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ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS
31/05/2000
Broadcasting Services Amendment (Digital Television and Datacasting) Bill 2000

CHAIR —I welcome representatives from the Federation of Australian Commercial Television Stations. Would you like to make an opening statement, Mr Branigan?

Mr Branigan —I would. The Federation of Australian Commercial Television Stations represents all commercial television stations in Australia. We appreciate the opportunity to talk to the committee about digital television. It is important to bear in mind what the legislation that is before the committee is intended to achieve. It is intended firstly to put the last regulatory pieces in place for digital television. It is hard to exaggerate what a difficult commercial challenge this will be for the television industry. We are effectively betting our future on our ability to persuade Australian viewers to make the digital transition with us. To be successful, we will need to be able to offer viewers a wide range of digital services. High definition will be very significant in promoting digital television, although we would not expect large numbers of high definition sets to be sold in the very early years. Program enhancements and datacasting will be essential other services to offer viewers in these very early years.

As we say in our submission, the regulatory regime involves a whole series of compromises, some of which will make our task in developing digital services more difficult than it would otherwise have been. It is not ideal, but we think it is workable. The second objective of the legislation is to define the parameters of datacasting which, of course, is a concept created in the 1998 legislation. Datacasting is a regulatory novelty. It is intended to be something other than broadcasting but using broadcast channels, something different from broadcasting, offering services that broadcasting does not and perhaps cannot offer. Over the last two years, a lot of wise men and women have debated how and where to draw this dividing line between broadcasting and datacasting. I do not think anyone seriously questions the need for this dividing line, given parliament's clear view that datacasting must not be broadcasting. It is by now pretty clear that those who are keen to make the new system work accept in broad terms the approach reflected in the bill. What is in contention is pretty much exactly where the lines are to be drawn.

Interestingly, most of the complaints in submissions to this inquiry relate to how the rules will limit the programs that datacasters can provide for their viewers. You would be forgiven for thinking that these submitters were talking about television services, not the new, different and non-television services which, they convinced the government and also the parliament, were just waiting to be created if only spectrum were made available. We could understand that potential datacasters may not yet want to reveal too much about their plans, but we imagine that committee members need something rather more concrete than the claim that the proposed rules will stop them from doing all the new, exciting things they have planned but cannot tell you about. We imagine you want them to tell you.

We do not claim the bill is perfect. Some of the drafting may need attention so that it reflects policy intentions more precisely. We have drawn attention to three areas where we think the wording falls down in that way. Others may well emerge in the course of the inquiry. It is important, we believe, that this legislation gets the balance of datacasting regulation right but, of course, this is not parliament's one and only chance to deal with this important matter. The bill assumes that parliament may well need to revisit how datacasting is regulated not too far down the track in providing for a broad review by 2003. By then, we will perhaps have a clearer idea of what these new and exciting services really are. I am happy to expand on these and any other points we have made in our submission or to answer as best I can any questions which committee members want to put. I have my colleagues here representing regional and city stations respectively. They will be prepared to answer the hard questions which I cannot answer.

Senator MARK BISHOP —We might lead off with the datacasting definition in the bill. Does your organisation believe the definition of datacasting in the bill will work in practice and will make it simple to distinguish between datacasting and broadcasting?

Mr Branigan —Yes, we think it will, Senator. We believe that in practice a lot of the services will find that it is very easy to operate with these rules, that they are not going to be continually bumping up against the restrictions that are laid down in the rules and that in practice there will be very little overhead. Once they are clear on what the rules say—and it is not a huge intellectual exercise to work out the parameters that are being drawn—then we think that people will be able to structure services that operate quite successfully, profitably and freely within the rules.

Senator MARK BISHOP —So you are comfortable with this category A, category B distinction for broadcasters and datacasters?

Mr Branigan —Yes. It is quite a smart way of distinguishing between program types that are not permitted at all and those that are permitted only within certain constraints. The strong point in favour of the category B rules is that they avoid what I think datacasters feared—namely, that they might be restricted to perhaps 10 minutes an hour or, at worst, 10 minutes a half hour of moving video. The rules as they are now set out in the legislation allow full motion video 24 hours a day, so long as it is structured in such a way that it respects the rules.

Senator MARK BISHOP —So that it respects the category A exclusions?

Mr Branigan —That is right. So that it respects the restrictions in category B and the prohibitions in category A.

Senator MARK BISHOP —One area that has been the subject of considerable criticism in a range of the submissions is the area of children's TV—whether its focus is education, entertainment or some combination of the two, what it is designed to do or what its purpose is. When you look at the category A and category B classifications, the decision of government appears to be, where there is disagreement or that grey area, to flick it off to the ABA to be either the expressed or implied arbiter of what is educational and what is not. My first question is: are you supportive of giving that power to the ABA to become, essentially, the arbiter of what is a particular type of program and hence can or cannot be broadcast or datacast?

Mr Branigan —I think there has to be an arbiter, and it is certainly preferable that the ABA is the arbiter rather than the courts. The ABA has a lot of experience in drawing boundary lines. It has been doing that consistently in relation to narrowcasting, as distinct from broadcasting, to take an obvious example, for all of the last decade. From a fairly shaky start, it has built a pretty respectable track record in consistent and clear decision making in an area that is probably as murky as this is likely to be. I do not say that in a disparaging sense. It is a similar exercise in trying to draw an imaginary, but necessarily regulatory, boundary line, so I think the ABA is well placed to do this. I would make the general point, though, that ideally the categories should be structured in such a way that people do not have to make continual recourse to the ABA. We read with some sympathy the ABC's concerns about children's broadcasting in particular. I think that reflects the difficulty of fitting the ABC's suite of programming into the datacasting rules. Again, we have some sympathy for their view that provision should have been made for multichannelling in their case and in SBS's case.

