Title Environment and Communications Legislation Committee
Database Estimates Committees
Date 28-05-2014
Committee Name Environment and Communications Legislation Committee
Page 1
System Id committees/estimate/400281cf-27c2-4cd8-8555-e2f2746a1ddb/0001

Environment and Communications Legislation Committee - 28/05/2014 - Estimates - COMMUNICATIONS PORTFOLIO


In Attendance

Senator Fifield, Assistant Minister for Social Services

Department of Communications

Management and Accountability

Mr Drew Clarke, Secretary

Mr Abul Rizvi, Deputy Secretary

Mr Ian Robinson, Deputy Secretary

Ms Nerida O'Loughlin, Deputy Secretary

Program 1.1 -Broadband and Communications Infrastructure

Mr Ian Robinson, Deputy Secretary

Mr Mark Heazlett, First Assistant Secretary, Telecommunications Division

Ms Joanna Grainger, Assistant Secretary, Broadband Quality Project

Mr Philip Mason, Assistant Secretary, Telecommunications Regulation Branch

Ms Elizabeth O'Shea, Assistant Secretary, Stakeholder Engagement Branch

Mr Damien White, Assistant Secretary, Cost Benefit Analysis and Regulatory Review

Program 1.2 - Telecommunications, Online and Postal Services

Mr Abul Rizvi, Deputy Secretary

Mr Keith Besgrove, First Assistant Secretary, Digital Services Division

Mr Andrew Maurer, Assistant Secretary, Assistant Secretary, Spectrum Treaties and Internet Governance

Program 1.3 - Broadcasting and Digital Television

Ms Nerida O'Loughlin, Deputy Secretary

Dr Simon Pelling, First Assistant Secretary, Broadcasting Division

Ms Marianne Cullen, First Assistant Secretary, Digital Switchover and Corporate Plan Project


Mr Simon Ash, First Assistant Secretary, Corporate

Telecommunications Universal Service Management Agency

Mr Elmer Wiegold, Acting CEO

Australian Broadcasting Corporation

Mr Mark Scott, Managing Director

Mr David Pendleton, Chief Operating Operator and Chief Financial Officer

Mr Michael Millett, Director Corporate Affairs

Special Broadcasting Service Corporation

Mr Michael Ebeid, Managing Director

Mr Peter Khalil, Director Corporate Affairs

Mr James Taylor, Chief Financial Officer

Australian Postal Corporation

Mr Ahmed Fahour, Managing Director and Chief Executive Officer

Mr Paul Burke, Corporate Secretary

Ms Christine Corbett, Executive General Manager, Retail and Consumer

Mr Chris Blake, Executive General Manager, Corporate Affairs and People

Ms Catherine Walsh, General Manager, Human Resources

Australian Communications and Media Authority

Mr Chris Chapman, Chair

Mr Chris Cheah, Full-Time Authority Member

Mr Richard Bean, Deputy Chair

Mr Giles Tanner, General Manager, Digital Economy Division

Mr Allan Major, Acting General Manager, Communications Infrastructure Division

Mr Christopher Hose, Executive Manager, Spectrum Planning and Engineering Branch

Ms Maureen Cahill, General Manager, Corporate Services and Coordination Division

Ms Jennifer McNeill, General Manager, Content, Consumer and Citizen Division

Mr Brendan Byrne, General Manager, Legal Services Division

Ms Anne Fleischer, Chief Financial Officer, Finance and Facilities Branch

NBN Co Limited

Mr Bill Morrow, Chief Executive Officer

Mr JB Rousselot, Chief Strategy Officer

Mr Greg Adcock, Chief Operating Officer

Mr Robin Payne, Chief Financial Officer

Committee met at 09:00

CHAIR ( Senator Williams ): I declare open this hearing of the Senate Environment and Communications Legislation Committee. The Senate has referred to the committee the particulars of proposed expenditure for 2014-15 for the environment and communication portfolios and certain other documents. The committee may also examine annual reports of the departments and agencies appearing before it. The committee is due to report to the Senate on Tuesday, 24 June 2014 and has fixed Friday, 11 July 2014 as the date for return of answers to questions taken on notice.

Under standing order 26 the committee must take all evidence in public session. This includes answers to questions on notice. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee.

The Senate by resolution in 1999 endorsed the following test of relevance of questions at estimates hearings: Any questions going to the operations or financial positions of the departments and agencies which are seeking funds in the estimates are relevant questions for the purpose of estimates hearings.

I remind officers that the Senate has resolved that there are no areas in connection with the expenditure of public funds where any person has a discretion to withhold details or explanations from the parliament or its committees unless the parliament has expressly provided otherwise. The Senate has also resolved that an officer of a department of the Commonwealth shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted.

I particularly draw the attention of witnesses to an order of the Senate of 13 May 2009 specifying the process by which a claim of public interest immunity should be raised. Witnesses are specifically reminded that a statement that information or a document is confidential or consists of advice to government is not a statement that meets the requirements of the 2009 order. Instead, witnesses are required to provide some specific indication of the harm to the public interest that could result from the disclosure of information on the document.

The extract read as follows—

Public interest immunity claims

That the Senate—

(a) notes that ministers and officers have continued to refuse to provide information to Senate committees without properly raising claims of public interest immunity as required by past resolutions of the Senate;

(b) reaffirms the principles of past resolutions of the Senate by this order, to provide ministers and officers with guidance as to the proper process for raising public interest immunity claims and to consolidate those past resolutions of the Senate;

(c) orders that the following operate as an order of continuing effect:

(1) If:

   (a) a Senate committee, or a senator in the course of proceedings of a committee, requests information or a document from a Commonwealth department or agency; and

   (b) an officer of the department or agency to whom the request is directed believes that it may not be in the public interest to disclose the information or document to the committee, the officer shall state to the committee the ground on which the officer believes that it may not be in the public interest to disclose the information or document to the committee, and specify the harm to the public interest that could result from the disclosure of the information or document.

(2) If, after receiving the officer’s statement under paragraph (1), the committee or the senator requests the officer to refer the question of the disclosure of the information or document to a responsible minister, the officer shall refer that question to the minister.

(3) If a minister, on a reference by an officer under paragraph (2), concludes that it would not be in the public interest to disclose the information or document to the committee, the minister shall provide to the committee a statement of the ground for that conclusion, specifying the harm to the public interest that could result from the disclosure of the information or document.

(4) A minister, in a statement under paragraph (3), shall indicate whether the harm to the public interest that could result from the disclosure of the information or document to the committee could result only from the publication of the information or document by the committee, or could result, equally or in part, from the disclosure of the information or document to the committee as in camera evidence.

(5) If, after considering a statement by a minister provided under paragraph (3), the committee concludes that the statement does not sufficiently justify the withholding of the information or document from the committee, the committee shall report the matter to the Senate.

(6) A decision by a committee not to report a matter to the Senate under paragraph (5) does not prevent a senator from raising the matter in the Senate in accordance with other procedures of the Senate.

(7) A statement that information or a document is not published, or is confidential, or consists of advice to, or internal deliberations of, government, in the absence of specification of the harm to the public interest that could result from the disclosure of the information or document, is not a statement that meets the requirements of paragraph (1) or (4).

(8) If a minister concludes that a statement under paragraph (3) should more appropriately be made by the head of an agency, by reason of the independence of that agency from ministerial direction or control, the minister shall inform the committee of that conclusion and the reason for that conclusion, and shall refer the matter to the head of the agency, who shall then be required to provide a statement in accordance with paragraph (3).

(d) requires the Procedure Committee to review the operation of this order and report to the Senate by 20 August 2009.

(Extract, Senate Standing Orders, pp 124-125)

I welcome Senator the Hon. Mitch Fifield, Assistant Minister for Social Services, representing the Minister for Communications, and portfolio officers. Minister, would you like to make an opening statement?

Senator Fifield: No, thank you.

CHAIR: Mr Clarke, would you like to make an opening statement?

Mr Clarke : No statement, thank you.

CHAIR: Very good. I invite questions.

Senator THORP: Mr Clarke, you previously advised the committee of the need to reduce the staffing in the department as a number of projects are coming to an end. You are following a process, I believe, that is called 'spill and fill', where staff have to apply for available jobs. Is that correct?

Mr Clarke : That is correct. I prefer not to use the term 'spill and fill', but it is the well recognised term, yes.

Senator THORP: How would you characterise the effectiveness of that policy and how it is going?

Mr Clarke : We are in the middle of the process now. To summarise the process, we are redesigning every position in the department on a clean sheet basis. We are restructuring the whole of the department along the way. As each layer is designed, we are exposing the positions to the available candidates and going through a selection process to find the best fit.

Senator THORP: You say you are in the middle of the process?

Mr Clarke : To date, I have completed the SES levels, at the deputy secretary, division heads and branch heads level. The assessment process for the EL2 level is largely completed. We are in the middle of the design process now, and the way our process is working is that when we do a design of a layer we do a draft design of the subsequent layer. This week, in fact, we are going through the process of designing the EL2 layer and in a few weeks’ time we will be going through the EL2 placement process. The final step after that will be the EL1 and APS levels.

Senator THORP: How long has this process been going on for?

Mr Clarke : The target—and we are on track to achieve this target—is that the entire process is completed such that the new structure and staffing is implemented on 1 September this year.

Senator THORP: And when did it begin?

