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Broadcasting Services Amendment (Digital Television and Datacasting) Bill 2000

CHAIR —Welcome. The committee has before it submission No. 16, which it has authorised to be published. Do you wish to make any alterations or additions to your submission?

Ms van Beelen —No. The submission stands as it is.

CHAIR —Would you like to make an opening statement?

Mr Willis —Yes. I would firstly like to state Telstra's commercial interest in the bill. Telstra's interest in this legislation is focused on its interest in participating in the datacasting trials to be held by the ABA later this year and also its 50 per cent ownership in Foxtel.

There are really six points to our submission. Firstly, we believe datacasting offers a unique opportunity to deliver information and services to all Australians. We believe that no other existing distribution technology has the capability of doing this because television sets are in almost every home. Therefore, this legislation could be a vehicle to deliver data to every Australian. When you compare this to PCs, which really have only a 30 per cent take-up, it makes television a ubiquitous device. Also, datacasting can be used as a vehicle to deliver government services, educational material and training to regional and remote Australians. Therefore, it has the potential to bridge the digital gap that we currently are going down the path to having. It is also an opportunity for Australia to develop a unique and new industry to create jobs and spin off some innovation. Secondly, datacasting will assist the driving of digital take-up. Through the provision of new interactive services, it has the potential to drive digital TV. We believe that, without the driving of datacasting, the take-up of digital will take decades.

Thirdly, we believe that, with the current legislation, consumers will be losers, especially in the regional and remote areas. We believe that consumers, under the proposed legislation, will miss out because it is unlikely to be a viable business. At the moment, our business case suggests that with the legislation it is extremely marginal, if viable at all. Fourthly, we believe it is vital for consumers that the MPEG audio standard is mandated by the government to ensure that Australia complies with the DVD global standards or SDTV and that we have set-top boxes, as a result, that are affordable to consumers. We believe that they will not be affordable to consumers if the free-to-air broadcasters are permitted to broadcast AC-3 audio.

Fifthly, we believe that, without rapid take-up of digital TV and datacasting services, consumers will not be able to benefit from the competitive provision of services using the spectrum that will be freed up once the analog simulcast is turned off. We believe that the bill is too prescriptive and unworkable and, therefore, this unique opportunity that we have could be lost. There are layers of prescription and limitation on datacasting services that really give us a lack of commercial certainty. The bill under discussion today effectively loses its unique opportunity. This is because datacasters are not interested in investing in spectrum, with the business cases really having only a 15-year anchor point, whereas with the free-to-airs there is an expectation of renewal. There are also many regulatory reviews which will impact on their business, anyway. These factors probably also mean that the cost of the datacasting spectrum will be low rather than high because of the inherent risk in entering into this business, especially in entering against businesses that will already have had secure bands and will be secure in that business.

Sixthly, we believe that the legislation disadvantages regional and rural consumers because, at the moment, they have an opportunity to become information rich via this technology. Most of those regional consumers may not have all of the broadband cable access that some of the metropolitan consumers have, but they certainly have the ability to receive the datacasting signals. Therefore, all they really need is a television and a set-top box to be provided for datacasting information. Also, broadcasters transmit content to a single audience, whereas datacasters complement the service with targeted material and services. So there is a difference between the broadcasting service and the datacasting service. They are complementary services, although they are intertwined. We believe that this bill restricts the content to such an extent as to make the licences and business model unworkable, from both a commercial and a consumer viewpoint.

Ms van Beelen —If I may, I would like to add a couple of comments, Chair.

CHAIR —Please proceed.

Ms van Beelen —We understand the policy intentions to be as stated in the minister's release last December. We actually see that the bill goes a lot further than it needs to go to implement those policy intentions. We understand the intention that there will be no new commercial broadcasters before 2007. But there are a lot of very prescriptive requirements to be imposed on datacasters which seem to go over the top in terms of implementing that policy. One example is the fact that there is to be no fully self-contained video. Apart from the question of what `fully self-contained' means, surely the 10-minute limit on video does the trick. It prevents the broadcast of video which looks like television because it is limited to only 10 minutes. Other aspects of it are uncertain. It is not clear what is meant by the provisions. For example, when we talk about 50 per cent of content being controlled by the datacaster, do we mean 50 per cent in terms of volume of bits or do we mean 50 per cent in terms of time? There are a lot of very prescriptive yet not entirely certain provisions relating to what datacasters will not be able to do. Obviously, the consequences for them of falling foul of those provisions are something that they are not going to want to risk. It seems to me that the policy outcome could have been achieved with less prescriptive regulation.