Senator MARK BISHOP —I will come back to the ABC and whether or not they should be permitted to multichannel. At this stage I want to explore in some depth this issue of children's programs and the difference between informing and educating children, both in the two- to five-year-old group and probably those in the age group of five to 10. How do datacasters inform and educate without lightly entertaining their viewers, particularly children from two to five years old? Unless you grab their attention in a way that is attractive to them, you are not going to be able to educate them. The advice that I receive is that, by and large, entertainment is both necessary and critical to cater to that market. Do you have a comment on that?

Mr Branigan —My first response would be that I suspect this is going to be a non-issue in practice, that most datacasting services initially are likely to end up being aimed at and received on PCs, not on television screens, and that it is most unlikely that datacasters will be providing either education or entertainment for very young children. To that extent, I do not think it is as significant an issue as one or two of the datacasters have been saying.

Senator MARK BISHOP —Obviously datacasters have an interest to pursue. It was not just them; it was the ABC, the Consumers Association—a range of community organisations.

Mr Branigan —I accept the ABC's problems. As I say, I think the desirable solution there would probably be to carve out some special multichannelling rules for the ABC which would allow it to do children's programming pretty much as it wishes.

Senator MARK BISHOP —As it currently wishes.

Mr Branigan —As it currently wishes. On the specific point of children's programming and the datacasting rules, that is one area which is likely to come down to ABA decision. I think the ABA would take a sensible decision within the context of the rules. I do not believe that the ABA's decision would necessarily rule out preschool children's programming which had an entertaining component, so long as it was very clear from the way it was presented and promoted that it was primarily of an improving educational nature.

Senator MARK BISHOP —That improving educational nature brings us to the critical area, doesn't it? I had a look at the ninemsn TV Guide for this week and there are a number of children's shows: Hi-5, Cheez TV, Totally Wild. Just to read you a couple of definitions, for Hi-5 it states:

This exciting show for children aged 2-8 provides fun, entertainment and education, all in an exciting and colourful way. Using music, language, visual and mathematic concepts ...

Is that education or entertainment?

Mr Branigan —It has an educational core in an entertaining husk. There is no doubt about that. It is a typical commercial television program aimed at a youngish audience. It is a television program. It would be surprising to see a program like that, to put it mildly, on a datacasting channel, given the way that datacasting has been envisaged.

Senator MARK BISHOP —So even though it has an educational core in a highly entertaining fashion for two- to eight-year-olds, you would be of the view that it is a traditional TV program and should be reserved under category A to broadcasters?

Mr Branigan —I cannot see how that kind of program could satisfy the definition in the bill, and rightly so.

Senator MARK BISHOP —Would you make the same comments about another TV show, Totally Wild? I quote:

In its eighth successful season in 1999, "Totally Wild" answers all of the questions, which inquisitive young-minds have about animals, nature and the world they live in ... "Totally Wild" deals regularly with scientists from universities and museums throughout the country, in addition to CSIRO agencies.

So, again, it is heavily reliant on a range of educational institutions to disseminate—

Mr Branigan —That is an interesting instance, Senator. I know that program fairly well. It is my wife's second favourite program. That description you have given could cover a wide range of programs.

Senator MARK BISHOP —A wide range of children's programs.

Mr Branigan —As it happens, that is, again, clearly a commercial television type children's program with some very solid information conveyed but in a very entertaining fashion. I think it would look somewhat out of place on the ABC, and that is not to decry the solidity of the information it conveys. The whole approach is very much commercial television.

Senator MARK BISHOP —But you are of the view that the programs I have identified are clearly traditional broadcasting and are reserved under category A?

Mr Branigan —Indeed, and that is because of the way they have been constructed. The emphasis is very much on entertainment—on obvious appeal to the audience in question. They are not appealing purely on an intellectual level or appealing to a very narrow desire for knowledge.

Senator MARK BISHOP —How are you going to educate youngsters aged two to eight years old without making it vibrant, attractive and moving—something that catches and retains their attention? Reserving educational programs for datacasters, if you say they are essentially dull but worthy—not entertaining—seems by definition to lead to the conclusion that the datacasters are not going to be in that area of children's education.

Mr Branigan —I think it will be difficult for them to construct programs for young children, assuming that they want to do that, in a way that satisfies the rules. I think the problems are far less for audiences of educational programs of any other age group.

Senator MARK BISHOP —Does your organisation believe that the provisions in the bill relating to enhanced services are different in substance from those announced by Senator Alston on 21 December last year?

Mr Branigan —I do not think they are in substance. They spell out some of the things that were either implicit or slightly uncertain in the form of words that we have been operating on since 1998. When I say `operating on', the inquiry had been conducted, on which there had been quite a lot of public and not so public debate. I think we had assumed that, in terms of that definition, we would be able to do quite a lot of accompanying video, provided that it was quite closely linked to the main program and the subject matter of the main program. It was not clear to what extent a station would also be able to run a simultaneous event of the same kind from the same venue. That, incidentally, is something that happens not infrequently at the moment. With, say, coverage from Wimbledon, you will find they will break away from the game they are covering to show a few minutes of another game. This will allow you to do that on a separate channel. So it is not a matter of interspersing them, and it is not wholly linear as it is at the moment.

We had assumed that that would be possible to some degree. We were not at all clear where that scope would end. This I think makes it a little clearer. I am not sure that it really extends the scope of it to any significant degree. Certainly we are not looking at large numbers of hours of programming each year—I would be surprised if it amounted to more than a few score hours each year, which is not huge—and does not really seem to justify the `we'll all be rooned' cries from pay TV.

