Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Broadcasting and Television Act - Australian Broadcasting Tribunal - Report - Remote Commercial Television services - Report-South-East Region, dated December 1985


Download PDF Download PDF

Π Γ

The Parliament of the Commonwealth of Australia

AUSTRALIAN BROADCASTING TRIBUNAL

Remote Commercial Television Services

Third Report: South-East Region

Presented 20 February 1986 Ordered to be printed 20 March 1986

Parliamentary Paper No. 87/1986

AUSTRALIAN BROADCASTING TRIBUNAL

REMOTE COMMERCIAL TELEVISION SERVICES

THIRD REPORT TO THE MINISTER FOR COMMUNICATIONS

DECEMBER 1985

DAVID JONES CHAIRMAN

JULIE JAMES-BAILEY MEMBER RUSSEL PERRY MEMBER

AUSTRALIAN GOVERNMENT PUBLISHING SERVICE CANBERRA 1985

Commonwealth of Australia 1985 ISBN: 0 644 01333 8

Printed by Aiken Press Pty. Ltd. — Smithfield

TABLE OF CONTENTS

ABBREVIATIONS

Terms, organisations and other bodies ................. vii

Reports, inquiries and Acts ........................... viii

PREFACE

Establishment ......................................... x

Third Report .......................................... x

Terms of Reference .................................... x

Membership of the Tribunal ............................ xiii

Notices of Inquiry .................................... xiii

Applications .......................................... xiii

Submissions and witnesses ............................. xiii

Public hearings ....................................... xiv

Staff ................................................. xiv

Temporary Staff ....................................... xiv

Acknowledgements ...................................... xiv

CHAPTER 1 REMOTE AND UNDERSERVED AREAS OF THE SOUTH-EAST REGION

INTRODUCTION 1

HOW THE SERVICE AREA IS DEFINED 1

Population to be served by retransmission sites ................................... 2

Isolated population ..................... 3

Service area penetration ................ 4

Conclusion .............................. 4

CHARACTERISTICS OF THE SOUTH-EAST SERVICE AREA 5

North-west and far west NSW............... 5

Snow Mountain region..................... 5

East Gippsland........................... 6

Western Tasmania......................... 6

General ................................. 6

(iii)

EXTENT AND SERVICE OF EXISTING MEDIA 6

Broadcasting and television stations ..... 6 Newspapers and magazines ................ 7

VCRs ..................................... 7

SPECIAL INTEREST POPULATIONS IN THE SOUTH-EAST RCTS SERVICE AREA 8

Aboriginal populations .................. 8

Conclusion .............................. 11

EDUCATIONAL NEEDS OF REMOTE AND UNSERVED AREAS OF THE SOUTH-EAST REGION 1 1

NOTES 13

CHAPTER 2 EVALUATION OF APPLICATION FOR SOUTH-EAST LICENCE

THE CRITERIA TO BE APPLIED 14

FIT AND PROPER PERSON 16

THE APPLICATION BY SATELLITE SOUTH-EAST PTY LIMITED 17

CONCLUSIONS 28

CHAPTER 3 FINANCIAL, TECHNICAL AND MANAGEMENT CAPABILITY

FINANCIAL CAPABILITY OF THE SOUTH-EAST REGION APPLICANT 30

INTRODUCTION 30

Market size ............................. 31

FINANCIAL PROPOSAL OF SSE 32

Financial resources ..................... 32

Capital costs ........................... 34

Operating costs ......................... 35

Revenue .................................. 37

Conclusions.............................. 41

(iv)

TECHNICAL CAPABILITY OF THE SOUTH-EAST REGION APPLICANT 41

INTRODUCTION 41

TECHNICAL PROPOSAL OF SSE 42

Type of service ......................... 42

Studios ................................. 42

Earth station ........................... 43

Retransmission sites .................... 43

Self help location and remote homesteads . 44 Maintenance ............................. 45

Installation ............................ 45

Previous experience ..................... 45

Technical personnel ..................... 46

Background investigation ................ 46

Conclusion .............................. 46

MANAGEMENT CAPABILITY OF THE SOUTH-EAST REGION APPLICANT 47

INTRODUCTION 47

MANAGEMENT PROPOSAL OF QSTV 47

Applicant's track record ................ 47

The SSE application ..................... 48

The SSE management structure ............ 49

Conclusion .............................. 51

COMMERCIAL VIABILITY CRITERION 52

Existing services ....................... 52

NOTES 53

CHAPTER 4 CAPABILITY TO PROVIDE AN ADEQUATE AND COMPREHENSIVE SERVICE AND ENCOURAGE AUSTRALIAN PROGRAMS

INTRODUCTION 54

ASCERTAINMENT 55

SSE ascertainment ....................... 55

Conclusion .............................. 57

PROGRAMMING 57

SSE programming ......................... 57

Hours of service ........................ 57

Program schedule ........................ 58

SPS ..................................... 58

Program sources ......................... 59

Program distribution .................... 59

Program costs ........................... 60

Aboriginal programming .................. 60

Educational programming ................. 61

Children's programming.................. 62

Conclusion .............................. 63

(v)

PRODUCTION 64

SSE production .......................... 64

News production .......................... 64

Rural production ........................ 65

Local windows at retransmission sites .... 66 Conclusion ............................... 67

Conclusions on capability to provide an adequate and comprehensive service and comply with licence conditions .......... 68

NOTES 69

CHAPTER 5 RCTS AND SATELLITE PROGRAM DISTRIBUTION

INTRODUCTION ............................... 70

RECENT CORRESPONDENCE ...................... 71

CONCLUSIONS ................................ 85

NETWORK SUBMISSIONS ........................ 89

CHAPTER 6 CONCLUSIONS AND RECOMMENDATIONS

INTRODUCTION 91

Fit and proper person (Chapter 2) ........... 91

Financial, technical and management capability (Chapter 3) .................... 92

Financial capability ...................... 92

Technical capability ...................... 93

Management capability .................... 93

Capability to provide an adequate and comprehensive serve and comply with licence conditions (Chapter 4) ......... 94

Ascertainment ............................. 94

Programming ............................... 94

Production ................................ 95

Conclusion on capability to provide an adequate and comprehensive service ........ 97

CONCLUSION ON QUALIFICATIONS

OTHER MATTERS 98

Financial informationg .................... 98

Ascertainment ............................. 98

Programming ............................... 99

Production ................................. 99

Consultation .............................. 100

Issues for Government attention ............ 100

CHAPTER 7 LICENCE RECOMMENDATION 102

APPENDIX 1 WITNESSES 103

(vi)

ABBREVIATIONS

Terms, organisations and other bodies

ABC Australian Broadcasting Corporation

ABCB Australian Broadcasting Control Board ('The Board' )

ABS Australian Bureau of Statistics

ABT Australian Broadcasting Tribunal ('The Tribunal')

ABC Australian Education Council

Aussat Aussat Pty Limited - the Australian national satellite <

AUSSAT Australian national satellite communications system

CAAMA Central Australian Aboriginal Media Association

CAE College of Advanced Education

DAA Department of Aboriginal Affairs

DDQ Darling Downs Television Pty Ltd

DOC Department of Communications

EMA Educational Media Australia Pty Ltd

EMSAT A company to be formed by EMA

FACTS Federation of Australian Commercial Television Stations

FARE Federation of Australian Radio Broadcasters

FDU Forward development Unit, DOC

GWN Golden West Network Pty Ltd

I CPA Isolated Children's Parents' Association

Imparja Imparja Television Pty Ltd - a company to be formed

INTELSAT International Telecommunications Satellite Organisation

MSC Multi-Channel Services

NAIBA National Aboriginal & Islander Broadcasting Association

PBAA Public Broadcasting Association of Australia

(vil)

Plessey

Q-Net

QSTV

RCTS

RTA

RTNA

SBS

Scientific Atlanta

SPS

SSE

TAPE

VCR

Plessey Australia Pty Limited (in association with Scientific Atlanta Inc USA)

Queensland Government's multi-purpose satellite communications network

Queensland Satellite Television

Remote Commercial Television Service

Regional Television Australia Pty Ltd

Regional Television News Australia

Special Broadcasting Service

Scientific Atlanta Inc USA

Satellite Programming Services

Satellite South-East Pty Ltd

Department of Technical & Further Education

Video Cassette Recorder

Reports, inquiries and Acts

THE ACT Broadcasting and Television Act 1942

CABLE REPORT Report of the Inquiry by the Australian Broadcasting Tribunal into Cable and Subscription Television Services and Related Matters (1982)

COFFS HARBOUR REPORT Report of the Inquiry by the Australian Broadcasting Tribunal into the Grant of a Licence for a commercial Broadcasting Station and the Grant of Two Licences for Commercial Broadcasting Translator Stations to serve the Coffs Harbour area of

New South Wales (1984)

CONNOR REPORT Serving Multicultural Australia, the Role of Broadcasting: Report by the Committee of Review of the Special Broadcasting Service (December 1984)

DIX REPORT Report by the Committee of Review of the Australian Broadcasting Commission: The ABC in Review, National Broadcasting in the 1980's (Canberra, 1981)

FIRST REPORT Remote Commercial Television Service First Report, A Report by the Australian Broadcasting Tribunal (Canberra, June 1985)

(viii)

LOCALISM REVIEW Review of the Policy of Localism in Australia, Department of Communications (August, 1984)

OUT OF THE SILENT LAND Department of Aboriginal Affairs Report of the Task Force on Aboriginal and Islander Broadcasting and Communications, (August 1984)

SATELLITE ACT Satellite Communications Act 1984

SATELLITE TASK FORCE REPORT Commonwealth Government Task Force on the National Communications Satellite System, Report (Canberra, 1978)

SECOND REPORT Remote Commercial Television Service Second Report, North East Region, A Report by the Australian Broadcasting Tribunal (Canberra, September 1985)

SPS REPORT Report of the Australian Broadcasting Tribunal's Satellite Program Services Inquiry in the Regulation of the Use of Satellite Program Services by Broadcasters (1984)

(ix)

PREFACE

Establishment

The inquiry into the grant of four Remote Commercial Television Service (RCTS) licences was initiated pursuant to sub-section 18(2) of the Broadcasting and Television Act 1942 ('the Act1 ) by the Minister for Communications on 31 October 1984. The original reporting date set by the Minister was 1 April 1985 although this was subsequently amended to 1 May 1985 for the report dealing with applications for the Western Australian licence and to 1 August

1985 for the reports dealing with the other licences. On 15 April 1985 the Tribunal provided the Minister with a progress report and indicated that "Bearing in mind the length of the hearings, the substantial record of evidence and the additional issues that have arisen the Tribunal anticipates that it will not be possible to deliver the first report to you by the 1 May 1985".

The First Report was delivered to the Minister on 28 June 1985.

The Second Report, which contains the Tribunal's evaluation, conclusions and recommendations on the application for the RCTS Licence for the north-east region, was delivered to the Minister on 30 September 1985.

Third Report

This report contains the Tribunal's evaluation, conclusions and recommendations on the application for the RCTS licence for the south-east region. A further report on the central region will follow this report.

Terms of Reference

The terms of reference for the inquiry were set out in a Direction by the Minister for Communications reproduced below:

I, Michael John Duffy, the Minister of State for Communications, pursuant to sub-section 18(2) of the Broadcasting and Television Act 1942 ('the Act') hereby direct the Australian Broadcasting Tribunal ('Tribunal') to hold an inquiry in accordance with Division 3 of Part II of the Act and make recommendations to me on the following:

Who would be the most appropriate applicant to be granted a licence to provide a Regional Commercial Television Service by satellite in each of the following regions and under what circumstances:

(i) NSW, Victoria and Tasmania;

(x)

(ii) Queensland;

(iii) South Australia and the Northern Territory;

(iv) Western Australia

In conducting its inquiry the Tribunal shall have regard to:

1· The procedures and practices set out in Part III B of the Act for the grant of licences;

2. The licensing criteria applicable in the grant of a licence;

3. The following specifications for ROTS licences:

a. licensees shall provide commercial television services by means of space transponders and at least such terrestrial transmitters as are specified in the Schedule to this Direction;

b. the areas served shall be those parts of each of the regions specified above which are not included in the Service Areas of existing commercial television stations or commercial television translator stations;

c. the purpose of the licences shall be to provide services appropriate to the needs of the residents of the areas referred to in (b) above;

d. licensees shall provide services utilising 30 watt space transponders in zonal beams using the Transmission Standard for the Homestead and Community Broadcasting Satellite Service set by the Minister for Communications. 4

4. The intentions of the Government expressed in my Statement to the Parliament on 10 October 1984.

The Tribunal shall report by 1 April 1985.

The Schedule attached to the Direction is as follows:

Terrestrial transmitters are to be provided by RCTS licensees at standards no less than those of the Self-help Television Reception Scheme,(1) at the following sites:

(i) NSW, Victoria and Tasmania

Bourke Lightning Ridge Walgett

(xi)

(ii) Queensland

Barcaldine Blackall Charleville Cunnamulla Goondiwindi Hughenden Longreach Miles Mitchell Roma

St George Thursday Island Weipa Winton

(iii) South Australia and the Northern Territory

Ceduna Goober Pedy Leigh Creek Woomera Alice Springs

Bathurst Island Katherine Tennant Creek

(iv) Western Australia

Broome Carnarvon Dampier Derby Exmouth Karratha Kununurra Moora Pannawonica Port Hedland Roebourne Wyndham

(xii)

(1) Department of Communications, Technical Papers, Numbers 2-4, 1982.

"regional" in the phrase "Regional Commercial Television Service" was qualified by the word "remote". Subsequently the inquiry has been referred to as an inquiry into the grant of four Remote Commercial Television Service licences.

Membership of the Tribunal

Members of the Tribunal constituting the Division for the purposes of holding the inquiry are Mr David Jones (Chairman), Ms Julie James-Bailey and Dr Russel Perry. Section 3 of the Broadcasting and Television Amendment Act 1984 amended S.15C of the Principal Act deals with the powers of Divisions. As the Division for this

inquiry was constituted after the commencement of the Amendment Act the amended S.15C applies to it. Therefore, the Division is the Tribunal for the purposes of decisions, recommendations and reports on the matters that are the subject of this inquiry. Further

details are in the Preface of the First Report.

Notices of Inquiry

A notice dated 2 August 1985 was prepared by the Tribunal and published in the Sydney Morning Herald, The Age and The Australian announcing that hearings in relation to the south-east zone (NSW,

Victoria and Tasmania) licence application would begin in Sydney on 26 August 1985. Members of the public were invited to attend.

Applications

Three applications were originally received for the south-east region licence. Two of the applications were lodged by the Bell Group and by Television Australia-Satellite Systems Limited. These applications were subsequently withdrawn, prior to the start of the

hearings. The only application considered for the licence was made by Satellite South-East Pty Limited, a company constituted by the regional licensees from NSW, Victoria and the licensees of the ACT and Tasmania.

Submissions

A list of the submissions to the inquiry can be found at Appendix 1 to the First Report. Submissions were also received from the NSW Ministry of Aboriginal Affairs, the Eora Centre and the National Aboriginal and Islander Broadcasting Association ('NAIBA'), and the NSW Minister for Education Representatives of each of these

submittors appeared at the south-east region hearings. A list of witnesses appearing at the hearings of the south-east region inquiry may be found at Appendix 1 of this report.

(xiii)

Public hearings

Public hearings of the inquiry in relation to the south-east zone licence were held on the following dates:

Sydney 26 - 29 August 1985

Staff

The Tribunal deployed one of its permanent officers, Stephen Simpson, to work on the inquiry to co-ordinate administrative arrangements. Michael Trimmer, Tasmanian State Representative, served as Clerk of Court and helped with the preparation of the report. Pamela Mathie, Research Officer, helped in the preparation of the report. Leona Geeves, detached from the Department of Communications, also assisted with report preparation.

Officers of the Program Services Division and Licensing Division, located in the Tribunal's Melbourne office, prepared background information for use by Members and inquiry staff.

Word processing operators were Rebecca Eames, Janelle Green, Tina McCahill, Melissa Howard, Debbie Austin, Julie Lugton and Hazel Hood, and the Chairman's Secretary, Lyn Gruber, provided the necessary support to complete this Report.

Temporary staff

The Tribunal engaged two Senior Research Officers, Joanne Stuart and Christina Spurgeon on a temporary basis to undertake research and assist in preparation of the report.

Acknowledgements

The Tribunal's wishes to acknowledge the co-operation received from the Commonwealth Reporting Service, and the Australian Government Publishing Service.

(xiv)

CHAPTER 1

REMOTE AND UNDERSERVED AREAS OF THE SOUTH-EAST REGION

INTRODUCTION

1.1 This chapter aims to establish the context within which the south­ east region RCTS will operate. The context for RCTS as a national system of television broadcasting has already been described in general terms in Chapters 1-7 of the RCTS First Report. Matters pertinent to the consideration of the south-east region RCTS

licence include the service area of the proposed service; the nature and diversity of populations that live there; and the extent of the service provided by existing media to those people.

1.2 These matters are discussed in this chapter with a view to describing the background against which the applicants fitness and propriety, financial, technical and management capability to effectively operate the RCTS and ability to provide an adequate and

comprehensive service can be judged.

HOW THE SERVICE AREA IS DEFINED

1.3 The service area for the south-east RCTS takes in all those areas of the states of New South Wales, Victoria and Tasmania which are presently unserved or underserved by existing commercial television services. Unlike the other three zones, the south-east RCTS

service area will not cover 90 per cent of the land mass of the states concerned. In New South Wales and Tasmania, over 50 per cent of the geographic area of the state is already served by existing commercial television stations. Only about 20 per cent of the geographic area of Victoria is presently unserved and will therefore form part of the RCTS service area.

1.4 The size of the south-east RCTS market is a matter of some debate. For example, in reaching an interim estimate of the combined unserved populations of New South Wales, Victoria and Tasmania the Department of Communications ('DOC') arrived at a total of 70 169, based on 1981 Census statistics (1). In an exercise to determine

the total unserved and underserved population of Australia's south­ east, the 50 dbu contour of existing services was selected as a cut-off point. All those residing beyond the 50 dbu contour were considered to be unserved or underserved by commercial television.

Using this method, and again relying on 1981 Census statistics, the DOC arrived at a total of 214 706 people in the south-east of Australia, unserved or underserved by commercial television. (2)

1.5 Towards the end of the public hearings DOC completed service area definitions for some of the existing regional stations and RCTS, and the final service area determination by DOC for the south-east RCTS region was received in August 1985. Using ABS figures from the Census of 30 June, 1981, it identified the population not

1

included in service areas proposed for existing commercial television stations and areas of potential overlap between service areas of existing licensees and RCTS licensees.

1.6 A letter from DOC to the Tribunal in June 1985 announced that the Minister had recently decided that RCTS service areas and the service areas of existing regional commercial television stations need not be mutually exclusive and may overlap to a modest extent in appropriate circumstances. In areas of overlap, both the existing licensee and the RCTS licensee will be entitled to provide retransmission facilities to serve any communities which are presently unserved, or inadequately served.

1.7 The population in the south-east RCTS service area is detailed in Table 1.1 below.

TABLE 1.1

POPULATION IN THE SOUTH-EAST REGION

State Population not

included in service areas for existing commercial TV stations

NSW 43 772

Victoria 23 918

Tasmania 5 099

Population in proposed over­ lap area

41 704 50 719 1 131

Total

85 476 74 637 6 230

Totals 72 789 93 554 166 343

Thus the total population in the south east region RCTS service area could be as high as 166 343.

1.8 The applicant, Satellite South East Pty Limited ('SSE') has based it's cost and revenue projections on a maximum population of 163 830 using 1981 Census figures. SSE acknowledges that to achieve this figure it will be sharing a large part of the audience with terrestrial licensees. The Tribunal was told during its

inquiry that some regional stations have objected to the proposed overlap and the total population figure objected to is 64 613. If those objections are sustained, then the south-east RCTS licensee is left with a population of 99 217.

1·9 Population to be served by retransmission sites

In the Schedule attached to the Minister's Direction for the RCTS Inquiry three communities in New South Wales are identified as sites where the successful applicant will be required to provide terrestrial retransmission facilities for the service. These

'retransmission sites' are to be constructed to standards, 'no less than those of self-help Television Reception Scheme' (3) The

2

applicant, S S E, has nominated two additional sites at Brewarrina and Wilcannia. Table 1. 2 indicates those communities to be served by retransmission facilities, and the make-up of the populations.

TABLE 1. 2

RETRANSMI SSI ON SI TES FOR THE SE ROTS ( 1981 CENSUS FIGURES)

Location Population Population Aboriginal Percentage in towns in LGA Population in LGAs

Bourke 3 326 4 303 818 19 per cent

Brewarrina 1 236 2 435 732 30 per cent

Lightning Ridge 1 112 ) 6 696 1 176 17 per cent

Walgett 2 157 )

Wilcannia 982 3 241 587 18 per cent

Total 8 813 16 675 3 313 20 per cent

1. 10 As the strength of the retransmission facilities of the self-help television reception scheme is not very great, it seems likely that only residents of the actual townships will be able to receive RCTS via the retransmission facilities. Unless the applicant chooses to install more powerful retransmission facilities the population in the rest of the LGA will have to install its own reception facilities. Therefore using 1981 Census figures some 8 813 people will be served by retransmission sites. ( 4) This figure represents

12. 1 per cent of the population not included in service areas proposed for existing commercial television stations ( 72 789) . .

1. 11 Based on the figures used by the applicant, 16 675 people live in the LGAs of the five retransmission sites, which is approximately 10 per cent of the total population of 163 830 claimed by SSE. The .

applicant has based its financial proj ections on these figures.

Isolated population

1. 12 The truly isolated population in the south-east RCTS service area is in the vicinity of 50 000 people. This is the population outside towns and communities ( and not in the area of proposed ,

overlap) who will have to install TVROs to receive a television signal. Approximately 70 per cent of the population not included in service areas proposed for existing commercial television stations ( see Table 1. 1 in this report) in the south-east region is isolated. This is a substantially higher proportion than any other RCTS region ( see Table 2. 1, First Report) , and will obviously put an onus on the licensee to provide advice and encouragement on the installation of TVROs. This onus will also extend to the provision of a high and appropriate level of service.

3

Service area penetration

1.13 The applicant's revenue projections assume a service area penetration of 50 per cent in the first year of operation, of 75 per cent in the second year, in the third 85 per cent, in the fourth 90 per cent, and in the fifth 95 per cent. SSE believe it has made its calculations on a fairly conservative basis.

1.14 SSE also believe that the Government and its Department of Communications should mount a very strong publicity campaign to promote the service through regional newspapers, capital city newspapers and magazines, as well as through national radio and television services which penetrate the outback area. The applicant has indicated that it will be employing a liaison officer to visit remote areas and to stimulate interest in self-help

facilities and TVROs.

1.15 The rate of penetration will obviously depend on how willing residents in the overlap areas are to install self-help facilities and TVROs. Although the signal some residents currently receive may not meet DOCs technical specifications, residents may not find

it poor enough to warrant spending $2 500 on a TVRO particularly when the ABC is received by many. The incentive to invest in TVROs or self-help facilities may not be as significant as the applicant anticipates, which will obviously affect the level of penetration. Ultimately the judgment of who is and isn't underserved will be made by the populations concerned and will be borne out in

collective or individual decisions to access the service by self­ help means. It also has to be borne in mind that there could be a choice between a poor signal from an existing regional transmitter which may provide multiple channels as equalisation of regional

services progresses and RCTS which will only provide one service.

Conclusion

1.16 It is reasonable to conclude that the south-east RCTS licensee will serve a minimum potential audience of not less than 8 813 at the commencement of the service, provided retransmission facilities at the five sites are fully operational.

1.17 The rate at which this minimum potential audience can be increased will depend, inter alia, upon the ability of the licensee to provide appropriate advice and support to those communities and isolated populations beyond the reach of retransmission sites.

1.18 In estimating the maximum population available to the RCTS licensee the Minister's policy of 'overlap' should also be taken into account. In areas of overlap, both the existing licensee and the RCTS licensee will be entitled to provide retransmission facilities to serve any communities which are presently unserved, or inadequately served. Further, it remains Government policy that any household within an RCTS service area may install an individual earth station to receive the RCTS signal, whether in an area of overlap or not.(5) However, as mentioned earlier, the rate of installation of self-help facilities and TVROs will depend on the

4

willingness of the populations in overlap areas to outlay the cash to provide reception facilities and their perception of the services being offered.