Greg has already alluded to the uncertainty in the bill. One of the key issues for datacasters is the fact that there is no presumption of renewal in relation to the spectrum licence. You have 15 years and no guarantee of a business after that, despite the work you have put into building it up. Obviously, there is a lot of uncertainty due to the ongoing policy review process, including the ABA's review as to what Internet broadcasting is and if it can be done. It seems to us that the bill perpetuates a tilted playing field. On the one hand, you have free spectrum, new revenue streams particularly with what we see as an extension of multichanneling in the form of digital program enhancements, firm business models and certainty about the availability of spectrum, protection from competition, broad regulation, flexibility and a perpetual licence. On the other hand, you compare that with a high up-front charge for spectrum to new entrants in an emerging industry who need to make a business case for acquisition of that spectrum in a highly risk environment with untested business models. It is most unusual to so prescriptively regulate an emerging industry. We see that as possibly being prone to litigation and uncertainty and as just not enhancing the business for datacasters at all.

A lot of this debate comes down to spectrum. Spectrum is a valuable, finite public resource which we think should be allocated and managed according to market principles to maximise its value and efficiency. We understand the initial basis for the loan of spectrum to the free-to-air broadcasters on the basis of high definition TV. We are now in a situation where that initial policy intent and the initial legislation are going to be potentially whittled away. High definition television may never happen. That may be the best thing for Australian consumers if standard definition gives them what they need and makes take-up faster because it is more affordable. The prohibition on multichanneling appears to have been whittled away as well. We have a situation where the policy intent was that enhancements would not be fully self-contained; they would be incidental and directly linked to the primary broadcast. That has been broadened in several ways. Firstly, they no longer need to be directly linked to the primary broadcast but to the subject matter of that broadcast. It seems to me that significantly broadens what is possible.

Then there are the category B enhancements, which are totally new, very flexible and broad, in stark contrast to the prescriptiveness of the datacasting regulation. And then you have the overlap provisions, which do not seem to have any constraints. You could have a sports broadcast that overlaps with Gone with the Wind for four hours. It seems to me that perhaps that should be limited. The basis for giving spectrum to free-to-air broadcasters was not to permit them to have this new business model of multichannelling—in fact, it was specifically to be prohibited—yet it seems that that is what may occur. We say that multichannelling should be constrained because it was not the basis for the allocation of spectrum. If high definition is no longer to be mandated, then the spectrum should be given back or at least paid for if it is going to be used to provide other services.

Senator MARK BISHOP —So Telstra is pretty happy with this bill, isn't it? It has no real complaints! You have expressed concern in your submission at the restrictiveness of the definition of datacasting. Telstra is obviously looking to become a datacaster?

Mr Willis —Telstra has an interest in being a datacaster. I think our real concern is whether this business is viable. Because Telstra is a carrier, this gives us another opportunity to carry over other platforms. It gives us an opportunity to provide services to people that do not necessarily have the richness of those services now.

Senator MARK BISHOP —So you are interested in exploring whether it is a suitable business model to be a datacaster. If so, what nature of transmissions would Telstra be seeking to datacast that are forbidden by the bill but would not be objectively perceived as an attempt at backdoor broadcasting? What sort of products would you offer?

Mr Willis —Maybe I can frame my answer slightly differently. The Internet and video are converging at quite a significant rate. If we datacast Internet product, I think it would be very difficult to keep it within the genres that are described in the datacasting bill, so I think it is unworkable.

Senator MARK BISHOP —When you say `if we datacast Internet product', do you mean streaming audio and video through the Internet?

Ms van Beelen —In part, yes. Telstra provides broadband Internet services today, and they include some elements of streaming audio and video. But they are in the nature of Internet services: they are accessed on demand, accessed in a fundamentally different way to the way in which you would access content on television. They are also different in other ways; quite often they have different types of content. We see that as being different to the way in which television content is accessed. We also think that we are not going to be in a position to re-edit content, particularly where we have acquired that content from third parties. It makes it a significantly more costly proposition if you have to re-edit for your datacasting service content that you already have for your broadband service. We may not have that right, in any event. If we have acquired content from a third party, it would quite often be provided to us on an `as is' basis. What we see as an opportunity to provide Internet type services to people who may not otherwise access them is going to be thwarted because we are not going to be able to use the content that we have.

Senator MARK BISHOP —So you have acquired all of this content and you are able to deliver it through the Internet at the moment. Your business model is also to be able to deliver it via a datacasting stream? Is that right?

Mr Willis —We believe that we will take content from various content suppliers. We will make partnerships with numerous parties and provide their content on their behalf, because that is the nature of the business we are in. We believe that that content and those technologies are converging extremely quickly and that it will be difficult to administer the descriptions that are in the bill.