Senator MARK BISHOP —Senator Alston's media release from 21 December referred to overlaps specifically with news bulletins—if there was a cricket match or tennis match going beyond 6 p.m. or 7 o'clock on the ABC there could be multichannelling or enhanced programming of the outstanding minutes to finish the respective match. The bill now refers to any programming, not just news bulletins. So it does strike me as being a qualitative difference in enhanced programming. Enhanced programming was limited to extensions relating to news bulletins; it is now related to everything that is broadcast.

Mr Branigan —I make the point that the circumstances are pretty clearly defined. In circumstances where the broadcaster does not have any control over the timing of the sporting event, where it does run over for circumstances entirely beyond the broadcaster's control, I think there is a recognition that this typically happens in two times of the day. The first is when an afternoon event runs over and that means that the early evening high appeal programming, which is typically news, has to be displaced or the broadcaster has to cut away from the sporting coverage. The other time when it happens is in the morning, particularly when you are getting live sporting coverage from overseas. This typically happens with golf. You may get a play-off, which means that instead of finishing at 6 a.m. the golf may go on until 8 a.m. or 9 a.m. You have the similar sort of problem with the morning programs, whether it is the Today type of program or children's programming. Again, the issue is: do you force this decision on the broadcaster of one or the other or do you allow this very limited multichannelling for the duration of the event, which is unlikely to be more than anything from a few minutes or, in the case of the golf, perhaps an hour or so?

Senator MARK BISHOP —So you do not really concede that the new definition in the bill of enhanced programming enables stations to multichannel to a significantly greater extent than was agreed or understood last December?

Mr Branigan —No, I think this is just dealing with some awkward issues that come up when you begin to think about the actual programming and operation of digital services. Presumably it is based on the assumption that you have the capacity to avoid annoying both sets of audience—the ones who want the sport and the ones who want anything but the sport—for these brief overlap periods. So why not allow it to be used?

Senator MARK BISHOP —Going back to this issue of ABC and SBS multichannelling, do all the members of your organisation consider themselves to be in direct competition with the national broadcasters?

Mr Branigan —There is no doubt we are in competition for audience. The commercial and non-commercial audience ebbs and flows over the years. If you go back to the early 1990s, I think the ABC-SBS share was at a historic low, under 15 per cent. Now it has risen somewhat, and it is probably 17 or 18 per cent. So the commercial television share of free-to-air viewing is down to about 80 per cent, 82 per cent or 83 per cent. So in a very real sense we are competing directly for audience. We are obviously competing, albeit at the margin, with SBS for advertising too. They now have about one per cent of entire free-to-air advertising revenue. It is perhaps not as direct and ferocious as the competition between the commercial networks, but it is very definitely competition.

Senator MARK BISHOP —Is there any reason why FACTS would oppose permitting the two national broadcasters the ability to multichannel in fulfilling their respective charters?

Mr Branigan —I think the key words are `in fulfilling their respective charters'. I think we are on record in the course of the reviews last year as expressing a view that we did not oppose multichannelling by the ABC and SBS provided that it was very definitely within their charters and provided that the focus was very much on complementary programming, rather than quasi commercial programming or programming that is likely to compete in a serious sense with commercial television. We recognise that the ABC and SBS do not have the capacity on a single channel to provide a lot of the complementary programming that they already have access to. The SBS foreign language news material is an excellent case in point. Perhaps the ABC's educational programming and some of its children's programming and more localised programming is another series of good examples where we would have no serious problems with that at all, even recognising that it may, at the margin, nibble at our viewing share.

Senator MARK BISHOP —In the bill there is provision for a number of reviews. My understanding is that those full reviews are to be carried out by the department at specific times. Would your organisation be in favour of those reviews being statutory reviews open to the public and answerable to the parliament, or would you have a view that they should be retained in their current form?

Mr Branigan —They are important reviews. We think all of them are very important in this process that is stretching ahead of us, not least because none of us have any absolute confidence that we know how the process is likely to go. Because they are important reviews, I guess we would see them as reviews that a wide range of people would want to have their say in and in all likelihood as reviews the parliament would want to look at. So I guess the short answer is no, we are quite relaxed as to whether they are ministerial reviews or statutory reviews.

Senator MARK BISHOP —Would you favour statutory reviews or departmental reviews?

Mr Branigan —Frankly, we have not discussed it to any degree. We certainly would not oppose statutory reviews.

Senator MARK BISHOP —In relation to the issue of streaming video and audio and whether this constitutes a broadcasting service or a datacasting service, the minister indicated in his second reading speech that the matter would be referred to the ABA for their investigation. Would you agree that it is desirable to clarify this particular issue with some of degree of urgency—that is, prior to the commencement of digital broadcasting and datacasting?

Mr Branigan —Very much so.

Senator MARK BISHOP —So have it resolved very quickly?

Mr Branigan —Yes.

Senator MARK BISHOP —Does FACTS have an opinion on the timing of the review of the HDTV arrangements? Would you consider it advisable that the review take place prior to the commencement of the mandated 20 hours of HDTV transmission so the take-up rates of the HDTV technology can be considered prior to the arrangements commencing?

Mr Branigan —It is a difficult question to answer because of the uncertainty as to how quickly a good range of equipment will be available in the market. We acknowledge that there is a lot of uncertainty about how much HDTV programming will be available a year, two years or three years from now. That to a considerable degree is because we do not know how the American market is going. It is quite likely, I guess, that three years from now most American prime time programming will be as a matter of course produced in HDTV format and available to the extent that we use it here as full native HDTV programming. It is quite likely that there will be a reasonable amount of HDTV programming being produced in this country within three or four years. But that can only be a guess at this stage. I suppose the range of possibilities is from everyone battling to find enough HDTV programming to meet the quota to everyone meeting it on their ear.