1.19 Therefore, based on 1981 Census statistics and the final service area determination for the south-east region, the minimum potential audience available to the service in subsequent periods would not be less than 72 789. This could be as high as 166 343 if residents

in the areas of overlap install reception facilities. Given that the annual growth rate of the population is 2.06 per cent (see Table 2.1, First Report) a significant increase in these figures could be expected by 1986.

CHARACTERISTICS OF THE SOUTH-EAST RCTS SERVICE AREA (6 )

1.20 A licensee is required under Sub-section 83(5) of the Act to provide an adequate and comprehensive service having regard to, inter alia, the nature and diversity of the community to be served. A brief profile of the south-east region follows.

1.21 In the western and the north-east regions, for the purpose of providing a concise socio-economic profile of the service area, a description was made in terms of Statistical Divisions. The nature of the south-east service area makes it impracticable to take this

approach. The south-east RCTS service area covers parts of three states - New South Wales, Victoria and Tasmania - and only the whole of three Statistical Divisions are included. Small areas of nine other statistical Divisions make up the remainder of the

service area. There are few large centres in the service area and any economic activity is of a relatively minor nature in comparison to other areas of the three states. Thus the description of the south-east RCTS service area will not be made in terms of

Statistical Divisions but will be a more general, geographically- based description.

1.22 The south-east zone is an area of enormous diversity in geographical and climatic terms. The area it covers takes in the north-west and far west of NSW, the Snowy Mountain region, the East Gippsland area of Victoria and the mountainous wilderness of western Tasmania. A brief profile of each area follows.

North-west and far-west NSW

1.23 The major part of the north-west and far-west of NSW is semi-arid with temperatures ranging from hot in summer to mild to cool in winter. The north-west area is well served by railways and roads; the Sydney-Perth railway line, the Silver City Highway and the

Barrier Highway run through the far-west. The major agricultural activity in the north-west is wheat growing, usually in association with sheep or beef cattle grazing. In the west, sheep grazing in association with beef cattle is the major agricultural activity.

The mining centre of the west. Broken Hill, is already served by commercial television.

Snowy Mountain region

1.24 The Snowy Mountain region has the highest elevations in Australia with its snowfields being a major tourist attraction. The region is an important water conservation area and is the site of the NSW State Hydro Electricity Scheme. Merino sheep are the principal

source of livelihood. This is supplemented in some areas by forestry activity.

East Gippsland

1.25 This is probably the most remote area of Victoria, covering the southern end of the Snowy Mountains and large areas of national park across to the coast. Forestry is the major activity. The climate is more temperate closer to the coast.

Western Tasmania

1.26 Almost all of the western half of Tasmania is included in the south-east RCTS service area. The climate is mostly mild to cold, and wet. The major economic activities are forestry and mining with some agricultural, pastoral and dairying activities. The

region is also an important water catchment area which is used for generating hydro-electricity.

General

1.27 Overall, agriculture is the major employer in the south-east RCTS service area. Other occupations not already detailed include milling, tourism, government and semi-government industries, transport and communications.

EXTENT AND SERVICE OF EXISTING MEDIA

1.28 Sub-section 83(5) of the Act requires a licensee to have regard to the nature of other broadcasting and television services (if any), of which satisfactory reception is being obtained by the community.

Broadcasting and television stations

1.29 Table 1.3 indicates the existing broadcasting and television stations in the service area. There are by definition no commercial television stations, except in the areas of proposed overlap. There are national television and radio stations, including RATV sites and translators, some commercial radio

(although some stations originate signals outside the RCTS service area they are transmitted to areas on the periphery of the RCTS service area), and one public broadcasting station.

1.30 As has already been discussed (refer paras 5.153-5.162 First Report), ABC HACBSS will not be providing a special remote area service, but will broadcast a national service. It will therefore be necessary for the RCTS licensee to provide a service which takes account of the special needs and diversity of interests of the service area.

6

TABLE 1.3

EXISTING TELEVISION AND BROADCASTING STATIONS IN THE SOUTH-EAST RCTS SERVICE AREA

Location National National Commercial Public

TV Radio Radio Radio

Alexandra ABGV-3/5A Bega 2BE

Bicheno ABT-2/4

Bourke * ABN-2/4 2WEB

Brewarrina * ABN-2/4 Byrock 2BY

Cann River ABLV-4/11 Cobar ABN-2/2(V)

Colac 3CS

Eildon ABGV-3/5A/1

Fingal 7FQ

Goodooga RATV

Grassy ABKT-11

Ivanhoe RATV

Lightening Ridge * RATV

Lithgow 2LT

Luina ABNT-3/2

Menindee ABLN-2/9(V) Mildura 3MA

Mudgee 2MG

Mungindi ABMIN-10

Omeo 3MT

Parkes 2PK

Queenstown ABT-2/4 7QN 7QT

Rosebery ABT-2/4/1 Savage River ABNT-3/2/4 Strahan ABT-2/4/10

Strathgordon ABT-2/5 Tottenham RATV

Walgett * RATV

Wilcannia * RATV 2WA

* Communities where retransmission sites are to be established.

7

Newspaper and magazines

1.31 In its application for the south-east RCTS licence, SSE identified the following papers as originating in the service area:

Bourke Walgett Kilmore Korumburra Warracknabeal

The Western Herald The Spectator Kilmore Free Press South Gippsland Sentinel-Times Warracknabeal Herald

VCRs

1.32 In all its RCTS inquiries the Tribunal has heard evidence of the high ownership of VCRs in remote areas. SSE commissioned McNair Anderson to undertake a research study in the RCTS service area in July/August 1985.(7) Of the 301 respondents, 34 per cent owned VCRs. The highest proportion of VCR ownership was in the north­ west of the service area where 52 per cent of respondents owned VCRs.

1.33 As discussed in the SPS Report (8) the extent of penetration of VCRs is much higher in remote areas than elsewhere in Australia. In Chapter 2 of the First Report (para. 2.82) it was stated that VCR penetration has been used as a yardstick to gauge the amount of money that remote and underserved populations would be prepared to pay to receive a satellite-delivered commercial television service.

SPECIAL INTEREST POPULATIONS IN THE SOUTH-EAST SERVICE AREA

1.34 Aboriginal populations

Aboriginal needs have been specifically identified as requiring attention by remote area television services (refer para 2.151 First Report). The Aboriginal population in the south-east region forms about 3.37 per cent of the total population. However, (based on figures provided to the Tribunal by the applicant) in NSW and the ACT it amounts to 6.3 per cent, in Tasmania it is 0.38 per cent, and in Victoria, 0.32 per cent.(9) This percentage rises considerably in some areas in the north of New South Wales, especially in the five areas where retransmission facilities are to be established.

1.35 The applicant, using 1981 Census figures, has identified the Aboriginal population in the south-east RCTS service area as being 5 535. The Department of Aboriginal Affairs ('DAA1) has identified 50 Aboriginal communities in NSW with a total population of 6 656, and three communities in Victoria and Tasmania with a population of 261. Mr John Berwick, who appeared as a witness for the NSW Ministry of Aboriginal Affairs, told the Tribunal that there is a very real problem of non-participation of Aboriginal people in Census gathering operations, and consequently that there could be at least 10 per cent more Aboriginals in the total population.

8

1.36 The five communities where the ROTS licensee will install retransmission facilities are located in the north-west of New South Wales, and have a much higher proportion of Aboriginals in the population than elsewhere in the service area. Mr Wilton Lean, the Application Manager for Satellite South East Pty Limited, gave

evidence to the Tribunal regarding Aboriginal populations in the north-west of NSW (refer Table 1.2 in this Chapter) and indicated that in the largest towns in the north-west of New South Wales there is a significant concentration of Aboriginals. The

implications of this for local production and windows at retransmission sites will be discussed in Chapter 4.

1.37 Mr Berwick also gave evidence to the Tribunal regarding Aboriginal media needs in these areas. The Tribunal was told that in these north-west towns there is a substantial level of social conflict and that Aboriginal people feel very deeply that often they are

misrepresented in the media. The Ministry believes that if Aboriginals could have some access to the media to put their view point and to show Aboriginals engaged in positive activities, for example sport, then this ill feeling and misunderstanding on both

sides could be greatly reduced over time. Mr Lean agreed that if more attention were given to the Aboriginal viewpoint by the media this would help to reduce tensions and conflicts (this is discussed further in the Production section of Chapter 4).

1.38 The Ministry in its written submission to the Tribunal (10) stated that the significant advances Aboriginal people have made over the last decade have been based upon the recognition of the cultural integrity of Aboriginal people by the wider community and the Ministry feels that the additional granting of access to suitable

facilities will further enhance the situation (this is discussed further in Chapter 4, para 4.35 and 4.36)

1.39 The Ministry is asking that maximum consultation take place consistent with the recommendation in the First Report (para 13.73). While the Ministry realises that this has to be subject to various considerations, for example the commercial reality of television operations and the Federal legislation which sets the framework for broadcasting, it believes that the appropriate body for consultation between the RCTS licensee and Aboriginal communities is the North West Regional Aboriginal Land Council. This body is composed of delegates from sixteen local Aboriginal

land councils.(11) Mr Berwick told the Tribunal that the land council structure was set up to fulfill the role of representation of Aboriginal interests across the state, not only in the claiming of land, and is therefore the appropriate body through which various aspects of community development may be carried out.

1.40 The Tribunal raised the issue of alcohol advertising in Aboriginal communities with Mr Berwick, who indicated that the NSW Ministry of Aboriginal Affairs held similar views to DAA, and that they believed that it could be better to limit alcohol advertising

in Aboriginal communities.

9

1.41 The Tribunal also heard evidence from representatives of two other Aboriginal organisations. Mr Robert Merritt, Co-ordinator of the Eora Centre, told the Tribunal:

I think without fear of contradiction, if there was time allotted for Aboriginal content, firstly my main concern is just because you are an Aboriginal it does not mean that you get up there and put anything up there. I think the recipients have to, and they are entitled to have high quality staff. So therefore it is just like a normal production. You get a team around you and you do the best you can and hopefully on the way through you train Aboriginals to present their own stuff (t.p. 4221)

1.42 Mr Merritt is one of the directors of Corroboree Films, and has just sold a 1 hour documentary to the ABC. The film, Eora Corroboree, was viewed by the Tribunal who noted that it was very well produced and provided a valuable insight into Aboriginal attitudes and the workings of the Eora Centre. The Eora Centre is soon to install video production equipment to the level of the

'Live Eye' equipment used by commercial broadcasters. The Eora Centre currently runs an 18 month course to train Aboriginals in all aspects of theatre, dance, music and film. It has 90 students and hopes to extend the course to a 3 year full-time credited course. Mr Merritt is a scriptwriter and has a full-length film currently in production. Students from the Eora Centre are filling all the acting roles.

1.43 The third Aboriginal representative to appear before the Tribunal was Mr Lester Bostock from the National Aboriginal and Islander Broadcasting Association ('NAIBA*). NAIBA was first set up in 1981 as a loose collection of Aboriginal broadcasters who were mainly working on public stations. It now has 25 representatives from various public stations. Mr Bostock gave evidence to the Tribunal

on training Aboriginals in the areas of broadcasting, film and video. Through the Victorian Koori College, the Film and Television School and Metro TV about 20 or 30 Aboriginal people have been trained in all areas of video making. There are also 90 Aboriginals being trained by the ABC, through the CES, over a 3 year period. When asked if there are Aboriginal people capable of being involved in production for the RCTS, Mr Bostock said:

I think they are there. I believe very strongly that they are there. There are a lot of people who have been trained - because they cannot find jobs in the industry anywhere they have gone back home and are

just living on unemployment. I think that there are people there who can fill those positions and we would - as someone said earlier this morning, Aborigines tend to be the most overtrained people in Australia and there are people there who have the

skills who are just doing nothing. This is one of the tragedies, that the people are there, (t. p.4243)

10

1.44 Mr Bostock said that it was his feeling that the commercial industry had not made any attempt to recruit or encourage Aboriginal people to become involved in it. He also felt that access to television was a way to break down barriers, and if Aboriginals are seen on television, then non-Aboriginal people will

see a more positive side to their character. Children's television was one area he especially mentioned, where the richness of Aboriginal story-telling could be used to advantage on television.

Conclusion

1.45 The applicant, Satellite South East Pty Limited, has done no research on Aboriginal needs to date, nor has it made any contact with Aboriginal groups. The evidence the Tribunal heard indicated a deep concern by Aboriginal people about the RCTS and a hope that

it can go some way towards meeting their needs. The Tribunal is therefore concerned that the applicant, if it is successful, carry out research into Aboriginal needs and interests in the service area, and that Aboriginal communities and organisations be involved

in this ascertainment process. The Tribunal believes these needs should be addressed when the program schedule is compiled and production plans are considered. This will be discussed further in Chapter 4.

EDUCATIONAL NEEDS OF REMOTE AND UNSERVED AREAS OF THE SOUTH-EAST REGION

1.46 The Tribunal has, during the course of its RCTS inquiry, heard a lot of evidence about the educational needs of remote area residents. While no representatives from educational bodies or Departments were present or gave evidence to the Tribunal during ,

the south-east region inquiry, the NSW Minister for Education, Mr R Cavalier, tendered a supplementary submission to an earlier ■

submission by the Australian Education Council.(12) No submissions were received from the Victorian or Tasmanian Minister for Education.

1.47 In his submission, Mr Cavalier stated that the introduction of satellite communications has provided an occasion for a re­ examination of the educational uses of all types of telecommunications systems and is encouraging educational planners to rationally examine their present and future communications systems. Mr Cavalier recommended that licensees be required to make available some minimum amount of time for educational broadcasting directly related to curricula and educational programs

of schools, technical and further education, and higher education institutions. He believes that as experience is gained and the awareness of users raised, that the demand for educational programs through the medium of the satellite will increase. It was also stated in the submission:

Knowledge that access is available will make it possible for educational providers to expedite their evaluation, co-ordinate other educational services

11

with the facilities offered by satellite communications and plan for the commitment of funds for the acquisition or production of program materials.(13)

1.48 The supplement also included a submission made by the Director General of the New South Wales Department of Technical and Further Education. It was stated in this submission that the NSW Department of TAPE has shared the use of ABC radio and television broadcasts to meet the needs of students enrolled in The School of General Studies. It would expect that the ABC would continue to provide these transmissions on its HACBSS service. It is more difficult to provide for the needs of TAFE students studying other courses by correspondence:

TAFE is the most diversified sector in Tertiary Education. Access to the RCTS HACBSS2 service would make it possible to transmit a broad range of materials which at this time can only be lodged with TAFE Colleges and accessed by students who can make the necessary journey from their remote locations ... Since it is not mandatory that students undertaking training attend for their instruction at a TAFE College, the potential for the use of distance education teaching in the preparation of trainees makes the exploitation of satellite and other communications technology significant. (14)

1.49 The submission listed 13 potential applications of the satellite which will improve educational opportunities in remote areas. The NSW Department of TAFE submitted that it has particular needs arising from its educational brief which make it necessary to seek access to RCTS 'windows' in order that remote students whose interests could not otherwise be met, receive the necessary and appropriate consideration. In the submission it is stated that these windows should be provided at no cost to TAFE.

1.50 The Tribunal, throughout its inquiry, has heard evidence relating to the importance of educational broadcasts complementing the state-based curricula. This will be more difficult to achieve in the south-east region, where the service area covers three states, than in.the western or north-east region. It will be essential for the RCTS licensee to liaise with the various State Education Departments to ensure that the needs of students in all three states in the service area are catered for adequately. The ability of the applicant to ascertain the educational needs and interests of the south-east region population and to apply the result of such research is an important licensing criterion. The applicant's ability to comply with this criterion is the subject of Chapter 4.

12

NOTES TO CHAPTER 1

( 1 )

(2 )

(3)

(4) (5) (6 )

(7) (8 )

(9) ( 1 0)

( 1 1)

( 1 2)

( 1 3)

(14)

DOC Submission, Attachment L. DOC Submission, Introduction, p.7. DOC Submission, Attachment A: Schedule to Direction by the Minister for Communications.

DOC Submission, Attachment K. DOC: Letter to the Chairman, ABT, 28 June 1985. Sources used in this section are the NSW Year Book, 1985, the Victorian Year Book 1984, and the Tasmanian Year Book 1985.

Exhibit No. S9. SPS Report, Vol. 2, pp.29-30. Exhibit No. S7. Exhibit No. S11, p.2. Exhibit No. S12, p.2.

Submission No. 1-044. Letter from NSW Minister of Education to ABT 22.8.85 p.2. Ibid.

13

CHAPTER 2

EVALUATION OF THE APPLICATION FOR SOUTH-EAST LICENCE

THE CRITERIA TO BE APPLIED

2.1 In this and the following chapters the Tribunal examines and evaluates the application for the remote licence for the south-east region (the south-east licence). In doing so, the Tribunal draws, where appropriate, upon the material, views and conclusions set out

in its first report on remote commercial television services (RCTS) hereafter referred to as the First Report.

2.2 The criteria used by the Tribunal in evaluating this application are as follows, (First Report paras 9.1-9.5):

. Whether it is a fit and proper person to hold the RCTS licence;

. Whether it has the financial, technical and management capabilities necessary effectively to provide the RCTS;

. Whether it has the capabilities:

(a) to provide an adequate and comprehensive service in pursuance of the licence, having regard to: the nature of the community to be served in pursuance of the licence; the diversity of the interests of that community; and the nature of the other broadcasting and television services (if any) of which satisfactory reception is being obtained by that community;

(b) to encourage the provision of programs wholly or substantially produced in Australia and use, and encourage the use of, Australian creative resources in and in connection with the provision of programs;

. Whether it is otherwise capable of complying with the conditions of the licence;

. The need for the commercial viability of other stations in the service area;

• The need to avoid undue concentration of the ownership or control of the media;

• The need to avoid control, direct or indirect, by foreign persons;

• The need to ensure the availability of at least one service;

• Whether an RCTS licence as contemplated by the terms of reference is the kind of licence that should be granted;

14

2.3 These criteria are generally reflected in the recent amendments to the Broadcasting and Television Act 1942 ('The Act'), which come into effect on 1 January 1986. These amendments provide for the grant of a remote licence, and section 83(6)(da) sets out the

grounds on which the Tribunal may refuse the grant of such a remote licence. It provides:

(6) The Tribunal shall not refuse to grant a licence to a person unless it has held an inquiry into the grant of the licence and -

(da) where the licence is a remote licence, it appears to the Tribunal, having regard to the following matters or circumstances, that it is advisable in the public interest to refuse to grant the licence to the person:

(i) it is not satisfied that the person -

(A) is a fit and proper person to hold the licence; (B) has the financial, technical and management capabilities necessary

to provide an adequate and comprehensive service pursuant to the licence; and (C) is otherwise capable of complying

with the conditions of the licence;

(ii) where the service area of the licence overlaps the service area of another licence or other licences - the need for the commercial viability of the service or services provided pursuant to the other licence or other

licences;

(iii) subject to the desirability of ensuring that, in all parts of Australia, there are available at least one service provided pursuant to a commercial radio licence or

remote radio licence and one service provided pursuant to a commercial television licence or remote television licence, the need to avoid

an undue concentration of the ownership of control, direct or indirect, of the media in the service area of the licence;

15

(iv) the likelihood that, if the Tribunal granted the licence, a person would, in relation to the licence or the holder of the licence, contravene an order of the Tribunal made for the purposes of section 92V;

(v) any relevant government policy statements;

(vi) any matters prescribed by regulations for the purposes of this paragraph;

(vii) any other matters or circumstances that the Tribunal considers relevant;

Section 102(1) of the Act as amended provides that the Tribunal is to grant a remote licence as soon as practicable after 1 January 1986, (the commencement date of the legislation), without holding an inquiry, to a person it has recommended in this inquiry. The legislation is discussed in Chapter 3 of the First Report.

FIT AND PROPER PERSON

The scope of this phrase in relation to remote licences was considered in the First Report at para 9.6, and the same principles have been applied in the consideration of this application. Therefore, the Tribunal has generally applied the principles set out in its Policy Statement POS 09 in its evaluation of the application. However, some change is necessary particularly in relation to ownership and control matters because of the wide discretion the Tribunal has in this area: First Report paras 3.24­ 3.32. In the First Report (para 3.1) the Tribunal outlined the factors it would consider in determining the extent of concentration that is or would be present in a particular case and whether that is contrary to the Government's policy objectives. Those factors are as follows:

. The structure of the applicant identifying, in particular, persons who have an interest direct or indirect of more than 15 per cent in the applicant.

. The nature, extent and relative size of the existing media interests of the applicant, including any person who has an interest of more than 15 per cent in the applicant:

a) in the proposed service area for the RCTS licence;

b) in the region covered by the RCTS footprint;

c) nationally.

16

The effect that the grant of the RCTS licence would have on the nature, extent and relative size of the applicant's media interests.

The extent of any interest held in the applicant by a foreign person and particularly whether a foreign person has an interest direct or indirect of more than 15 per cent in the applicant.

THE APPLICATION BY SATELLITE SOOTH EAST PTY LIMITED

2.6 The Tribunal now turns to consider this application. For convenience, this application will be referred to in these chapters as the SSE application and the applicant, pursuant to the application, will be referred to as SSE. SSE is a company with twelve equal shareholders who together hold or control all the regional television licences in the Australian Capital Territory, New South Wales, Victoria and Tasmania (including Hobart), with the

exception of BKN-7 Broken Hill. The shareholders of SSE are set out below; they each have an 8.33 per cent interest in SSE:

. Associated Broadcasting Services Limited . Australian Capital Television Pty Limited . Broadcast and Communications Limited . Country Television Services Limited

. ENT Limited . NBN Limited . Northern Rivers Television Limited

. Riverina and North East Victoria TV Limited . Southern Cross Communications Limited . Sunraysia Television Limited . Television New England Limited . TWT Limited

2.7 Mr William Rayner, Chairman of directors of SSE and Chief Executive of Australian Capital Television Pty Limited, told the Tribunal that the metropolitan commercial television stations in Sydney and Melbourne had declined to join SSE. However, Mr Rayner indicated,

during the following exchange with the members of the Tribunal, that a standing invitation, in effect existed for these stations to join SSE:

MS JAMES-BAILEY: If I could now pick you up on a couple of things you said earlier. You said that the company would not necessarily be limited to the existing 12 shareholders. Is there any plans in the immediate future to extend that and what did you have in mind in making that statement?

MR RAYNER: I said earlier, Ms James-Bailey, that it was our fervent wish always that this be a consortium of all broadcasters in the beam. We believe that that would be a proper way to go, because all

broadcasters would at the same time get some

17

experience in satellite technology. They would be able to co-operate and exchange information and none of them would feel threatened. We have in the past spoken to the Sydney and Melbourne stations and they have considered it. They have not joined us at this time, but they may. The door is not closed to them. Also, who knows, Satellite South-East may have rather wider implications for the future than its present area. Who knows in the restructuring of broadcasting, throwing around words like aggregation and so on, what well may happen? I do not know. It is a broadcasting company which intends to have a future. We would like as many broadcasters as possible to join us in the venture. There may be others outside broadcasting who may well see opportunities in RCTS. I say no more than that, Mr Chairman.

THE CHAIRMAN: You have not got a closed door as participation by other - - -

MR RAYNER: I make that point, not at all.

MS JAMES-BAILEY: If we could just pursue that a little, particularly with the metropolitan companies, the four metropolitan companies, the situation still exists that if any one of them was interested, you wold be talking to them?

MR RAYNER: We would be very interested talking to any body with an interest in broadcasting.

MS JAMES-BAILEY: Would it be on the basis of an equal share?

MR RAYNER: Not necessarily. It may well be that in the initial stages the capital required may be more than some of the smaller members can bear. It may be that larger members may want to take a greater share. That is the flexibility of the company way.

(transcript, pp. 4268-4269)

The applicant however does not include any metropolitan companies in its consortium and therefore the issue of whether the inclusion of any of the four Sydney and Melbourne companies would create undue concentration of ownership for the applicant has not been considered. It would be addressed by the Tribunal, in the event of a metropolitan licensee seeking to become a shareholder in SSE.

