitude.

Broadcasting (Ownership and Control) Bill 1987

There is to be no provision in the Broadcasting (Ownership and Control) Bill 1987 which will require forced divestiture of interests legally acquired under different rules on or before 27 November 1986-the date of my announcement of the Government's intention to introduce the new ownership and control limits provided for in this Bill. The Bill therefore includes provisions to `grandfather' interests acquired on or before 27 November 1986 which would otherwise have contravened the new cross-media rules. The Bill also provides for other consequential amendments to the licensing, share transaction and directorship limit provisions.

The provisions of this Bill together with a further Bill to put in place the Government's equalisation policy are part of a package designed to put in place the Government's policy objectives of a restructured, mature television broadcasting industry. There is, at present, a fundamental structural imbalance in Australian television. The imbalance is between metropolitan and regional television. It arises from a regulatory regime which has outlived its usefulness and is now counter-productive. This inequitable situation is quite unnecessary. The imbalance has been brought about by the two-station rule. This effect has been exacerbated by the current regional television market structure of comparatively small monopolistic markets which are unlikely to be able to facilitate, let alone encourage, new ownership groups able to take a significant role in program decision making.

Are we to condemn Australian viewers to the strait-jacket of the current imbalance-a system with little room for growth-or are we going to give broadcasting sufficient elbow room to prosper and mature? The proposed 75 per cent reach rule will allow structural changes to take place and so encourage ownership by new groups able to take a role in program decision making, and thereby enhance competition in program commissioning and distribution; and encourage greater investment in the television industry.

Networking-that is, the central production and/or acquisition of programs for distribution to affiliated stations-has its role to play. Networking has been part of metropolitan television from the early days. There has also been a considerable amount of de facto networking in the regional areas. It is the Government's belief that this Bill and the complementary equalisation Bill, when reintroduced, will promote a trend to more balanced and competitive networking arrangements in this country. This will facilitate an evolution towards a greater number of competitive television organisations to the benefit of all Australia.

Honourable members will recall that the policy issues associated with this Bill have been the subject of considerable public debate. In 1984, the Australian Broadcasting Tribunal, in its satellite program services report, drew attention to the lack of opportunities for new television enterprises, and for expansion of television licensee companies based outside Sydney and Melbourne. The ABT, as is well known by now, identified structural imbalance in the system caused by the television licensees based in these two largest metropolitan areas dominating the program purchasing and distribution arrangements. This in turn was seen as a function of their greater financial resources arising from the size of the market served by the licence. In its 1982 cable report, the ABT had previously identified the inequity in the operation of the two-station rule which treated all licences alike-regardless of the population served. Because the rule ignored variations in market size, a licence in Mount Isa or Broken Hill had the same weight as one in Sydney or Melbourne. The rule consequently took no account of the real financial strength of licensees or their power within the system.

My Department's 1985 report, Future Directions for Commercial Television, analysed these structural problems arising from the present ownership or control rules for commercial television and concluded that what was needed was rules which allowed for the expansion and growth of commercial television interests outside Sydney and Melbourne. The findings of the report pointed to the need for a review of the heart of the system-the two-station rule-with the object of achieving a more open-textured framework for regulation of ownership or control-one which takes full account of the economic realities of commercial television in the 1980's; includes a clear statement of policy intent; takes account of the size of commercial television markets; provides opportunities for growth for commercial television interests outside Sydney and Melbourne; avoids the detailed, costly and complex regulatory processes of the current scheme and takes account of the Government's general deregulatory stance; and is sufficiently flexible to accommodate the introduction of new technologies.

Subsequently, on 28 August 1985, I announced that my Department would undertake a full scale study of the ownership and control rules for commercial television. That report, `Ownership and Control of Commercial Television: Further Policy Directions', was tabled in Parliament on 22 August 1986. Its findings suggest that the current rules are no longer adequate and badly need updating; that despite the complex net of interrelated provisions there are fundamental flaws in the current system of ownership and control regulation. In particular, the report suggested that one approach to correcting the inequity of the two-station rule could be to allow persons to hold interests in any number of licences so long as the population served did not exceed a specified maximum limit, expressed as a percentage of the total Australian population.