Senator MARK BISHOP —So, for example, you can deliver the content you purchase from the ABC or from a range of other content providers 24 hours a day over the Internet but you will not be able to provide it, for example, through the TV as datacast, will you?

Mr Willis —That is our understanding, yes.

Senator MARK BISHOP —But, if I click on to the TV and there is point to point connection, I will be able to get it through the Internet as well, won't I? Doesn't the bill provide that Internet transmission of content is not broadcasting and, hence, not regulated by this bill?

Ms van Beelen —It is most unlikely that that kind of point to point service will be made available using datacasting spectrum, in our view, because it is a most inefficient use of spectrum. We see the distinction as being between an Internet carriage service and, if you like, a walled garden. That is the distinction upon which the application of the genre restrictions is based. But, point to point Internet content is not the type of content that is going to be made available because the nature of this spectrum is that it is used for datacasting. If it were used for a point to point interaction it would be in most cases, I understand, quite an inefficient use of the spectrum and not something that would be viable or workable. So, in effect, that exception is not there.

Senator MARK BISHOP —So the content that you purchase for broadcast on the Internet is not suitable for use in a datacast context through the TV?

Ms van Beelen —It would have to be in a site that we controlled. So it would have to be, in a sense, taken from the Internet and put in a walled garden. We understand that it would then be subject to the genre restrictions, which makes it problematic if we have that content in an unalterable state.

Senator MARK BISHOP —A lot of your contracts with providers do not permit you to alter the content, do they?

Ms van Beelen —Certainly our ABC one does not.

Senator MARK BISHOP —Certainly we know that, yes.

Mr Willis —It also may be the case that we do not purchase content but that we simply provide content through our technology for the ABC, or for anyone else. Therefore, we would simply transmit that content on their behalf.

Senator MARK BISHOP —Given the opportunity to define datacasting afresh, in Telstra's view, what would be the important elements of the definition?

Ms van Beelen —We have always maintained that datacasting should be defined as broadly as possible because it is a new industry that we are trying to create here. The objects of the act are to actually be amended to say that part of the purpose of the act is to facilitate datacasting, so we need a definition that helps the industry to emerge. There are problems with a lot of the suggested ways of doing it. It did seem to us that you need some certainty about what datacasting is, so there are a lot of options that can be ruled out because they would involve a case by case analysis. The definition in the current legislation is not all that bad; it is basically anything that is not broadcasting. If a datacaster was under threat of falling foul of the law and the consequences that that entailed if they did do broadcasting, it may be that datacasting could be that broadly defined. I just see no reason for it to be as constrained as it is. It is meant to complement broadcasting; it is meant to be different. I do not see the big issue, I suppose, if it goes a bit close. That is surely the best thing for consumers.

Senator MARK BISHOP —In that context, then, what amendments would you seek to ameliorate the impact of the restrictions in the definition?

Ms van Beelen —We are not so naive as to seek amendments to that extent. I think, potentially, the time for that has passed. But we would certainly try to simplify it. I think I have already referred to some of the issues where there just seem to be layers of prescription. We would say that the 10-minute video might be workable, but to say that it cannot be fully self-contained is not clear. Does that mean it can only be half of something? If it has an ending and a beginning, is that stand-alone? There are a lot of things in there that need clarification. The difficulty with this legislation is that it is already very prescriptive, and if you try to clarify further it is only going to be more so. I think it needs to pull back and ask the question: what do we really need here to basically get the policy intention effected in the legislation without having such a high degree of prescription?

Senator MARK BISHOP —But is your bottom line really that you want to be able to datacast any product that you are capable of transmitting?

Ms van Beelen —We do not want to use it to broadcast, but we do want to be able to provide on-demand services, including some which would include video content that we have managed to source.

Senator MARK BISHOP —What do you mean by `on-demand services'?

Ms van Beelen —We understand that datacasting would involve consumer choice. That is one of the many ways in which it is different from broadcasting; that is, they can actually choose what they get access to—from a limited offering, admittedly, but there is some consumer choice. We would like to be able to have consumers interacting with the content.

Senator MARK BISHOP —So you would like to offer a suite of programs, if you like, at a particular time and consumers would click on or choose one of the programs?

Ms van Beelen —We do not see the timing as being dictated to the extent that it is in broadcasting. I do not believe that is necessary in the datacasting environment.

Senator MARK BISHOP —So there would just be a suite of offerings of a whole range of products or programs and consumers would simply choose what they received at a time suitable to themselves?

Ms van Beelen —That is my understanding.