Mr Clarke : I announced it on 27 February. I guess technically the processes began on 27 February. We really only got into the deeper layers, because this is a top-down, layer by layer process. It is only now that the larger cohorts—EL1s and EL2s and so on—are engaging in the process.

Senator THORP: The department’s report for the Senate Order on Contracts for the last half of 2013 shows that you paid BCG half a million dollars between June and September last year for an organisational review, 2013-18. The report is confidential for intellectual property and operational sensitivities. What in general, though, did it recommend?

Mr Clarke : That review was a piece of work that I commissioned last year as part of the strategic context for the next version of the Department of Communications—the logical development of the department. It was a review that scanned the communications sector environment—broadband, digital economy and communications—and gave us advice on what major issues we could expect to be dealing with over the next several years. It started the process of considering how best we could organise ourselves in dealing with it. So it was more of a strategic policy review at that stage.

Senator THORP: What kinds of issues did they bring up?

Mr Clarke : The complete landscape, Senator, from market structures and how they are evolving in broadband and telecommunications, the convergence issues that are happening across the media sector and the entire gamut of the portfolio’s interests.

Senator THORP: Value for money?

Mr Clarke : I felt so. I was very pleased with the outcome. I used the report as the basis for preparing a lot of my incoming government briefing, so that I felt confident that I could advise whichever party was returned that I have a good handle on the strategic framework and the issues the incoming government were facing over the next several years.

Senator THORP: The tenders.gov.au website shows a further contract with BCG for another half a million dollars for analysis and strategy services from March to June 2014. What is that for?

Mr Clarke : That built on the foundation of the first study that we just talked about and went directly to the organisational design question. So if that is the strategic landscape that we have in front of us, and these are the priorities and policies of the government of the day, exactly how will we organise ourselves to best deliver on those landscaping priorities, and by what process might that be implemented? So it went from strategic policy to organisational implementation.

Senator THORP: There appears to be a further contract for another half a million dollars with BCG from 14 November to June 2014 for organisational change and implementation services.

Mr Clarke : I think that that is the same contract.

Senator THORP: So there was the original one between June and September—the organisational review—

Mr Clarke : I apologise, Senator. Could you repeat that question?

Senator THORP: We have established the half a million dollars to BCG for the original organisational review. Then there is a further contract for half a million dollars for analysis and strategy services from March to June. And then there appears to be a further one, from 14 November to 30 June 2014, for organisational change and implementation services.

Mr Clarke : I need to make a correction. I have been advised that I may have inadvertently misled you. There are in fact three contracts. Two of them relate to strategic policy and implementation and the third is an unrelated contract.

Senator THORP: And what is that one for?

Mr Clarke : It regards an analysis of Australia Post and postal services strategy.

Senator THORP: So it is quite a specific one?

Mr Clarke : It is very specific, yes.

Senator THORP: Given those three contracts, how much money has been paid to BCG since June last year?

Mr Clarke : It would be the sum of those three, that I know of.

Senator THORP: So one and a half million dollars?

Mr Clarke : Yes.

Senator THORP: I refer to an article in TheCanberra Times of 9 May headed 'Bureaucrats face tough test to save jobs'. Are you requiring all staff to be assessed as part of that—and I know you don't like the expression—spill and fill process?

Mr Clarke : Yes, I am. The process that I have used is different and is tailored to the layer. The process that I have used for SES officers is not the same as for EL2, and the process that we will use for EL1s and below will not be the same as that used for EL2s. The principle of an assessment against future jobs for all staff has been applied uniformly.

Senator THORP: It is getting a bit like politicians who have to reapply of our jobs on a regular basis. Are you paying the Clarius Group $140,000 for this?

Mr Clarke : The Clarius Group has been retained to assist us in that assessment process, yes.

Senator THORP: What do they actually do?

Mr Clarke : I will ask my colleague to respond to that.

Ms Cullen : The Clarius Group have been engaged to assist us in the independent capability assessment of our executive level two officers. That process has involved the conduct of six separate assessment components, which all of our executive level 2 officers have been through, including behavioural interviews. They have done a written exercise, they have done some work together as a group, they have done a presentation in relation to the group work, they have done a leadership questionnaire and they have done an online tool around critical thinking. From that, the Clarius Group will give us independent assessments of all of the executive level 2 officers that participated in that process. That will assist us in two regards. Firstly, helping us place people into the new roles that we are redesigning and, secondly, to give us a really good baseline understanding of their capability and their learning and development needs.

Senator THORP: What sort of time is involved in this?

Ms Cullen : The total time to complete the six assessments is around four hours for each officer. Because it is going to give us that really good information about the learning and development capabilities and the development needs of each officer, we are seeing it as a very significant investment in our staff and developing our capabilities.

Senator THORP: You are confident that it is an efficient use of time, because people are obviously going to be off task while they are doing this work?

Ms Cullen : Yes, we are.

Senator THORP: The people being considered all currently work for your department, don't they?

Mr Clarke : That is correct. We have essentially frozen external recruitment in all but exceptional, critical skills that are unable to be sourced internally.

Senator THORP: Why wouldn't the online managers, who obviously know their staff pretty well, be the ones best able to explain what they see as their skills or skill deficits?

Mr Clarke : It is a question that we have debated at length. If this were a traditional promotion or recruitment round, then referee and supervisors checks would be a primary source of advice in the process. So we certainly discussed the extent to which we might use that traditional technique in this area. And we chose not to. It was a very deliberate decision after discussion and analysis. There are a range of reasons for that. Some staff would feel very comfortable doing it, others specifically asked us not to use that for reasons such as only having been working in the area for a few days, weeks or months. 'The supervisor that knows me best has since left the department'. It was just that on balance, having listened to all of those arguments, we felt the risk of unfair, inequitable assessments was too great. So by putting it all in an arm's-length process and using a uniform set of tools delivered by an external agency to all staff simultaneously, we maximise the perception and the reality of fairness and equity.

Can I add that that is the assessment. The second stage, post-assessment, is the placement of officers in the new positions in the structure. There, the supervisors, the people at the level above, have an absolutely critical role in saying, 'I see the assessment. I see the position; indeed, I have designed the position.' There is a strong degree of ownership there, and the judgements about fit of people to roles very much involves the senior layer.

Senator THORP: So the decision about using Clarius Group was about staff not being comfortable being assessed by their own managers, not about managers not having the skills to do the assessments?

Mr Clarke : Largely, yes. It was an on balance view, because there would have been a full range of opinions if we had polled all staff on this. But it was an on balance view that having an arm's-length assessment that used an objective tool uniformly was more likely to yield an equitable outcome.

Senator THORP: What was the point of the People Foundations Consulting Group running 'enhancing performance through conversation training'?

Ms Cullen : Sorry, can you repeat that.

Senator THORP: Evidently $25,000 was paid to the People Foundations Consulting Group, which was around managers being able to assess their staff, I understand. And they ran a course called 'enhancing performance through conversation training'.

Ms Cullen : Yes. That piece of training work is actually being conducted as part of our ongoing commitment to performance assessment processes in the department. We have an annual cycle of doing performance assessments for all staff, and that training was aimed at assisting managers in understanding how to conduct those conversations with staff.

Senator THORP: You don't see any conflict, if you like, between the fact that you made a decision that it is not appropriate to do staff assessments in-house and yet you are still spending significant sums of money on training managers to assess staff?

Mr Clarke : No, Senator. On the contrary, I see that as a very deliberate and appropriate strategy. One of the key things in this spill and fill process is that it is not a performance assessment. A performance assessment is something that is the responsibility of management and it is a continuous responsibility that obviously we take carefully.

Senator THORP: It is more about the appropriateness of fit.

Mr Clarke : It is capability against the capability standards for the classification, and then fit to the newly defined roles.

Senator THORP: What are you going to do if you end up with the newly defined roles and you don't have the people to fit them? You have your pool of people here who are all being checked out to see what their skill sets are and what they are best at et cetera, and then a set of roles, presumably. Say you have 100 roles and 100 people they you need to mesh. What are you going to do if they don't?

Mr Clarke : Well, we are going to do a best fit, because I am not going to go through a process of declaring someone excess because I couldn't get a reasonable fit and then go and recruit. I simply will not do that. So it will be a best fit.

Senator THORP: Will the people involved know that that is the case?

Mr Clarke : I have made that very clear, I believe, all the way through. My experience in these sorts of roles is that not everyone hears the messages that management gives, and we have to keep repeating them. But I believe I have made it quite clear that this is about fitting the current staff to the new jobs and not about cutting any further than that.

Senator THORP: If you had the freedom to do everything exactly the way you would like, would you like to start afresh or are you happy that you have the people you need to do the tasks adequately?

Mr Clarke : I believe I have both the budget and the skills to do the task that the government is asking me to do. I am quite confident about that. I believe that the process that I am doing is the most equitable way of squaring that circle, of achieving the budget downsizing that I have to implement. My perfect scenario, of course, is that I would be able to recruit other people in to bring in new skills for a fresh upgrade and add new talent to the organisation. I am simply unable to do that in the current budget circumstance.

Senator THORP: So no new players. You have the team you have got.

Mr Clarke : Only in exceptional circumstances. There is one senior executive position where I am currently going through an external recruitment process. I had to cross all of the hurdles and demonstrate that there were no internal candidates, and I can do that in the APS, and only then was I able to advertise in the market more generally. I am in the middle of that process now. It is conceivable that other specialist skills positions might emerge of that nature. The first recourse, of course, is the APS's redeployment register and all of those hurdles that we go through.