We find it very hard to know at what point it will be that we will have a clear view of how the market is trending in terms of set availability, set purchases and program availability, so it is difficult, as a result of all this uncertainty, to know what the right time for the review is. We are happy to have a review whenever parliament decides that it is necessary but, desirably, there should be a couple of years to really test the market, both in terms of equipment and programming availability.

Senator MARK BISHOP —In relation to the review of regulatory and revenue arrangements for datacasting licences, would you consider it appropriate that this review be completed prior to the end of the moratorium on commercial TV broadcasting in 2007? Do you want certainty?

Mr Branigan —That is the intention at the moment. I suppose everyone would like to know, at a reasonably early stage, what the arrangements are that will follow the end of the regulatory period. At the moment you can really only draw inferences because the legislation does not really give you much assistance in knowing just what will happen after 31 December 2006, both as regards possible new commercial services and the status of existing datacasting services. It is all a bit fuzzy, and fuzzy in a way that is not going to be helpful either to broadcasters or, I would imagine, datacasters.

Senator MARK BISHOP —There are two issues there. One is the regulatory issue and the second is the revenue arrangements. Come the end of 2007, as one understands the bill, datacasters will have an allocation of spectrum, a licence to transmit and, unless there are changes, they will become de jure broadcasters. Is it not better that the nature of regulation for those operators be reviewed well prior to 2007? Secondly, as we all understand, there is considerable value in the licences and the spectrum and hence return on this asset on loan from the Commonwealth. Again, is it not better that these revenue arrangements for the datacasting licences be resolved well prior to the expiry of 2007?

Mr Branigan —We would agree with that.

Senator MARK BISHOP —On the digitisation costs, all or most of the commercial TV broadcasters recently aggregated their transmissions by pooling ownership of towers into a single company, listed as TX. What are the consequences of this aggregation? What will be the result in reduced costs for digital conversion of commercial stations?

Mr Branigan —I am probably not best placed to answer that; maybe some of my colleagues can chip in. I would have thought that it was conceived as a way of using these resources most efficiently. It reflects the fact that in recent years commercial broadcasters have begun using each other's facilities very much to provide standby transmitters in the event that something goes wrong with their primary transmitters. Everyone has been working very closely together with secondary transmitters, translators, for many years. In fact, there have been joint facilities companies installing these around capital cities and more generally. And I think it is a recognition that there are benefits, even if not huge cost savings, to everyone in pooling their resources in an era when everyone is going to have to work even more closely together.

Senator MARK BISHOP —I understand the argument on operational convenience and pooling of the assets for the primary transmitter or the secondary transmitter but three national networks—having established, run, maintained and paid for their own broadcast systems—now pooled into one must have some impact on cost reduction. Wasn't cost reduction one of the drivers of aggregating the assets into the one company?

Mr Branigan —We are looking at established networks, so it is not as though each of them had huge operating staffs or anything. When we talk about a `national' transmission network, we are talking about networks in the five capital cities. We are probably looking at quite trivial numbers of staff. It is not like the old PMG. We are probably looking at a dozen or so people per network—maybe a little more, but certainly not scores or hundreds. So there may be some scope for saving a few bodies. We are looking at a situation over the next few years where these transmitters are going to become cost centres as a lot more prospective broadcasters come into the business in the form of data customers, who certainly will not be setting up their own transmitters. They will be looking to use existing transmitters. It may be that there is an element of looking forward to a rather different era from the one we have been used to over the past 45 years.

Senator MARK BISHOP —Will there be some impact on the reduced cost for digital conversion?

Mr Branigan —Transmission costs have never been a huge factor in metropolitan markets. Transmission costs are a major factor once you get to John Rushton's market, to the aggregated markets covering vast areas and having lots of transmitters and huge microwave link chains. But, typically in a capital city, you have one main transmitter and anything up to perhaps a dozen very small translators. These small translators are typically operated by a shared facilities company anyhow, so you are really looking only at the cost of operating and maintaining the main transmitters. Without being privy to the cost details, I would be surprised if you are looking at more than a few million here or there, frankly. But that is enough to justify something like this, I am sure. I would be surprised if you were looking at tens of millions, though.

Senator BOURNE —Back to the 2003 review, there is a view around that it creates a bit of a vicious circle. If there is a review of whether we need HD at all in 2003, there will not be an awful lot of the people out there buying sets, just in case they do not need them after 2003—especially at such a high price. As for the broadcasters themselves, it is not a very good commercial decision to buy an awful lot of HD production equipment if you do not need it after 2003, and that could in itself create the environment where it all falls down anyway. Do you have a view on that?

Mr Branigan —There may be a misunderstanding here. The review anticipates the possibility that the quota may no longer be necessary after 2003, but that is not to say that HDTV would not be around after 2003. As I said in the opening remarks, we see it as an important element of digital television and in all likelihood growing in importance as the cost of receivers comes down and as the community becomes more familiar with the advantages and the benefits of much higher resolution television receivers. As I indicated a little while ago, the inquiry might well find that everyone is meeting those 20 hours a week with ease and perhaps providing two or three times that. If that is the case then the review might decide, `The quota is not doing any harm. We'll leave if there,' or, `The quota is no longer necessary. There is a vigorous market in HDTV sets and a healthy supply of HDTV programming, so we'll remove the quota.' On the other hand, it is possible that some or all networks could be struggling to meet those 20 hours by then. That is much less likely, but it is a possibility—in which case, I would have thought, abandoning the quota is probably the least likely option. It would be much more likely that it would be set at a level that was sustainable.

Senator BOURNE —Do you think abandoning HDTV altogether would also be a very unlikely option?

Mr Branigan —I cannot see the industry abandoning HDTV. It is far too important, certainly long term, for us to abandon it. We have always recognised that it is going to be a slow build up. It is really a matter of a number of stars coming into alignment, if you like. There has to be a very good range of HDTV programming and a very strong trend downwards in set prices for lots of people to make the commitment to HDTV.