Another major defect in the current regulation, as my Department's report identified, is that the Broadcasting Act 1942-the Act-contains no cross-media ownership rules. The Government addressed these two major defects last November. Announcing the new television ownership policy on 27 November 1986, I stated that under the new rules, the effect would be to limit the reach of any one television licensee, or substantial investment, to 75 per cent of the Australian population. Also it is the Government's intention that licensees will face competition in their markets. They do so at present in metropolitan markets and, under the Government's equalisation program, which remains this Government's policy, they will in regional markets also. The extension of the one-to-a-market rule to regional areas will occur. While that restriction formed part of the equalisation Bill, it is seen as an essential complementary provision to the new rules to be put in place by this Bill. The delay to the one-to-a-market rule caused by the rejection of the equalisation Bill in the other House will not be allowed to affect the eventual outcome of the application of these rules as a package.

The Government is particularly concerned to inhibit the perpetuation of existing monopolies. The existing regulatory regime for television is protectionist. It limits the provision of additional services, and it limits investment opportunities. The Government wishes to remove these protectionist, monopolistic bulwarks of a bygone era. If competition is to be enhanced, an essential part of the reform program is to limit cross-media ownership, that is, the common ownership of television-newspaper and television-radio interests within television services areas. Cross-media ownership has a long history in this country going back to the 1920s when newspaper interests decided to become involved in the new broadcasting industry. It is of concern because it can limit public access to diversity of opinion, information, news and commentary. It can inhibit competition, produce monopolies, and affect employment opportunities.

For these reasons, the Government has decided to regulate cross-ownership of the media within television markets in order to facilitate better access by the public to diverse sources of news and information. The present Bill accordingly prohibits the cross-ownership of commercial television and relevant newspapers or commercial television and commercial radio which has a monopoly anywhere in the related commercial television service area. Persons who hold prescribed interests in a relevant newspaper and/or a monopoly commercial radio licence will not be able to continue to hold a prescribed interest in the associated commercial television licence-subject to the grandfathering provisions already mentioned.

On 22 January 1987 I confirmed the Government's intention to introduce this Bill in these sittings and foreshadowed a later Bill to address the supporting provisions and administrative arrangements. The present Bill interweaves the new 75 per cent reach rule and the cross-media ownership rules into the existing structure of the Broadcasting Act 1942. There is a need to review the procedural and administrative provisions supporting the ownership and control rules in the Act with the objective of making them more efficient, effective and understandable. I have accordingly asked my Department to review these provisions of the Act with a view to having a further Bill introduced in the next sittings.

The 75 per cent Reach Rule

The Bill provides for an amendment to paragraph 92 (1) (a) of the Act to repeal the current limitation which prevents a person from holding a prescribed interest in more than two commercial television licences throughout Australia. This is known as the `two-station rule'. Clause 22 of the Bill replaces this rule with a provision which will allow persons to hold prescribed interests in any number of commercial television licences so long as the combined population of their service areas does not exceed 75 per cent of the Australian population. The Bill will, however, provide for one exception to the new 75 per cent reach rule. The two-station rule will be retained for persons holding prescribed interests in commercial television licences using multi-channel service-MCS-permits in approved markets which will be provided for in the reintroduced equalisation Bill. Such persons will be prevented from benefiting from the relaxed ownership rule. In essence, this is an incentive to encourage the move to aggregation on a competitive basis. Honourable members should note, however, that interests acquired by persons in MCS permit holders outside of approved markets will be grandfathered, that is exempted, from application of the two-station rule. This is to cover the situation where the area served by an MCS permit is outside an approved market and where a new approved market is subsequently specified which encompasses the service area of that MCS permit.

The proposed amendments will permit major adjustments in the structure of the commercial television industry. Although some television groups have the financial capacity to expand into program production activities, the existing structure has limited their ability to obtain outlets for their product. The 75 per cent reach rule will encourage the growth of new ownership groups able to make a substantial contribution to program making, acquisition and distribution. The consumer will benefit from the provision of more services and more sources of news and commentary.