Senator THORP: I suppose if I have a concern it is twofold. One concern would be that it seems to me that there is an extraordinary amount of effort going into this whole process. My concern would be about taking people away from that job. My other concern would be that communications is, as we all know, a very dynamic area, and yet you seem to be hamstrung a little in the sense that you are stuck with the people you've got—if you don't mind me putting it that crudely.

Mr Clarke : Well, I would like to address both of those points, if I may. In the announcement that I made to staff earlier this year in starting this process, we considered a lot of different models for doing this before we settled on the one that we are now deep into. As part of the context, I had already run an open voluntary redundancy process across the department during 2013 in response to the impending closure of one particular large program—the digital switchover program. It would have been an option open for me to use voluntary redundancy tools in order to see how close I could get to the budget number. But I rejected that option in the end. This relates to that second BCG consultancy that you have asked me about. We looked at how organisations go about making these kinds of changes and what the signals of success are—what does it look like going through. So I absolutely accept that what I am doing now is taking time and money to do. I am absolutely convinced that, when I get to the end of it, I will have a better result than if I had done it the other way. So I accept that that was a choice I made on the way through and, frankly, I still believe it was the right choice.

As to your second point about the staff that I have, I have many talented staff in the organisation. I think people are very adaptable. People come and work in the Department of Communications because they are excited about the technology and market developments in the sector. I am confident that I will be able to get a good fit across that team.

Senator THORP: You said earlier that you are about the middle of the way through the process and you are happy with the time lines. But I understand that your website refers to the move to the new structure from February 2014.

Mr Clarke : I think that is an interim structure that we posted in February. The organisational structure itself, which is changing very significantly as part of this process, I have done in two stages. So there is an interim structure that was posted in February—

Senator THORP: And that is what is referred to on the website.

Mr Clarke : I believe so.

Senator THORP: Also, you said at February estimates that your current headcount was about 510, and you are tracking to a significantly lower number by 30 June but could not say what it would be. Are you able to indicate what it will be and when the process will be completed?

Mr Clarke : Certainly. The ongoing headcount today is just shy of 500. I have nearly 50 separations at various stages that are either agreed or under consideration. Many of them are voluntary redundancies. I have not closed the VR channel. And there are other forms of separation. The target at this stage, four weeks out from the end of the financial year, will be somewhere in the high four hundreds. But what I am driving towards is the number of positions that I want permanently filled in implementing the new structure on 1 September. That will be in the low four hundreds. But under the entitlements that staff have, I may still have a significant number of people exercising their retention period rights and be still employed in the department for a period beyond 1 September. So there will be a period in which these numbers would be quite misleading. I will have a number that I regard as in positions that are ongoing, a number of staff who are still working with us under retention and a number who are just working to their rights in the VR process.

Senator THORP: I have been through a similar exercise to the one you are going through, and two of the consequences of the process were less than ideal. Firstly, you had people taking voluntary redundancy who were probably going to retire soon anyway and, secondly, people who were very talented and knew they could get positions elsewhere. You didn't necessarily get the people you wanted to go. Are you concerned at all that that may be the outcome of your voluntary redundancy program—that you actually lose some of your best and brightest?

Mr Clarke : At the end of the day, I can't force people to work for me, and I have to deal with the budget numbers that I have in front of me. And, of course, the redundancy and redeployment entitlements are all written in the enterprise agreement. So I have little flexibility in that area.

Senator THORP: You can't say specific areas; it just has to be right across the department?

Mr Clarke : I could have. To go back, the choice that I made at the start of that was to redesign every single position in the department. I can do that in part because it is such a small department. This would be a lot harder if I had tens of thousands of staff in dozens of locations. But with a small department with only two locations, it was doable. So I judged it to be the way of getting the best outcome beyond September. I agree with the two observations you made. I am observing both phenomena—

Senator THORP: It is human nature, isn't it?

Mr Clarke : It is.

Senator THORP: People think, 'I was going to go in two years time, but I may as well go now,' or, 'Gee, that is a nice unexpected bonus, and I know I can get work somewhere else.'

Mr Clarke : I agree that those risks are real and that those risks do manifest themselves. I am seeing both happening. They are not happening at levels that I believe are undermining the strategy.

Senator THORP: At February estimates you had also just advertised the role of chief economist. Where is that at?

Mr Clarke : That was the one exceptional position that I alluded to earlier. I now have that down to a single digit short list. I interviewed a longer list of 10 for that position, and that will enable me, along with the panel formed under the commissioner's SES rules, to interview a smaller number of people next week or the week after.

Senator THORP: When do you expect it to be filled?

Mr Clarke : If those interviews lead to a clear, crisp preferred recommendation and negotiations and exits go well, my goal was to have the person in place by 1 September. That would be at the optimistic end. But certainly not long after September.

Senator THORP: In February you also indicated that you thought the bureau of communications research needed about 20 staff, but full staffing would depend on assessing other priorities. Have you determined what the staffing will be?

Mr Clarke : We have been working on that this week. The 20 number is still holding up as a working number. Of course, it is a zero-sum game for me. Every staff member that I assign to the bureau is one fewer to assign to another part of the department. Twenty continues to be the working number.

Senator PRATT: I want to ask some questions about the red tape reduction program. Are you able to tell the committee how much in red tape reduction was claimed by the government in the portfolio in the first red tape reduction day?

Ms O'Loughlin : The estimate of red tape reductions for the first repeal day was around $35 million.

Senator PRATT: How much of that was ascribed to savings made by ACMA revising the requirements from retailers selling prepaid mobiles?

Ms O'Loughlin : I do not have quite the exact figure, but it was a substantial part of that $35 million.

Senator PRATT: Am I right that something like half of the pages of the omnibus bill related to the communications portfolio?

Ms O'Loughlin : Yes, around about half related to communications portfolio red tape reductions.

Senator PRATT: Am I also right that the proposals contained in this red tape reduction were estimated to save the industry itself just over $8 million?

Ms O'Loughlin : The estimate in the bill itself was over $8 million, yes. Some of the other savings were from subordinate instruments, particularly some of the prepaid stuff done by the ACMA.

Senator PRATT: The department recently issued a document entitled Communications portfolio: deregulation roadmap 2014. I am just going to step through that briefly. The first item mentioned is the consultation paper for the deregulation bill. Can you advise what the projected savings to industry are from the measures proposed in the consultation paper?

Ms O'Loughlin : We have prepared a number of consultation and information papers to, I suppose, inform the discussions that the government is having with industry around the deregulation agenda. The first one that we developed and released was what we have called a deregulation framing paper. The intent of that paper was really to give industry a sense of some of the things that the government will be taking into account. For example, it indicated to industry that there were some things, which we called in that paper 'enduring concepts', which are things that no matter what deregulation agenda was going to pursue would still be important to include in legislation or regulation. One of the things we included in that was protection of children from harm, which is a principle that would be unlikely to be removed by government at this time or in the future. So we had industry on notice that there were things where we would still be looking at regulation or delivering those enduring concepts in some way.

Senator PRATT: Are you able to ascribe savings to that?

Ms O'Loughlin : No. There are no savings to that.

Senator PRATT: That was my question. The other item is the review of section 593, community representation and the research grants. Am I right that the funding for that currently goes to ACCAN?

Ms O'Loughlin : Yes, it does.

Senator PRATT: And the costs of that program are recovered from a hypothecated tax, aren't they?

Ms O'Loughlin : They come from the telecommunications industry levy, yes.

Senator PRATT: Yes, the carrier fees. Can you explain why these funds are included in the administered program indexation pause, as the effect is not to save the Commonwealth any money, although it will save the industry a small amount?

Ms O'Loughlin : There were a number of those programs included in that indexation pause. You are correct that it will not have any effect on the budget. It will be recouped for industry out of a reduction in the levy.

Senator PRATT: The roadmap says that the processes are yet to be finalised for the review. Have they been finalised? If not, when do you expect that they will be?

Ms O'Loughlin : They have not been finalised at this stage, Senator. The roadmap points out a large range of activities that we will be undertaking through 2014. It gives some dates to those things which are settled at this stage, such as already commencing consultation on the Telecommunications Deregulation Bill No. 1, which will include some reductions in reporting and other matters relating to telecommunications. We haven't set a time frame for looking at the research grants. We will see how we progress through the year, but the intention is to at least commence something this calendar year.

Senator PRATT: The next item is the spectrum review, which commenced just recently. The document says that the department will conduct the review in cooperation with ACMA. Can we infer from this that there will be a review structure resourced by personnel from both of the agencies?

Ms O'Loughlin : That is correct, Senator.

Senator PRATT: The roadmap then turns to broadcasting. What consultation process is planned for the review of schedule 4 of the Broadcasting Services Act?

Ms O'Loughlin : We expect to release a consultation paper around June or July this year. That will draw out submissions from the industry about what we are proposing before that proceeds through the normal legislative consultation process leading up to repeal day two.

Senator PRATT: What about the consultation for the review of captioning?

Ms O'Loughlin : Again, we are developing our proposals at this stage. There is quite a lot of active work between us and the ACMA. Rather than just going out to industry and saying, 'What do you think', we are trying to come up with solid proposals that we can discuss with industry and other stakeholders, particularly for captioning, around what might be achievable and have those consultations quite openly.