Senator BOURNE —It would probably take a lot longer than to 2003 for that to happen.

Mr Branigan —You might be seeing the beginning of that, but I would have thought five years was a much more likely period in which to see that beginning to happen.

Senator BOURNE —Mr Branigan, can you assure the committee that your members are taking HDTV very seriously, that they want to broadcast in HD and that they will be trying to go for the full quotas as fast as possible?

Mr Branigan —Absolutely. If the digital simulcast requirement had not been announced last year and incorporated in this legislation, you would have found that probably at least one and possibly two networks would have begun digital television with probably many hours each day of HD transmission. Very little of it initially would have been in the form of actual native HD programming; most of it would have been up-converted standard definition. They are less likely to do that now because the digital simulcast requirement makes it difficult in the first place to squeeze both program streams into the one channel. Secondly, it would be much more costly, at least in terms of opportunities lost, because you cannot do anything else while you are doing that digital simulcast. Even so, it is quite likely that, when stations do not have another valuable use for their spectrum, they may still up-convert quite a bit of material. There may well be quite a lot of hours of almost high definition programming available from the beginning of next year.

Senator BOURNE —Would you expect there to be a lot of Australian content available?

Mr Branigan —Not initially. That is for a number of reasons, the most significant of which is that there are no real HD capable production facilities at the moment. Naturally, the networks have been focusing on the first order of business, which is getting the transmission structure up and operating. Production facilities have always been seen as the second stage. I would not expect any serious progress on that front until well into next year.

Senator BOURNE —If there were to be an Australian content provision in the legislation, when do you think it would be feasible for that to start?

Mr Branigan —It is likely that commercial television stations will want to present their most popular programming in high definition as early as they sensibly can. At least five out of the top 10 programs on commercial television in any week are local programs; often it is seven or eight. Some of those programs may be very difficult to produce in high definition television for some little time. Sport is a good example of that, where the technology is really not there yet.

American broadcasters, who have been carrying football and one or two other intermittent events in HDTV this last year, have really been almost inventing the future. They have had to create quite a lot of equipment because commercially there is simply not the huge range of equipment that is needed for top flight live coverage of a major sporting event. I think that is realistically a couple of years down the track. It may be that we find that some drama production is possible a little before that. I am sure it is an area that everyone is looking at very carefully.

Senator BOURNE —Even with up-conversion from film, as we heard this morning, you would still need the telecine machines.

Mr Branigan —Yes, that is right. It is not cheap. John Rushton, I am sure—wearing his production house hat—would be able to tell you more about that. It is often said—and unfortunately it is said glibly—that most American series are actually made on high quality film, so they are HDTV ready. That is not so; they are in fact post-produced on videotape. They are not high definition quality. Post-producing in HDTV is still very expensive. I think the Americans have found that it adds something like $US20,000 or $US30,000 per hour. That is quite a significant hit on an average US production cost of about $US1[half ] million an hour. It is a huge hit on an average production cost for a drama here of perhaps $150,000 or $200,000 an hour. You would be adding perhaps 25 per cent, 30 per cent or maybe more per hour of production. That is something that stations will obviously be approaching with due consideration.

Senator BOURNE —I am sure they will. I will just ask my devil's advocate question. If the review of HD decided that HD was not necessary at all, do you think that the free-to-airs should still maintain their seven megahertz? If you do, why do you think that should be the case?

Mr Branigan —I think the review is into the quota, is it not, not into HDTV as such?

Senator BOURNE —I have just been looking it up and I cannot find it. I had the impression that it was into whether it should exist at all.

Mr Branigan —My understanding is that the review is into the quota. We have strong market reasons for wanting to do HDTV. You will certainly find that some networks place more emphasis on HDTV than others, but I would be most surprised if, in the absence of a quota, everyone did not continue to do HD and some networks did not continue to aggressively increase the amount of HDTV programming they provide.

Senator BOURNE —If I find it I will let you know.

Senator CALVERT —I have one question and it follows on from what Senator Bourne was saying. You would have heard the evidence from Mr Encel this morning that so far there are only 5,000 HDTV sets in the US and that, if you extrapolate that out to Australia, the likelihood would be about 170. So one has to ask the question: are they the sorts of figures that would make commercial broadcasters put in many hundreds of thousands or millions of dollars to broadcast HDTV?

Mr Branigan —I think it is important to get the statistics correct. I think Mr Encel is talking about the number of integrated high definition television sets that have been sold. Certainly that is fewer than 15,000 over the last 15 months. Several hundred thousand higher resolution or HDTV displays have been sold. Without wanting to get too much into the detail, that means a set of a lot higher quality than an existing television set and one that can capture a large part of the increased resolution high definition television broadcast. Most of those sets, interestingly enough, have not been sold with HDTV tuners, so they are clearly not being used for HDTV at the moment. They are being used for other purposes, and everyone is assuming it is for watching DVDs—digital video disks.

There is a huge number of problems that the American television broadcasters are facing with digital television, many of them unique to that country and which will not be reproduced here. Broadly speaking, they have chosen an inferior technical standard, which is creating heaps of problems in that country. We were wise enough to choose the other standard—the European standard—which should provide a much higher quality, more robust picture to the average viewer. I think a large part of the explanation for the failure of HDTV to date in the US is unique to that country. We certainly do not believe that there will be mass sales of HDTV receivers early on here. We think HDTV will be very important early on to promote digital television generally. We think, without HDTV, we would have a huge uphill battle to get anyone into an electrical goods store. HDTV is going to be the drawcard. It will be what people see in clubs and pubs. It is going to be what people go into the electrical goods store to look at. Whether they buy it or not is another matter; they may walk out with a cheaper set. Beyond that, we certainly see it as pretty much being, if not the centrepiece, one of the centrepieces of digital television. We realise that, for that to work, we have to provide a lot of very appealing HDTV programming. That is another area where American broadcasters have fallen down.