2.8 The twelve member Board of Directors of SSE is comprised of a Chief Executive from each of the twelve 'broadcasting organisations' operated by the twelve respective shareholders in SSE. Mr Wilton Lean, Chairman of TWT Limited and currently employed by SSE to manage the SSE application, stated that this

'executive kind of management board' would 'work closely' with

18

the Chief Executive of SSE (transcript p. 3979). Both Mr Rayner and Mr Michael Moroney (Director of SSE and General Manager of Television New England Limited), told the Tribunal that although SSE's proposed commercial television station, for the RCTS in the

south-east region, would be situated adjacent to CTC-7 Canberra, SSE's operations would be largely separate from those of its shareholders, including Australian Capital Television Pty Limited which holds the licence for CTC-7.

2.9 The current significant media interests of each member of SSF are as follows :

Associated Broadcasting Services Limited

. Wholly owns Ballarat and Western Victoria Television Ltd, which holds the licence for BTV-6 Ballarat.

. Wholly owns Goulburn-Murray Television Ltd, which holds the licence for GMV-6 Goulburn Valley.

. Holds the licence for 3SR Shepparton.

• Holds the licence for 3UL Warragul.

Ballarat Courier Pty Ltd and its wholly owned subsidiary Ballarat Broadcasters Pty Ltd together hold 20.37 per cent of the shares in Associated Broadcasting Services. The other media interests of the Ballarat Courier Group are as follows:

. Holds the licence for 3BA Ballarat.

. Publishes the 'Ballarat Courier'.

Australian Capital Television Pty Limited

. Holds the licence for CTC-7 Canberra.

Mr K M Stokes is deemed to control Australian Capital Equity Pty Ltd, which wholly owns Australian Capital Television. The other media interests of Mr Stokes are as follows :

. Holds 31.51 percent of the shares in New Broadcasting Ltd, which holds the licence for 6NOW Perth;

. Mr Stokes is a major shareholder in West Coast Telecasters Ltd, which is an applicant for the third commercial television licence in Perth.

Broadcast and Communications Limited

Wholly owns Broadcast Operations Ltd, which :

. Holds the licence for MTN-9 Murrumbidgee Irrigation Area;

. Holds the licence for 2RG Griffith.

19

3KZ Radio Pty Ltd, a wholly owned subsidiary of Industrial Printing and Publicity Co Ltd, is deemed to be in a position to control Broadcast and Communications Ltd.* The other media interests of 3KZ Radio Pty Ltd and Industrial Printing and Publishing Co Ltd are as follows :

. Industrial Printing and Publishing Co Ltd holds the licence for 3KZ Melbourne.

. 3KZ Radio Pty Ltd wholly owns HMA Broadcasters Pty Ltd which holds the licence for 7LA Launceston.

* Tribunal approval of the recent acquisitions by 3KZ Radio Pty Ltd in Broadcast and Communications Ltd (which has resulted in the former being deemed to control the latter), has not yet been granted.

Country Television Services-Limited

. Holds the licence for CBN-8 Central Tablelands.

. Holds the licence for CWN-6 Central Western Slopes.

. Holds the licence for 2GZ Orange.

. Holds the licence for 2NZ Inverell.

. Holds 4.5 percent of the shares in Broadcast and Communications Ltd (see above).

. Also has minor interests in other commercial radio and television stations

ENT Limited

Wholly owns Tasmanian Television Ltd, which holds the licence for TVT-6 Hobart.

Wholly owns Northern Television Pty Ltd, which holds the licence for TNT-9 North Eastern Tasmania.

Wholly owns Tasradio Pty Ltd, which holds the licence for 7HT Hobart and for 7EX Launceston.

Wholly owns Sunshine Coast Broadcasters Ltd, which holds the licence for 4SS Nambour.*

Wholly owns the Examiner Newspaper Pty Ltd, which publishes in Launceston 'The Examiner1, 1 Launceston Week' and 'Sunday Examiner Express'.

20

. Holds a minor interest in Davies Brothers Ltd, which publishes in Hobart 'The Mercury' and the 'Sunday Tasmanian'.

* ENT recently advised that it had sold 4SS and had purchased commercial radio station 3UZ Melbourne. Both transactions are subject to Tribunal approval.

NBN Limited

. Holds the licence for NBN-3 Newcastle-Hunter River.

Parry Corporation Ltd (Group) owns 99 percent of the shares in Hadjoin, which in turn owns 99.99 per cent of the shares in NBN Limited. The Parry Group also holds 19.07 per cent of the shares in Rockhampton Television Ltd, which in turn :

. Holds the licence for RTQ-7 Rockhampton;

Northern Rivers Television Limited

. Holds the licence for NRN-11 Grafton-Kempsey.

. Wholly owns Richmond-Tweed TV Ltd, which holds the licence for RTN-8 Richmond-Tweed.

Northern Star Holdings Ltd holds 76.21 per cent of the shares in Northern Rivers Television Ltd. The other media interests of Northern Star Holdings Ltd are as follows :

. Wholly owns Richmond River Broadcasters Pty Ltd which holds the licence for 2LM Lismore.

. Wholly owns Gold Coast Radio Broadcasting Co Pty Ltd which holds the licence for 4GG Gold Coast.*

. Owns 31.27 per cent of the shares in Tweed Radio and Broadcasting Co Pty Ltd which holds the licence for 2MW Murwillumbah.

. Publishes the following regional newspapers : 'The Daily Examiner' (Grafton), 'The Daily News - Gold Coaster' (Murwillumbah), 'The Northern Star' (Lismore), 'The Advocate' (Coffs Harbour), 'North Coast Advocate' (Ballina and Byron Shires), 'Richmond River Express Examiner'

(Casino), 'Gold Coast Bulletin' (Gold Coast).

* Tribunal approval of this acquisition has not yet been granted.

Riverina and North East Victoria TV Limited

. Holds the licence for RVN-2 South-Western Slopes and Eastern Riverina.

. Holds the licence for AMV-4 Upper Murray.

21

Southern Cross Communications Limited

. Wholly owns Barrier Reef Broadcasting Pty Ltd, which holds the licence for 4MK Mackay.*

. Holds 15 per cent of the shares in North East Broadcasters Pty Ltd, which holds the licence for 3NE Wangaratta.

Techcom Australia Pty Ltd wholly owns Southern Cross Communications Ltd. A wholly-owned subsidiary of Southern Cross Communications, Victoria Broadcasting Network Pty Ltd, holds the following licences in trust for a partnership comprising Techcom Australia Pty Ltd and Tri-City TV Pty Ltd (another wholly owned subsidiary of Southern Cross Communications) :

. BCV-8 Bendigo . GLV-8 La Trobe Valley . 3TR Sale.

* 4MK has recently been sold to the Universal Telecasters Group. As noted in the Second Report (para 2.14), this transaction is subject to Tribunal approval.

Sunraysia Television Limited

. Holds the licence for STV-8 Mildura.

The Lanyon Family indirectly holds 27.98 per cent of the shares in Sunraysia Television. The other media interests of the Lanyon Family are as follows:

. Wholly owns the Elliott Newspaper Group Pty Ltd, whose subsidiary, Sunraysia Broadcasters Pty Ltd, holds the licence for 3MA Mildura.

. Through the Elliott Newspaper Group and its subsidiaries publishes the following regional newspapers: 'Swan Hill Guardian', 'Castlemaine Mail', 'Kyneton Guardian', 'Midlands Express' (Kyneton), 'Gippsland Times' (Sale), 'Maffra Spectator', 'The Weekly Trading Guide' and the 'Sunraysia Daily'.

. Owns 68.10 per cent of the shares in Regional Communications Pty Ltd which holds the licence for 3YB Warrnambool.

Television New England Limited

. Holds the licence for NEN-9 Upper Namoi.

. Holds the licence for ECN-8 Manning River.

. Wholly owns Manning Valley Broadcasting Pty Ltd, which holds the licence for 2RE Taree.

22

. Wholly owns 2M0 Gunnedah Pty Ltd, which holds the licence for 2MO Gunnedah.

. Wholly owns Tamworth Radio Development Co Pty Ltd, which holds the licence for 2TM Tamworth.

. Wholly owns Amalgamated Marketing Pty Ltd which holds the licence for 4WK Warwick.

. Holds 50 per cent of the shares in New England Broadc .sters Pty Ltd, which holds the licence for 2AD Armidale.

. Television New England also has minor interests in other television stations.

TWT Limited

. Holds the licence for WIN-4 Illawarra.

WIN Properties Pty Ltd, a wholly owned subsidiary of TWT:

. Holds just under 5 per cent of the shares in Country Television Services Ltd (see above);

. Holds 3.31 per cent of the shares in Television New England Ltd (see above);

. Has minor interests in other commercial radio and television stations.

2.10 The service area for the RCTS in the south-east region has been determined by the Minister. Some of the television stations controlled by SSE members will be adjacent to the RCTS service area and all but RTQ-7 Rockhampton will be within the region covered by the south-east satellite beam.

2.11 The nature and size of the television and radio markets in the Australian Capital Territory, New South Wales, Victoria and Tasmania are detailed below in Table 2.1. The figures are based on estimates contained in George Patterson's latest publication of

Status of the Media 1985.

23

TABLE 2.1

(a) Television

Market Stations

Potential Viewers

Potential Households

George Patterson Ranking

Sydney ATN/TCN/TEN 3,240,000 1,080,000 1

Melbourne HSV/GTV/ATV 2,991,000 997,000 2

Newcastle NBN 588,000 196,000 8

Ballarat/ Shepparton BTV/GMV 542,100 180,700 9

Bendigo/Traralgon/ Mildura BCV/GLV/STV 411,900 137,300 10

Tasmania TVT/TNT 408,300 136,100 11

Goffs Harbour/ Lismore NRN/RTN 364,200 121,400 12

Wollongong WIN 334,200 111,400 13

Orange/Dubbo/ Griffith CBN/CWN/MTN 302,700 100,900 15

Tamworth/Taree NEN/ECN 295,800 98,600 16

Canberra CTC 278,400 92,800 18

Wagga/Albury RVN/AMV 258,900 86,300 19

Broken Hill/ Port Pirie BKN/GTS 172,200 57,400 26

(The Television figures provided by George Patterson are for households. The figure for viewers has been calculated applying a multiplier of 3)

24

(b) Radio

Potential Listeners

George Patterson Ranking Market Stations

Sydney

Melbourne

Newcastle Canberra Wollongong Gold Coast

Hobart Gosford Katoomba/Penrith Geelong Ballarat/Colac Wagga/Griff ith

Shepparton/Maryborough Shepparton/Deniliquin Midcoast Sale Burnie/Devonport Warragul Lismore Albury

Shepparton Launceston/Scottsdale Tamworth/Gunnedah

Bathurst/Orange Bendigo/Maryborough Hamilton/Warrnambool Nowra Wimmera/Malee

Dubbo Taree Wangaratta

Young Swan Hill Bega Mildura

Grafton Moree Armidale Inverell Parkes

Goulburn Muswellbrook Broken Hill Lithgow

Mudgee Cooma Queenstown

2CH/2GB/2KY/2SM/2UE/ 2UW/2WS/2DAY/2MMM 3AK/3AW/3DB/3KZ/3UZ/ 3XY/3MP/3EON/3FOX 2HD/2KO/2NX 2CA/2CC 200/2WL RAD1097/4GG 7HO/7HT

2G0 2KA 3GL 3BA/3CS 2WG/2RG 3SR/3CV 3SR/2QN 2MC

3TR 7BU/7AD 3UL 2LM 2AY 3SR 7EX/7LA/7SD 2TM/2MO 2BS/2GZ 3BO/3CV

3HA/3YB 2ST 3WM 2DU 2RE 3NE 2LF 3SH 2BE

3MA 2GF 2VM 2AD 2NZ 2PK 2GN 2NM

2BH 2LT 2MG 2XL 7QT

3,001,800 1

2,982,500 2

448.400 6

275.100 7

251.800 8

234.000 9

206.100 10

194,900 11

193.200 12

185.400 13

140,100 17

135.600 18

135.000 19

134.200 20

130.400 21

126.600 22

115.200 23

108,300 25

107.800 26

99.100 29

95.000 31

93.700 32

93.300 33

93.300 34

87.400 36

82.800 37

71.300 38

69.100 39

66.400 40

60.600 42

56.700 43

50.600 45

47.700 46

45.800 49

44.600 50

39.100 51

39.100 52

37.100 54

35.800 58

34.700 60

33.600 63

31.000 64

27.200 67

21.200 74

19.100 75

14.400 77

10,500 83

25

2.12 These tables illustrate the different nature and size of commercial radio and television markets in the Australian Capital Territory, New South Wales, Victoria and Tasmania. By way of further illustration, commercial television is divided, outside Sydney, Melbourne, Brisbane, Adelaide and Perth into thirty-six markets, a number of which are combined by relay arrangements (the George Patterson rankings are based on thirty-five markets including metropolitan markets). On the other hand, commercial radio is divided outside the major capital cities into some ninety-five markets (the George Patterson rankings are based on some eighty-

four markets including metropolitan markets).

2.13 In considering issues of ownership and control, it is necessary to examine the relative position of SSE within the south-east region and nationally. If the television/radio audience of Australia and the south-east region is regarded as being of the order of 15 million and 10 million respectively, then based upon the stations they are deemed to control SSE shareholders collectively have access to the following commercial audiences :

. all the non-metropolitan (that is excluding Sydney and Melbourne) television audiences in the Australian Capital Territory, New South Wales, Victoria and Tasmania, except for those in the viewing area of BKN-7 Broken Hill. The equivalent figure for radio is about 30 per cent;

. about 40 per cent of both the television and radio audiences in the south east region;

. about 25 per cent of the television and just under 40 per cent of the radio audience nationally.

. there is no issue relating to the foreign ownership of SSE.

2.14 This analysis indicates that, collectively, SSE shareholders (including companies that are deemed to control those shareholders):

. do not control any metropolitan television station;

. have almost complete access to the non-metropolitan television audience in the south-east region;

. have substantial access to television audiences in the south-east region and nationally;

. control three metropolitan radio stations (3KZ and 3UZ* Melbourne and 6N0W Perth);

. have substantial access to radio audiences nationally, in the south-east region and in the non-metropolitan south-east region;

. have print media interests in some non-metropolitan areas of the south-east region

26

. do not have any media interests within the proposed RCTS service area (excluding service area overlaps).

* The 3UZ acquisition is subject to Tribunal approval.

2.15 All SSE members either hold commercial television licences or alternatively have wholly owned subsidiaries which hold commercial television licences. These licensees have had their performance examined by the Tribunal at a number of inquiries, see :

Report Number

BTV-6 Ballarat (Associated Broadcasting Services Ltd) 213/84 R(T)

GMV-BGoulburn Valley (Associated Broadcasting Services Ltd) 146/83 R(RT)

CTC-7 Canberra (Australian Capital Television Pt> r Ltd) 186/83 R(T)

MTN-9 Murrumbidgee Irrigation Areas (Broadcast and Communication Ltd) 178/83 OR(RT)

*CBN-8 Central Tablelands (Country Television Services Ltd)

178/83 200/84 OR(RT) 0(R)

and

*CWN-6 Central Western Slopes (Country Television Services Ltd)

178/83 200/84 OR(RT) 0 (R)

and

TVT-6 Hobart (ENT Limited) 108/82 OR(RT)

TNT-9 North Eastern Tasmania (ENT Limited) 108/82 OR(RT)

NBN-3 Newcastle-Hunter Valley (NBN Limited) 166/83 R(RT)

NRN-11 Grafton-Kemp sey (Northern Rivers Television Ltd) 229/84 R(T)

RTN-8 Richmond-Tweed (Northern Rivers Television Ltd) 229/84 R(T)

RVN-2 South Western Slopes and Eastern Riverina (Riverina and North East Victoria TV Ltd) 143/83 R(RT)

AMV-4 Upper Murray (Riverina and North East Victoria TV Ltd) 143/83 R(RT)

BCV-8 Bendigo (Southern Cross Communications)

146/83 235/84 R(RT) O(RT)

and

27

GLV-8 La Trobe Valley (Southern Cross Communications)

146/83 235/84 R(RT) O(RT)

STV-8 Mildura (Sunraysia Television Ltd) 146/83 R (RT)

NEN-9 Upper Namoi (Television New England Ltd) 228/84 R(T)

ECN-8 Manning River (Television New England Ltd) 228/84 R(T)

WIN-4 Illawarra (TWT Ltd) 218/84 R(T)

* The acquisition by Roslyndale Securities Pty Ltd and related persons of a controlling interest in Country Television Services was approved by the Tribunal on 28 October 1985, Report No. 3 24/85.

2.16 At these inquiries the Tribunal has been satisfied as to the fitness and propriety of each licensee. The Tribunal's assessment of the application of the other licensing criteria to these licensees is discussed later in this report.

CONCLUSIONS

2.17 Under the SSE application the RCTS licence will be held by a separate company, SSE. This is a company with 12 equal shareholders (8.33 per cent interest) who either hold or control regional television licences in New South Wales and Victoria and the television licences in Australian Capital Territory and Tasmania. An evaluation of the fitness and propriety of SSE therefore involves an examination of the qualities of these shareholders and those that control them.

2.18 As stated above, the Tribunal has found in licence renewal inquiries that the licensee companies (or those that control them) that comprise the shareholders of SSE are fit and proper persons to hold their licences. Leaving aside the issue of media concentration which is considered below, there is no evidence before the Tribunal in these proceedings to suggest that these companies are not fit and proper persons to hold their shareholdings in SSE as the RCTS licensee.

2.19 It is clear that the shareholders in SSE as a group have substantial access to television and radio audiences in the south east region and nationally. The addition of the RCTS will increase that access and give the group access to the total non-metropolitan television audience in the south-east region, with the exception of those people located within the viewing area of BKN-7 Broken Hill. It could be said that this would result in or add to undue concentration of the media nationally and regionally.

28

2.20 As was pointed out in the Second Report (para 2.22), there are a number of factors which militate against such a finding. First, no shareholder in SSE can be said to be in a position of deemed or commercial control of the RCTS licence. Ownership and control is

diffuse as it is spread among twelve shareholders. Second, no individual shareholder can be said to hold a substantial position in providing radio or television services in the region or nationally. This can be contrasted with the position of the applicant for the north-east licence. Third, the addition of the

RCTS service area does not represent a very significant increase in the population the shareholders in SSE already serve. Fourth, the Government's objective to discourage concentration at all three levels (national, regional and local) is conditional on its primary

emphasis of ensuring that at least one service is provided.

2.21 As stated in the Second Report (para 2.23), the public benefit in disqualifying a sole applicant because of undue concentration has to be weighed in the balance with the public detriment arising from the resultant lack of service. The Tribunal is satisfied in this case that the need to ensure the provision of a service clearly outweighs any additional concentration of the ownership or control of the media that would arise from the grant of the RCTS licence to

SSE. The position is much more clear cut than that discussed in the Second Report in relation to the north-east applicant (para 2.24). Consequently, the Tribunal does not consider that the media interests of the shareholders of SSE, in the circumstances of

this case, disqualify SSE as an applicant for the RCTS licence.

2.22 In the result the Tribunal is satisfied that the SSE application qualifies in terms of fitness and propriety.

29

CHAPTER 3

FINANCIAL, TECHNICAL AND MANAGEMENT CAPABILITY

3.1 As stated in Chapter 2 of this report (para 2.2), the Tribunal is required to evaluate applications for RCTS licences, inter alia, against the following criteria:

whether they have the financial, technical and management capability necessary effectively to operate the RCTS and thereby provide an adequate and comprehensive service pursuant to the licence.

3.2 Therefore, in this chapter, the Tribunal will analyse and evaluate the financial, technical and management capability of the applicant for the south-east region licence.

3.3 As also stated in Chapter 2 of this report (para 2.2), in considering the application for a new licence the Tribunal has to consider the need for the commercial viability of other stations in the service area. Thus the commercial viability of existing stations will also be dealt with in this chapter.

FINANCIAL CAPABILITY OF THE SOUTH-EAST REGION APPLICANT

INTRODUCTION

3.4 As stated in Chapter 10 of the RCTS First Report (para 10.5-10.9) there are a number of elements to which the Tribunal should have regard to when evaluating the financial capability of the applicant. Firstly consideration of an applicant's track record if it is available and known. In the case of the south-east region it is, since the twelve parties represented in the application hold fourteen current television licences between them and hence their financial records are available to the Tribunal.

3.5 A second element to be considered is the basis of the financial calculations in the application. The purpose of such an analysis is not only to make judgements about the validity of the various financial estimates for technical equipment, staffing and programs etc, but also to ascertain that the methods of calculation and the assumptions used are soundly based.

3.6 Finally, the concluded financial picture presented in the application needs to be evaluated. Chapter 4 of the First Report detailed the cost and revenue infrastructure of the RCTS and set out the criteria relevant to an evaluation of financial capability It is appropriate to measure the applicant against those criteria which are set out in summary form below:

30

the financial resources available to the applicant for the establishment of the service and to help it over any short-term difficulties

capital costs, including earth station retransmission sites

operating costs, including transponder costs program and production costs

revenue from advertising other B-MAC services SPS other sources

3.7 In summary, in assessing financial capability the Tribunal needs to be satisfied that an applicant's borrowing capacity and resources and its ability to generate a positive cash flow are sufficient to meet any deficit resulting from a consideration of capital costs,

operating costs and revenue. The Tribunal also needs to be satisfied that the applicant will have the necessary motivation to continue operating the service until it becomes profitable. This is discussed in full in Chapter 4 of the First Report.

Market size

3.8 A key factor which is relevant to the financial projections of the applicant is the size of the RCTS market, which will in turn affect the advertising revenue available to the applicant. Chapter 1 discusses in detail the population estimates for the south-east

region RCTS service area. It concluded that the minimum potential audience at the beginning of the service would not be less than 8 813, and the minimum potential audience available to

the service in subsequent years would be 72 789. The rate at which the audience increases from the base of 8 813 will in turn depend upon the rate at which the service is provided. In

particular, the ability of the licensee to provide appropriate encouragement and advice to communities and isolated homesteads beyond the reach of nominated retransmission sites. In addition the rate of installation of retransmission sites themselves will be of critical importance and will be more significant in this

region compared to the other three regions because of the relatively low number of specified retransmission sites.

3.9 As stated in Chapter 1 there are 93 554 residents in areas of proposed overlap between the service areas of RCTS and existing licensees. The rate of installation of self-help facilities and TVROs will depend on the willingness of the populations in overlap

areas to outlay the cash to provide reception facilities. Thus the maximum potential audience for RCTS in the south east region.

31

assuming 100 per cent penetration of the service area together with total access to the population in areas of overlap with existing licensees, will be approximately 160 000.

FINANCIAL PROPOSAL OF SSE

Financial resources

3.10 The structure of this applicant is discussed in Chapter 2 and clearly the financial resources of the proposed licensee (SSE) is dependent upon the financial capability of the fourteen regional stations represented in the incorporated company, Satellite South East Pty Limited.

3.11 At the hearing, the applicant submitted revised figures for sections 5, 7 and 8 of the application. These sections give estimates of capital costs, income and operating costs, and the amount and source of funds respectively.

3.12 The establishment costs proposed by SSE as shown in its revised application amount to $4 221 920 to be spent in period 1. An additional $1 450 000 will be spent during periods 2 to 6. Accumulated operating losses at the end of period 3 total

$2 149 000 and the applicant estimates it will begin to make a profit in period 4. Thus the financial exposure projected during the first periods of operation could be up to $7 820 920.

3.13 The revised application (1) states that the funds available for the establishment of the service are $4 500 000 to cover capital and operating costs. Consequently the applicant estimates that from Period 4 a reasonable return of funds can be made to shareholders.

3.14 The commitment of establishment funds is proposed to be met from the resources of the participating stations. As stated in Exhibit S4 p.7:

Funds will be provided by shareholders in the form of capital and interest-free loan funds.

As a result the applicant company will not be liable for any financial expense.