Senator PRATT: Am I correct that the review is restricted to reviewing reporting obligations and that there won't actually be any prospective reduction of captioning obligations in part of the review?

Ms O'Loughlin : No, our focus is very much on the reporting obligations. We do not see that this review will not extend to the actual captioning obligation itself, but how that is delivered by broadcasters and reported on in a compliance sense for the ACMA.

Senator PRATT: Both of these are due to be included in the second repeal day. How much do you expect to save in so-called 'red tape reductions' from a review of schedule 4 of the BSA? If you cannot identify those savings, what are the current costs to industry imposed by schedule 4?

Ms O'Loughlin : We have not got to that stage as yet. We are still in the process of developing the proposals with schedule 4 and with captioning. Once we have those proposals fairly solid we will go through the costing process with industry. I would say, though, that we would expect that there will not be significant savings from schedule 4 because a lot of it relates to the rollout of digital television. So it is a lot of the planning instruments, and obviously there is no ongoing costs of those to industry.

Senator PRATT: They will be redundant.

Ms O'Loughlin : Yes. A lot of it is redundant and some of it is winding back some of those reporting things as well. But we will get to the costings a little later this year.

Senator PRATT: The roadmap indicates reviews of Australian children's content requirements and of local radio content, reporting that they are held off until later. Is that right?

Ms O'Loughlin : Yes. We have not set a date on those. The roadmap, as you can see, is a pretty hefty agenda for the department across the board. We have progressed those things which put a date against those things and which the minister was happy for us to proceed with on those time frames. However, some of the longer term reform processes we have not settled as yet. We will settle those throughout the year and use the roadmap as a way of highlighting to industry what they should expect and what consultation they should expect throughout the year.

Senator PRATT: Is the change to Australian television content requirements really a red tape reduction exercise? Is it more really a cultural policy issue?

Ms O'Loughlin : It is a bit of both. Some of the things that we have identified in the roadmap are purely the regulatory approaches, but there are other things which are a mixture of deregulation and, perhaps, better put forward as regulatory reform. With something like Australian and children's content, there are the core requirements but there is also enormous amounts of reporting and compliance material done through those. So they do have a deregulatory approach as well. But you are right; it is a bit of a mixture of both.

Senator PRATT: Will other alternative policy approaches, such as the differing production offset quotas for film and television content, be considered for achieving the cultural policy objectives in conjunction with the review of quotas?

Ms O'Loughlin : We have not settled on the scope of that review as yet. But we are very aware of the balance of support for Australian content being partly regulatory through the quotas and the Broadcasting Services Act, and partly through the direct funding and tax arrangements, which are part of the arts portfolio. So that is a discussion that we will be having with Arts over the coming months about the best way to proceed with the review that we want to proceed with.

Senator PRATT: The roadmap foreshadows things outside the deregulation agenda. The independent cost benefit analysis and review of regulation of the National Broadband Network is due to report in mid June. Is that correct?

Mr Clarke : It is, Senator.

Senator PRATT: When will the government be responding to that review?

Mr Robinson : We do expect that the panel doing that cost benefit analysis and regulatory review will report during June. When the government responds is a matter for the government. It really depends on the report and the processes it is taken through.

Senator PRATT: Okay. One of the other issues is the use of the sixth television channel, including the future of community broadcasting. Is the government reconsidering the previous government's decision to rule out the creation of a fourth commercial network?

Ms O'Loughlin : There is no active consideration of those issues at this point in time. Really, the reason why we have included it in the roadmap is firstly so that industry understands what the government will be consulting on, and working with them and talking with them about over 2014. But we are also aware that the community broadcasting licences expire at the end of this year. So we need to give them some certainty around the tenure on that spectrum going forward.

Senator PRATT: So your expectation is that you'll use this process to give them certainty?

Ms O'Loughlin : Our expectations is that we will look at the whole issue of the sixth channel, and we are very cognisant of providing as much certainty to those community broadcasters as soon as possible.

Senator PRATT: Certainty that they may not exist or that they will always exist into the future? I am unclear about that answer.

Ms O'Loughlin : That is a matter for government consideration. We really are just going through the process, aware that it needs to be looked at this year because of the licensing arrangements for the community broadcasters.

Senator PRATT: When will that be certain?

Ms O'Loughlin : We have not settled the date on that as yet. But I expect that that review will, as we have said in the roadmap, proceed throughout this year.

Senator PRATT: So it is open to the government to consider closing down community television?

Ms O'Loughlin : The broadcasters are currently sitting on that sixth channel. They are providing services in metropolitan areas. It will be a matter for government consideration about what it wants to do with that sixth channel. There are various options available to it, including continuing community broadcasting. But there is also a call on that spectrum from, for example, broadcasters who want to use it to test out new technologies. So they are some of the issues that we will be looking at through that review process.

Senator PRATT: With respect to the anti-siphoning rules, changes to current media ownership rules and retransmission of commercial and national broadcasting services, will those issues—because they are interconnected in part—be considered together or separately?

Ms O'Loughlin : That would be a matter for the minister. We have really just highlighted them in the roadmap for completeness. Going back to your earlier question, the things that are solely deregulatory we have included in detail in here, but we wanted to make sure that industry was on notice that the government knew and understood that there were issues of concern to them that they would want to discuss throughout 2014. So that is why we have included them in the roadmap for completeness. How they are managed and how they proceed is really a matter for the minister.

Senator PRATT: Finally, will there be a public consultation process on each of those, and how will that operate?

Ms O'Loughlin : Again, that is a matter for the minister. We are not as far progressed on those things so there has not been a decision made about what consultation processes will take place. But I would expect that, given the consultation processes that we are proceeding on for telecommunications for spectrum reviews, that there would be—

Senator PRATT: What it sounds like is that you would put a proposal forward for public consultation and wait to see what the minister says about that.

Ms O'Loughlin : No, that is not what I said. The final decision on how the issues are progressed is a matter for the minister.

Senator PRATT: So you are waiting for that direction?

Ms O'Loughlin : Well, you know—

Senator PRATT: Okay, I will not go to questions about advice to government. But clearly somewhere there may or may not emerge consultation on those questions.

Ms O'Loughlin : That is correct. It is a matter for the minister, but as I have said, the process to date on the deregulatory agenda has been a very open and consultative one. So I would expect that that would continue.

Senator PRATT: Thank you.

Senator THORP: I would like to get to the issue of ministerial correspondence. Mr Clarke, does the department manage the correspondence from constituents to the minister both by letter and email?

Mr Clarke : Both by letter and email? I will ask my colleague Mr Ash.

Senator THORP: I really need a quick short and sharp answer on this.

Mr Clarke : I think the answer is yes.

Senator THORP: One of my constituents, since 10 April, has sent three emails to Minister Turnbull's aph account and has not had a response yet. Is that the normal length of time that it takes?

Mr Clarke : They were sent in April?

Senator THORP: Three since 10 April.

Mr Clarke : So we are at six weeks.

Mr Ash : It is a bit difficult to give you a specific answer on that one.

Senator THORP: No, I do not want you to be specific about that one. It is more about what the time lines are. What are your KPIs on getting ministerial correspondence addressed?

Mr Ash : We usually work to a 10-day response.

Senator THORP: Since 10 April would be outside of those parameters.

Mr Ash : Yes.

Senator THORP: Thank you. Mr Clarke, are you familiar with the document on the Department of Prime Minister and Cabinet's website entitled Guidelines for the presentation of documents to the parliament (including government documents, government responses to committee reports ministerial statements, annual reports and other instruments) October 2013?

Mr Clarke : I am aware that there are extensive guidelines in that area.

Senator THORP: In that document, it refers to the fact that the tabling of documents is an important means of keeping the parliament and everyone informed et cetera, of government activities. It also states that documents prepared for tabling are confidential and under embargo to the government until they are presented to parliament. I am sure that you would agree that the confidentiality of these documents is very important.

Mr Clarke : Yes.

Senator THORP: That importance also applies to documents including government responses to committee reports, even if all of the committee recommendations are being rejected, doesn't it?

Mr Clarke : The importance of due process in closing the loop, I acknowledge, yes.

Senator THORP: Yes. Section 5 of the document details the normal process for preparing government responses to committee reports. Would I be correct in saying that that process outlined requires a department to prepare a response? So you have a report, there needs to be a government response—

Mr Clarke : The normal model is that the department would get advice to the Minister or government on responses.

CHAIR: Senator Thorp.

Senator THORP: This is a line of questioning that I do need to follow up.

CHAIR: We only have 10 minutes left, and Senator Ruston requires 10 minutes. You have had 50 minutes. We only have one hour.

Senator THORP: Is there any flexibility there?

CHAIR: Probably not.

Senator THORP: I mean, this is an important part of—

CHAIR: You may have to put some on notice, I am sorry. Continue on.

Senator THORP: Okay, I have two minutes. I really wanted to get to the point that there are procedures that are followed, and the department is involved with developing the government response to committee reports. And I want to draw your attention to the document that was posted to the blog section of Minister Turnbull's personal website. The document is entitled, Response to the Senate Select Committee on the NBN, dated 30 April 2014. Did you prepare that document?

Mr Clarke : I do not know. I will have to take that on notice. I am not immediately familiar with the document. I would have to take that question on notice.

Senator THORP: Okay. In that case could you come back to me with the answer to that question?