Senator CALVERT —So in your opinion the time has arrived—we should not be following the world but leading the world?

Mr Branigan —We think that it is the right time to begin what we see as a long march to establish a very substantial HDTV population in this country. We do not pretend that it is going to be quick and that it is going to be easy, but we are satisfied that it will happen to a very significant degree over the next decade.

Senator CALVERT —Would you care to comment on the fact that the Japanese do not look like starting anything like this until 2003?

Mr Branigan —That is largely a reflection of the fact that they leapt into HDTV too early. They adopted an analog system in the late 1980s. They invested huge amounts of money and huge amounts of prestige in that satellite delivered system. They have been trying to work out for the last five years, since it became clear that there was no future for analog TV, how to back out gracefully from that and move forward into digital television. The main effect of that delicate manoeuvre has been that they are moving rather later than other major countries.

CHAIR —Mr Branigan, I would like to ask you a question about sound systems. In your submission you say that you prefer the Dolby system over the MPEG, which is what the government tends to be favouring. Do you mean that, as a total statement, you would prefer Dolby? Or would you allow a preference? What are your reasons in general for supporting the Dolby system?

Mr Branigan —When we embarked on planning for digital television, we looked very carefully at technical standards for both video and the audio. Our main concern was to select a system which had very little in the way of legacy issues—in other words, technology which would not last the distance or which would quite quickly be outdated—and, on the other hand, as far as possible, building into the system all the technical and creative headroom that we would need for the next 20 years or so, assuming we are still going to be using this system 20 years down the track. The problem with MPEG audio, to the extent it is a problem, is that it is reasonably limited in its implementation. It does not go beyond stereo. It cannot provide, or at least as it is being implemented, the surround sound that Dolby is able to provide. It is not a technical limitation as such; it is just that it has quite a limited market. That limited market is largely restricted to what I might loosely call nineties technology. It is interesting, for instance, that, in the few market situations where MPEG audio has come up against Dolby AC3, Dolby AC3 has won overwhelmingly. I guess the key example there is DVDs, which started off in Europe as MPEG only and ended up MPEG plus AC3 and, in practice, are AC3 only throughout the world now. That is because it provides the range of options that MPEG sound does not.

We favoured it not for any other reason than that it was the most flexible and had already been proved in the marketplace. Our concern is that, if we have to carry MPEG sound with SD, we will be carrying two audio streams and, since it is our preference to carry AC3 with both HDTV and SDTV, that could end up being quite costly in terms of data capacity if we have to carry both sets of audio with different program streams.

CHAIR —Thank you. I have one short question to Mr Rushton. You may have been here earlier and heard the discussion about captioning.

Mr Rushton —No, I was not.

CHAIR —I noticed in your submission that you said quite a bit about the requirements for captioning and expressed a view that you would like to be able to use electronic newsroom captioning, as it is used in the United States, for country regional news services. Would you like to expand on that a little and tell us about the difficulties a regional television service like yours might have with undertaking the captioning requirements of the act?

Mr Rushton —The requirement to caption totally a news broadcast requires a court type stenocaptioner to take down the spoken word that can then be put into captioning. Our investigations have shown that this skill is extremely limited in regional areas. We produce news in some major cities such as Canberra and Wollongong, but we also provide local news services in the likes of Griffith, Mildura, Loxton, Mount Gambier, Launceston and Cairns. That skill is not available and, in the way that we put our news to air, there is not the time, forgetting the cost, or the talent available to do it. The electronic newsroom is the latest equipment that is now available and enables all scripted material to be automatically closed captioned.

We are in the throes of installing that throughout our newsrooms right now. We have just recently had a trip to the US to study this. In the equivalent of our regional markets in the States, they accept this as captioning, understanding that at this stage it is just not practical for every small regional station to be able to fully caption a news or non-scripted program. That is why we believe that should be acceptable in regional news bulletins. If and when the technology were to arise that it could be done automatically, so long as it was not cost prohibitive these small newsrooms would then be able to install that equipment and full captioning would follow.

CHAIR —What you would caption in effect is the typed sections of the news that the newsreaders read. What would not be captioned might be descriptions of a scene or a dialogue from a person who is being interviewed, perhaps?

Mr Rushton —If somebody is at a road accident or a fire, or a journalist is interviewing the fire captain, that is non-scripted material and so we would not be able to caption that. The introductions to each story, which gives an outline of what the story is about, would be captioned. Any voiceovers that are done in the studio, where a film comes in from a source where there was not a journalist present, is scripted in the studio and that would be captioned.

CHAIR —Thank you.

Senator MARK BISHOP —Mr Branigan, I want to briefly return to that issue raised by Senator Calvert. When I listened to Mr Encel this morning—and I had another look at his submission over lunch—I did not understand him to be talking about integrated HDTV systems. In fact, we had two examples where we referred to that `hole in the wall' and the TV over there—the hole in the wall being a size and the TV being the type of product that a consumer might purchase to receive the HDTV. That is my understanding of what Mr Encel was talking about, not some fancy integrated system.

The second point I would make is that there have been very few highly expensive HDTV sets sold in the United States—15,000 or 20,000. The equivalent in Australia is 170, so there appears to be limited demand. The hundreds of thousands that are sold, in my understanding, are SDTV sets, which are going to be one of the triplecast mediums here. In that context the government intends to mandate HDTV. It is going to take five-sevenths of the of the spectrum allocation and lock out others who might want to enter the market. But the price of the TV set, according to all objective advice we have received, is somewhere in the order of $15,000 to $20,000. If I spent $15,000 or $20,000 on this TV set to receive high definition TV, Mr Encel has advised me that, even at this distance from the TV set, the quality of the picture will be no different from traditional analog. With the allocation of spectrum being the driver, why would any consumer want to pay $15,000 or $20,000 for the equivalent of that, when what he will view for the foreseeable future is not significantly different?