3.15 Originally, the applicant had intended that $1 million would be available from the issue to each of the twelve prospective shareholders of 83 334 shares at an issued price of $1 per share. A further $2 675 500 would be made available from borrowings from a financial institution. However, as explained at the hearing by Mr Moroney:

Now the intention is to do it within the group of member companies. There has been no firm decision as to how much of that would in fact be capital and how much would be loan funds. It has been headed as non-interest

32

funds, so it could be all capital or it could be a million capital and three and a half loan funds. (t. p.4087)

3.16 The application (at p.9) states that 1 all proposed shareholders will be obliged to fund the operations of the proposed company by equal contributions'. This means that with an establishment cost of $4.2 million, each shareholder would be faced with a maximum

contribution of about $350 000. (2) In addition financial coverage of additional capital and projected operating losses could require an additional contribution of up to $300 000 (3). The applicant acknowledged that there would be no legal obligation on shareholders to commit funds to SSE. This obligation was simply a

commitment, made in good faith, to the application for the RCTS licence.

3.17 The Tribunal has available to it the financial records of all the stations involved and is satisfied that each shareholder group has sufficient reserves, unappropriated profits or other financial resources to support its share of the RCTS financial commitment during its initial years of operation.

3.18 It is relevant in considering the ongoing financial capability of the shareholder members to briefly refer to the recently announced government policy of equalisation of television services in regional areas.

3.19 At the hearing, Mr Moroney stated that the participating stations in the applicant company would certainly be affected by the government's equalisation policy. (4) The estimated total capital cost of establishing two additional services in each existing market in the south-east region would be $60 to $70 million; approximately $5 to $6 million for each existing market. However, Mr Moroney explained that costs associated with a requirement to

'equalise' services should be addressed separately from the costs to operate an RCTS service. He estimated that SSE's $4.5 million start-up cost would be about 6 to 7 per cent of the costs expected for equalisation. Clearly equalisation is a matter under active

consideration by all television licensees in Australia, most notably existing regional operators. Those licensees represented in SSE are proceeding with the RCTS application in the full knowledge of the likely commitment required for equalisation.

3.20 The applicant is not relying on direct assistance from any of the three State governments within the south-east region. However, the applicant intends to hold discussions with the State governments to explore possible avenues for involvement. This matter was

discussed at the hearing:

CHAIRMAN: It might come within that area, Mr Moroney, because the arrangements that we have looked at, as I discussed with Mr Lean [at t. p.4091] would move into

the area of government making some use of the service for the purposes of disseminating information and data that would involve it in some cost in doing otherwise.

33

MR MORONEY: Yes, that is right

CHAIRMAN: So it is not just a handout or a subsidy, it is on the basis that they are getting some value for the payment.

MR MORONEY: That is right. We believe that it will develop. We can only hope. (t. p.4104)

3.21 There are twelve shareholder groups committing $4.5 million to establish the RCTS service. The resulting share is therefore not too onerous for each group. The Tribunal considers that SSE will have the necessary financial resources through the participating

groups to operate the proposed remote commercial television service.

Capital costs

3.22 Below is the breakdown of capital costs estimated for the service (full details are provided at Exhibit S4, pp 2-4):

TABLE 3.1

(a) technical equipment $2 307 500

(b) radiating & receiving structures 730 000 (c) land & ancillary facilities 200 000

(d) buildings 629 420

(e) other pre-operational expenses 355 000

$4 221 920

3.23 Within these estimates, $ 180 000 has been budgeted for retransmission facilities at three sites specified by the Minister; Bourke, Walgett and Lightning Ridge. In addition the applicant proposes to provide two additional transmission sites at Wilcannia and Brewarrina. Mr Beasley, the applicant's technical co-ordinator and spokesperson, stated at the hearing that SSE did not anticipate any capital expenditure at the two additional sites.

(5). He said that SSE proposes to use the services of others who are offering to provide the facilities on a fee for use base. The fee has been allowed for under operating costs. Mr Beasley did not indicate specifically who would be offering the retransmission facilities at Wilcannia and Brewarrina.

3.24 The capital cost estimates include the provision of land, technical equipment and a studio complex at a site adjacent to CTC in Canberra. This location can produce some savings for SSE as CTC could provide assistance in the form of its computer facilities and automatic control of the presentation of programs. In addition, CTC could assist with some program production and staffing amenities.

34

3.25 SSE has costed capital equipment on a basis of transmitting on UHF which is more expensive than VHF, although it is hoping that some VHF operation at some sites will be acceptable to DOC (t. p.4154).

Operating costs

3.26 Estimated operating costs were given in the revised section 7 of the application (6) and are summarised in Table 3.2 below:

TABLE 3.2

Period 1 $ 355 000

Period 2 $5 832 000

Period 3 $6 615 000

Period 4 $7 498

g

Period 5 $8 271 000

Period 6 $9 128 000

3.27 The operating costs include transponder and uplink charges, estimates of program and production costs, staffing costs, commissions and licence fees, power and maintenance, depreciation and overhead costs. (7)

3.28 Mr Moroney told the Tribunal that SSE took the satellite transponder costs

as applicable from the Aussat rate card for level 2 charges and we allowed for an annual increase of 10%. (t. p.4104)

While the applicant hoped that the annual increase would be much less than 10 per cent, it preferred to err on the side of caution and chose the conservative higher figures. The Tribunal raised the issue of whether a Level 3 protection might be sufficient particularly if all other hirers of 30 watt transponders took Level

3 protection status. Mr Moroney acknowledged the potential savings but again emphasised the conservative approach taken by SSE.

3.29 The applicant proposes to utilise the Aussat uplink facilities at Canberra and the appropriate leasing charges have been allowed for within the calculation of operating costs.

3.30 SSE has calculated estimates of program costs by taking the current average cost of both Australian and overseas programming to regional stations. Then, as Mr Moroney explained:

We applied that to the population that we had available to us. We have made a difference in the exercise that the Tribunal has before them now, in that we have in the first two years of operation, the period two and three, we have applied those program rates at the percentage of penetration; namely 50% and 75 ... by the third year ... we would be expected to perhaps or willing to pay for the full population reached. (t. p.4105)

35

3.31 The percentage of total operating costs which would be allocated to program production is 5 per cent if the transponder and uplink costs are taken into account, or about 15 per cent if those costs are excluded.

3.32 At the request of the Tribunal, the applicant provided a breakdown of program production costs for period 2, the first full period of operation. In summary, these are:

TABLE 3.3

Staff Costs $197 000

Stringers' Fees $ 50 000

Travelling Expenses $ 13 000

Program Production $ 30 000

Consumables $ 65 000

TOTAL $355 000

3.33 The Tribunal inquired about the percentage of program production costs going to members of SSE. Mr Moroney indicated that it would not be large; the majority of costs would be for news staff and the RCTS news service. Company member companies would receive fees for services provided, such as news items provided in the packaged RCTS news service or programs of a rural nature.

3.34 As mentioned earlier, SSE members will not be absorbing any direct costs of the RCTS service. However, assistance is expected in a number of areas such as sales, computers, some management and staff facilities, and engineering assistance. With respect to sales, Mr Moroney indicated that shareholder companies could be involved

in "the selling to the community of the use of the (RCTS) service and so many other areas. We would be looking for that help..." (8 )

3.35 The Tribunal asked Mr Moroney if SSE had considered merging with an existing regional operator. Mr Moroney relied:

Yes, we have considered that at various times. We would see that perhaps more as a fall back position ... we prefer ... to have our separate operation and run quite

independently in terms of the decisions that need to be made in running the service from all of our members. (t. p.4113)

3.36 Other operating costs included in the applicant's budget reflect the level and type of service proposed and estimates are appropriately conservative.

36

Revenue

TABLE 3.4

Advertising Program Ancillary Total

Period Delivery Service Delivery Service

3.37 The estimated revenue (9) and its sources are:

1 - -

2 1 160 000 1 516 000 1 950 000 5 126 000

3 2 801 000 1 705 000 2 437 000 6 943 000

4 3 572 000 1 919 000 2 742 000 8 233 000

5 4 254 000 2 159 000 3 085 000 9 498 000

6 5 052 000 2 428 000 3 471 000 10 957 000

3.38 Mr Moroney advised the Tribunal that the applicant's rate card and revenue estimates were based on a population figure of about 160 000. The cost per thousand viewers based on the 30 second prime time rates and audience size estimates would be $2.44. This

is a higher rate compared with that for the regional stations in the south-east region, however it compares favourably with the rates for regional stations Australia-wide as detailed at para 4.114 in the First Report. The estimated growth rate of homes serviced is a key factor in the projected advertising

revenue figures. Mr Lean stated that:

We have made our calculations on a fairly conservative basis ... that in the first year of operation (Period 2) we would reach 50%, in the second year 75%, in the third 85% and in the fourth 90% and in the fifth 95%.

(t. p.3944)

3.39 The Tribunal asked Mr Moroney on what basis the applicant was estimating the rate of audience penetration, particularly as only 8 813 people would be within the coverage area of the retransmission facilities and the use of TVROs and community self­ help facilities would have to be high. Mr Moroney discussed this

issue and felt confident that recent surveys undertaken showing a strong interest in purchasing the required reception facilities supported the applicant's projected penetration of the viewing audience being met. He also considered that there were significant

numbers of people in mountainous areas within the service areas of existing regional stations and people on the fringes of these areas who have been waiting for many years to overcome the reception problems caused by their particular location. However, the Tribunal is concerned that SSE's penetration projections are optimistic. Any marked rise in TVRO costs is likely to meet buyer resistance and this has been indicated in a recent survey

37

commissioned by Plessey Australia. This is an important issue for the south-east region licensee since the vast majority of people within its service area are not within the coverage area of the retransmitted signals and will require either community

self-help facilities or TVROs.

3.40 SSE anticipates receiving very little revenue from local advertising, essentially because few communities of substantial size exist in the service area. The applicant's view is also based on the experience of its member stations when serving small communities. In addition, Mr Lean said that little opportunity was envisaged for advertising revenue associated with educational programs. (10)

3.41 The advertising revenue estimate is therefore largely based on projected national and state receipts. Mr Moroney explained:

We have not been able to really identify the split that may occur between what are called state and national, in terms of the fact that we service three different States and also as I made reference to the arrangements that may

apply with shareholder companies selling markets in conjunction with our licence and those shareholder companies selling with network arrangements. Sometimes we may be involved in those. So there could become a mix that is not yet clear. So those facts just made it very difficult for us to be able to decide what might be what one might term national or state business. So our assessments have been on the relationship as we said, to what markets generally attracted business and we worked on those percentages. (t. p.4126-7)

3.42 Mr Moroney said that SSE had not included possible advertising revenue from State governments in its estimates beyond the level at which government advertising currently provides revenue to its constituent members. However, he indicated that SSE "would be pushing for what we could". For example, Mr Moroney stated that the NSW Government may wish to reach the people served by retransmission facilities in remote parts of NSW and therefore additional revenue might be available in the early periods from this source.

3.43 SSE stated in its application that it 'proposes to enter into arrangements with each of its shareholders for the sale of their station time and the broadcast of advertisements on their stations simultaneously with their broadcasts in the RCTS program or alternatively in the delayed retransmission of a program'.(11) However, at the hearing, Mr Lean stated that no firm arrangements had been made to date with any of the south-east region operators. He went on to say:

Our objective of course is to sell time in the RCTS and we would certainly anticipate marketing very closely with shareholders stations to develop zonal and regional

sales, (t. p.3954)

38

3.44 Mr Lean also said:

our major audience is the RCTS zone and that audience would be a part of any deal, any sales deal which might be extended via the component stations. (t. p.3955)

3.45 Any joint arrangements entered into will be based upon the existing rate cards of the member stations.

3.46 The applicant indicated that joint selling arrangements would be explored later with the networks to see if metropolitan areas could be included in joint buys. No estimates of any such revenue have been included in the calculations (12).

3.47 The revised section 7 of the application (13) states that estimates of income from delivery of SPS regional stations in the south-east zone are based on the use of 35 per cent of the available program supply at a rate of $50 per hour. This hourly cost is in turn based on an assessment of the current average costs of distribution by the existing terrestrial delivery system; for example, print and

tape costs, freight, handling and land line costs. With fourteen stations using the SPS service on this basis, the expected revenue is $1,516 million for Period 2, the first year of operation. This represents about 30 per cent of the overall

estimated revenue of $5,126 million for that period. (14)

3.48 The Tribunal raised the issue of the effect on the estimated revenue from SPS use by the RCTS licensee if equalisation proceeded:

CHAIRMAN: If that income was not available or was substantially reduced, then it might be said that that has some serious implications for the viability of RCTS and raises issues about whether the shareholders would be able or would want to continue to support it. The

FDU initiative could raise issues about the ability to use RCTS as an SPS if for example the result of an equalisation scenario was three channels in the regional areas which lined up with the three networks; because

in those circumstances it would be very difficult to use a cherry picked RCTS service as an SPS.

MR MORONEY: When we made the application originally, equalisation had not been mentioned and we did consider that the majority of our programs would be taken by our member shareholders for their services.... Each

company, we are aware, is trying to assess their position and what they will do in terms of equalisation...so we have assumed that with all that mixture of confusion and uncertainty as to what will happen, that 35% of our available program would be taken by the members ... so what we have done is taken the 35%

of our available hours we have by the members and at a rate of $50 per hour we have assessed the income that we have allowed. (t. p.4090-2)

39

3.49 The applicant is clearly aware of the possible implications of equalisation for the RCTS scheme, but given its current state of play, is not in a position to do other than make the published projections of likely use and revenue.

3.50 There was some discussion at the hearing about the implication of a competing network SPS distribution, namely, that regional stations might in some circumstances, find it more attractive to use the network SPS rather than the RCTS SPS. The applicant accepted this situation and had taken it into account in anticipating 35 per cent use of the RCTS SPS. Mr Moroney assessed that approximately 30 per cent of national advertising revenue would come through network or RCTS SPS. A clearly significant factor in his view was that national advertising is generally purchased on a market basis and by a number of marketing arrangements, which could include SPS.

3.51 In Period 2, SSE expects to raise $1.95 million from ancillary delivery services, that is from all services other than normal television program material. This includes radio, data, teletext as well as advertisements, programs and marketing tapes relayed during downtime.

3.52 Mr Moroney indicated that advertisements, audition program tapes and the regular news bureau service from Canberra were to be relayed on SPS during RCTS downtime. He went on to say:

So on a 12-month basis we are looking at another 5 000 such tapes being made available. Our assessment of those costs are that they could be anywhere up to even $100. The commercials are

thought to be somewhere between $50 and $100 and advertising agencies suggest $100 as costs to them by the time they pay for the dubbing, the ttepe itself - because they are never reused - and the freighting and the whole thing. They think it would be as much

as $100. So what we have done is assessed all of those at $25 to be conservative and that gave us an income of $1,778 million.

We then had to look at extra - and that is perhaps where the ancillary applies more - services that would be available to us and Mr Lean has made mention of the sorts of things; radio services - when radio becomes available we would be interested in that - muzak, electronic mail, teletext, perhaps even such things as slow scan teleconferencing, off-peak power control and so forth; those types of services, plus other programme services .... (t.p. 4095)

3.53 He also said that such ancillary services would take extra time to fully develop and the basis for the estimated cost recovery was an assessment of only 5 per cent of transponder costs in the first year of operation (Period 2), 12.5 per cent in the second year and

inflation level cost increases thereafter. This appears to l>e an appropriately conservative approach.

40

3.54 The applicant proposes to lease the radio, data and teletext channels. However, no firm revenue estimates were provided as the applicant was uncertain as to government policy for remote radio services and further technical development was required for data and teletext services on the B-MAC system.

3.55 The applicant had also not taken into account potential revenue from the use of downtime by educational institutions.

Conclusions

3.56 The Tribunal considers that the overall financial estimates of the applicant are reasonable in the circumstances and are sufficiently realistic in indicating that the service will be commercially viable within three or four years of commencement.

3.57 Generally revenue estimates are conservative and while the Tribunal does not share the applicant's optimistic view of the likely rate of service penetration, it believes that there are other areas, particularly in ancillary delivery services, which could prove more

lucrative than budgetted for at this stage. This could achieve either earlier than expected profitability or balance unexpected short falls in revenue elsewhere.

3.58 The financial strain of subsidising the RCTS in its initial years of operation will be spread over the twelve participating companies and therefore should not place too much of a burden on any one station.

3.59 On the basis of the above analysis and evaluation of the evidence, the Tribunal concludes that SSE has the financial capability necessary to effectively operate the RCTS.

TECHNICAL CAPABILITY OF THE SOUTH-EAST REGION APPLICANT

INTRODUCTION

3.60 Discussion of the technical capability of the applicant will involve an examination and assessment of the technical proposal. The component areas which can be examined are:

. overview of the type of service . studios . earth station and earth station link . retransmission sites

. homestead/self help sites . maintenance . installation

41

3.61 With regard to the assessment of the proposal, the applicant's technical capability will be evaluated in terms of:

. previous technical experience . technical qualifications of key personnel . investigation/preparation concerning the application . technical capacity to provide the proposed service

TECHNICAL PROPOSAL OF SSE

Type of service

3.62 SSE proposes to install a Level 1 B-MAC system which will enable the full capabilities of the B-MAC system to be utilised. In the early periods the applicant intends to provide a commercial television service only; data, radio and teletext capacity will be explored at a later stage when government policy and technical issues have been developed further.

3.63 The facilities would be independent of CTC's operation and would be linked to the Aussat uplink facility at Canberra. However, SSE would have its own satellite reception capacity. This would include a 6.7 metre dish to receive all 12 watt and 30 watt transponder signals and a smaller dish to address the RCTS service. With the addition of transmit electronics at some later stage, the

6.7 metre dish could become an uplink.

3.64 The applicant has no plans to use multiplexing or vidiplexing techniques as they do not appear to be viable at this stage. However, it would monitor progress in the refining of the various channel sharing techniques with a view to keeping its options open.

Studios

3.65 It is proposed to build the RCTS facilities in Canberra adjacent to CTC. On establishment, the applicant proposes to equip one studio (approximately 10 metres x 15 metres) suitable for news, panel show presentation and commercial production. It would be equipped with the following facilities:

TABLE 3.5

Presentation Equipment

1 x Program Switcher 1 x Title Generator 1 x Audio System 1 x Monitoring - Video

- Audio

1 x Machine Control

42

Program Origination & Assembly

3 x 1" 'C' FMT VTR (On air) 2 x 1" *c' FMT VTR (Assembly) 1 x Beta Cart (On air) 3 x Beta Rec/Replay only (Assembly & Backup)

1 x Still Store (On air & Assembly) 3 x Studio Camera (Presentation, News etc) 1 x Production Switcher (Hosting, News, etc.) 1 x Title Generator

1 x Audio System 1 x Monitoring - Video - Audio

Master Control

1 x S.P.G. & Distribution System 2 x Frame Sync. 1 x Routing Switcher

1 x Cueing Gen. & Inserter 8 x Equipment Racks 1 x Video Distribution 1 x Talk back System

1 x Cable & Inst. 1 x Monitoring - Video - Audio - W/F etc.

- Test equip.

News

1 x Suite 1 x Beta Cam System 1 x Auto Cue System (Manual)

Earth station

3.66 It is proposed that the Aussat earth station at Canberra be used for the uplink service. A microwave link will be established between the studio of SSE and the Aussat earth station and there is direct line of sight between them. In addition a fibre-optic

link is proposed between the studios and CTC for program supply and exchange purposes. (15).

Retransmission sites

3.67 The Minister's Direction nominated 3 retransmission sites in the south-east region: Bourke, Lightning Ridge and Walgett. The applicant has since indicated plans to establish two additional retransmission sites at Brewarrina and Wilcannia.

3.68 The applicant intends to share facilities at retransmission sites with DOC and Telecom where practicable. Mr Beasley, General Manager of Northern Rivers Television who was responsible for

43

engineering matters relating to RCTS, advised that he has had conversations with officers of DOC, Telecom and the ABC to this end. However, he indicated that some sites may not be suitable for sharing. Mr Beasley explained:

There are a number of factors involved in the sharing. Many of the sites that the ABC currently run are Telecom communications sites. These may not always be

the ultimate site. The one serving Bourke and Brewarrina for instance, it is in VHF spectrum. The DOC guidelines of course is that these things - at this moment we get the impression that they are favouring the

UHF and in fact our costing has been made on UHF, although we will be pressing very strenuously for a VHF solution. (t. p .4152)

3.69 Mr Beasley said that he expected to be installing either a 2.4 metre or 3.7 metre dish at the retransmission sites. The proposed retransmission facilities could have an uplink and thus two-way capability, given the additional electronics, but this capability would be limited to radio, data and voice transmission.

3.70 With respect to the provision for local input to retransmission facilities, the applicant indicated its willingness to accommodate this subject to the suitability of available program material. Mr Beasley said that no direct assistance would be provided and that none had been budgetted for; however SSE would provide

"assistance in kind" (16). Mr Beasley said:

Yes, we will provide the interface equipment. We believe that we are only just beginning down the track of this new process of local input. We are quite enthusiastic about it and I believe that it has

the potential to become a very useful form of community expression (t.p. 4156).

Self help location and remote homesteads

3.71 Some 90 per cent of the population to be served by the south-east RCTS will need to install self help facilities or TVRO's. It will therefore be clearly in the interests of the licensee to ensure that appropriate advice and assistance is provided to those people.

3.72 Mr Beasley identified the major contribution which could be made in this regard by the technical staff of the regional stations in the zone. He said:

... there certainly will be a role for the SSE engineering manager to be well aware of the retransmission sites of self help and to provide assistance in whatever way we possibly can (t. p.4171)

3.73 Mr Beasley also talked about the additional support in this regard of the proposed liaison officer:

44

... the liaison officer can be sufficiently versed in the technical aspects as related to the retransmission and the TVROs ... It is not an in­ depth technical requirement at all. (t. p.4172)

3.74 Earlier at the hearing, Mr Lean strongly emphasized his view that the Federal Government had a significant role to play in this respect as "it is a service that the government dearly wants". (17) Mr Lean said:

Well, we believe, Mr Chairman, that the Commonwealth government must take some very positive steps in this direction. It should launch a comprehensive and very widespread publicity campaign to make people of the outback fully aware of the services to be offered by

RCTS, underline the importance of self help in the economies available to communities by co-operating to purchase receiving and retransmitting equipment. We also believe that the government should, by every means at its disposal, do everything possible to ensure that

necessary equipment is not priced beyond the means of the people living in the outback. (t.p. 3951)

Maintenance

3.75 At page 45 of the application, it is stated that the applicant proposes to enter into an arrangement with DOC/Telecom to use the national television service contractor for the maintenance of the retransmission facilities. Consequently, no test equipment will be provided by the applicant.

3.76 Mr Beasley indicated that alternatively there was a likelihood of the service being provided by an outside contractor.

Installation

3.77 In its application (p.45), SSE said that it envisages commencing a service approximately twelve months after a licence is granted. No further information was provided.

Previous experience

3.78 The twelve members of the applicant SSE have all had considerable experience in operating regional television stations. (Hobart is regarded as a regional market given its market size). Of all the stations, those owned by Television New England have had the most

relevant experience in broadcasting to remote areas because of their location and the nature of the service areas. Clearly this experience is relevant in a technical sense to the establishment

and operation of RCTS.

45

Technical personnel

3.79 Mr Beasley led a sub-committee of chief engineers from member companies in designing and assessing technical proposals for the service. The sub-committee comprised Mr Graham Morley of Southern Cross Communications, Mr Alan Martin of Australian Capital Television and Mr Peter Twoomey of Associated Broadcasting. Mr Beasley, who acted as Chairman, was formerly Chief Engineer of Northern Rivers Television and is currently General Manager of the

same company.

3.80 SSE proposes to have an Engineering/Operations Manager who will be responsible for all technical services including presentation, program inspection and make-up.

Background investigation

3.81 The Tribunal inquired of the applicant the extent of its investigation into B-MAC technology and of any consultation with P1essey/Scientific Atlanta and Aussat. Mr Beasley stated that SSE representatives have attended various seminars conducted by DOC and FACTS in conjunction with Plessey/Scientific Atlanta. Mr Morley, of the engineering sub-committee, visited Plessey while on a visit to the UK and had extensive discussions with them. SSE has also maintained a close liaison with Aussat.

Conclusion

3.82 Through the installation of a Level 1 B-MAC system SSE will be able to provide a range of services which maximises the full capabilities of the B-MAC system. It initially intends to provide a television service only, although will formulate plans for the data, teletext and radio services when feasible.

3.83 SSE has an appropriate technical knowledge of B-MAC technology and the RCTS system. It has undertaken research and investigation during the preparation of its application and technical proposal.