Mr Clarke : I will attempt to do that in the course of the hearings.

Senator THORP: It should be pretty straightforward because it is a document on the minister's website entitled Response to the Senate Select Committee on the NBN, dated 30 April 2014. My question is: did your department prepare that report? My other question on notice, then, is in relation to a question on notice from February that remains unanswered. It is question on notice 333 from Senator Ludwig. Minister, I am sure there has been an oversight. I am sure Minister Turnbull does not have any pay TV, newspaper, magazine and publication subscriptions that he wants to hide. That was basically the nature of the question. Could you take that on notice and come back later in the day please. It is quite a detailed question.

Mr Clarke : Question 333 from which hearing, Senator?

Senator THORP: From February, and it is in four parts.

CHAIR: Senator Ruston, you have 10 minutes.

Senator RUSTON: I understand the department is undergoing an organisation and structural change. Can you give us an outline of how the department will be structured and how this is going to better enable the department to be flexible and proactive in the longer term?

Mr Clarke : Thank you. The structure that we are in the process of implementing comprises six divisions or functional units and three policy divisions that are working right across the communications agenda. One is on infrastructure, one on digital productivity and one focused on consumer and content issues. One of the products of the advice that Senator Thorp asked me about earlier was how best to address this rapidly changing landscape. We have chosen to adopt a more thematic structure, looking at infrastructure holistically, digital productivity holistically and consumer issues holistically, rather than in the traditional stove pipes of the telco sector, the print media sector and the broadcasting sector. In addition, there are three whole of department groups. Firstly, the bureau of communication resources that we are in the process of establishing. Secondly, my office of the general council. A lot of the work in the department is heavily legal, and I maintain that as a separate unit. Thirdly, the corporate division that has the usual range of corporate functions.

Senator RUSTON: In terms of the restructure, how has that been affecting redundancies?

Mr Clarke : I am implementing the restructure at the same time as the downsizing. I mentioned earlier this process of redesigning, re-specifying, every job in the department and we are doing that in this new structure. We are then doing the subsequent fit. So the two processes are tied together. But a point that I have made to staff in the department repeatedly is that even if I wasn't in the position of having to do a downsizing, if the budget didn't require you to do it, I would still be doing this restructure. I would still be redesigning every position, I would still be changing the way we organise ourselves and work and I would still be taking out one or two layers of reporting. I would still be expanding the spans of control. So I have joined the processes together, but they are not cause and effect. It is a necessary process, because I am doing them concurrently. But I would still be restructuring anyway.

Senator RUSTON: When did this process first commence?

Mr Clarke : I announced it in February this year.

Senator RUSTON: That was the restructuring, but in terms of the actual instigation of the process for the downsizing, has that been something—

Mr Clarke : No, the budget reductions were really locked into the 2013 budget last year.

Senator RUSTON: The 2013 Labor budget.

Mr Clarke : And they have their origins in earlier budgets in terms of terminating programs. But the forward estimates that were announced in the 2013 budget were such that the responsible course of action was to commence the major downsizing, post the 2013 budget.

Senator RUSTON: So the restructuring has been a proactive and in some ways as much a positive response to having to do with the problem of downsizing that you have had for some time?

Mr Clarke : I have less resources, I have a very dynamic communications sector and I have a bunch of new priorities and programs from the incoming government. I had to deal with the three simultaneously, and the restructuring is part of that.

Senator RUSTON: Of recent times there has been a lot of talk, as you say, in this space. But there have been several studies highlighting the contribution of mobile broadband to economic growth. Is it intended that the new bureau of communications research will enable the department to better focus on its work to ensure regulation and policy settings are aimed at the maximum benefit with these rapidly evolving technologies and the obvious implications on society of that changing space?

Mr Clarke : The plan is that the bureau will be commissioning research, undertaking research or synthesising all of the research that is already out there around the world and presenting it in a way that is policy ready and useful to policymakers. It will say that this is what is happening in technology, this is what is happening in markets and this is what happening in consumer preferences, and these are the implications for policy settings for government. So, yes, that is a classic example.

Senator RUSTON: Can I go back to the deregulation agenda that consumed most of the rest of this section of the hearing. In terms of repeal day number two, what is the response that you have had as part of the consultation process, because we have been through repeal day number one and we have started the process. What is the consultation process on repeal day number two doing? Generally, what sort of response are we seeing now that we have already had one round of it?

Mr Clarke : I will observe that the industry is very engaged.

Senator RUSTON: Yes.

Mr Clarke : We are not short of proposals.

Ms O'Loughlin : As I mentioned earlier, the minister has agreed a roadmap for the year. Where we are going with that is that we have already started consultation work on a number of measures. So, significantly, the department has released a discussion paper on some aspects of telecommunications regulation, which includes proposals from industry to deregulate in the areas of some technical things around preselection priority systems, retail price control and those sorts of things. We released a paper. We have gone through a consultation process. The parliamentary secretary hosted a forum with industry and consumer groups to try to work through the issues. So that has been progressing extremely well.

The next stage of that will be settling on the proposals, doing the costing and getting ourselves ready for repeal day two. That is a formal consultation process. There are also individual consultations going on—for example, with organisations such as Telstra, who have licence conditions that they want to talk to us and the government about the removal of. We have released terms of reference and ideas around a major review of spectrum management. So those things are progressing very well. We are also looking internally ourselves at where there is additional redundant regulation that we can get rid of for repeal day number two. So it is a very active agenda for the government and it is also a very active agenda for the department in our consultation with industry about what can be removed.

We are also working very closely with our colleagues at the ACMA. Obviously they have a lot of discretion to introduce regulation themselves. They also have a program of work underway of consultation with industry about where we can wind things back. Specifically, with the ACMA, a lot of that is about reporting obligations, particularly where reporting obligations have a long history of compliance in the industry with obligations and whether they can change that reporting and relieve some of that regulatory load. So, yes, it is a very active engagement with industry and, as the secretary said, there is a great interest from industry to remove quite a lot of regulation.

Senator RUSTON: It is hopefully a space where we can make some significant economic gains.

Ms O'Loughlin : I think that that is right. Also, the deregulation we are looking at has just been overpassed by time. The three pieces of major legislation that are in place came out of the 90s, and so much has happened since then in regards to technology, market structure changes and all sorts of things. So it is a really opportune moment to relook at the regulation and the legislation and see whether it is actually fit for purpose in 2014.

CHAIR: Thank you. Can I clarify one thing, Minister, Mr Clarke and Senator Thorp? An answer to question 333 was actually forwarded to Senator Ludwig on Monday. It has not been put on the website because the secretariat has been flat out with estimates. So there is probably no need for you, Minister, to spend time—

Senator THORP: Thank you for that. But if I may, Chair, there is no clear answer to question 4.

CHAIR: I will let the secretariat chase that up. We will investigate that.

Senator THORP: It does not really help if I do not explain the problem. The question asked, 'What publications were provided to the minister and what was the cost?' The cost has come back but not the names of the publications.

Mr Clarke : I understand the question, Senator. Can I also clarify my previous answer? I am advised that correspondence to the minister's aph account are managed by him personally and his office. They do not enter the department's formal MinCorro system.

Senator THORP: So it is not you that is slow; it is the minister?

Mr Clarke : The minister tries to take a very personal approach on his approaches. He is one of the most approachable ministers I have worked for.

Senator THORP: It is not up to you to comment—

CHAIR: Senator Thorp, I don't think we'll get into an argument about not getting a question on notice in time or we might go back in history about five years. Senator Fifield.

Senator Fifield: Just on the same point, I want to clarify with Senator Thorpe when she was referring to the minister's aph account. That is not a department account and is therefore not managed by the department. I know from personal experience that Mr Turnbull does endeavour to reply personally to as many of those in his aph account as he can. Where he needs to, he seeks departmental input for responses. Senator Thorp, if off-line you want to provide the details of that constituent, then I am happy to follow up, because it may well be that the response is waiting in Minister Turnbull's outbox.

Senator THORP: Thank you; I appreciate that.

CHAIR: We will now move on to program 1.3, broadcasting and digital television.

Senator THORP: Can I get some clarification from you, Chair, about how much time I will have, because I ran out.

CHAIR: You had 50 of the 60 minutes. This time there is one hour and 15 minutes. What if I give you 50 minutes out of the 75?

Senator THORP: Okay.

CHAIR: How would that be?

Senator THORP: Would you like me to go first?

CHAIR: I would love to you to open the bowling, Senator Thorp.

Senator THORP: Thank you. No googlies.

CHAIR: You can have 55 minutes. Away you go.

Senator THORP: I want to get on to the area of deregulation, if I may. The deregulation roadmap flags three areas of media policy for reform, being any changes to the anti-siphoning rules, any changes to the current ownership rules and retransmission of commercial and national broadcasting services. Do reforms in these areas have a potential significant impact on the commercial positions of major media players?

Ms O'Loughlin : They are probably three of the most important issues for commercial broadcasters. They are fundamentally very critical issues for the shape of broadcasting, yes.

Senator THORP: It is an important issue, isn't it, because the whole anti-siphoning set-up is to make sure—

Ms O'Loughlin : They are very important issues, yes.

Senator THORP: So, by taking something off the list, that does provide a commercial benefit to pay TV and free to air, does it not?

Ms O'Loughlin : Yes, there is an ongoing debate with government by the free to air and pay television sector about what the right balance is of things that are on the anti-siphoning list and things that are taken off the anti-siphoning list.