Mr Branigan —The short answer is that you would not.

Senator MARK BISHOP —Why is it being mandated?

Mr Branigan —I think Mr Encel is saucing the pudding a little there. What do we have to go on in terms of what HDTV equipment will retail for in this country? Very little. The only manufacturer that I can recall providing an estimate of what its equipment would cost is Sony, which told the government late last night that its first HDTV offering here would cost, I think, $8,000. As you know, Sony is not traditionally a bottom of the market operator. I do not know that you can assume from that that TEAC, Goldstar or whoever will be offering equipment at half that price. I honestly do not know. The operations of the retail market for television sets and electronic equipment generally are very mysterious.

The fact of the matter is that a major manufacturer like Sony thinks that it can bring a reasonably sized HDTV set into this country and sell it at a profit for that sort of money. I would imagine that other manufacturers, certainly in a little time, will be producing it for a lot less than that. We have talked to a number of Chinese manufacturers who are talking about something like half that price. Whether that turns out to be achievable or not is anyone's guess.

Going back to an earlier point in your question about the United States: if you inferred from what Mr Encel was saying that large numbers of standard definition digital sets are being sold in the United States, that is quite a wrong inference to draw. As far as I am aware, none are being sold at all. The emphasis has been entirely on sets that are capable of receiving everything from high definition to standard definition, and that includes something like 15 formats.

Terrestrial digital television has not taken off in the United States. I think it will, but it certainly has not in the last 18 months. Satellite delivered digital television is doing great guns. It now has something like 11 million subscribers in the United States. Almost without exception, those subscribers are using decoders to feed the signal into a standard analog set. They are providing high definition television. It is the most consistent amount of programming that most American people who want to watch high definition have access to. Home Box Office is providing something like 16 hours a day of high definition programming via the major satellite provider Echo Star. Terrestrial digital television generally is doing appallingly in the United States, but it may well turn round.

There are certainly more than a few glimmers of hope for HDTV. We are, I guess, satisfied that if we avoid some of the egregious errors that the Americans have made and if we accompany HDTV with other digital services, we will develop a worthwhile market in the initial years and that will become a mass market after a few years.

Senator MARK BISHOP —I suppose you might be right. Even if the figure of $8,000 from Sony is out by a factor of 50 per cent and the figure is $4,000, or $3,000, it strikes me as being a huge amount to pay for a TV set that is going to have, on occasion, close-up a significantly clearer picture, when all the consumer data shows that most people want to pay somewhere between $200 and $500 for a TV set. I would probably dispute what you are saying there. Secondly, you say that there might be a bit of product differentiation and that through the HDTV we will get other services. The other services are datacasting and interactive and access to the Internet and text and all of those sorts of things. But we can get all of those services through standard definition TV as well. Again, I ask: what is so different about the HDTV that encourages me to pay $2,000—which I have never paid for a TV in my life—to get a picture that will not be greatly different to analog?

Mr Branigan — I guess it goes back to the fact that HDTV is not being mandated on anyone except broadcasters. We are the only people who have to do HDTV. You will not have to buy HDTV or look at HDTV. You will have a choice of watching everything through your existing analog set, buying a standard definition set or buying a high definition set.

Senator HUTCHINS —But the spectrum is limited, isn't it?

Mr Branigan —Indeed, but the point I would make is that we are looking at not just what is going to happen in the next two, five or 10 years. We are looking at the sorts of services that we hope to be offering and which I am sure viewers will want us to be offering 10 and 15 years down the track. I have no doubt at all that by then high definition television will not be an expensive oddity. It will be pretty much the norm, whether it is coming from cable, from satellite or from over the air service providers. It is just a matter of time until all the equipment costs come down and all reasonable quality programming, as a matter of course, is produced in HDTV format. When it happens, I think you will notice a sea change in viewers' attitudes towards high definition television.

Senator MARK BISHOP —That might come up in one of the reviews which are going to be occasioned in, we hope, the not too distant future. There is one final issue that I want to resolve with you. The captioning people told us this morning that free-to-airs who retransmit commercial content are taking the captions off when they retransmit. Are you aware of that? If the answer is yes, why is that occurring?

Mr Branigan —I understand that one pay TV operator was routinely stripping the captions and other teletext material off the broadcast signal and retransmitting. I do not know whether that is still happening. I believe it is not. In any case, my understanding is that the current legislation has a provision which goes to that which effectively says that you cannot retransmit a free-to-air service via satellite or cable unless you also carry the captions.

Senator MARK BISHOP —So you are not permitted to decaption?

Mr Branigan —You are at the moment, but the current bill will fix that problem.

Senator MARK BISHOP —The current bill does not extend the mandatory captioning requirements to pay TV, does it?

Mr Branigan —No. Funny that.

Senator MARK BISHOP —Do you know why that is?

Mr Branigan —No doubt because it is a young, developing industry, as we are told all the time.

Senator MARK BISHOP —You are very charitable, Mr Branigan.

Ms Oddie —Before we get off that, one thing that has not been focused on in these sessions is what viewers will be able to see in reading captions. Whilst it has been focusing on the transmission side, one of the things Ten supports—and, as I understand it, the captioning industry as well—is including a chip in the receiver so that you decode the captions because, whilst we will be transmitting all these hours of captioned material, it is obviously equally important that there be devices out there so that people can receive those captions.