Mr Willis —I think one of the other focuses we have is interactivity. We believe that the products should be defined with some sort of interactivity. We think that differentiates it somewhat from broadcasting.

Senator MARK BISHOP —So a choice of products on offer and interactivity. Is there any other critical part of your definition?

Mr Willis —We could take that on notice.

Senator MARK BISHOP —I do not mind you taking it on notice, but we would like a response fairly urgently because we have to table our report no later than next Thursday.

Ms van Beelen —We understand.

Senator MARK BISHOP —So you will take on notice the critical elements of an appropriate datacasting definition?

Mr Willis —We have a number of elements but they are individual elements. We could certainly put those together as a package.

Senator MARK BISHOP —That would be fine. I will now turn to the series of reviews that are outlined in the bill. With respect to the review on the regulatory and revenue arrangements for datacasting licences subsequent to the end of the moratorium period for commercial television broadcasts, would you consider it appropriate that this review be a statutory review? A statutory review is essentially a public review—a review conducted in public where submissions are received and comments are made—which is delivered to the parliament and answerable to the parliament as opposed to an in-house ministerial or departmental review. Do you have a view on that?

Ms van Beelen —We did not really have a view on that. I guess one of the concerns we have is that it is not clear at all what can be done with this datacasting transmitter licence after 2007. But I suspect that it is going to be a review of significant policy issues and should probably be a parliamentary review.

Senator MARK BISHOP —So it should be a statutory review?

Ms van Beelen —Yes.

Senator MARK BISHOP —And sooner rather than later? Presumably you want some certainty as to the revenue costs involved with the datacasting licence?

Ms van Beelen —Ideally, to give you certainty, you would have it before you had to fork out for the licence. But the practicality of that seems to be absent.

Senator MARK BISHOP —What sort of timeframe would you suggest for completion of that review?

Ms van Beelen —I am sure it is not something that can be done quickly, but the sooner the better. That is the review as to what other services can be provided under the Broadcasting Services Act and by whom.

Senator MARK BISHOP —Yes.

Ms van Beelen —I think the sooner that happens the better.

Senator MARK BISHOP —In that context, what do you consider the pertinent issues to be addressed by that review? Is it simply whether we are going to maintain this distinction between broadcasters and datacasters?

Ms van Beelen —It certainly needs to address issues of convergence. A lot of the issues that have been addressed by the Productivity Commission need to be considered. The fundamental question seems to be: to what extent can converging industries, including broadcasting, be liberalised?

Senator MARK BISHOP —Have you given any thought to how transmission and revenue arrangements would change at that time?

Ms van Beelen —Telstra has a preference for the provisions in this bill for the separation of the spectrum licensing process from the service licensing process. We would like to see spectrum licensing subject to market based principles as it is in telecommunications today—namely, auctioned with a presumption of renewal. In relation to services licensing and broadcasting or other content type services, it would happen presumably under the ABA, similarly to how it does now.

Senator MARK BISHOP —The net of that is for it to be a public statutory review, and sooner rather than later?

Ms van Beelen —Yes.

ACTING CHAIR (Senator Calvert) —I have a couple of observations. Under your walled garden scenario, couldn't that be used to provide television programs, and then you become a broadcaster and subject to breaching the law? You are talking about datacasting and a walled garden situation, but you conceivably could broadcast or provide television programs through there and broadly be seen to be a broadcaster rather than a datacaster, couldn't you?

Ms van Beelen —It certainly would not be the intent. My understanding is that the technical requirement is such that Internet access per se, on a point to point basis, is highly unlikely, and that what is to be used is some sort of carousel where the datacaster chooses content to be made available to consumers upon their selection of it. We would not have any problem with restrictions that prevented us from broadcasting. We have no intention of doing that. Some constraints on the length of video are perhaps appropriate, but the lengths to which this legislation goes to prescribe what types of video in what contortions it can be offered seem to me excessive.

ACTING CHAIR —The other thing in Telstra's case is that on the one hand you are seeking to be datacasters and on the other hand you are 50 per cent owners of Foxtel. Do you see an overlap or a problem with that?

Mr Willis —Firstly, to put it in context, datacasting to us is about innovation. It is not about broadcasting. There are a number of digital products that are coming down the stream that I think make broadcasting not the most innovative platform to be on. But datacasting certainly is. We are a 50 per cent shareholder of Foxtel. We do not think that gives us a conflict of interest. We do not at this stage have any plans to align our datacasting interests and with our interest in Foxtel.

Senator BOURNE —You mentioned that interactivity is probably the key to getting people into datacasting and that you saw a few things coming on line. Can you tell us what sorts of things you are expecting the new interesting stuff to be?