Senator THORP: Similarly, any change to the rules about when and how rights can be bid for. That would have a commercial impact on those firms as well.

Ms O'Loughlin : Absolutely. Sport in particular, which is probably what is on the anti-siphoning list, is highly valued by both pay television and free to air television.

Senator THORP: The changes to the media ownership rules will presumably include the 75 per cent reach rule.

Ms O'Loughlin : What the roadmap mentions is that there will be consideration of the rules. It does not say that there will necessarily be changes to that rule, but each of the rules would be looked at.

Senator THORP: Because the valuation of the regional networks depends on the programming deals, the structure and value of the possible outcomes would be different for each of the three 75 per cent network owners, wouldn't it?

Ms O'Loughlin : It is difficult to speculate on different proposals, but obviously each of the broadcasters would have different options available to them if various rules were changed.

Senator THORP: Similarly, will existing assets differentially shift in value with changes to the cross ownership laws?

Ms O'Loughlin : Again, that would depend on what changes were made and what acquisitions or mergers they were envisaging.

Senator THORP: It is a fraught area, though, isn't it?

Ms O'Loughlin : It is a very complicated area, yes. It is of a significant interest to the entire broadcasting industry and beyond.

Senator THORP: Would any proposal to reconsider retransmission rules result in a transfer value from pay TV operators to free-to-air operators?

Ms O'Loughlin : The issue with free transmission is around the use by Foxtel of an existing retransmission role in the Broadcasting Services Act which allows them to retransmit free-to-air television without payment for copyright to the broadcasters. So the free-to-air broadcasters have raised the concern with the government that they should be paid for copyright of broadcasts by pay TV. That is the issue that we will be looking at through in that review process.

Senator THORP: So you are looking at three quite important areas there—anti-siphoning, retransmission and media ownership rules. They all have differential value affects. Should they be being looked at as a package of reforms?

Ms O'Loughlin : As I mentioned earlier, I think that that is really a matter for the minister.

Senator THORP: Perhaps Senator Fifield could answer that one.

Senator Fifield: No, I will take it on notice for the minister.

Senator THORP: It is a pretty basic question. Given the three important areas being looked at for reform, and the fact that they are going to have consequences each for the other, I just want to get a position on whether or not those reforms will be looked at as a package.

Senator Fifield: I will take that on notice for the minister.

Senator THORP: The Fin Review reported on Monday that the department would be releasing on Friday research outlining the state of media regulations. Is that report correct?

Ms O'Loughlin : I am not going to speculate on what the AFR indicates we are doing. But I can indicate that the department has been asked by the minister to develop a contextual paper around the current media ownership rules and the current media ownership landscape.

Senator THORP: That is a body of work you have been requested to do by the minister?

Ms O'Loughlin : And we are quite well progressed on it, yes.

Senator THORP: Is it possible that it might be released on Friday?

Mr Clarke : All things are possible, Senator.

Senator THORP: Of course there would be absolutely no coincidence in the fact that that would be immediately post estimates and not before estimates.

Ms O'Loughlin : No, we have been working on that for quite a considerable length of time.

Senator PRATT: We are not that important.

Senator THORP: Clearly.

Ms O'Loughlin : There was not really a defined date of release. But it is along the lines of what I discussed earlier. The department has been developing and will be releasing a series of papers starting with our framing paper and, as indicated in the roadmap, a regulatory frameworks paper which will also be released in the next couple of weeks. They are really just informative papers.

Senator THORP: Is it more of a historic description of current rules or is it going into comparative studies for reform options?

Ms O'Loughlin : It is more the former. It is looking at what the current rules are. But it is also looking at what the current environment is for media ownership, particularly around news and current affairs, which is where media diversity rules tend to focus, and the emergence of such a huge range of new news and current affairs services online.

Senator THORP: So it is a document that sets the scene of where we are at?

Ms O'Loughlin : That is right. It is setting the scene for any further discussion about what the future landscape for media is.

Senator THORP: Who is the audience for that document?

Mr Clarke : This is a process that we have been going through, and which we hope to model in other areas, of publishing a paper first which is factual and should of itself—

Senator THORP: I would hope that all of the documents you publish are factual.

Mr Clarke : Sometimes we do modelling and forecasting, which is what it is. We will put out an authoritative paper that describes the current reality and history, of which people should say, 'Yes, that is a fair and accurate description of where we are now,' and not say anything further. So it is a platform on which the public policy debate can occur. That is our goal in preparing these kinds of papers. The audience, therefore, is people who will be engaged in the public policy debate. As you say, the first order of engagement comes from the industry itself—the companies for whom these decisions are commercially very important. But the community at large obviously has a first order interest in this as well.

Senator THORP: We have established that it is a platform document. But the important part is where to from here, isn't it?

Mr Clarke : Correct.

Senator THORP: Because they are the changes to the rules. Are you doing any work or modelling of a reform process?

Ms O'Loughlin : At this stage our focus has been on the development of this factual paper. The distinction in my mind is that this is sort of an informative paper. It sets the scene; it talks about the current environment. As we move forward with some of our other issues—for example with telecommunication consumer protections— in that space we have put out a consultative paper on new models and new reform. That is the sort of distinction that at this stage with media ownership we have been asked to focus on—the informative part of the process.

Senator THORP: And that information will be in the document when it may or may not be released. It covers off on all the three significant rules we were previously discussing?

Ms O'Loughlin : The 75 per cent reach rule, two out of three, four out of five, the ACCC merger and acquisition rules and foreign investment.

Senator THORP: Right. It is quite significant. With the next stage, I suppose we will have to wait and see. We will have to wait for the question on notice about where we are going to go with either bringing that reform process together or doing it separately. Is that correct, Senator Fifield?

Senator Fifield: I am sure you would appreciate the benefit of Mr Turnbull's advice.

Senator PRATT: The department advertised positions on the ABC and SBS boards, including the Chair of SBS, in March. How far before the expiry of the existing terms were these advertisements placed?

Ms O'Loughlin : The vacancies were advertised in late March and early April. Applications were advertised as closing on 14 April and they are currently being assessed. Currently there is an acting chair of SBS until that role is filled through this process.

Senator PRATT: So it was a matter of weeks. The existing contracts have expired; is that what you are saying?

Ms O'Loughlin : The existing term of the Chair of SBS had expired, yes.

Senator PRATT: So the advertisements were not placed even though the term was about to expire?

Ms O'Loughlin : The advertisements were run in March, and the terms had already expired at that stage, yes, for the members and the Chair of SBS.

Senator PRATT: So the Chair of SBS but also for positions on the ABC board, as I understand it.

Dr Pelling : Yes, all three of them.

Senator PRATT: The advertising took place in mid-April, you said?

Mr Clarke : Late March.

Ms O'Loughlin : Late March and early April.

Senator PRATT: With the applications closing in mid-April?

Ms O'Loughlin : That is correct.

Senator PRATT: What were the actual expiry dates?

Ms O'Loughlin : I do not seem to have those with me, but we should be able to come back to you during this session.

Dr Pelling : They were in March but I can't remember the precise date.

Senator PRATT: Why was there such a short time line? For example, was the department awaiting instruction from the minister about whether existing appointees would or would not be reappointed?

Mr Clarke : We are obviously not going to talk about those sorts of processes or advice. We acknowledge that the advertising was late. It would have been desirable for it to be in earlier.

Senator PRATT: Were you in a position to do that advertising earlier?

Mr Clarke : We are not in a position to do anything without government approval, Senator.

Senator PRATT: Okay. Was the paperwork required for approval by the Prime Minister for reappointment prepared by the department, and was it submitted to the Prime Minister?

Dr Pelling : The final process, once the candidates are selected, will go through the cabinet.

Senator PRATT: So you have not done any of that paperwork previously?

Dr Pelling : Currently we are going through the process of conducting the appointment round, as required under the legislation. That involves advertising for the candidates and then there will be a selection process for the candidates. Then a shortlist will be provided to the minister, who will decide which candidates he wants to put to the cabinet for approval.

Senator PRATT: So none of that paperwork has been done previously?

Dr Pelling : We have done several appointment rounds in the past, if that is what you mean.

Mr Clarke : Is your question whether, in effect, appointments or decisions have already been made?

Senator PRATT: No, I am really just trying to understand the process. Clearly they have not been made because the minister has not made them.

Mr Clarke : Correct. Can I ask Dr Pelling to just take you through, perhaps in a more staged way, what the process will be?

Senator PRATT: No, I have some questions on the process and the Chair is being very strict with the time today. So I think it is best to me if I move certain questions. I would very much like an overview of the process, but the Chair has placed very strict limitations on us. Can you reassure us that the story in Crikey that Sophie Mirabella is to be appointed chair of SBS was just an April Fool's Day joke?

Mr Clarke : I can say unequivocally that no decisions has been taken on these appointments.

Senator PRATT: The question remains open whether she is a potential nominee for those positions.

Mr Clarke : We would not comment. The question of who has put their hand up is a strictly confidential matter for those individuals and the government.

Senator PRATT: Once we have got to the point that the minister has been clear that the members will not be reappointed, clearly then you advertise. That includes contracts starting in mid-March with Adcorp for $24,000 and Amanda O'Rourke to undertake recruitment at a cost of $44,000. Is that correct?

Mr Clarke : Yes.