3.84 Through the member stations, SSE can demonstrate technical competence and experience in the operation of a terrestrial network; this experience covers metropolitan and regional (including some remote) areas. This is obviously technical experience relevant to RCTS.

3.85 In view of this evaluation, the Tribunal considers that SSE has the technical capability necessary to effectively operate the RCTS.

46

MANAGEMENT CAPABILITY OF THE SOUTH-EAST REGION APPLICANT

INTRODUCTION

3.86 In evaluating the management capability of the applicants for the RCTS licences it is appropriate to consider their past management track record if such information is available. The Tribunal has available to it via the licensing process, detailed information about all twelve companies in the applicant company and hence it is

relevant to have regard to their track record when evaluating the application.

3.87 In addition, management capability can be measured by evaluating the 'quality' of the application itself. In so doing, the Tribunal will look at the approach taken in the preparation of the application, the information and preparatory work drawn upon, the

range and basis of concepts included in the application, the quality of witnesses and evidence presented in support of the application and its ability to stand the test of cross-examination. In other words, the preparation and presentation of an application

involves the use of management skills and therefore can give some indication of an applicant's management capability to effectively operate the service.

3.88 Finally it is necessary to evaluate the appropriateness of the actual management concept presented for the RCTS licence. Matters such as staffing, operation of facilities, flexibility to cater for future developments, the reality of proposals made, and the likely achievement of financial and technical goals will be taken into account.

3.89 Therefore this section will consider the applicant's capability in terms of track record, preparation of the application itself and the concepts engendered by the application.

MANAGEMENT PROPOSALS OF SSE

Applicant's track record

3.90 The licences of the fourteen participating stations have been renewed following public inquiry on a number of occasions and each occasion for the maximum term permitted. On the great majority of occasions the Tribunal has not found it necessary to be critical of the management capabilities of the licensees.

3.91 The Tribunal is satisfied that generally the participants in the SSE application have a sound management track record and that their regional experience is a basis for evaluating the proposals set out in the application.

47

The SSE application

3.92 The task of preparing and presenting the SSE application involved several members of the company. Mr Wilton Lean of TWT Limited, was the co-ordinator of the application and a key witness for SSE; Mr Michael Moroney, General Manager of Television New England, worked on the financial area; Mr Bert Beasley, General Manager of Northern Rivers Television, the technical proposal (as head of an engineering sub-committee); and Mr Bill Rayner, Chief Executive of Australian Capital Television and Chairman of Directors of SSE, was responsible for corporate policy.

3.93 Mr Lean's evidence covered a wide range of areas with respect to the proposed service but the Tribunal considers that in some areas this evidence lacked sufficient depth. It appears in several places that the application has been developed to concept stage only; the result of inadequate research and preparation, particularly in the areas of planned assistance and services to the Aboriginal populations in the service area, and in the arrangements

for the news stringers and their training. In addition, the Tribunal is concerned at comments made by Mr Beasley with regard to the applicant's approach to those in the Aboriginal population and others who may seek involvement at the retransmission sites. Mr Beasley said that if people wanted access "then we believe it is their prerogative to take advantage of it ... and they need to provide the actual equipment themselves. It has been our experience that if you give somebody something for nothing, that is exactly the value of it" (t.p. 4158). It seems to the Tribunal that this is an oversimplification of an important aspect of the provision of an RCTS; that is the need to foster local input.

3.94 In 1983, prior to the Minister for Communications calling for applications for RCTS licences, Regional Television Australia commissioned Market Facts (Qld) Pty Ltd to conduct a survey into the potential for RCTS in the eastern states of Australia. Then prior to the preparation of the SSE application, Market Facts was

commissioned to conduct a follow-up telephone survey of 440 respondents in the remote areas of the four eastern states. The results of this survey, which are discussed in Chapter 4, were drawn upon in preparing the application.

3.95 The SSE application presented sufficient information for the Tribunal to obtain a profile of the applicant - its structure, service and level of commitment. The applicant provided soundly based financial and technical proposals. However, it was less satisfactory in the area of programming and ascertainment (see Chapter 4). The Tribunal is disappointed that the applicant has not given more attention to identifying the needs of people, such as the Aboriginal population, in the RCTS service area and consequently providing programs which are informative, useful and most importantly, relevant to them. The Tribunal also felt that the applicant could be more positive in relation to a commitment to assist and encourage local production and input. These are matters

48

relevant to management capability and do not reflect well on the applicant. Attention will need to be given by SSE to these matters in the establishment and development of the service.

The SSE management structure

3.96 It is now appropriate to look at management capability reflected by the management concepts envisaged for the RCTS operation and presented in the SSE application.

3.97 It is intended that a management structure be established to give the RCTS complete autonomy from the participating stations. The Directors of SSE are drawn from shareholder companies and will form a Board of Directors to which the Chief Executive will be directly responsible.

3.98 The application contained an outline of the proposed management and staffing structure (p.21). However, SSE has since revised this area and now proposes the following structure (original proposed staffing levels are in brackets):

TABLE 3.6

Full-time

Administration 5 (10)

Sales 1 (8)

Programs 7 (8)

Technical Services 15 (13)

Total 28 (39)

3.99 The reduction in staff reflects the financial structure of the proposed service and is considered by the applicant to be sufficient to establish and maintain that proposed service.

3.100 The original application stated that a Chief Executive would manage the company. This remains unchanged. The company will continue to have a Company Secretary but no longer intends to employ an Assistant Accountant. There is a significant change in the Sales

Department where instead of 8 staff - a National Sales Manager, a State Sales Manager, 6 sales representatives - only a National Sales Manager is now planned. This person will be based in Sydney or Melbourne and will seek to utilize and co-ordinate the sales staff of existing regional operators which will offer the RCTS market as well as their own to prospective buyers. This will produce a closer relationship between the RCTS operation and

regional stations in respect of advertising sales. The RCTS National Sales Manager would also be responsible for the

49

3.101

3.102

3.103

3.104

3.105

3.106

appointment and supervision of commission sales agents in the service area. However, Mr Lean said that SSE had not at this stage identified areas where sales agents might be located.

In the area of programs, a proposed sub-editor/newsreader has been eliminated, leaving a news editor, two journalist/news readers and two camera operators with a program manager heading the department with one assistant. In administration, the reduction from ten to

five has resulted from a movement of some staff to a different category; for example, traffic clerks and program handlers to technical services and a reduction in their numbers from three traffic clerks and two program handlers to one of each. This also means that technical services has been increased by two.

A proposed liaison officer is to make arrangements for ascertaining the needs and views of people in the service area. Mr Lean could not indicate definitely where the liaison officer would be based, but said possibly Canberra with extensive travel to remote parts of the service area. Mr Lean agreed with a suggestion from Mr Berwick of the NSW Ministry of Aboriginal Affairs, that the liaison officer could be an Aboriginal (18).

With respect to management of program supply, the Tribunal raised as an issue the extent to which the programming on RCTS will be determined by the needs of the regional stations. Mr Lean said that most of the prime time programming of RCTS will be suitable for and taken by the regional stations and where the programming needs differed, that could be accommodated (19).

This matter was also considered in the north-east RCTS hearing. In the Tribunal's report of that inquiry (20), it is stated that great care will need to be taken to preserve the autonomy of RCTS programs and meetings between RCTS and regional programmers should not become a forum for regional operators to direct the content of the RCTS schedules. These comments are also applicable to the programming arrangements for the south-east RCTS.

SSE plans to use some stringers located in remote areas producing voice and video pieces. SSE anticipates stringers will own their own equipment and will take this into account in the remuneration arrangements. . .

The applicant said that it would provide training in a number of areas. Mr Lean said "We are prepared to train stringers..." (21) and Mr Beasley indicated that training would be available to assist in the development of local production:

THE CHAIRMAN: You would see the station then as having a role in terms of training and assisting that to develop.

MR BEASLEY: I can only speak for our station and I am sure the philosophy ...

50

3.107

3.108

3.109

3.110

3.111

THE CHAIRMAN: I am talking about the RCTS licensee.

MR BEASLEY: I am sure that is so. (t.p. 4170)

However, Mr Beasley went on to say that he believed "that the government has a responsibility in the role of the training of these people and I draw attention to the courses which are available ..." (22). With regard to training and assistance for Aboriginal communities, Mr Lean said:

Well, if that means the assistance of Aboriginal production units in places, then we do not have any specific plans (t.p. 4048)

The applicant was clearly not able to make any firm and specific commitments to training in these areas.

Conclusion

Overall, the management structure of SSE appears to be adequate and staffing levels sufficient to maintain and operate an independent station providing the proposed service.

However, the Tribunal is concerned that the applicant has at this stage given insufficient attention to the needs and roles of particular staff and this could affect the local programming in the overall RCTS service. The position of news stringers is in need of more attention and the role of the liaison officer, a

crucial position in the south-east RCTS context, is unclear, particularly with respect to a technical advisory role. A significant level of training will be required for the person

filling that position. The area of training in general is also in need of greater and more positive consideration. With respect to Mr Beasley's comment about government responsibility to train

people, the Tribunal does not consider that this relieves a licensee from an obligation to provide training or assistance where necessary or desirable. Mr Lean's comments about having no plans to give assistance to potential Aboriginal programmers are therefore disappointing. The Tribunal would like to see the licensee taking a positive attitude and commencing plans for the provision of appropriate levels of assistance and training wherever

justified and practicable.

There will obviously be some advantages accruing from the participation of the regional stations in the applicant company: for example in the areas of news, commercial production, engineering and joint sales.

An analysis of the applicant's financial projections and technical planning are discussed elsewhere in this chapter and will not be repeated here. However, the positive conclusions drawn there will

also reflect on the applicant's management capability.

51

3.112

3.113

3.114

3.115

3.116

3.117

Notwithstanding the reservations expressed above, the Tribunal is satisfied that SSE has the necessary management capability to operate the service.

COMMERCIAL VIABILITY CRITERION

As explained in the introduction to this chapter the Tribunal is to have regard to the need to maintain the commercial viability of existing broadcasting and television stations in the south-east RCTS service area.

Existing services

As detailed in Chapter 1, the only television stations operating in the service area are national stations, including translator stations. There are no commercial television stations in the service area.

Apart from ABC radio, there are seven commercial radio stations and translators in the service area.

The Tribunal has received no submissions from any of the existing radio licensees in the service area expressing concerns about the effects of a remote commercial television service on their commercial viability, nor was there any evidence presented during the course of the public inquiry on this matter.

Therefore the Tribunal does not consider that the commercial viability of any existing television and broadcasting stations will be threatened by the grant of an RCTS licence in the south-east region.

52

NOTES TO CHAPTER 3

(1) Exhibit S4 p .7

(2) t. p.4085

(3) Ibid

(4) t. p.4089

(5) t. pp.4153-4 (6) Exhibit S4, pp.5-6 (7) Ibid

(8) t. p.4112

(9) Exhibit S4, p .6 (10) t. p.4077 (11) Original application, p. (12) t. pp. 3966-7

(13) Exhibit S4, pp.5-6 (14) Ibid

(15) Application p.39 (16) t. p.4152 (17) t. p.3951 (18) t. p.4058

(19) t. p.4015 (20) RCTS Second Report p. 67 (21) t. p.4031 (22) t. p.4170-1

CHAPTER 4

CAPABILITY TO PROVIDE AN ADEQUATE AND COMPREHENSIVE SERVICE AND ENCOURAGE AUSTRALIAN PROGRAMS AND OTHERWISE COMPLY WITH LICENCE CONDITIONS

INTRODUCTION

4.1 As stated in Chapter 11 of the First Report, in deciding on the type of service for the remote areas, the Government has followed the Tribunal's recommendation made in the SPS Report that people living in remote areas are entitled to receive a basic level of commercial television service and that a service therefore needs to be licensed specifically to serve these areas.

4.2 The terms of reference for the Tribunal to decide which applicant should be granted the licence for the RCTS state that:

The licensees will provide a service appropriate to the needs of residents of such areas utilising satellite transponders in the spot beam ... (1)

4.3 The Broadcasting and Television Act 1942 requires persons seeking the grant of a licence to give an undertaking to the Tribunal. Sub-section 83(5) of the Act states:

(5) An applicant for a licence shall, at the inquiry into the grant of the licence or, if the Tribunal, in accordance with sub-section (2), considers the application without holding an inquiry, before the consideration by the Tribunal, give an undertaking in writing to the Tribunal that he will, if the licence is granted to him -

(a) comply with the conditions of the licence; and (b) if the licence is a licence referred to in paragraph (a), (b), (g), (h), (k), (ka), or (i) of the definition of 'licence' in sub-section 80(1) -

(i) provide an adequate and comprehensive service in pursuance of the licence, having regard to -

(A) the nature of the community to be served in pursuance of the licence;

(B ) the diversity of the interests of that community; and

(C) the nature of the other broadcasting and television services (if any) of which satisfactory reception is being obtained by that community; and

54

(ii) encourage the provision of programs wholly or substantially produced in Australia and use, and encourage the use of, Australian creative resources in and in connection with the provision of programs.

4.4 Although there is no legislation applicable to this inquiry the Tribunal required applicants to give an undertaking in these terms. The Amendment Act (refer to First Report, Chapter 3) has included the undertaking for the remote commercial television licences.

4.5 As RCTS is a new service intended for people who have never had commercial television, the Tribunal took evidence to assist in identifying the nature, diversity and special interests of the remote area viewers. These characteristics for the south-east region have been identified in Chapter 1 and will now be compared to the ascertainment of needs, the program service proposed and the production anticipated by the applicant, identified in the application and during the course of the inquiry.

ASCERTAINMENT

4.6 Tribunal Policy Statement No. 6 (PCS 06) outlines the principles the Tribunal will apply when assessing the first part of the undertaking. The wording of the undertaking indicates that ascertainment of the needs of viewers in the service area is the

rock upon which the undertaking is built. Knowledge of the diversity of interests of a community requires an appreciation of the goals and expectations of various sections of the community in question and not just a typical range of programming interests of the average member of the community. The Tribunal expects

licensees to gain a detailed insight into the nature and diversity of interests of the community by means of audience research and other sources of information and then to draw upon the results in

designing a service which is both adequate and comprehensive.

SSE ascertainment

4.7 SSE relied on two research studies to ascertain the nature of the community to be served and the interests of that community.

4.8 The first research study was conducted by Market Facts (Qld) Pty Ltd in 1983, and was commissioned by Regional Television Australia to survey the potential for remote commercial television services in the eastern states of Australia (Queensland Satellite Television also relied in part on this survey to ascertain the needs and

interests of remote area residents in the north-east region). Additional research was carried out by Market Facts in November 1984, but was not used in preparing the SSE application. The Market Facts surveys were primarily aimed at a determination of

advertising potential rather than audience needs although the two are clearly related.

55

4.9 The second research study was commissioned by SSE and was carried out by McNair Anderson & Associates in July/August 1985, just prior to the Tribunal's hearing into the application. This research study was confined to the RCTS draft service areas of New South Wales and Victoria. Mr Lean told the Tribunal that in the second survey SSE wanted to re-test some of the earlier findings in the light of possible increase in the knowledge of remote area residents on the aims of the service generally. It also wanted to test, in particular, feelings on the purchase of TVROs in view of price increases for this equipment.

4.10 Of the 301 respondents in the McNair Anderson survey, 84 per cent could receive both ABC and commercial television. 56 per cent rated reception quality as good, while the balance considered it adequate to almost useless. If this sample is representative it means that only 44 per cent of the RCTS service area does not receive adequate reception already. It also raises a question about the validity of the research as it is likely that only 44 per cent would bother to access RCTS.

4.11 The research also showed, Mr Lean said, that there was a positive view about the prospect of a commercial television service. In terms of programming, movies and documentaries were high on the list of preferences, 67 per cent of respondents wanted more access to news and information services, and there was a lot of support for educational and local programming. It was stated in the research document:

It is noteworthy that most respondents' responses were framed in terms of wanting 'more' of what they presently receive rather than what they presently don't receive.(2)

4.12 SSE has indicated that no specific proposals have as yet been formulated as a result of this research. It is its intention, if granted the RCTS licence, to devise an ongoing research program. In its application, four areas of research were identified.

(a) the degree of penetration of the service

(b) level of audience viewing

(c) acceptability of the programs to the audience and ascertainment of preferences not provided for

(d) degree of response to commercial advertising (3)

4.13 During the hearing, Mr Lean stated that SSE would be exploring the data potential of B-MAC in carrying out audience surveys, at least of a qualitative nature. This would overcome some of the problems in undertaking research in such a large and remote service area.

56

Conclusion

4.14 The Tribunal considers it is unfortunate that the main ascertainment research specifically designed for the south-east region was undertaken too late for the results to have any concrete effect on the applicant's programming proposals. The Tribunal also

considers it unfortunate that the research did not include the proposed program schedule to enable respondents to make meaningful comment about the timing and types of programs they could be

receiving. While the Tribunal recognises that it is too early for individual program titles to be identified on a program schedule it stresses the importance of testing the timing of types of programs and the benefits that this testing provided to the north-east applicant who was then able to correct the timing of local news as a result of this research.

4.15 The applicant has also not specifically surveyed Aboriginal needs and interests. The Tribunal believes it is important that additional research into what Aboriginals see as their needs is undertaken, and that the results of that research are taken into account in the program schedule. This is particularly relevant at

retransmission sites where Aboriginal populations are high as these populations will be the first to receive RCTS.

4.16 The Tribunal is concerned that the results of any research undertaken to date is reflected in the program schedule.

4.17

PROGRAMMING

In the preceding section, evidence of the applicant's efforts to ascertain the needs of viewers in the RCTS south-east region was examined. How those information gathering procedures are translated or proposed to be translated into programming decisions

is, in the Tribunal's view, an integral part of ascertainment. That process is now examined in relation to the programming proposals of the applicant. To facilitate this procedure, the following criteria have been established against which the programming proposals can be compared: hours of service, program

schedule, SPS, program sources, program distribution, costs and the allocation of windows in the program schedule.

SSE programming

Hours of service

4.18 SSE proposes from the outset to transmit a program schedule occupying 117 hours a week, running from 7 am to 12 pm weekdays, and from 8 am to 12 pm at weekends.

4.19 This leaves a total of 51 hours of 1 downtime* or unused broadcast time in the vicinity of midnight to 7 am. The applicant indicated to the Tribunal that it proposes to use downtime to transmit educational programs and other specialist programs for taping and

57

replay at a later date, as well as for the distribution of commercials to regional stations. The applicant would expect educational authorities or bodies to pay for the use of downtime relays.

Program Schedule

4.20 SSE has not yet finalised its program schedule. A program schedule for a typical week was included in the application.(4) It was emphasised that this schedule should be regarded as being indicative only of program types in the various time slots. If the applicant is successful, it states that the schedule will embrace the best commercial programming available at the time of launch together with material of special interest to outback audiences. It is intended that the final format will be based on the results of the research study.

4.21 Mr Lean told the Tribunal that drawing up a program schedule for use more than a year down the road would not get them very far. When drawing up the schedule SSE will have to take into account points raised by the Tribunal, the submitters, the other applicants, as well as consultations with educational bodies and so

forth.

4.22 The program format in the application showed specific RCTS programming as being a half-hour news and weather service 5 nights of the week, a 1/2 hour slot at 10 am on weekdays which could be filled by rural or other special interest programs, and 1 hour of educational programming at 10.30 am five days of the week. There is no prime time slot allocated for special RCTS programming other than the local news service.

SPS

4.23 SSE proposes to provide a Satellite Programming Service ('SPS') to regional stations. As a consequence of this the Tribunal questioned Mr Lean as to what influence regional program managers would have on SSE's program schedule. Mr Lean stated that because

SSE will be the program purchaser there will certainly be some input from the regional stations. But Mr Lean saw that role as not being very different from that currently fulfilled by RTA for existing regional operators. Mr Lean told the Tribunal:

The RCTS programme manual [manager] would not be operating in a vacuum. He would be well aware of his responsibility as the deliverer of SPS programmes to the regional stations and usually programme decisions are made at preview meetings and so forth - programme previews where viewpoints are freely exchanged against programme managers and where at present decisions are made through RTA to either purchase - for all purchase for some or maybe purchase for none; do not purchase at all. I would imagine that a similar kind of process would be achieved. (t. p.3980)

58

4.24 SSE assumes that regional stations will use 35 per cent of the available feed, and that will be the amount of programming that it- anticipates will be common across the regional stations. The regional stations in the south-east region are not proposing any

arrangements to facilitate equalisation through RCTS and SPS, such as proposed by Queensland Satellite Television in the north-east region (refer paras. 4.21 - 4.33 RCTS Second Report).

Program sources

4.25 In its application, SSE indicated it would probably be purchasing the following percentage of programs from the sources indicated:

From metropolitan stations holding Australian rights: 49 per cent

From Overseas distributors: 33 per cent From Australian distributors: 13 per cent From Applicant: 5 per cent

4.26 At this stage the applicant has had no discussions with independent producers but Mr Lean told the Tribunal:

... we would welcome the opportunity to buy from producers of all kinds material we consider suitable for the service. There are no limits to that as far as we are concerned and we certainly would welcome broadening the base of Australian production for

television, so we are ready, willing and anxious to do that. (t. p.4022).

4.27 The applicant has held discussions with all three networks regarding program supply. The networks have indicated that they will consider the question of program sales when a licence is awarded for the zone. Overseas distributors have said that they

are quite happy to sell programs for satellite delivery.

Program distribution

4.28 In its application, SSE indicated its intention to seek an arrangement with metropolitan stations for relay rights covering a range of material including major movies, Australian series, sports programs, 'specials', national news, current affairs and mini­

series. It is anticipated that some 45 hours weekly would be scheduled from this form of delivery.

4.29 The applicant intends to establish studio facilities in Canberra which will allow SSE to tap into the terrestrial bearers between Sydney and Melbourne. It will also install a 6.7 metre dish which will enable it to receive material from either a 30 watt or a 12

watt satellite transponder.

59

Program costs

4.30 Mr Lean told the Tribunal that SSE is hoping that because of the nature of the RCTS market - its widespread distribution and lack of large centres - that it may be able to do better deals than is the current norm amongst the regional stations.

4.31 However, the costs budgetted are based upon the rate per thousand that regional operators pay at the moment.

Aboriginal programming

4.32 SSE has not formulated any proposals for Aboriginal programming other than to assure the Tribunal that it considers the use of "suitable material relevant to the Aboriginal scene" would form part of the program schedule.(5) Mr Lean told the Tribunal he did not envisage having a fixed spot in the program schedule for Aboriginal programming but if good material of high quality were available then he could see it being broadcast as a special program in prime time.

4.33 This is in contrast to Corroboree Films who submitted to the Tribunal:

... that meeting the special needs of remote Aboriginal communities should be a pre-requisite for the granting of such a licence. To ensure this, we suggest that the Tribunal might consider stipulating that a minimum of 5% of transmission time (say 6 hours out of 120 per week) should be devoted to Aboriginal programming.(6)

4.34 Later, the Tribunal raised the issue of embedded programming as proposed by the Department of Aboriginal Affairs ('DAA1) which refers to the inclusion of Aboriginal program material in general programs provided to the total viewing audience. Mr Lean said:

Yes, well, as I have already indicated, we certainly favour that course. We think that is an ideal way to broaden the impact of Aboriginal programming or programming relative to Aborigines to a wider section of the audience that might not otherwise see them. And we will do our best to accommodate such a programme. (t. p.4048)

4.35 Mr Berwick, of the NSW Ministry of Aboriginal Affairs, put it to the Tribunal that the Ministry, and the Aboriginal Land Councils, were strongly in favour of having structured and specific access to RCTS at set times. This could allow trained Aboriginal personnel regular access to a broadcasting facility to properly present their people's case.

4.36 The Tribunal was told that the Ministry feels there is great benefit to be gained from a regular half-hour program across the whole service area in which videos that have been made by Aboriginal

60

people (whether they be in Western Australia, the Northern Territory etc) could be presented, as well as some news of national importance. This would be the best way to assist cultural and social development. While Aboriginals will gain as much enjoyment

from commercial television as everyone else, a program that specifically addresses their own community needs and development initiatives, both social and political, is very important.

