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Wednesday, 9 November 2016
Page: 2281


Senator O'NEILL (New South Wales) (11:32): The Broadcasting Legislation Licence Fee Bill (2016) proposes to amend the Television Licence Fees Act 1964 and the Radio Licence Fees Act 1964 to reduce the licence fees paid by commercial television and radio broadcasting licensees by 25 per cent. Labor supports the passage of this bill and considers the proposed reduction in licence fees to be a sensible step towards improving the international competitiveness of Australia's media sector and promoting the production of local content.

It is instructive to briefly revisit the history of broadcast licence fees to understand how things have changed and why the bill before parliament is important. As the Productivity Commission stated in the report of its inquiry into broadcasting in the year 2000, licence fees 'seek to recover some of the value inherent in commercial broadcasting licences from commercial broadcasters and provide a return to the public for their use of scarce radiofrequency spectrum'. Commercial television and commercial radio broadcasters are required to pay broadcasting licence fees, which are levied as a proportion of their gross earnings from broadcasting or televising, as the case may be, advertisements or other material or matter during the return period.

Under the Broadcasting Services Act 1992, a person or entity providing a commercial broadcasting service on radio or television must hold a commercial radio or television broadcasting licence. Under the Radio Licence Fees Act 1964 and the Television Licence Fees Act 1964, a licence fee is payable annually by the holder of a commercial radio broadcasting licence or a commercial television broadcasting licence respectively. The sector-specific licence fees levied on commercial broadcasters formed part of the 'social compact' that has been a central theme in how broadcasting policy and legislation has been approached in Australia. This compact provided broadcasters with privileged access to use 'the airwaves'—the radiofrequency spectrum—the highly valuable, finite and public asset that is used to transmit programming. It also afforded other market advantages that, in turn, provided commercial broadcasters with unique access to a mass market of television viewers and radio listeners across Australia.

Historically, this business model delivered strong revenue and profits in an environment that is less competitive than what we have today. In exchange for these privileges, broadcasters were required to pay licence fees and were also subject to regulation that aimed to promote a range of public interest objectives, such as: promoting a sense of Australian identity, character and cultural diversity; encouraging fair and accurate coverage of matters of public interest and appropriate coverage of matters of local significance; respecting community standards concerning program material; and protecting children from exposure to program material that may be harmful to them. In 2014-15, the Australian Communications Media Authority collected roughly $153.9 million in licence fees from the commercial television sector.

The rise of the internet as a channel to aggregate and distribute content has had a significant impact on the media landscape. The structure and economics of media are changing and broadcasters are facing increasing competition from new breeds of content providers who do not use the broadcasting spectrum or are not subject to the same level of regulation. For example, 'over-the-top' content providers such as Netflix, Google and Facebook do not pay tax in the same way as Australian media companies and they are not subject to detailed Australian media regulation, requiring investment in local content, talent or production staff.

As noted recently by Network Ten in their submission to the Senate's inquiry into this bill:

… Australian media companies are now competing directly against the foreign internet companies that are exempt from local media regulation, don't pay television licence fees, pay minimal corporate tax despite taking billions in advertising revenue in this market …

It was further noted by Network Ten in their comments to the Senate inquiry:

PwC forecasts that by 2020 internet advertising will dominate the advertising sector, reaching $10 billion, or approximately 50 per cent of the sector.

Unfortunately, local journalism and local production will not benefit from this growth, with an estimated 70 to 80 per cent of total Australian digital advertising revenue going overwhelmingly to two foreign technology companies, Google and Facebook …

The challenges facing the television sector were also noted by the Department of Communications. In a 2014 paper on media ownership and control, the department cites analysis by PricewaterhouseCoopers forecasting that the share of total advertising revenue for the commercial television sector will fall from 29 to 27 per cent between 2013 and 2017, while the internet share was forecast to rise from 27 to 37 per cent over the same period.