Mr Willis —I think the people will be able to personalise their lifestyles through datacasting, which really means, `How do I want to pay my bill? How do I want my information delivered to me? What sort of information would I like to receive? What is the sort of information I don't want to receive under any circumstances?' So it is the ability to personalise people's information for their consumption choices.

Senator BOURNE —And you would see that mostly in e-commerce terms?

Mr Willis —I think e-commerce has an important role to play and I think e-commerce is a datacasting advantage rather than a free-to-air advantage. But I think there are other things too, like education programs. I think there is a real opportunity to provide education programs, retraining programs, via datacasting.

Senator BOURNE —That is a good point.

Mr Willis —That certainly would not rate as a broadcasting opportunity.

Senator MARK BISHOP —There is a proposal by News Corporation where they are developing a worldwide 21-university company to deliver educational services. Is that going to be delivered by the Internet or datacasting?

Mr Willis —I am not really sure. I have only seen that in the paper. I have called the gentleman at Newscorp and asked for some information.

Senator MARK BISHOP —Would it be logical to deliver it as datacasting?

Mr Willis —I think so. Just on the face of the article, I thought it had a lot of legs.

Senator MARK BISHOP —And it would come within the definition of category B, wouldn't it?

Mr Willis —I think we would need to understand a little bit more about it rather than just having the newspaper article.

Senator MARK BISHOP —If it is not a commercial-in-confidence matter, can you take that on notice and advise us if the corporation has decided how to deliver it and, if so, by what medium?

Mr Willis —I would certainly have to talk to Newscorp. But I will take it on notice.

Senator BOURNE —If interactivity would involve caching or a backchannel or something like that, I assume that Telstra would be able to do backchannels reasonably easily, probably more easily than most. Would you see that as being a major part of any datacasting that you did?

Mr Willis —Backchannel is necessary for interactivity, and obviously a PSDN line would be an easy way of providing that interactivity. We actually do not think that is the best way of providing it. We would like to provide that either via a modem or via a terrestrial return path. Certainly in the regional and remote areas a digital return path would be the most suitable.

Senator BOURNE —And that could significantly increase the access regional and remote areas have to a lot of things.

Mr Willis —I think so. In fact, I believe there are some gentlemen here from NTL that may have a view on that as well.

Senator BOURNE —Good point. I have three other questions which are quite different. Can I get your views on the definitions of datacasting, being whatever is not broadcasting, the 10-minute rule or what is currently there. Do you have a preference out of any of those?

Ms van Beelen —I guess our view has always been as broad as possible to implement the policy statement. If what is there is workable then that would be our preference, I think.

Senator BOURNE —Do you have a feeling for that 10-minute restriction? You mentioned it throughout the submission, but I did not get a feeling for whether you thought that was workable.

Mr Willis —I do not think it is workable. I have got some difficulties, just putting it in a very simplistic term, that you could transmit a song but you cannot transmit a number of songs, it seems to me, under that definition. So on a very simplistic base it does not seem to work.

Senator BOURNE —Fair enough. And equally the 50 per cent content definition needs defining itself. My next question is on MPEG versus AC-3. You mentioned affordability as a major problem. Why is that?

Mr Willis —My understanding is that the Dolby product is extremely expensive compared with the MPEG.

Senator BOURNE —Is that because it is proprietary?

Mr Willis —No, I believe the functionality required in the set-top box is significantly different. I believe one is studio quality but really takes it out of the affordability of most Australians.

Senator BOURNE —And, as far as you know, technically you would not be able to get a set-top box which could pick up a sort of base level of AC-3 and then you could have the fringes if you wanted to.

Mr Willis —I am not technical. I believe that anything can be done in a set-top box. The real issue to me is that we need to roll set-top boxes to the community at around $500 or $600, not at $1,500.

Senator BOURNE —Okay. I should ask somebody else that.

Mr Willis —I think our view on this is very socio-economically based. We want all Australians to be able to afford this technology, otherwise the take-up will not happen.

Senator BOURNE —True. The review in 2003 must really be a problem for you as far as certainty goes. When would you like to see it to get certainty? Obviously, you would like to see it either at the beginning or the end of 15 years because that is what it is for. Do you think bidding for datacasting licences will put people off?

Mr Willis —We would like to see certainty in August. If people are going to bid for this spectrum, I think we need to have certainty of our business.

Senator BOURNE —For at least the 15 years for which you have—

Mr Willis —I think we need an automatic renewal or an expectation of renewal as long as we keep within the legislation after that period, maybe similar to what the free-to-air broadcasters now enjoy.

Senator BOURNE —Thank you.

CHAIR —Thank you for appearing.

[5.23 p.m.]