4.37 Lester Bostock from the National Aboriginal and Islander Broadcasting Association ('NAIBA') told the Tribunal that what the Aboriginal people are asking for is a program slot which will broadcast programs produced by Aboriginals to cater for their

cultural and social needs. NAIBA believes that Aboriginal programs must be produced and presented by Aboriginal people.

4.38 In its application, SSE states that it intends to confer with Aboriginal groups concerned with the social and cultural aspirations of their people. It is hoped in this way to come to a better understanding of Aboriginal needs and to determine a programming policy designed to satisfy those needs. Although eight months had elapsed between lodging the application and the inquiry

no consultation with Aboriginals had taken place.

4.39 When questioned by the Tribunal about the possibility of Aboriginal communities opting out of the RCTS, Mr Lean said that this had been considered. However, SSE does not think it desirable and believes that people who do not wish to watch a program have the ability to opt out on an individual basis. Mr Lean did say that the station could be aware of objections to certain things and take additional care when previewing a program.

4.40 Any Aboriginal programs will be broadcast in English as there are many Aboriginal languages spoken by small groups but no one language has a wide usage. Most Aboriginals in the south-east region speak English. Mr Berwick told the Tribunal that languages were not a problem.

4.41 SSE gave the Tribunal no indications as to how many hours it would consider devoting to Aboriginal programming over a week or when such programming would be shown or what financial commitment it was prepared to make.

Educational programming

4.42 In the pro-forma schedule in its application, SSE has proposed 5 hours a week of educational broadcasts - 10.30 to 11.30 am, five days a week. Mr Lean stated:

At the moment I see quite an expansion on that notional period that is shown, for the various levels of education requirements and of course for the adult level, which as I mentioned might very well be a

down-time type of programme. But certainly I could envisage quite a hefty expansion on what is shown there. (t. p.4066)

61

4.43 The ascertainment study undertaken in August indicated a high demand for educational programs. Mr Lean told the Tribunal that SSE had held preliminary discussions on educational broadcasts with the Federal Minister and another round was scheduled for the

next week. Because of the difficulties of broadcasting educational material across three states, the applicant has indicated a need for consultation with a council of Education Ministers from the three governments to work out ways to accommodate the needs of all students.

4.44 Compared to the other three regions, the south-east RCTS will be reaching a much higher proportion of underserved as well as truly remote residents (see Chapter 1, para 1.12). Mr Lean said that the target audience for educational programs would be the outback or remote students. In most cases the term 'underserved' applied to areas of overlap where educational facilities were available but due to geographic conditions did not have adequate television services.

4.45 The Tribunal raised the issue of who should be responsible for the costs involved in educational programs. Mr Lean stated that SSE would be looking to receive compensation for providing time for educational broadcasts because it is of importance to the

educational authorities. However, the Tribunal then pointed out that the provision of programs specifically made for the region covered by RCTS and for minority interests in the region constituted part of an RCTS licensee's undertaking. Mr W Rayner, the Chairman of Directors of Satellite South East Pty Limited, said in evidence:

The applicant sees the need for production of educational material in the normal programme sense and it would be part of the for instance programme pattern. It could well be made by the one of the members of the company on contract or contracted

elsewhere or indeed made within the production facilities ultimately of Satellite South-East. (t. p.4254)

4.46 The applicant also stated it believed that with the addressability function of B-MAC technology every school in the south-east region, not only the RCTS service area, should be able to receive educational broadcasts off the satellite.

Childrens programming

4.47 The applicant does not intend to produce any childrens programs itself but its constituent stations are making such programs and SSE would anticipate drawing on these for programming outside and within the 4 to 5 pm timeslot.

62

Conclusion

4.48 The program schedule provided in the application is only a proforma. It fulfills the minimum requirements relating to children's programming, Australian content and religious programming. SSE indicated that it could be another year before the program schedule was finalised.

4.49 Nevertheless, the Tribunal is concerned at some aspects of the schedule. They are:

- scheduling a rural program mid-morning on a weekday - no specific reference to Aboriginal programming - few details about educational programs

- no local program windows at retransmission sites. (This will be looked at in more detail under production.)

4.50 In view of the applicant's proposal to deliver a Satellite Programming Service to regional operators, the Tribunal believes it is important that the regional stations do not exert too much influence over the programming decisions of SSE. While the Tribunal understands the economic advantages of providing an SPS

for regional operators, it will be important for the licensee to ensure by regular ascertainment that the program schedule is appropriate to the needs and interests of RCTS viewers.

4.51 The Tribunal would also wish to see some evidence of special RCTS programs in prime time when the majority of viewers would be watching, to ensure the schedule is relevant to RCTS. The proforma program schedule has not included programs specifically for RCTS

viewers in prime time. Mr Lean did indicate that a special Aboriginal program might occasionally be suitable for prime time broadcasts.

4.52 The Tribunal is concerned that there are no details of programs for, or about, Aboriginals in the schedule. Aboriginals make up 3.37 per cent of the total population in the RCTS service area, but up to 30 per cent of the population at some retransmission sites. The Tribunal believes it is important for this applicant to

adequately address the specific needs of Aboriginals in the region. SSE has assured the Tribunal it intends to accommodate Aboriginal needs.

4.53 Earlier, reference was made to a request by Corroboree Films that there be a minimum of 6 hours per week of Aboriginal programming, or 5 per cent of broadcast time, given that 3.37 per cent of the population in the service area is Aboriginal. The Tribunal believes 6 hours is unrealistic, especially given the current

capacity of production houses producing suitable material. The Tribunal however reached an in principle conclusion in its First and Second Report that there should be a condition requiring windows for special RCTS programming. Some of this should be in

prime time and could include Aboriginal programming.

63

4.54 The Tribunal is also concerned that SSE, if it is the successful applicant, should work out a schedule of educational broadcasts that goes some way to accommodate the needs of students in New South Wales, Victoria and Tasmania.

4.55

PRODUCTION

As has already been discussed in the First Report, the RCTS licences will be the first television licences granted on the basis of applications which include the undertaking as prescribed in Section 83(5) of the Act. This puts an onus on applicants not only to indicate in their application the programs they intend to produce, but to ensure as far as practicable that these productions

or their equivalents actually take place and that the amount of production indicated continues into the future.

4.56 In order to judge the application the Tribunal has to examine the applicant's production proposals, their relevance to the community to be served and the ability of the applicant to carry them out. This section will therefore examine the production proposals of the applicant for the south-east licence.

SSE production

4.57 SSE plans to produce a daily half hour local news service and a weekly half hour rural program on a regular basis. It is also its intention, on occasions when social and political issues arise of special significance to the outback, to mount a panel-type discussion program. SSE states in its application that it proposes to commission regional television stations to produce special programs on sports subjects, rodeos, country music festivals and other similar events.

4.58 Mr Lean told the Tribunal the budget is basically a news production budget which is capable of expansion as needs dictate. If something special needs to be done, this could be accommodated.

News production

4.59 SSE proposes to produce a half hour of regional news five days a week. Stories would come from the following sources:

- Regional Television News Australia (1RTNA1), which has its own crew based in Canberra picking up stories of particular interest to country audiences.

- Stories purchased from regional stations for a fee. (These will sometimes be commissioned)

- Stringers located in remote areas.

No details were given of the likely proportion of these stories in a daily news program.

64

4.60 The SSE news staff located in Canberra will comprise a news editor and two journalists, both of whom will double as news readers and sub-editors.

4.61 Mr Michael Moroney, a Director of SSE, told the Tribunal that as well as the half-hour of regional news in the evening, there would be a lunch-time service of 6 to 10 minutes and a late night summary of the day's events. SSE would be looking at broadcasting 16 to 20

stories a day. The Tribunal is concerned that as no detailed budget was provided indicating fees for stringers, payments to regional stations or RTNA, that the news program could develop into a program consisting mainly of repeated regional news stories.

4.62 The applicant, while stating it will employ stringers, did not indicate at this stage how many or where they will be located. It has also stated that it will equip stringers but has not budgetted any amount for this cost. Mr Lean assured the Tribunal that SSE would be purchasing high quality equipment for stringers. However Mr Moroney indicated that on the whole SSE prefer stringers to own

their own equipment, as they tend to take more care with it.

4.63 Most material produced by stringers would be sent to Canberra by road or normal air transport as stories from the outback are not usually time-sensitive. Any stories that are time-sensitive could be covered by the nearest regional station and sent to Canberra by bearer, or SSE would send a crew in by chartered plane.

4.64 The local news will also contain a comprehensive weather service. The Tribunal sees this as important as it was impressed by an affidavit to the north-east inquiry which stated that weather maps identifying weather movements over the whole continent were particularly helpful to people on the land.

Rural production

4.65 SSE proposes to produce a 30 minute weekly series tentatively titled Man on the Land which will survey the newest developments in farm management, animal husbandry, computer aid and other subjects of interest to the rural population. This program is tentatively

scheduled for 10 am on a week day. The Tribunal questioned the appropriateness of this time slot and Mr Lean indicated that it could well be revised. The applicant stated that RTNA is a possible source of material for this program.

Local windows at retransmission sites

4.66 While generally supporting the concept of local windows and production at retransmission sites, SSE has not yet formulated any specific plans as to how this might be achieved nor has it identified a time in the program schedule. Earlier in the inquiry

SSE put forward an option for dealing with this issue with which the Tribunal is in general agreement. (First Report paras. 3.37­ 3.46) Some of the submission is reproduced below:

65

SSE contends that access at retransmission points can be given to local groups who wish to produce programs for retransmission at little administrative cost to the Tribunal, those groups or the licensee.

... SSE submits that the licensee should be responsible for this form of telecasting and SSE is prepared to take that responsibility.

... There need be no formal system of permission for local retransmission written into the Act. Those initiating retransmission locally would become limited agents of the the licensee for the delivery of a local service. They could be contractually obliged to the licensees to provide a service within the limits of their defined authority.

Mr Rayner told the Tribunal:

We would not want the tribunal to feel that we will not be experimental and will pull back from this, but we have to say at this point in time that we do need to study this situation carefully; we do not know in what sort of circumstances the retransmission equipment will be housed - whether it will be close to the town or in a tin shed or wherever. Conditions are fairly rigorous in the field. What we would propose to do in a number of matters - not only this

- but when and if the successful applicants for RCTS licences are announced in the zones other than west, which has already been announced, there should be a meeting of all RCTS licensees to see if some sort of modular approach to this whole matter might not be derived. Because what we do not want to do is lack a standard. I can see considerable significance, as chairman of Satellite South-East, in the ability to inject local material at retransmission points. (t. p.4257-8)

4.67 Mr Bert Beasley, a Director of SSE in charge of the technical aspects of the application, told the Tribunal that he thought it would be appropriate for the four successful RCTS licensees to have discussions on the issue of local windows at retransmission sites. This could be useful to standardise equipment, addressability and

local input, and to organise bulk purchases on behalf of communities for their various pieces of equipment. Mr Beasley said to the Tribunal in evidence:

We accept the principle. Yes, we will provide the interface equipment. We believe that we have only just begun down the track of this new process of local input. We are quite enthusiastic about it and

I believe that it has the potential to become a very useful form of community expression. (t. p.4156)

66

4.68 Mr Rayner, in his summing up, told the Tribunal

We would want to consult with the communities concerned and would do so. We would want to encourage people to think of the retransmission point as their own and given all of that, we would want to be experimental. (t. p.4267)

Conclusion

4.69 The Tribunal has some concerns about SSE's production proposals. No evidence was given on the size of the budget allocation for this area and some vague promises were made in relation to special interest productions for Aboriginal groups, special sports programs

etc. The only concrete production proposal identified was an RCTS news service. However the Tribunal has some concerns about these proposals also. One such concern is the failure to provide firm proposals on the employment and equipping of stringers. While

stating that this will take place, no concrete proposals in terms of numbers, location or budget are evident. Also, the applicant did not identify any plans to utilise the two journalists it proposes to employ in Canberra for any news gathering purpose; the tasks that were identified are newsreading and subediting. Overall, the proposals for a news service appear to be underdeveloped. The Tribunal believes that more thought must be

given to a comprehensive coverage of local news for the RCTS service area.

4.70 The Tribunal is concerned that there is a danger that SSE could become over reliant on regional stories from consortium members and that the RCTS news will just become a collection of repeated stories from regional stations with doubtful relevance to RCTS and

little specific RCTS coverage.

4.71 When selecting stringers, the Tribunal believes it would be appropriate for the applicant to consider employing Aboriginals in some areas. This would be of particular relevance in the north­ west of New South Wales where there is a high proportion of Aboriginals. The Tribunal would expect that regular stories would

involve Aboriginal communities. The Tribunal heard from the NSW Ministry of Aboriginal Affairs evidence relating to dissatisfaction with media coverage of Aboriginal issues (see Chapter 1, para 1.37) and believes that RCTS has the potential to go some way to aleviate

that.

4.72 Again, while the applicant has expressed support for the concept of local windows at retransmission sites, no concrete proposals were evident. No communities have yet been consulted or any local groups contacted to explore the potential of this concept.

4.73 The Tribunal believes it is important for SSE to consult with Aboriginal groups in the five towns where retransmission facilities are to be established when developing plans for local windows at retransmission sites. Since up to 30 per cent of the total population at these sites is Aboriginal, local windows could go

67

a long way towards meeting the needs and interests of Aboriginals in these communities. It is likely that some Aboriginal communities will require initiatives and funding from the applicant to assist groups to provide local programming into the local windows.

4.74 In the First Report, the Tribunal concluded:

6.150 Production at the local retransmission sites is an integral part of the RCTS. Licensees will have to provide for these programs in order to meet their undertakings given to the Tribunal. The onus is on the licensee to investigate and initiate new and creative ways to find, assist, train and where necessary, fund local groups to provide local programming.

6.151 The plans of applicants to provide local programs together with their capability and capacity to realise those plans will be one of the criteria used by the Tribunal in assessing applicants at the

grant of an RCTS licence and considering the renewal of such a licence.

4.75 To satisfactorily meet the undertaking, applicants must provide remote communities with information of local community events, interests and developments. Local production therefore has an important role to play in any programming proposals. However production also has the characteristic of being the most expendable as it is an operating cost which can be cut back. Should the applicant be successful in qualifying for the grant of a licence, it would be the Tribunal's intention to closely monitor and evaluate the applicant's production output.

Conclusions on capability to provide an adequate and comprehensive service and comply with licence conditions

4.76 Although expressing reservations about the applicant's proposals and performance to date in the areas of ascertainment, programming and production, the Tribunal considers that SSE does have the capability to provide an adequate and comprehensive

service, to encourage Australian programs and otherwise comply with licence conditions. However the Tribunal is of the view that more thought should be given to meeting RCTS needs by providing for the specific production of news stories and local programming for RCTS viewers.

4.77 While emphasising the importance of local production, the Tribunal recognises that the practicalities of this are tempered by the uncertainty of the economics of the RCTS operation. The Tribunal however considers a high priority should be given to local production.

68

NOTES TO CHAPTER 4

(1) DOC, submission ' 1-040 RCTS inquiry Attachment C, p.7 (2) Exhibit S9 p.12 (3) SSE Application, Section 11.1 p.25 (4) SSE Application, Section 13 p.29 (5) t. p.4044

(6) Exhibit S1 3

V

69

CHAPTER 5

RCTS AND SATELLITE PROGRAM DISTRIBUTION

INTRODUCTION

5.1 In Chapter 3 (paras. 3.18 - 3.30) of the RCTS Second Report, the Tribunal addressed an issue raised by Network Ten in a late submission to the north-east region inquiry (Letter of 9 September 1985 from Mr Wilf Barker to the Chairman, ABT). The issue that concerned Network Ten was the intended use by the applicant, QSTV, of the RCTS as an SPS to the regional stations in Queensland, and QSTV's related proposal to achieve equalisation of services.

5.2 As stated in Chapter 3 of the Second Report (para. 3.22), in correspondence after the inquiry, Network Ten raised a number of matters relating to the QSTV application:

. The Multi-channel proposal was contrary to the Government's equalisation objectives.

. Network Ten has considerable doubts about the revenue projection of QSTV.

. Although Network Ten is pleased to negotiate the sale of program rights to RCTS licensees for the service for which they are licensed, it is not the case that this also automatically means those rights will include the right to distribute those programs to other terrestrial broadcasters by an RCTS SPS. This is a matter to which Network Ten has a basic and sustained policy objection in its consideration of overall broadcasting interests across Australia.

. No RCTS licence should be granted to QSTV because the service proposed:

(a) is based on a concept incapable of achievement;

(b) will not be commercially viable; and

(c) is contrary to the Government's policy of equalisation, whether by way of aggregation or MCS.

5.3 In response, QSTV stated

. Difficulties were being experienced in negotiations with Network Ten in regard to proposals to deliver programs to Queensland regional stations via the RCTS. However, negotiations were proceeding

satisfactorily with the Seven and Nine Networks.

70

. QSTV maintained that its proposal was consistent with the Government's equalisation policy objectives.

. The opposition of Network Ten was motivated by factors such as its concern that the proposal would give regional stations more bargaining power on program prices than under a straight-up networking

situation.

5.4 The Tribunal expressed its belief that the position taken by Network Ten in its letter was in conflict with sworn testimony given by its representatives at the Tribunal's SPS inquiry on April 19, 1985. This will be discussed further later in this chapter. The Tribunal concluded in para. 3.30:

The QSTV application proceeds on the basis that SPS use will be made of the ROTS. As pointed out in the First Report, this is consistent with government policy. In the light of the evidence given to it in

the SPS inquiry the Tribunal would expect that regional stations would be able to negotiate program rights and the means of delivery on a normal commercial basis which would give them the option of

using the RCTS for distribution of programs acquired. The extent to which it will be practicable to use RCTS as an SPS will be affected by the decisions that the Government ultimately takes on implementation of

equalisation.

5.5 In this chapter, the Tribunal deals with the implications of this issue for both the north-east and the south-east region RCTS licence grants in the light of further developments which have occurred since the publication of the Second Report.

RECENT CORRESPONDENCE

5.6 The Tribunal received letters from the 7, 9 & 10 networks in response to its interpretation of their position as stated in the Second Report. It is necessary to set out the contents of these letters in full. In a letter of 28 October 1985, Mr M Bostock of Network Ten stated:

Network Ten Australia has considered criticism of it and its representative by the Tribunal in its RCTS Report in respect to the North East Region. The Report alleges conflict between the evidence presented by Network Ten to the SPS Inquiry and the matters

raised in the letter from Mr Wilf Barker of September 9, 1985.

Network Ten wishes to make its position plain. Network Ten rejects the suggestion that there is any conflict between its position as stated to the Tribunal during the SPS Inquiry and that put in

71

Mr Barker's letter in relation to the satellite distribution of Network Ten's programs on a third party transponder, ie, RCTS-SPS. We agree with the Tribunal that during the SPS Inquiry we gave a commitment not to make [Network] program delivery by satellite a condition of program supply. However, the Tribunal in referring to this undertaking in the North East Region Report appears to have ignored the context in which that commitment was given. The issue of RCTS SPS delivery canvassed in Mr Barker's letter simply did not arise during the SPS Inquiry.

It is plain from the context of the statements made by Mr Barker during the SPS Inquiry, quoted in the North East Region Report, that he was responding only to questioning about the delivery of programs on the one hand by traditional (terrestrial) means, and on the other hand by satellite on an SPS operated by this Network. His comments were not directed to Network Ten programs being delivered by a third party SPS. This was not an issue raised by us or with us during the SPS Inquiry. Indeed, it is clear from the transcript that the assumption made by all parties during the SPS Inquiry was that those matters concerned only the Network role as a national SPS provider. The Tribunal has no grounds for extrapolation of this position to a subsequent proposal for RCTS-SPS.

The key element of such questioning was the potential for Network insistence on delivery by satellite as opposed to existing terrestrial systems and this arose from fears expressed by the Perth stations. At the time of Mr. Barker's (and other Network) evidence to the SPS Inquiry, there was no suggestion of third party re-distribution of Network product - that only came somewhat later. These fears of the Perth stations, to which reference is made in the Chairman's question in the first quotation on page 44 of the North East Report, were quite explicit in that regard. Indeed, Mr Aspinall continued at p. 784 of the SPS transcript:

"So the reality is that it is unlikely, as the response to this inquiry so far indicates, that there will be any real significant SPS suppliers except the Sydney and Melbourne stations? That certainly is correct and that is certainly the way that we have attacked the questions."

72

The Tribunal was specifically reminded of this fact in the course of the submissions made to the Tribunal's General RCTS Inquiry, held in March 1985. We refer the Tribunal to the contents of the Outline Submission

to the RCTS Inquiry, dated February 22, 1985, lodged by News Limited and Network Ten. At Part 4 of that submission the issue of SPS was dealt with. In the opening paragraph of that part of the submission the

Tribunal's attention was drawn to the context in which the SPS Inquiry was held:

"The Ministerial Statement to Parliament of November 15, 1983 concerning the Development of Satellite Related Broadcast

Services and Ownership of the Satellite System indicated that 'all space station transponder capacity used for commercial SPS will be in the national beam'. The SPS

Inquiry was held in the context of this statement and if any change in the policy expressed in the statement is proposed, (Network Ten) would wish to be heard on that matter."

The announcement of a change in government policy permitting SPS on a zonal beam only occurred during the course of the RCTS Inquiry. Our RCTS evidence made it clear that this was indeed a problem to this

Network in pursuance of plans for national availability of its programming via network-leased satellite facilities.

Given the terms of our submission to the Tribunal in February 1985, it should have been clear to the Tribunal that the Statements made during the SPS Inquiry were made in an wholly different context. The Tribunal had no reason to believe that Network Ten

gave any assurance to supply programs to an RCTS in respect to its operation as an SPS provider where such a carrier may be in direct competition with the services provided by the Network itself. It was in part to avoid any misconception in this regard that Mr

Barker wrote his letter of September 9, 1985 - at which time he had noted evidence during the North East Inquiry.

We are disappointed that the Tribunal chose to make such damaging criticisms of this Network and its representative, in particular Mr Barker, without affording us the opportunity to respond to the views proposed to be expressed in that Report prior to its

finalisation and public release. We do, of course

73

regret that the Tribunal formed the belief that comments made by our representatives could be applied to a factual situation to which they had not directed their minds.

We trust this letter will be accepted by the Tribunal as a genuine effort on our part to cure any misunderstanding that the Tribunal may have had about our position. However, in the circumstances. Network Ten believes it is appropriate for the Tribunal to retract the references in the Report to the alleged conflict in our sworn testimony and advise the Minister accordingly.

5.7 Channel 7 also responded to comments made in the Second Report in a letter of 17 October 1985:

We have now had an opportunity to study the Second Report - North East Region on the Remote Commercial Television Service inquiry and need to make some comment regarding ATN's position.

On page 43, and in other places, reference is made to a statement by QSTV that "negotiations were proceeding satisfactorily with Seven and Nine Networks" regarding delivery of programs to Queensland regional stations via the North East RCTS.

As far as Seven is concerned, negotiations are not proceeding at all. I attach copies of correspondence related to this matter. As you can see, the Seven Network will determine its program distribution strategy after the Federal Government has determined its equalisation plans.

There is no reason, that is apparent at this time, why the Seven Network would not continue to sub­ licence programs to Queensland Regional stations nor to sell to the North-East R.C.T.S. We should point out some practicalities and precedents related to program distribution. Over many years the Seven Network has held a full-time lease for a Sydney- Melbourne terrestrial bearer and has used this for program distribution, where appropriate, for all

stations capable of linking to it.

It has never been contemplated that where such a service exists any group of Regional stations would lease another bearer and request distribution on such duplicated system.

74

To this stage the Seven Network has not committed to lease an Aussat transponder although we have been encouraged by Government to do so. Should we make such a commitment, as the Nine and Ten Networks have done, we would see the situation as being similar to

the case of our Sydney-Melbourne bearer lease. We would anticipate that the lease of a transponder would be justified if its cost could be amortised over all Regional stations receiving programs from it. If a

significantly sized group of stations opted not to purchase rights for programs distributed in this way, then the viability of the use of the satellite would be thrown into doubt.

We reiterate the advice given to Mr. Astley in the attached correspondence, that the Seven Network will adopt its final position on this matter when all relevant information is available. At this stage it cannot be assumed that Seven Network programs would be able to be distributed to part of our market by the North East RCTS.