Commercial Radio Australia has also emphasised that the reduction in licence fees is a welcome relief to Australian radio broadcasters, who continue to carry regulatory obligations and costs well in excess of unregulated online competitors. The radio sector incurred roughly $24.83 million in licence fees across 273 licensees for the 2014-15 period. As noted by Commercial Radio Australia, it is important that the issue of the pricing of spectrum licences for commercial free-to-air radio broadcasters be considered 'in the broader context of heavy regulation, local and Australian music content requirements, advertising restrictions and mandatory tags required of radio broadcasters, as well as the key role of radio in emergency situations.'

When Labor was in government we recognised the convergence-driven challenges faced by commercial television broadcasters. The former Labor government announced a rebate of 33 per cent for 2010 and 50 per cent for 2011. The 50 per cent reduction was extended to the end of 2013 by regulation and confirmed in legislation at that time. In announcing the licence fee reductions in February 2010, then Minister Conroy conveyed that Labor was committed to reviewing the future role of licence fees in the face of significant change. He also articulated the importance of a strong and vibrant broadcasting sector in saying:

Broadcasters have a unique role in preserving our national culture and the commercial television sector invests hundreds of millions of dollars each year in the production of local content.

I think it is instructive at this point to revisit some of the comments made by Minister Conroy on 21 February 2010 on the Insiders program. He was asked by the host about how networks are struggling to meet their local content requirements. Then Minister Conroy said:

What we're seeing around the world is firstly that there is a long-term structural decline in commercial TV's business model. That's acknowledged around the world.

In the UK in response to that a couple of years ago, they slashed licence fees. In Canada licence fees are around 1 per cent. So Australian commercial TVs are still paying the highest in the world even after this cut.

What we're seeing is the advent of IPTV that's coming on-stream as part of the national broadband network, but it's arriving on existing networks today. Enormous competition is coming to the commercial TV sector.

At the same time, the Government has taken from them an enormous amount of spectrum which we we'll be auctioning in the next few years which will be of enormous benefit both in a straight-dollar return from the auction, but more importantly, the productivity-enhancing boost that will come from allowing this spectrum to be used far more efficiently than it has been used in the last few years.

I contend those comments stand true today. Labor remains committed to preserving a strong and vibrant broadcasting industry and recognises the positive effect a competitive sector has on local jobs and our sense of Australian identity. We also recognise the competitive pressures facing the sector and the need for meaningful and effective measures by government to ensure broadcasters can continue to invest in local production and content.

This brings me to the reasons we consider justify supporting this bill. In light of revenue declines and the regulatory asymmetries I have outlined, commercial broadcasters have argued that the licence fees they pay are excessive. International comparisons have shown that the licence fees imposed on Australian broadcasters are indeed higher than comparable jurisdictions overseas—for example, licence fees in Australia are currently 4.5 per cent of revenue compared to 0.41 per cent in the UK, 0.27 per cent in New Zealand and only 0.05 per cent in the US. This bill proposes to reduce the fee by a further 25 per cent, which would bring it down from 4.5 per cent of gross revenue to 3.375 per cent. This reduction has been estimated to reduce the financial burden on industry by about $163 million over the forward estimates.

I note that the continuing spectrum review, which now appears to be continuing into another year, has been a source of ongoing concern for the broadcasting sector. There remains a lack of certainty about how the revised spectrum legislation will operate in practice and the arrangements for broadcast spectrum moving forward, particularly on matters of pricing. I urge the government to ensure that the legislative package it brings before parliament has cohesion and provides certainty for stakeholders moving forward. There is of course an argument that current licence fees reflect the value of spectrum and other advantages enjoyed by commercial free-to-air broadcasters. I am sure that this debate will continue for some time to come. Nonetheless, for the reasons that I have outlined, the current schedule of licence fees should be adjusted in a manner that is both sensible and proportionate.

As you well know, Madam Deputy President, the job of parliament is to promote the public interest. Given the centrality of the broadcasting sector to our system of democracy any substantive decision impacting this sector will require careful consideration that is both informed by evidence and guided by the enduring policy objectives we aim to promote. Labor is satisfied the evidence supports the proposed measure whilst preserving, and indeed promoting, the policy objects central to the Broadcasting Services Act 1992 through the provision of support for a sector that invests in local Australian content and local Australian jobs. For these reasons Labor supports the passage of this bill.