Ms O'Loughlin : That would be correct. I think that that is in line with previous appointment processes.

Senator PRATT: Appointments to these boards are governed by an independent selection process. Who are the current members of that nomination panel?

Dr Pelling : Sorry, I was just distracted by my colleague who was telling me that the terms expire on 26 March. There are two current members of the nomination panel. The chairman is Mr Rick Smith and the other member is David Gonski.

Senator PRATT: In relation to the process, has Amanda O'Rourke met with the nomination panel to discuss the process and the progress?

Dr Pelling : Yes.

Senator PRATT: Will candidates identified be provided directly to the nomination panel or will the minister be provided with the list before it goes to the nomination panel?

Dr Pelling : The candidates are collected by the consultant and an initial ruler is run over to make sure that they are compliant with the process. They are then provided to the nomination panel chair.

Senator PRATT: So the minister will not be provided with a list before it goes to the nomination panel?

Dr Pelling : There is nothing preventing the minister requesting a list.

Senator PRATT: But the minister will not have the capacity to remove people from that list until after the nomination panel?

Dr Pelling : No, the process is fully independent. Essentially, it is the nomination panel that assesses and decides who they will interview. They then present a list to the minister, and that is provided for in the statute.

Senator PRATT: Given that the ads were placed two months ago, has the nomination panel started considering candidates yet and, if not, why not? And when do you anticipate the process will be complete?

Dr Pelling : At the moment we are in the process of finalising the compilation of names through the consultant as a result of inputs from the advertising process. One of the consultants roles was to do some headhunting, for want of a better word, and to seek out suitable candidates and encourage them to put in an application.

Senator PRATT: So the panel has not started considering candidates?

Dr Pelling : The panel has not yet started considering names.

Senator PRATT: When do you anticipate the process will be finished?

Dr Pelling : I don't think it is possible to put a precise date on that because the panel has to put in place its own processes to consider the candidates. They will have a number to interview, and the dates will have to be set for the interviews, which will depend on candidate and panel availability. Then the process will be put—

Senator PRATT: Surely if the terms expired in March, it would have to be done fairly expediently.

Dr Pelling : Yes, I can assure you that once the panel convenes, it will be done as expeditiously as possible.

Ms O'Loughlin : While it is undesirable, both of the boards both have forums, but we are aware of needing to get the process done as quickly and as efficiently as possible.

Senator PRATT: Well, it is nearly June. Thank you, Chair, I will hand back to my colleague.

Senator THORP: I want to talk about the spectrum review. I note the government's spectrum review commenced on 23 May. In the regulation roadmap it was stated that:

The framework was last reviewed by the Productivity Commission over 11 years ago. Since that time there has been significant industry and technological change and it is timely to reconsider whether elements of the regulatory arrangements embodied in the framework—including spectrum planning and allocation, licensing etc—remain fit-for-purpose. The Review will cover the Act, subordinate regulation, and the respective roles of the Minister, the Department and the ACMA. Extensive consultation will be undertaken …

That is a huge task, by the sounds of it.

Mr Clarke : It is. It is a great opportunity to take such a big issue and look at it from first principles. It goes very much to some of your earlier questions to me about how dynamic the communications sector is. Spectrum is, of course, a public asset and the way in which it is managed, allocated and treated can have such a big impact on the market and consumer experiences. So this is a very important review, I agree.

Senator THORP: I do have a concern that the terms of reference document specifies that the review report is expected to be provided to the minister in six to nine months, but in the first consultation paper it says that respondents are asked what areas can be completed in 12 to 18 months and what could take longer. So can we expect just one report covering a potentially protracted reform period or a series of reports?

Ms O'Loughlin : Because it is such a large and extensive review, the first part of the process will be to try and flesh out some of the core issues over the coming months. So we are taking a staged approach to it, because it is such a broad review.

Senator THORP: So we could expect, then, to see a series of reports with particular signpost moments along the way?

Ms O'Loughlin : That is right. Obviously there are a wide range of issues that are flagged in the terms of reference. If we moved to legislative change, there is extensive legislative change which would have to be considered. So we want to take the time to be able to fully flesh out those issues through the review process.

Senator THORP: Fair enough, too. What resources have been dedicated by the department and the ACMA to this review, and will external consultants be used?

Mr Clarke : In the new organisational structure that we have talked about with you and Senator Ruston, we have included in that branch a unit whose primary focus will be this spectrum review.

Senator THORP: Do we have a name for the area?

Mr Clarke : Spectrum.

Ms O'Loughlin : Spectrum branch.

Senator THORP: How many people are we talking about?

Mr Clarke : There is an ongoing spectrum function and then there is the review function on top of it. There is always spectrum work in the department. I would expect an order of magnitude—

Senator THORP: You would have to beef it up a bit, wouldn't you?

Mr Clarke : Correct. So we are staffing that branch today, knowing that it has a peak workload over the next 12 months to undertake this review. I am talking single digits—half a dozen to 10 people.

Senator THORP: What about the external consultants?

Mr Clarke : I do expect the team comprising both the department and ACMA officials to contract out or contract in some specialist expertise. It is possible. For example, I know the ACMA has a lot of expertise in the engineering side. It may be that we need some other expertise in that area. There is a rich academic literature on the way in which spectrum markets can operate.

Senator THORP: Is a literature review being done at this stage?

Mr Clarke : I see that as an early stage of this process. Whether we need to contract in or out certain economic expertise in markets, options et cetera, for spectrum decisions—

Senator THORP: Perhaps they are questions for further estimates.

Mr Clarke : I do expect there to be some consulting or contracting work.

Senator THORP: But the actual nature thereof you are not clear on yet.

Mr Clarke : Correct. What we are not doing is contracting out the entire research. I am not issuing a consultancy to do the review. That is definitely not the model.

Senator THORP: Where are we at in terms of the objectives of the act as to whether or not spectrum discussion should be around economic efficiency, top dollar or other social outcomes like the use by emergency services or defence?

Mr Clarke : That is the absolute fundamental question that this review will have to grapple with—that is, what is the objective for government in dealing with this public asset. What weight you give to those. Like all things, it is a compromise and there are trade-offs. It is a question about what priorities or weighting you give to the various objects.

Senator THORP: Surely that is the first thing that really needs to be worked out?

Mr Clarke : It is a fundamental question, I agree.

Senator THORP: The first term of reference of simplification, and whether we are talking about economic efficiency, there is that potential to be at odds. All government business enterprises and state owned companies always have that kind of consideration, don't they?

Mr Clarke : They do. It is like water and it is like any other scarce asset. Judgements need to be made by the government of the day, and we have to think about whether the legislative and regulatory framework is designed to keep pace with the market developments. The special thing about spectrum, compared to some other assets, is how rapidly the market is evolving and how innovative technologies and new business models are coming into play that use it. This is very much about getting a modern legislative and regulatory framework that deals with those trade-offs around public good and commercial interests. Judgements need to be made.

Senator THORP: Sitting here today, though, we can be confident that the needs of defence or emergency services, for example, will be met?

Mr Clarke : Yes. Public safety and public good applications are always part of the mix.

Senator THORP: Will remain paramount?

Mr Clarke : They are one of the multiple factors to be considered simultaneously.

Senator THORP: But is it really possible to conduct the review given, as we went through before, the size of the task—which is a big task—without having ascertained those fundamental objectives around social good as opposed to economics or—

Mr Clarke : I see the characterisation—and, in legislative terms, it is the objects of the act, which, of course, drive it—I see that as fundamental to being done inside the review. It is part of the review. I think the terms of reference, while not spelling it out as plainly as I have just said—my reading and my understanding of the process is that that is fundamental.

Senator THORP: I am sure that Senator Fifield could reassure us all that the public good—

Senator Fifield : In one word—absolutely.

CHAIR: There you go.

Senator THORP: Thank you—that is all we wanted to hear. A significant part of the subject of the review seems to turn on the relative roles of the ACMA, the department and the minister. I do not want to be negative here, but could reviewing these roles be seen as an indictment of the efficiency and effectiveness with which ACMA performs its role?

Mr Clarke : No, not at all. It is seen as good practice to review the respective roles of the arms of government—the minister exercising the executive authority, the statutory independent regulator and the department in the middle advising the minister. So this is simply that, if you are doing a first-principles root and branch review then it logically follows that you should consider which decisions are best made at arm's length by a statutory regulator and which are best made by government.

Senator THORP: And I am sure that you would say that the objective of this is not to provide greater political control of spectrum management.

Mr Clarke : No, I think it is about—it is exactly as you say: the efficient allocation. But there are many dimensions of efficiency, from public good to commercial, and there is also the question about the form of advice. The discretion, for example, that the government might give to a regulator is a gift of government—how you legislate; what you prescribe that the regulator must do versus what you say the regulator may consider. So it is all of those sorts of issues that are in the scope for this review.

Senator THORP: So will you be intending to give a clear guide to the current roles and functions of the ACMA, the department and the minister to aid that review process?

Mr Clarke : That sound like a fine idea, Senator—that an early product of this review would be a clear statement of the current roles of the parties.

Senator THORP: And, referring back to a comment you made earlier, a clear guide to the operation of the subordinate legislative instruments?

Mr Clarke : I agree—that logically follows.

Senator THORP: It is setting the groundwork, isn't it. They are pretty fundamental things.

Mr Clarke : I agree, Senator.