As there is such a doubt, and noting the attitude of the Ten Network as reported in the R.C.T.S. report, the figures in table 3-6 on page 50 would seem to be most optimistic. If SPS fees are disregarded from

the viability consideration, the QSTV proposal would indicate that after six years they would be trading at a loss, with accumulated losses of $12,427,000 and no

hope of ever trading profitably.

5.8 TCN Channel Nine adopted a similar position in a letter of 24 October, 1985:

The Australian Broadcasting Tribunal's Second RCTS Inquiry Report draws some mistaken inferences about the Nine Network's attitude to program distribution.

The Report quotes the Queensland RCTS consortium to the effect that negotiations are proceeding with the Nine Network for the purchase of programs which will be delivered to Queensland regional television

licensees by means of the North-East RCTS transponder. There have been no negotiations. The Nine Network has simply told the Queensland RCTS consortium that it would be prepared to discuss program sales on a normal commercial basis. It

should not be assumed from this that programs will be made available in the way the Queensland consortium intends.

Our position would be familiar to you from our submissions and testimony to the SPS Inquiry. The Nine Network will not require any stations to take programs by satellite. If they elect to the Network

75

reserves the right to nominate the carrier. An agreement between the Nine Network and STW-9 which spells out these provisions was made available to the Tribunal.

If we proceed to lease satellite capacity, it will be on the expectation that we can use it to provide a service to our customers, as we do at the moment with our leased bearers. We have made it clear to Government that we seen no obligation to allow RCTS to distribute our programs to our customers.

5.9 It was clear to the Tribunal that the position taken by the networks as reflected in this correspondence had implications for the south-east RCTS as well as the north-east because of each of the applicants' proposed reliance on RCTS-SPS. The Tribunal therefore decided to proceed as follows:

(a) To place the correspondence on the public record for the inquiry.

(b) To forward the correspondence to the south-east and north­ east region applicants for any comments they may wish to make.

(c) To draw the correspondence to the attention of the Minister in view of the implications it could have for the Government's consideration of equalisation of services, revised ownership and control rules and network regulation.

(d) To ask further questions of the networks to more precisely ascertain their position.

(e) To deal with the matters raised by the networks, and in particular Network 10, in this Report.

This action was taken and again it is necessary to set out the contents of the correspondence in full.

5.10 QSTV replied in a letter of 4 November 1985 from Mr David Astley and stated:

Thank you for your letter of 31 October 1985 reference 84/243 inviting us to comment on correspondence from the Seven, Nine and Ten Networks.

We do not understand the remarks made by Mr Thomas of the Seven Network and Mr Chisholm of the Nine Network that there have been no negotiations in regard to the

use of the Queensland RCTS as a means of delivering programs to regional stations. We have been discussing this matter with all three networks since May 1985. Prior to the north-east RCTS hearings in July, there had been several meetings between representatives of regional stations and network

76

stations to discuss issues associated with the use of remote commercial television services for satellite program services. The network representatives who attended those meetings were Mr John Sturzaker,

Program Development Manager of the Seven Network, Mr Len Mauger, Managing Director of the Nine Network, and Mr Wilf Barker, General Manager (TV Development) of the Ten Network. It is noted that none of the

writers of the letters to the Tribunal - Mr Thomas, Mr Chisholm and Mr Bostock - attended any of these meetings.

Since the north-east RCTS hearing, discussions have continued with Mr Sturzaker, Mr Mauger and Mr Barker, although as the Tribunal will have noted from our

letter to Mr Sturzaker dated 16 September, 1985 (a similar letter was written to Mr Mauger), we agreed to let the matter stand on the basis outlined in our letter of 16 September until we were granted an RCTS

licence and the Government had finalised its policy decisions in regard to equalisation, at which time we would meet again to determine on a normal commercial basis the means by which programs would be delivered

to regional stations in Queensland.

We interpreted the term 1 normal commercial basis' to mean that the networks may offer regional stations incentives to use their national SPS transponders for program delivery or alternatively impose cost

penalties on those licensees electing to use the RCTS for program delivery. On several occasions the writer has tested this interpretation on Mr Sturzaker and Mr Mauger. Their responses did not cause us to

reconsider our interpretation although it is acknowledged that neither Mr Sturzaker or Mr Mauger have said that their networks would permit their programs to be delivered by RCTS. However neither Mr Sturzaker nor Mr Mauger have said that their programs could not be delivered by RCTS. Only Mr Barker has

said that his network would not permit programs to be delivered via RCTS. It was for this reason that, until we received from the Tribunal copies of the Seven Network's letter dated 17 October 1985 and the Nine Network's letter dated 24 October 1985, we considered our negotiations with those two networks were progressing satisfactorily.

Unfortunately it now appears that the Seven and Nine Networks are adopting a similar position to the Ten Network and may with-hold programs to regional licensees who wish to use the RCTS for delivery.

jh

77

This would have an adverse effect on the viability of the Queensland RCTS. As we indicated at the north­ east RCTS hearing, the Queensland RCTS will only be viable if it is able to receive the income from program delivery fees that have been budgetted for.

We observe that on the copy of our letter dated 16 September 1985 attached to the Seven Network's letter dated 17 October 1985, there is a handwritten note that includes the question "do they (QSTV) mean that they want to be able to insist that TEN delivers on TAA rather than Ansett?" The answer to that question is yes, because that is precisely what we do now. We are the buyer of the product, we have to pay for its delivery and therefore we expect to have the right to nominate the method of delivery.

Regional stations currently have a contract rate with TAA for the cartage of prints and tapes that is more attractive than Ansett are able to offer. Therefore we nominate TAA as the carrier. TEN do not insist

that we use Ansett because of News Limited's shareholding in Ansett Transport Industries.

Mr Chisholm states in his letter that if stations elect to take programs by satellite, then the Nine Network reserves the right to nominate the carrier. Our reasons for opposing this position go beyond what we consider to be a normal commercial right of the buyer of the product. There are a number of operational requirements that need to be taken into account.

For eighteen weeks of the year (during NSW daylight saving), programming on the networks' national transponders would be one hour advanced, necessitating all Queensland stations recording and 'turning around' programs by the hour. This is a costly process which the Brisbane metropolitan stations currently have to undertake. One of the advantages of using the RCTS as a delivery service to regional stations is that programs would have already been turned around in Brisbane from where it is intended to originate the RCTS.

Another important consideration for regional stations is that it is intended to sell the RCTS as part of a total state or regional Queensland 'buy' and this will involve a large number, possibly more than half, of all commercials booked on regional stations being relayed via the RCTS. If QSTV is not able to provide a program feed to regional stations, complete with

78

these commercials, then Queensland regional stations will not be able to take advantage of the economies provided by this method of operation. Each station

would have to originate all its commercials from its own facilities.

The economic and operational benefits of networking in this manner were recognised by the Tribunal in its SPS Report. However it appears that ATN, TCN and TEN believe that they are the only stations entitled to these benefits.

If the network stations are permitted to determine the method of program delivery, then the distribution of Australian programs will be substantially in the hands of the three Sydney network stations. Given that

these stations already effectively control the production and sale of most Australian programs, we consider that it would not be desirable for these stations to also control the distribution of programs.

It should not be overlooked that, if regional stations are granted MCS permits by the Government to equalise commercial television services, then regional stations will consider using other satellite program services

to feed their second and third transmissions. Whether they use the proposed network satellite program services will depend on whether the networks' SPS charges are competitive with other means of delivery,

such as Telecom bearers.

We submit that the receiving stations should remain free to select the method of distribution (including the nomination of carrier) which must include RCTS.

5.11 SSE also responded in a similar manner in a letter of 8 November 1985 from Mr W Rayner:

We refer to your letter of October 31, 1985 enclosing copies of letters from Networks 7, 9 and 10 and inviting comment from Satellite South East.

With regard to the so-called SPS element of RCTS we wish to make the following observation.

An RCTS licensee will be licensed under the Broadcasting Act and there is ample historical precedent for a licensee to provide a relay service of its own broadcast programs to another licensee

(eg, Mildura, Griffith, Dubbo, Albany, etc). The distinction between SPS and RCTS is essentially one of whether or not the feed is a broadcast (licensed) signal or a non-broadcast (radio-communications)

signal.

79

As a licensed broadcaster, we submit, an RCTS licensee would be entitled to enter into a relay arrangement with terrestrial stations (who would individually purchase broadcast rights).

The revenue projected for Satellite South East from the program delivery to regional stations is in fact a recoupment of the costs of providing a relay.

This is revenue to which it is submitted, Satellite South East would be entitled, and no amount of Network re-definition of SPS should stand as an impedence to it.

Furthermore, where a Network purchases all-Australian rights (or acquires then through production), as a matter of principle it seems to us that the rights of the Network vis-a-vis regional stations in negotiations for that program, should be limited to a reasonable sale price free from distribution charges. Once a regional station has acquired the rights to broadcast the program the means by which the program reaches the transmitters and translators of the purchaser should not be subject to Network control.

This principle basically restates sentiments expressed in the SPS Report - that the three elements of commercial television (production/rights purchase, distribution and transmission) should be separated (or at least separable at the option of the purchaser/end user). Indeed for many regional stations this arrangement reflects the existing situation where bearer bookings are made by the receiving station.

5.12 The Tribunal also sought further responses from the Networks. A similar letter was forwarded to each network:

The Tribunal has noted the contents of your letter of 28 October. It considers the most appropriate course is to address the matters that you have raised (and those raised by the 7 and 9 Networks) in its Third Report on the South-East Zone which will be published shortly. A copy of your letter has been forwarded to

the South-East and North-East applicants for any comments they might wish to make. A copy has also been forwarded to the Minister for Communications for his information.

The Tribunal would be assised by further elaboration of the position that Network Ten will take or is likely to take to satellite distribution of programs

80

for which it controls the Australian rights. In particular, the Tribunal would appreciate Network Ten's answers to the following:

1. Would Network Ten be prepared to sell the rights it holds to a program to a Queensland regional station for telecast in its own market where that regional station proposed to effect delivery of the program in the following way: off-air or micro-wave relay from TVQ to the Queensland RCTS

station; satellite distribution via RCTS to the regional station.

2. If the answer is no would it be different if Network Ten did not have its own SPS.

3. If the answer is yes would it be on the same or similar terms to those that currently apply to the sale of program rights to such a regional station. Would Network Ten include in its negotiations any amount to cover distribution between Sydney and Brisbane where the program had originated from Sydney.

4. Would Network Ten be prepared to sell the rights it holds to a program to a Queensland regional station for telecast in its own market where that regional station proposed to effect delivery of the program in the following way: video-tape delivered to the Queensland RCTS station; satellite distribution via RCTS to the regional station.

5. If the answer is no would it be any different if Network Ten did not have its own SPS.

6. If the answer is yes would it be on the same or similar commercial basis as currently applied whereby the regional station would assume responsibility for the cost of delivery of the

tape.

7. Would Network Ten be prepared to sell the rights it holds to a program to a Victorian regional station for use in its own market where that regional station proposed to effect delivery of the program in the following way: Sydney-Melbourne bearer to CTC Canberra; off-air or micro-wave relay from CTC to South-East RCTS station; satellite distribution via RCTS to the regional station. 8

8. If the answer is no would it be any different if Network Ten did not have its own SPS.

81

9. If the answer is yes would it be on the same or similar terms to those that currently apply to the sale of the program rights to such a regional station. Would Network Ten include in its negotiations any amount to cover distribution between Sydney and Canberra.

ί would be grateful if you could forward your reply to the Tribunal by 18 November 1985.

5.13 The Tribunal received the following responses. From ATN-7 on 14 November 1985:

The following replies are relevant to questions in your letter of 11th November.

1. Assuming that the Seven Network had its own SPS then sales to Queensland Regional stations of Network programs would be via that SPS. If BTQ made a sale of one of its programs to a Queensland Regional station, then the decision on

form of distribution would be theirs.

2. If the Seven Network did not have an SPS we would determine our program distribution strategy after the Federal Government had determined its equalisation plans.

3. Not applicable.

4.5.&6. This is a hypothetical situation that is not very logical. Why would any station want to pay for delivery of a program to a third party just so that third party could then charge the

station extra for finally delivering the program?

7. No.

8. See answer to question 2.

9. Not applicable.

5.14 The Tribunal was not satisfied with this response and asked for a further response:

Thank you for your letter of 14 November concerning the questions raised by the Tribunal in its letter of 11 November.

The Tribunal would be grateful if you could provide a responsive answer to questions 4, 5 and 6. Although ATN might think it to be a hypothetical situation that is not very logical, the Tribunal does not share this view and therefore asks for a statement of ATN's position in such a situation.

The Tribunal has agreed to a request from the Ten Network to

82

extend the time for its response to 5 December so that the matter can be considered by its board. Could your further response be provided by that date.

The following letter was subsequently received on 9 December 1985:

I have considered the request in your letter of the 21st November. ATN would prefer to wait until the Government clarifies the whole Satellite issue, and we are able to consult the Network on the situation before adopting a position on the matter to which you refer.

5.15 Channel 9 replied in a letter dated 19 November 1985:

In your letter of 12th November, 1985 you posed a series of questions concerning the Nine Network's attitude to distribution of its programs to regional stations by RCTS.

I notice that you have copied to others my earlier letter on this subject. For the benefit of any other readers of this letter, I shall set out our general approach to program sales.

The Nine Network negotiates the sale of its programs with individual regional stations. The purchasing station is normally responsible for meeting the delivery cost. Freely negotiated agreements between

Nine Network program sales staff and regional stations will continue to determine the price at which programs are sold, and how they are made available.

The only difference will arise from the Nine Network's full-time lease of a satellite transponder. Where a station wishes to take a Nine Network program

by satellite, that program will be offered on the Nine Network transponder. It would still be open to purchasing stations to take Nine Network programs by landline or videotape, or off-air.

The answers to your questions should be evident from the approach I have outlined: 1 * * 4

1. If a Queensland regional station opts for satellite delivery of a Nine Network program, that program would be offered on the Nine Network transponder.

2 & 3. Not applicable.

4. This hypothetical situation seems to us to involve the same considerations as question one. The same response applies. 5 & 6. Not applicable.

83

8 & 9. Not applicable.

5.16 The Tribunal asked Channel 9 to confirm the Tribunal's understanding from the letter that if any part of the delivery chain is proposed to be by satellite, the program will only be available to the regional station on the basis that delivery is effected direct to it by the Nine Network SPS. At the time of finalisation of this Report, the Tribunal had received no response and therefore assumes that it's understanding of the Nine Network's position is correct.

5.17 Network Ten requested an extension of time to allow their Board the opportunity to consider the matter. The Tribunal agreed and subsequently received a letter of 5 December, 1985:

I refer to your letter of November 11, 1985 and to subsequent telexes between the Tribunal and our Solicitors, Dawson Waldron, concerning the matter. The Board of Network Ten Holdings Limited has now considered the matters raised and I am authorised to state that while changing circumstances and needs may bring a change in the company's policy at any time, the policy which the company intends to pursue is as follows.

In relation to the position of Network Ten with regard to satellite distribution of programs for which it has Australian rights. Network Ten has previously provided full and detailed information to the Tribunal about its position which has most recently been the subject of correspondence with the Tribunal, in particular, my letter of October 28,

1985. However, the following is provided for the Tribunal's information.

The Tribunal will be aware that no separate delivery charge is levied by us on programs. Program price is the same irrespective of where the purchasing

licensee decides to collect the program.

Network Ten has signed a contract with Aussat for a 12 watt transponder and intends to operate an SPS. To the existing delivery points where delivery can be taken of a program by a purchasing licensee, that is, the network film exchange, or off-air, or off-bearer or by the availability of a video tape, we will add the option that a licensee may access a program on our SPS. There will be no price differential for this option.

7. See response to question number one.

84

Since Network Ten has signed a contract with Aussat for the lease of a 12 watt transponder, therefore the hypothetical questions posed in Questions 2, 5 and 8 do not now arise.

The answers to the particular questions are as follows: -

1. No.

2. Does not arise.

3. Not applicable.

4. No.

5. Does not arise.

6. Not applicable.

7. No.

8. Does not arise.

9. Not applicable.

I am also asked to reiterate the appreciation of the Directors of Network Ten Holdings Limited for being able to consider this matter at its Board Meeting of December 4, 1985 and to enable the position of the Company to be reviewed by the Board at the meeting.

Lastly, we have been provided with a copy of Mr. Astley's letter of November 4, 1985 from the Tribunal's records. Comments on that letter will be provided by Mr Barker under separate cover.

5.18 A further letter was received from Mr Barker on 11 December joining issue with Mr Astley on some of the matters raised in his letter. It is not necessary to set out here the contents of Mr Barker's letter as it does not alter the fundamental issues which are in question or raise any further issues of relevance to the Tribunal's

considerations.

CONCLUSION

5.19 Thus it is apparent that the battle lines have again been drawn over program supply and distribution. The Networks take the position, with respect to programs for which they have the Australian rights (which generally is over half the programming

televised by the regional stations), that those programs will not be available to regional stations where they propose as part of the delivery chain to use RCTS as an SPS. Although the 7 Network has been somewhat equivocal in its response, its recently announced decision to lease a 12 watt transponder seems to inevitably lead

85

the network to this position. The regional stations take the position that they should be able to negotiate program rights independent of distribution, as they have always done, so that, after having agreed a fair commercial price for the rights, they can make their own arrangements about distribution. Such arrangements could include the distribution of programs via RCTS. The networks maintain that if SPS is to be utilised it is to be their SPS. Clearly they are not prepared to allow a situation to develop where a third party would be distributing, in competition with them, the programs for which they hold the Australian rights.

5.20 Thus the position is as the Tribunal stated in its First RCTS Report:

What is at stake here is what has always been at stake: who controls the supply and distribution of programs and where the balance lies in the overall structure and

operation of the system in the future. The evidence of the network representatives is clear that they are concerned that RCTS provides the opportunity for alternative competitive distribution systems and thereby reduces their ability to maximise the use of the satellite (para. 7.39)

5.21 It would seem that added reasons for concern that could have lead the networks (which essentially means the Sydney and Melbourne stations) to this position are the decisions of the Holmes a Court and Bond Groups to lease transponders and the proposals currently under consideration by the government to change the ownership and control rules to allow groups outside Sydney and Melbourne to substantially expand their interests. For example, the regional approach to program supply and distribution would appear to enable Mr Holmes a Court, if he so wished, to offer distribution of Ten Network programs to regional stations through his Adelaide station and his SPS. In that situation he would be offering a competitive distribution system to the Ten Network or the other methods of distribution (eg video tape or Telecom bearer). The Networks' approach would mean that Mr Holmes a Court would not be able to distribute Ten Network programs by satellite because they would not be available to regional stations if they proposed to receive them via his SPS.

5.22 The approach being taken by the networks also impacts upon the Government's policy that RCTS licensees should be able to use the satellite for Satellite Program Services to regional licensees: see Minister for Communications, Announcement, 23 May 1985. For this policy to be effective the RCTS licensee needs to have access to programs that can be distributed. On the present market structure this would mean that approximately half of the programs currently televised by regional licensees would not be available for satellite distribution to them except by the networks' SPS. It is necessary to consider the implications of this; first for the south-east and north-east licensees and then generally.

86

5.23

5.24

5.25

5.26

5.27

5.28

5.29

The Tribunal has reviewed the financial estimates of both the north-east and south-east applicants in the light of a possible reduction in their proposed SPS revenue.

QSTV is proposing to deliver by SPS up to 15 hours of programming to the regional operators in Queensland (that is, the full program schedule excluding two hours a day of special RCTS programming) most days of the week. The position taken by the networks could

reduce this delivery by at least 8 hours a day.

It can be expected that most overseas programming will continue to be purchased through RTA, and Seven National News and State Affair would be purchased through BTQ Brisbane (a member of the consortium), not ATN Seven in Sydney. None of this programming would be subject to distribution conditions from the networks and

could total up to 7 hours a day. Down-loading of commercials, of educational and aboriginal programming in the midnight to dawn period should also not be affected by the network position.

SSE has estimated that only 35 percent of its program schedule will be taken by regional licensees. Again, this could be, at least to some extent, programs purchased through RTA. Some loss of revenue could be assumed due to an inability to deliver network programs on RCTS-SPS, but this would not appear to be a very substantial amount

in the south-east region.

The Tribunal considers that SSE and QSTV still have the financial capability to operate the RCTS licence, despite the potential drop in revenue from that originally estimated. Such a loss would need to be contributed by participating stations and companies. Any shortfall may require a contribution spread over nine stations in the case of QSTV and twelve companies in the case of SSE. Therefore the impact on each individual station or company, although significant, should not be incapable of absorption.

However, the Tribunal is concerned that the standard of service of either the RCTS licensees, or the participating regional companies or both is likely to suffer as a result of the position taken by the three networks. It is likely that local production will be the

area most affected as this is the most expendable cost (refer First Report paras 6.1-6.13). One of the important objectives of RCTS is to provide local programming and relevant scheduling to remote communities and the statutory obligation to sign an undertaking to provide an adequate and comprehensive service and encourage the use

of Australian resources, requires it.

It is worth noting at this stage, that the successful applicant for the western region did not include any SPS revenue in its financial estimates. Neither of the central region applicants are estimating a significant amount of revenue from SPS delivery.

The position that has developed provides added weight to the comments made by the Tribunal in its SPS Report about the structural imbalance in the commercial television system. There is no need to repeat those comments here. They are fully set out in the concluding section of Chapter 2 of that Report (paras 2.441-

87

2.479). The Tribunal identified a dominant influence being exercised by the licensees of the Sydney and Melbourne stations, which are controlled by powerful media groups, in the current

commercial television system. It did not consider that regulation of the conduct of individual television licensees could alter this imbalance within the whole media system and that rather the issue had to be addressed more fundamentally by providing for more diverse control of the system and more opportunities for companies in centres outside Melbourne and Sydney, with less cross-media concentration, to play a prominent role in commercial television. The position being adopted by the networks on satellite distribution further demonstrates the dominant influence and economic ascendancy of the Sydney and Melbourne stations. Further,

it is reasonable to infer that this position is being adopted to ensure that this influence and ascendancy is preserved.

5.30 As the Tribunal stated in its SPS Report, such a position does not accord with established broadcasting policy. Within the current market structure the networks hold the upper hand in this battle because the regional stations need their programs more than the networks need the regional stations' money. This will be accentuated as services are extended in regional areas as a result of the Government's equalisation policy. Further, the regional stations do not have the same capacity as the Sydney and Melbourne stations to produce their own programs or to secure the rights to other programs for their markets in competition with the networks.

In other words, it is not a free market.

5.31 Clearly, it is in the interests of the RCTS service and more diverse control of the commercial television system that there be the opportunity for viable satellite distribution alternatives to the networks' satellite distribution. The question then is how that can be achieved bearing in mind the market forces that operate in the current market structure. The use of direct regulation has been considered. The issues relating to the regulation of program supply were discussed in detail in the SPS Report (Chapter

2, paras. 2.234-2.340). In the end the Tribunal concluded that although regulation might prevent some acts of domination over stations by networks, it would not remove the fundamental economic imbalances between the networks based in Sydney and Melbourne and other stations. As the Tribunal said in the SPS Report, so long as these imbalances are present, it is unlikely that any regulation will be able to impose equality from outside. In the end it is very difficult to force networks by regulation to make programs available to regional stations where there is no real economic incentive and strategically it is not in their interests to do so.

5.32 The Tribunal also concluded in that report that the answer must lie with the creation of a market place where there will be economic incentives and forces that will cause participants to act in a desired way rather than by trying to achieve such a result by some form of imposed regulation. This might be achieved, for example, by modifying the ownership and control rules to enable groups outside Sydney & Melbourne to play a prominent role in program production, acquisition and distribution. Such groups could be

88

economically strong enough to negotiate independently for the rights to their markets at the source of programs rather than being forced to obtain such rights from the networks after they have

acquired them for the whole of Australia.

5.33 Such competition, if it developed, could in turn result in a change in the current position the networks are taking. The networks would not be in the same strong position to make program sales conditional on the method of satellite program delivery by not being prepared to offer programs for satellite delivery unless their SPS is used.

5.34 The Tribunal is therefore concerned that if the networks implement these new conditions on program sales, the north-east and south­ east applicants may not be able to provide an adequate and comprehensive service. This in turn could lead to a situation where the networks, because of their dominant position in relation to program rights place the RCTS licensees in a commercial position

where they could not meet their obligations under the Act. As pointed out in the SPS Report (para 2.259) the Tribunal does not have the power under the legislation to take any action against the networks in such a situation. The only power would be against the

RCTS licensee. However, it would not be productive to take action against that licensee when the situation was not of its making.