A key reason for consolidating television licences into ownership groups with wide population reach is the economies of scale associated with buying programs for distribution to multiple outlets. Another is the ability to offer advertisers a mass market in a number of cities. In the longer term the proposed amendments should produce a more balanced commercial television industry less reliant on Sydney-Melbourne based interests for their programming. Television is a capital-intensive industry. A proliferation of small owners, cut off from expansion capital, inhibits the development of services. There are presently 15 capital city commercial television licences. There are 36 regional licences, each in a monopoly market. Entry into the commercial television industry is limited by the licensing process. Under the 75 per cent reach rule it is likely that some existing small owners will be brought out. The industry may eventually shake out into a smaller number, possibly five or six, stronger ownership groups able to operate competitive services.

Administration

Administration of the new national limit on television ownership requires provisions to take account of measurement of the population in:

(i) Australia as a whole;

(ii) the service area of each commercial television licence; and in

(iii) the area of overlap between service areas.

Accordingly, the Bill includes provisions to the effect that measurement of the Australian population will be determined on the basis of the most recently available census count as published by the Australian Statistician. The Minister for Communications is required to publish the figures in the Commonwealth of Australia Gazette. Similarly, the population figures and the relevant percentage population figures for the service areas of each commercial television licence will be gazetted as soon as practicable after publication by the Australian Statistician of the results of a census count. When a service area is varied or a new licence granted the population figures for the new area will be gazetted. The gazettals will include the percentage of population in any area of overlap for the purpose of administering the 75 per cent reach rule.

Service areas can, and do, overlap. The area of overlap can be readily identified by reference to the statistical collection districts contained within it. For the purpose of determining whether a person has breached the 75 per cent reach rule, the area of overlap will only be counted once. On the other hand, the whole of the population within the relevant service area will be taken into account in assessing the population reached by a person who has a prescribed interest in only one of those television licences.

Cross-media Ownership

Cross-media ownership rules are an integral part of this legislative package. The Government considers it critical that such rules be introduced in tandem with the 75 per cent reach rule in order to curb a major expansion in television by existing newspaper or radio interests which already have considerable influence over the formation of public opinion. Raising the national ownership limit without placing limits on cross-media ownership would produce an unacceptable level of media concentration in local television service areas. Cross-media ownership rules have therefore been introduced in order to:

(a) Support competition policy;

(b) discourage concentration of media ownership in local markets;

(c) enhance public access to a diversity of viewpoints, sources of news, information and commentary.

The cross-media ownership rules will provide safeguards for the future. The sources of news and information in each local market will not be able to become concentrated in the hands of one owner. As I foreshadowed on 27 November 1986, the Bill therefore includes provisions to amend the Broadcasting Act 1942 in order to prohibit a person holding a prescribed interest in a commercial television licence from also:

(a) Holding a prescribed interest in a relevant newspaper, 50 per cent of whose circulation is in the service area of the associated commercial television licence; or

(b) holding a prescribed interest in a commercial radio licence which has a monopoly anywhere in the service area of the television licence concerned.

Cross-ownership interests held on 27 November 1986 which would be in conflict with the new rules will be grandfathered. However, pre-existing interests will be exempted only as long as they are not increased. An increase in an existing interest after 27 November 1986 would cause the grandfathering to cease to apply. Consistent with previous amendments to the Act, an increase by way of a bonus share issue and the like would not invalidate the grandfathering as long as the issue was common to all other persons holding shares of that class.

`Monopoly' Commercial Radio

The Bill provides that the prohibition on the holding of cross television-radio interests will be triggered when there is an area of overlap between the service areas of the radio and television licences concerned and the service areas of other commercial radio licences do not, either alone or in combination, completely cover the area of overlap in question. Where a person has a prescribed interest in each of two or more commercial radio licences the service areas of which have a common overlap within the service area of the related television licence, this will be treated as a monopoly within the ambit of the cross-media rules.

Associated Newspapers

For the purpose of the limits on holding cross-media interests, the Australian Broadcasting Tribunal will be required to maintain an associated newspaper register of newspapers that are published in English; sold as newspapers; published four or more days per week; and have 50 per cent or more of their circulation in the service area of the associated commercial television licence. The register is to be updated quarterly and will be available for public inspection. The Bill also provides for the publication by the Tribunal in the Commonwealth of Australia Gazette of those newspapers which are to be taken as associated with the service areas of commercial television licences as at 27 November 1986. This will provide a certain basis for determining whether a person is grandfathered under the new cross-media rules. Honourable members will note that clause 18 (j) of the Bill provides that ostensibly `separate' newspapers will be treated as part of the same publication if it is reasonable to conclude that this is the case having regard to the ownership, editorial control and style of those newspapers.