Senator MARK BISHOP —Thank you, Ms Oddie. In the explanatory memorandum, there is a table at page 48 or 49 that tells us how much captioning Channel 7 and the ABC have done in both prime time and remainder of time, and they get big ticks for captioning—they are nice people. Channel 9 and Channel 10 we don't think get big ticks. I would like to ask you why the total amount of your captioning in prime time and other time has either stayed still or declined, one, absolutely and, two, relative to the ABC and the Channel 7 network? Is it solely that it costs a lot of money to do the captioning and you are not going to do that until you are mandated?

Ms Oddie —Just to clarify, page 45 sets out the levels of the captioning. Network Ten has not declined in any period since 1987. We have actually increased each year. The Caption Centre's last quarter also shows that we have increased both overall and in prime time.

Senator MARK BISHOP —Yes, you have increased. You have gone from 8.4 per cent in prime time in 1988 to 8.9 per cent.

Ms Oddie —Captioning is an expense, and it is an expense that is going to increase substantially with the obligations in the digital bill. We nevertheless recognise that we will need to meet those obligations. However, it is also important to recognise that it is a balancing act, because there is no offset in terms of revenue that is generated as a result of those captions.

Senator MARK BISHOP —So it is a cost issue and nothing else?

Ms Oddie —It is not just a cost issue; there is also the difficulty. John Rushton has flagged previously that it is more difficult to caption a number of different programs than others. For example, with a show like The Panel, when people are screaming over each other, how do you show who is talking and at what level? Also, it is an issue of getting people who are qualified to provide accurate captions.

Senator MARK BISHOP —I see that Channel 7 have gone in prime time from 54 per cent to 87 per cent—and they have plenty of live, rowdy TV shows—and the ABC have gone from 57 per cent to 64 per cent. They have been able to achieve some improvements, notwithstanding personnel shortages and technical difficulties.

Ms Oddie —Once again, if the sets can receive the captions, the increase that will be seen by all networks in meeting the obligations under the digital bill will mean that those who are hearing impaired will have a chance to see those captions.

Senator CALVERT —I just want to mention that Retravision have an HDTV on their books, and it is a National Panasonic TC-42 called Tau Plasma. It is a 106-centimetre 16 by 9, and the recommended retail price is $30,999.

Mr Branigan —That is a big set.

Senator CALVERT —A big price, too.

Mr Branigan —Chairman, can I clarify one point. You asked me a question earlier about the audio. We did not actually deal with that in our submission. You may have been picking up on a reference in a submission by Network Ten, not on behalf of the whole industry.

CHAIR —I should have asked you, Ms Oddie. But Senator Hutchins has a question.

Senator HUTCHINS —Mr Branigan, you have seen Mr Encel's paper, and you have disputed his position in relation to the United States. He also elaborates on the position in the United Kingdom, where he says that they need—by the date that they go digital—95 per cent. They also say in their submission that it is unlikely that it will be 95 per cent by that date. Do you have any projected figures of what you anticipate the Australian market will be in HDTV? We have been advised by one or two people today that HDTV is going to be quite expensive and is unlikely to be taken up by the consumer.

Mr Branigan —HDTV is going to be more expensive than it would have been under the original scheme. The effect of the digital simulcast requirement is to segment the already small retail market for digital equipment. You will have an as yet unknown split between standard definition integrated receivers, standard definition decoders, high definition capable decoders and high definition sets. I suspect a lot of retailers are going to find that bewildering, and so are a lot of consumers. That may have the effect of dampening down sales in the initial period.

We felt that we could come up with some broad-brush estimates 12 months ago. We are less confident now because the retail scene is so murky. We are hopeful that the mist will clear as next year progresses, but I would be most reluctant to hazard a guess. It is easier to speculate as to where we might be five, six or seven years down the track. I would not be at all confident that by 2008 we would be much beyond the 50 or 60 per cent mark, but you would have to accept that there is quite a large margin of error in that.

Senator HUTCHINS —Would that 50 or 60 per cent be on HDTV?

Mr Branigan —No, HDTV, SDTV or some sort of converter box still using analog. It is quite possible, though, that at that point you may find that most analog sets that are sold incorporate a low cost digital chip that will allow them to also pick up digital signals. It may be that the last 35 per cent or so is not all that difficult to achieve. The really tough, uphill battle is going to be over the next five or six years.

Senator HUTCHINS —You disputed Mr Encel's figure that if we extrapolated the American experience to here, I think 170 HDTVs would be sold. You said that was because of technical glitches, because the Yanks had made the wrong decisions and because of topography. You identified a number of Americans that were already on digital television. Are you able to differentiate between that figure of HD and SD?

Mr Branigan —No.

Senator HUTCHINS —Is that able to be done?

Mr Branigan —All sets in the US receive both HD and SD. Perhaps I can try to explain the American figures as I understand them. They are currently selling just under 25,000 digital receivers a month, and that includes integrated HDTV receivers and set-top boxes. The set-top boxes are less than 20 per cent of the total. Somewhere close to 80 per cent of the total are higher definition to very high definition screens which have an analog decoder but no digital decoder. They need a set-top box to operate with them. People are presumably buying these in anticipation of using them as digital receivers down the track, when the mists have cleared around the current American technical standard.

Without wanting to go into this in boring detail, there is some real uncertainty at the moment as to whether the Americans will persist with their current standard or adopt the standard that we and the Europeans will be using because of the immense technical problems they have encountered, which mean that very few people with normal antenna systems can reliably pick up a digital signal. That is not a problem that has been encountered in the United Kingdom and it is certainly not a problem that we anticipate here, but it is a major drawback with the American digital television system.

Senator HUTCHINS —Thank you.

CHAIR —We thank FACTS for appearing. Mr Rushton, I assumed that because you were there with FACTS you were part of that group.

Mr Rushton —No, I wear two hats.

CHAIR —If you wish to appear independently, then please feel free to do so.

[3.49 p.m.]