5.35 It also should be noted that in submissions received from all three networks to the SPS Inquiry in 1984, it is stated that all negotiations between regional licensees and the networks over program supply have been carried out without complaint of network oppression or domination - and that this situation will continue. This now seems unlikely given the position of the networks in their

current submissions on RCTS-SPS.

5.36 As stated in the North-East Region Report (para 3.30) the Tribunal believes that regional stations should remain free to select the method of distribution of programs, which must include the RCTS transponder. Notwithstanding the evidence discussed above, the

Tribunal believes that it is in the public interest to grant the RCTS licences in the north-east and south-east regions.

NETWORK SUBMISSIONS

5.37 There is one final matter that needs to be addressed. In its letter of 28 October 1985 Network Ten expressed concern about what it perceived to be criticisms by the Tribunal in its RCTS Second Report of the Network and its representatives, particularly Mr Barker, arising out of their evidence to the SPS Inquiry. Network Ten submitted that the Tribunal had misunderstood the

evidence presented to the SPS Inquiry and that there was no conflict between that evidence and the position the Network was now adopting. The 7 and 9 Networks also submitted that the Tribunal has misunderstood their position as reflected in evidence to the SPS Inquiry. The Tribunal has reviewed its comments in the RCTS Second Report in the light of the submissions that have been made.

89

The Tribunal considers that the interpretation it placed on the evidence was one that was reasonably open to it on the record, given that the change in government policy that SPS could be provided in zonal beam as well as national beam was indicated as a strong possibility by Mr Peter Westerway from the Department of Communications before the networks gave evidence at the RCTS inquiry and the networks did not in their evidence specify the position that they are now taking.

5.38 Nevertheless the Tribunal accepts the explanations that have been given by the networks, particularly that of Network Ten, regarding their evidence given at the SPS Inquiry and their current position. It is correct that RCTS-SPS was not specifically raised by the Tribunal with the witnesses at the SPS Inquiry and the satellite guidelines at that time provided for SPS to be in the national beam. It follows that the Tribunal accepts, in the light of the explanation provided, that the Network Ten representatives were not addressing their minds to RCTS-SPS in the evidence to the SPS

Inquiry and therefore there is no conflict between that evidence and the position set out in the subsequent correspondence.

5.39 However, it should be pointed out that the application for the north-east RCTS licence was publicly available in December 1984 and clearly set out the applicants' intentions to use the RCTS as a SPS. The networks therefore had the opportunity to address the Tribunal on this issue. While not raised specifically at the General Inquiry, the use of RCTS as an SPS was clearly addressed in the Tribunal's First RCTS Report (para 4.131-4.135) released at the end of June 1985. The networks had the opportunity to study the First Report and to address the Tribunal on this matter at both the north-east and the south-east inquiries in July and August 1985.

90

CHAPTER 6

CONCLUSIONS AND RECOMMENDATIONS

INTRODUCTION

On the basis of its evaluation of the SSE application set out in Chapters 2, 3 and 4 the Tribunal concludes that the applicant qualifies for the grant of the remote area (1RCTS1) licence for the south-east region.

As stated in Chapter 2, the Satellite South East Pty Limited applicant is a company constituted by twelve equal shareholders who together hold or control all the regional licences in the Australian Capital Territory, New South Wales (with the exception of BKN-7 Broken Hill), Victoria and Tasmania (including Hobart).

As in the other chapters, for convenience this application will be referred to as the SSE application and the applicant, pursuant to the application, will be referred to as SSE.

It is appropriate to repeat here the conclusions previously stated.

Fit and proper person (Chapter 2)

Under the SSE application the RCTS licence will be held by a separate company, SSE. This is a company with 12 equal shareholders (8.33 per cent interest) who either hold or control regional television licences in New South Wales and Victoria and the television licences in the Australian Capital Territory and Tasmania. An evaluation of the fitness and propriety of SSE therefore involves an examination of the qualities of these

shareholders and those that control them.

As stated above, the Tribunal has found in licence renewal inquiries that the licensee companies (or those that control them) that comprise the shareholders of SSE are fit and proper persons to hold their licences. Leaving aside the issue of media

concentration which is considered below, there is no evidence before the Tribunal in these proceedings to suggest that these companies are not fit and proper persons to hold their shareholdings in SSE as the RCTS licensee.

It is clear that the shareholders in SSE as a group have substantial access to television and radio audiences in the south east region and nationally. The addition of the RCTS will increase that access and give the group access to the total non-metropolitan television audience in the south-east region, with the exception of those people located within the viewing area of BKN-7 Broken Hill.

It could be said that this would result in or add to undue concentration of the media nationally and regionally.

As was pointed out in the Second Report (para 2.22), there are a number of factors which militate against such a finding. First, no shareholder in SSE can be said to be in a position of deemed or

91

commercial control of the RCTS licence. Ownership and control is diffuse as it is spread among twelve shareholders. Second, no individual shareholder can be said to hold a substantial position in providing radio or television services in the region or nationally. This can be contrasted with the position of the applicant for the north-east licence. Third, the addition of the RCTS service area does not represent a very significant increase in the population the shareholders in SSE already serve. Fourth, the Government's objective to discourage concentration at all three

levels (national, regional and local) is conditional on its primary emphasis of ensuring that at least one service is provided.

6.8 As stated in the Second Report (para 2.23), the public benefit in disqualifying a sole applicant because of undue concentration has to be weighed in the balance with the public detriment arising from the resultant lack of service. The Tribunal is satisfied in this case that the need to ensure the provision of a service clearly outweighs any additional concentration of the ownership or control of the media that would arise from the grant of the RCTS licence to SSE. The position is much more clear cut than that discussed in the Second Report in relation to the north-east applicant

(para 2.24). Consequently, the Tribunal does not consider that the media interests of the shareholders of SSE, in the circumstances of this case, disqualify SSE as an applicant for the RCTS licence.

6.9 In the result the Tribunal is satisfied that the SSE application qualifies in terms of fitness and propriety.

Financial, technical and management capability (Chapter 3)

Financial capability

6.10 The Tribunal considers that the overall financial estimates of the applicant are reasonable in the circumstances and are sufficiently realistic in indicating that the service will be commercially viable within three or four years of commencement.

6.11 Generally revenue estimates are conservative and while the Tribunal does not share the applicant's optimistic view of the likely rate of service penetration, it believes that there are other areas, particularly in ancillary delivery services, which could prove more

lucrative than budgetted for at this stage. This could achieve either earlier than expected profitability or balance unexpected short falls in revenue elsewhere.

6.12 The financial strain of subsidising the RCTS in its initial years of operation will be spread over the twelve participating companies and therefore should not place too much of a burden on any one station.

6.13 On the basis of the above analysis and evaluation of the evidence, the Tribunal concludes that SSE has the financial capability necessary to effectively operate the RCTS.

92

Technical capability

6.14 Through the installation of a Level 1 B-MAC system SSE will be able to provide a range of services which maximises the full capabilities of the B-MAC system. SSE initially intends to provide a television service only, although it will formulate plans for the data, teletext and radio services when feasible.

6.15 SSE has an appropriate technical knowledge of B-MAC technology and the RCTS system. It has undertaken research and investigation during the preparation of its application and technical proposal.

6.16 Through its members, SSE can demonstrate technical competence and experience in the operation of a terrestrial network; this experience covers metropolitan and regional (including some remote) areas. This is obviously technical experience relevant to RCTS.

6.17 In view of this evaluation, the Tribunal considers that SSE has the technical capability necessary to effectively operate the RCTS.

Management capability

6.18 Overall, the management structure of SSE appears to be adequate and staffing levels sufficient to maintain and operate an independent station providing the proposed service.

6.19 However, the Tribunal is concerned that the applicant has at this stage given insufficient attention to the needs and roles of particular staff and this could affect the local programming content of the overall RCTS service. The position of news

stringers is in need of more attention and the role of the liaison officer, a crucial position in the south-east RCTS context, is unclear, particularly with respect to a technical advisory role. A significant level of training will be required for the person

filling that position. The area of training in general is also in need of greater and more positive consideration. With respect to the applicant's comment about government responsibility to train people, the Tribunal does not consider that this relieves a

licensee from an obligation to provide training or assistance where necessary or desirable. The applicant's comments about having no plans to give assistance to potential Aboriginal programmers are therefore disappointing. The Tribunal would like to see the

licensee taking a positive attitude and commencing plans for the provision of appropriate levels of assistance and training wherever justified and practicable.

6.20 There will obviously be some advantages accruing from the participation of the regional stations in the applicant company: for example in the areas of news, commercial production, engineering and joint sales.

93

6.21 An analysis of the applicant's financial projections and technical planning are discussed elsewhere and the positive conclusions drawn there will also reflect on the applicant's management capability.

6.22 Notwithstanding the reservations expressed above, the Tribunal is satisfied that SSE has the necessary management capability to operate the service.

Capability to provide an adequate and comprehensive service and comply with licence conditions (Chapter 4)

Ascertainment

6.23 The Tribunal considers it is unfortunate that the main ascertainment research specifically designed for the south-east region was undertaken too late for the results to have any concrete effect on the applicant's programming proposals. The Tribunal also considers it unfortunate that the research did not include the proposed program schedule to enable respondents to make meaningful

comment about the timing and types of programs they could be receiving. While the Tribunal recognises that it is too early for individual program titles to be identified on a program schedule it stresses the importance of testing the timing of types of programs and the benefits that this testing provided to the north-east applicant who was then able to correct the timing of local news as a result of this research.

6.24 The applicant has also not specifically surveyed Aboriginal needs and interests. The Tribunal believes it is important that additional research into what Aboriginals see as their needs is undertaken, and that the results of that research are taken into account in the program schedule. This is particularly relevant at retransmission sites where Aboriginal populations are high as these populations will be the first to receive RCTS.

6.25 The Tribunal is concerned that the results of any research undertaken is reflected in the program schedule.

Programming

6.26 The program schedule provided in the application is only a proforma. It fulfills the minimum requirements relating to children's programming, Australian content and religious programming. SSE indicated that it could be another year before the program schedule was finalised.

6.27 Nevertheless, the Tribunal is concerned at some aspects of the schedule. They are:

6.28

- scheduling a rural program mid-morning on a weekday - no specific reference to Aboriginal programming - few details about educational programs - no local program windows at retransmission sites. (This

will be looked at in more detail under production.) In view of the applicant's proposal to deliver a Satellite

94

Programming Service to regional operators, the Tribunal believes it is important that the regional stations do not exert too much influence over the programming decisions of SSE. While the Tribunal understands the economic advantages of providing an SPS for regional operators, it will be important for the licensee to ensure by regular ascertainment that the program schedule is appropriate to the needs and interests of RCTS viewers.

6.29 The Tribunal would also wish to see some evidence of special RCTS programs in prime time when the majority of viewers would be watching, to ensure the schedule is relevant to RCTS. The proforma program schedule has not included programs specifically for RCTS

viewers in prime time. Mr Lean did indicate that a special Aboriginal program might occasionally be suitable for prime time broadcasts.

6.30 The Tribunal is concerned that there are no details of programs for, or about, Aboriginals in the schedule. Aboriginals make up 3.37 per cent of the total population in the RCTS service area, but up to 30 per cent of the population at some retransmission sites. The Tribunal believes it is important for this applicant to

adequately address the specific needs of Aboriginals in the region. SSE has assured the Tribunal it intends to accommodate Aboriginal needs.

6.31 Earlier, reference was made to a request by Corroboree Films that there be a minimum of 6 hours per week of Aboriginal programming, or 5 per cent of broadcast time, given that 3.37 per cent of the population in the service area is Aboriginal. The Tribunal

believes 6 hours is unrealistic, especially given the current capacity of production houses producing suitable material. The Tribunal however reached an in-principle conclusion in its First and Second Report that there should be a condition requiring

windows for special RCTS programming. Some of this should be in prime time and could include Aboriginal programming.

6.32 The Tribunal is also concerned that SSE, if it is the successful applicant, should work out a schedule of educational broadcasts that goes some way to accommodate the needs of students in New South Wales, Victoria and Tasmania.

Production

6.33 The Tribunal has some concerns about SSE's production proposals. No evidence was given on the size of the budget allocation for this area and some vague promises were made in relation to special interest productions for Aboriginal groups, special sports programs

etc. The only concrete production proposal identified was an RCTS news service. However the Tribunal has some concerns about this proposal also. One such concern is the failure to provide firm proposals on the employment and equipping of stringers. While

stating that this will take place, no concrete proposals in terms of numbers, location or budget are evident. Also, the applicant did not identify any plans to utilise the two journalists it proposes to employ in Canberra for any news gathering purpose; the

95

tasks that were identified are newsreading and sub-editing. Overall, the proposals for a news service appear to be underdeveloped. The Tribunal believes that more thought must be given to a comprehensive coverage of local news for the RCTS service area.

6.34 The Tribunal is concerned that there is a danger that SSE could become over reliant on regional stories from consortium members and that the RCTS news will just become a collection of repeated stories from regional stations with doubtful relevance to RCTS and little specific RCTS coverage.

6.35 When selecting stringers, the Tribunal believes it would be appropriate for the applicant to consider employing Aboriginals in some areas. This would be of particular relevance in the north­ west of New South Wales where there is a high proportion of Aboriginals. The Tribunal would expect that regular stories would involve Aboriginal communities. The Tribunal heard from the NSW Ministry of Aboriginal Affairs evidence relating to dissatisfaction with media coverage of Aboriginal issues (see Chapter 1, para 1.37) and believes that RCTS has the potential to go some way to alleviate that.

6.36 Again, while the applicant has expressed support for the concept of local windows at retransmission sites, no concrete proposals were evident. No communities have yet been consulted or any local groups contacted to explore the potential of this concept.

6.37 The Tribunal believes it is important for SSE to consult with Aboriginal groups in the five towns where retransmission facilities are to be established when developing plans for local windows at retransmission sites. Since up to 30 per cent of the total population at these sites is Aboriginal, local windows could go a

long way towards meeting the needs and interests of Aboriginals in these communities. It is likely that some Aboriginal communities will require initiatives and funding from the applicant to assist groups to provide local programming into the local windows.

6.38 In the First Report, the Tribunal concluded:

6.150 Production at the local retransmission sites is an integral part of the RCTS. Licensees will have to provide for these programs in order to meet their undertakings given to the Tribunal. The onus is on the

licensee to investigate and initiate new and creative ways to find, assist, train and where necessary, fund local groups to provide local programming.

6.39

6.151 The plans of applicants to provide local programs together with their capability and capacity to realise those plans will be one of the criteria used by the Tribunal in assessing applicants at the grant of an RCTS licence and considering the renewal of such a licence. To satisfactorily meet the undertaking, applicants must provide

96

remote communities with information of local community events, interests and developments. Local production therefore has an important role to play in any programming proposals. However production also has the characteristic of being the most expendable as it is an operating cost which can be cut back. Should the applicant be successful in qualifying for the grant of a licence,

it would be the Tribunal's intention to closely monitor and evaluate the applicant's production output.

Conclusions on capability to provide an adequate and comprehensive service and comply with licence conditions

6.40 Although expressing reservations about the applicant's proposals and performance to date in the areas of ascertainment, programming and production, the Tribunal considers that SSE does have the capability to provide an adequate and comprehensive

service, to encourage Australian programs and otherwise comply with licence conditions. However the Tribunal is of the view that more thought should be given to meeting RCTS needs by providing for the specific production of news stories and local programming for RCTS viewers.

6.41 While emphasising the importance of local production, the Tribunal recognises that the practicalities of this are tempered by the uncertainty of the economics of the RCTS operation. The Tribunal however considers a high priority should be given to local production.

CONCLUSIONS ON QUALIFICATION

6.42 It follows from the conclusions set out above that the Tribunal concludes that SSE qualifies for the grant of the licence and that the SSE application should succeed. As explained in Chapter 5, the position of the networks on satellite distribution services, if

implemented, could impact on the south-east RCTS. However, although it is concerned about such a development the Tribunal is still of the view that the licence should be granted to SSE. It further follows that the Tribunal should recommend the grant of the

licence as sought by the SSE application and that it will recommend accordingly.

6.43 The Tribunal considers that the term of the grant of the licence should be the maximum period that the Act permits and it will act accordingly when in a position to effect the grant. The Tribunal noted in the First Report that although the Act currently provides for a maximum term of five years for RCTS it has recommended this be changed to seven years.

97

OTHER MATTERS

6.44 During the course of this inquiry, the Tribunal has addressed a range of issues which are either relevant to the proposed operation of the RCTS in the south east region and which need to be addressed by the Tribunal in granting an RCTS licence to SSE, or are felt by the Tribunal to warrant attention by the Government. These matters have been discussed in earlier chapters and reports and a summary of them is set out below.

Financial information

6.45 Although SSE proposes to operate as an autonomous and stand-alone service and does not propose t o .draw on staff and other resources of participating stations (as is the case of the successful western region applicant which proposed to combine the RCTS with its regional operation) the Tribunal is concerned to monitor the financial arrangements of RCTS licences, especially licensees with connections with existing stations such as the SSE company.

6.46 The Tribunal will therefore wish to be able to evaluate the financial performance of the RCTS as a service separate from those of the members of the company. This is in order to properly determine the operating result of the SSE company as well as to monitor accurately the continuing performance of existing

licensees. Being a new type of a licence there is potential for revenue generation which cannot be predicted at this time. If revenue is in excess of what has been forecast the Tribunal believes, where practicable, that priority in the use of this additional revenue should be given to local production.

6.47 Therefore, the Tribunal will carefully examine the financial information it will require from the south-east RCTS and the terrestrial stations that are operated by the shareholders in SSE to ascertain the financial relationship between RCTS and other services. In particular the Tribunal will be anxious to ensure that there is proper allocation of costs between companies; that the financial accounts reflect accurately the trading results of each licensee, and that there are no hidden subsidies between companies in the group.

Ascertainment

6.48 The Tribunal is concerned that SSE undertakes additional research into Aboriginal needs and interests in the service area and that the results of this research are provided to the Tribunal for its information. The Tribunal also asks to be provided with the final revised program schedule planned for the RCTS as a result of both research studies undertaken by SSE. This will then bring up to date the applicant's program proposals which are still in the development stage.

98

Programming

6.49 SSE has recognised the need for special RCTS programming in the program schedule. At this stage it proposes approximately 2 hours a day (14 hours a week) for RCTS special programming. The applicant has not indicated whether any RCTS programming will

be scheduled regularly in prime time or how much will be Aboriginal programming. However SSE did indicate that a special Aboriginal program could occasionally be shown in prime time. The Tribunal would expect that the final program schedule would reflect an

appropriate priority for this RCTS special programming.

6.50 In its First Report (para 13.76) the Tribunal stated that it had reached an in-principle conclusion that there should be a condition requiring a window for educational and other special interest programming imposed on the RCTS licence for Western Australia. There was a similar conclusion in the Second Report (para 5.56) for

the RCTS licence for Queensland. SSE submitted that it hesitated to agree that such a condition should be imposed on any licence granted to it. For the same reasons stated in the First Report the Tribunal has again reached an in-principle conclusion that there

should be such a condition imposed on the south-east licence. However, the Tribunal affirms the view expressed in the First and Second Reports that it would not be appropriate at this stage to

determine the final form of such a condition. Consultation will be required with the licensee and it will be necessary to assess any further research and the details of the final program schedule when it is known precisely what the applicant proposes to do with respect to special RCTS programming. However, in view of the evidence the Tribunal would expect that such programming would not be less than the proposed 14 hours per week. It will also be

necessary to await the Tribunal's decision on all four RCTS regions before a final decision is taken on the form of a licence condition to ensure that a consistent approach is followed.

Production

6.51 As stated in the First Report (para 13.72) the Tribunal is of the view that the provision of news stories from the remote area and the provision of local programs within the local area windows is relevant, having regard to the nature of remote communities, to the

licensee's provision of an adequate and comprehensive service. At this stage the local production proposed by SSE is a local news service which will utilise material from regional stations, and an unknown number of stringers whose location is yet to be

determined. This raises the question of whether such arrangements will ensure that the service adequately caters for news stories that occur within the service area of the RCTS. The Tribunal

believes that SSE will need to take further steps to consolidate their proposed use of stringers to facilitate the provision of news stories from remote areas. In conjunction with this the Tribunal believes that SSE will need to address through practicable steps

such as assistance with equipment and training, the development of local program production at re-transmission sites. Such production could, as proposed in the Western Zone, form an

99

important part of the RCTS news service. The Tribunal is also of the view that SSE should address the practicable steps that it can take to assist Aboriginals to be responsible for their own productions. It will be the Tribunal's intention to review the

action taken by SSE with respect to those matters as the service is established and develops.

Consultation

6.52 As stated in the First Report (para 13.73) the Tribunal believes that liaison with representatives of special interest populations in the service area should form an ongoing part of ascertainment. In the south-east region the Tribunal considers that liaison with Aboriginal communities and educational authorities is particularly important. In achieving this the establishment of advisory committees would seem necessary.

6.53 SSE has indicated to the Tribunal its willingness to liaise with advisory committees in both these areas. Meetings had already been arranged with representatives from the various Educational Departments. The Tribunal heard evidence from the NSW Ministry of Aboriginal Affairs that the Land Councils might be appropriate bodies to liaise with a licensee on behalf of Aboriginal communities. However, the Tribunal considers that ultimately it is for the RCTS licensee to determine the composition of any advisory committee having regard to the communities involved and the people and/or organisationts) available.

6.54 As further stated in the First Report, it needs to be kept in mind that RCTS represents a new form of broadcasting with new challenges and problems for the Tribunal and licensees. It will therefore be important, particularly in the initial years, that there be regular dialogue and consultation between the Tribunal and the licensee, outside formal licence reviews, on the progress of the service including the matters referred to above.

Issues for Government attention

6.55 The Tribunal stated in its First Report that it was of the view that educational broadcasts should be accessible by educational institutions outside the RCTS service area (see First Report para 13.84 and Second Report para 5.62). The Tribunal still considers it to be appropriate for audiences in existing service areas which will be encompassed within the footprint to be able to receive educational broadcasts. Mr Rayner indicated to the Tribunal that he saw great opportunity in being able to address educational broadcasts to all schools in the service area via B-MAC without threatening the normal broadcasts of other television stations. The Tribunal therefore sees merit in a variation to the encoding policy as annunciated by the Minister, to allow the reception of educational programs throughout the three states.

100

6.56 The Tribunal draws attention to its conclusions in Chapter 5 on the issue of RCTS/SPS and program rights and distribution. The Tribunal believes that they are important issues to be addressed by the Government in its review of the ownership and control rules,

equalisation of services and regulation of networking.

101

CHAPTER 7

LICENCE RECOMMENDATION

7.1 By the Tribunal: David Jones, Chairman; Julie James-Bailey, Member; Russel Perry, Member.

7.2 The Tribunal recommends that a remote television licence to serve the South-Eastern Zone (as defined by the Minister) be granted to Satellite South East Pty Limited ('SSE').

7.3 The above recommendation is subject to the following conditions:

1. SSE shall be constituted in accordance with the proposals in the successful application.

2. There will be no change to the shareholding or voting interests in SSE without the prior approval of the Tribunal.

/

Dated tills 19th day of December 1985.

Dav/id Jones James-Bailey

Isel Perl

102

APPENDIX 1

WITNESSES

QSTV Mr David Astley Managing Director Telecasters North Queensland Limited Co-ordinator QSTV Consortium

Mr John Gleeson Chairman Telecasters North Queesnalnd Limited

Mr John Penglis Managing Director Queensland Regional Television Pty Ltd

Mr Paul Ament Chief Engineer Telecasters North Queensland Limited

Mr Christopher Jeremy General Manager Mt Isa Television Pty Ltd

Mr Douglas Rowell Deputy Director and Chief Executive Officer Department of Industry Development

Queensland Government

Mr John Kitt Acting Assistant Director Technology Services, Department of Education Queensland Government

Mr Robin Yarrow Executive Officer Department of Community Services

Queensland Government

DDQ Mr Laurie Burrows

General Manager Darling Downs Television Limited

103