Prescribed Interests in Newspapers

The Bill includes detailed provisions to take account of prescribed interests in newspapers. A person has a prescribed interest in a newspaper if he or she:

(a) is the publisher of the newspaper;

(b) is in a position to exercise control either directly or indirectly, of the newspaper; or

(c) where the newspaper is published by a company

(i) is in a position to exercise control of more than 15 per cent of votes that could be cast on a poll; or

(ii) is the holder of more than 15 per cent of the paid up capital of the company.

Other provisions define when a person is deemed to be in a position to control a newspaper. They follow the existing provisions in the Act in relation to commercial radio, adapted to cover the situation where a newspaper publisher may be a natural person, a member of a partnership, or a joint venturer.

Enforcement

For the purpose of enforcement of the new 75 per cent reach rule and the cross-media rules, contraventions of these new provisions will be treated in the same way as the Act treats contraventions of the existing two-station rule. Persons contravening the new ownership and control limits will have a minimum six months period of grace, or longer with Tribunal approval, to dispose of excess interests. I am confident that the Tribunal will take all reasonable measures to expedite its inquiries into the important media transactions which have already occurred since the date of my announcement on 27 November 1986.

A person holding a prescribed interest in a commercial television licence will be required to notify the Tribunal within 28 days of the acquisition of a prescribed interest in an associated newspaper. Persons who have acquired cross-media interests between the 27 November 1986 and commencement of this legislation will be deemed to have contravened the Act from the date of commencement.

Consequential Amendments to Licensing and Directorship Limits

The Bill also provides for consequential amendments to licence grant, renewal and transfer provisions in order to take account of the cross-media limits. Consequential amendments have been made to the directorship limits in section 92c to bring them into line with the 75 per cent reach rule. However, the present limit on directorships under 92c is retained for persons who are directors of companies in a position to control a licence utilising an MCS permit in an approved market. This is consistent with retention of the two-station rule for persons who hold interests in licences utilising MCS permits.

New section 92fad incorporates directorship limits for cross-media ownership. The Bill provides that a person who is a director of a company in a position to control a commercial television licence may also not be a director of a company in a position to control an associated newspaper or a `monopoly' commercial radio licence in the same television service area. Since some persons may have contravened the cross-media directorship limits since 27 November 1986, the Bill provides for a six months period of grace, starting from the commencement date of this legislation for persons to take the necessary action to cause these contraventions to cease.

I want to include, at this point, a clear warning to licensee companies or associated interests about the strength of the Government's resolve to enforce these new arrangements. I believe I made it abundantly clear as to the arrangements which the Government seeks to apply with effect from 27 November 1986 when I first announced the proposals. Over the last few months some clever corporate schemes have been devised which, it is suggested, could be used in an attempt to frustrate the intent of the ownership and control provisions in the Act. If there is any attempt to try to circumvent the clear intent of these new provisions, through an artificial avoidance scheme, the Government will consider the introduction of retrospective legislation.

Financial Impact

Administration of the new rules will entail some extra work load for both the Department of Communications and the Australian Broadcasting Tribunal. It will be necessary for the Department to arrange for gazettal notices of service area populations and percentage of population figures for all commercial television licences and variations to these notices from time to time as appropriate. The ABT will also need to maintain up to date data on associated newspapers for the purpose of administering the cross-media rules. It is also expected that the ABT will be involved in additional share transaction inquiries arising from the new rules.

Conclusion

This legislative package will provide the basis for the first real reform of the ownership or control rules in more than 20 years. It addresses the problems covered by concentration of ownership at both the national and local level; it provides for the emergence of competitive interests; it restructures the traditional relationship in the media industry and exposes them to market forces. This legislation is essential in removing the barriers to competition which have long deprived the public of additional services. I commend the Bill to the House. I present the explanatory memorandum.

Debate (on motion by Mr Beale) adjourned.