Senator THORP: Is it anticipated that the review of roles will result in significant saving in resource requirements?

Mr Clarke : There is no anticipation in that area. This is not—this review is not—

Senator THORP: It is not a cost cut?

Mr Clarke : predicated on a particular finance efficiency or budget outcome.

Senator THORP: You must be about the only area around that is not being bashed over the head with that, so—

Mr Clarke : I note that the revenue from spectrum is a material factor, but we are going into this with all issues and options on the table. This is not a budget-driven review.

Senator PRATT: It is lucky that Senator Cormann is not here.

Senator THORP: Yes. This is my final question before we move to another section. Budgets often have included unpublished amounts for the expected future sale of spectrum. I am not asking you about amounts or anything like that, but could you give us an idea of when such sales will occur?

Mr Clarke : Senator, I am at a disadvantage here in that my experts in this area have left, not anticipating this line of questioning. Can I come back and give you an answer during the session?

Senator THORP: If you would. I will be quite specific about my question then. Is there any provision in this budget for expected future sale of spectrum, in what year or years does it occur and what are the anticipated lots? That is my question.

Mr Clarke : They are indeed very specific. If we can answer during today we will do so, but I—

Senator THORP: Just do your best.

Mr Clarke : I am wary that there is a commercial dimension to the question that might mean that I am not able to answer you. But I will do my best to answer you during the day.

Senator THORP: I would appreciate that. Thank you.

Senator PRATT: I have some questions regarding your answer to question on notice 325 regarding the ABC and SBS efficiency study. In that answer you state that the study is not investigating the quality of ABC and SBS programs, but that is not actually the question. The question was: does the efficiency study adequately reflect the output side—in particular, will it guarantee that the same or better-quality output can be generated after the claimed efficiencies are achieved?

Mr Clarke : The efficiency study was predicated on no change to the quality or quantity of outputs.

Senator PRATT: That is right, but that was not the question in the document. The benchmark is better quality. So you are saying: yes, there is no change. You are saying: yes, it will be the same or better.

Mr Clarke : Correct.

Ms O'Loughlin : The focus of the efficiency study was very much the back-of-office operations of both of the broadcasters. That is where it focused its attention. It was not looking at programming.

Senator PRATT: So you are saying that you will guarantee the same or better-quality output even with those—

Mr Clarke : It is not our position to guarantee ABC and SBS outputs. What we are saying is that the study that the department undertook was based on a requirement going in that it not affect the quality or quantity of outputs and we believe that the report that we have delivered to the minister achieves that goal.

Senator PRATT: I presume that you saw comments made by the CEO of ABC after the budget was delivered that the ABC has historically reinvested efficiency savings in new initiatives such as iView and News 24. Is that an accurate view that that has historically been the case?

Mr Clarke : I saw Mr Scott's comments—yes.

Senator PRATT: Did you agree with those comments?

Mr Clarke : I have no reason to doubt them.

Senator PRATT: I note that the ABC has been separately funded for Ramp Up, the ABC's online destination the news discussion and debate for people in Australia's disability communities, but there is no new funding for this. Is this the kind of thing that could have been expected to continue to operate if the ABC had been allowed to reinvest savings from efficiencies?

Mr Clarke : Choices about allocation of resources and priorities are matters for the ABC board, so it would be a matter of speculation for us to comment on that, which is not appropriate.

Senator Fifield: I might just add there that, on the funding for ABC for Ramp Up from government, it was made clear by the previous government when they made that funding, which I think was subsequently added to, that it was start-up funding and at the conclusion of that funding in the middle of this year the expectation was that the ABC would continue to undertake the ABC Ramp Up as part of its core business. I would certainly encourage the ABC to do just that within their funding.

Senator PRATT: I do not doubt that that is the case, but it is now without the efficiency dividends to reinvest to do so.

Senator Fifield: I would just refer to the secretary's comments that the efficiency review was predicated on not impacting on ABC programming and content. I would consider that the ABC Ramp Up service would fall within that. So there is no reason due to the work of the efficiency review and no reason as a result of what was announced in the budget that the ABC should not be in a position to continue ABC Ramp Up if they choose to do so. But it is a decision for the ABC. If the Ramp Up site does not continue it is not because of actions by government; it will be because of a decision by the ABC.

Senator PRATT: It is a very popular service that I would have thought could have been funded with those efficiency dividends. Anyway, the minister announced—

Senator Fifield: There is nothing the government has done or decided that would prevent the ABC from deciding to continue the ABC Ramp Up service.

Senator PRATT: Other than that it seemingly will have to compromise output and quality elsewhere.

Mr Clarke : No, the minister has made it clear in the announcement of the review and the process that that is precisely not the intent.

Senator PRATT: I think that is completely internally contradictory, particularly when you have an independent organisation making its own decisions about this.

Mr Clarke : You are going to intent and scope of the efficiency study. As Ms O'Loughlin has said, the study was all about back-office, non-programming, non-content matters.

Senator Fifield: So it was, is and remains a decision for the ABC.

Senator PRATT: Part of the reason that things like ABC 24 and iView were able to come about was because the changes in technology and all of those kinds of things meant that back-office efficiencies would mean front-end content. That is what the ABC is being denied.

Mr Clarke : And priorities around the front—the programming. Choices are made in all of that. I acknowledge that—

Senator PRATT: But you cannot say that those back-end efficiencies do not have impact on the front end because, historically, all of the technology and organisational change has meant that we have had new front-end services as a result of those efficiencies.

Ms O'Loughlin : The thing with the efficiency study, which has been provided to the boards, is to give them an independent look at their organisations and where they may be able to find more efficiencies than they have to date.

Senator PRATT: Yes. The minister announced the ABC and SBS efficiency study in January and appointed Peter Lewis, formerly of the Seven network, to conduct the review. Was Mr Lewis identified for the review by Minister Turnbull?

Mr Clarke : Senator, I need to correct an important point in your question.

Senator PRATT: Please do.

Mr Clarke : The department undertook the study, not Mr Lewis. Mr Lewis was engaged by the department to assist us, but it was our work with his advice and assistance.

Senator PRATT: So who was Mr Lewis identified by for the review? Was it Minister Turnbull or someone else?

Mr Clarke : I recall having many discussions with the minister in the period leading up to the announcement in which we canvassed names for advice. My position was that I thought that the department would need assistance to undertake its review—somebody that had worked in a broadcaster and that really understood the industry better than we did. Ultimately, my recollection is that Mr Lewis's name was a suggestion of the minister—yes.

Senator PRATT: Thank you. Did the minister suggest Mr Lewis on the recommendation of his former business partner Bruce McWilliam, who is now with Seven?

Mr Clarke : I have no idea.

Senator PRATT: When the minister announced the review in January, he said that it would be completed in April. Is the efficiency study completed and, if not, when will it be?

Mr Clarke : A draft of the efficiency study—we the department provided that report to the managing directors of the ABC and SBS on 24 April. So we got it to the point where we had done as much work as we could and we exposed it to the MDs on 24 April. They gave us some feedback. We made some small changes—we acknowledged that they picked up some important points—and the draft was subsequently provided to the chairs of the two boards on 9 May. So the primary analysis by the department is completed and the reports are currently in the hands of the broadcasters. They are still labelled as drafts because I am sure there will still be ongoing engagement between the broadcasters, the department and the minister.

Senator PRATT: I had heard reports that the review—and it seems to be in part reflected in your comments; I am interested in the extent to which it has been amended—was poor and that, even though it has been delayed, it is still being revised. Is that correct?

Mr Clarke : No, I have laid out the version. We provided a draft to the MDs on 24 April. We incorporated—we considered their remarks and made some adjustments and then we provided the subsequent draft to the chairs on 9 May. I think that is just a normal process.

Senator PRATT: I would go to the question as to whether the appointment made by Minister Turnbull—whether Mr Lewis was really the right person to do the job. But I guess we will not see or know the extent to which that document required amendment.

Mr Clarke : I am happy to respond to the general principle. Firstly, the department was very pleased with Mr Lewis's engagement—which is now completed, I hasten to add; he is no longer engaged by us. We felt that he provided excellent advice and input to work with officers of the department and seconded officers from the ABC and SBS. The project team that worked on this comprised department officers, staff seconded from the two broadcasters and Mr Lewis. If the degree of change between the final draft—or the draft presented to the MDs and the draft presented to the boards—is a measure of how well Mr Lewis provided his advice then I would say he gave excellent advice.

Senator PRATT: The release of the report will depend on the ABC and SBS and the minister, and that is something you have advised us on by a question on notice. Have you asked the ABC and SBS at this point on their view about when and if the report should be released?

Mr Clarke : No, we are not at that stage yet.

Senator PRATT: Clearly you will ask them about whether it should be released?

Mr Clarke : A decision will need to be made on whether any or all of the report will ultimately be released. I think it is highly unlikely that anyone would judge that the full report should be released. It necessarily goes to some quite commercially sensitive issues and on that ground I do not envisage that the full report would be released.

Senator PRATT: How do we know as an estimates committee whether Mr Lewis's appointment was appropriate or not? We cannot judge his—

CHAIR: Check out his history and background—his profession—

Senator Fifield: Are you suggesting it was inappropriate?

Senator PRATT: I cannot make a judgment on that because I am not privy to the evidence.

Mr Clarke : I am happy to assert, Senator, that in my opinion he provided excellent service to the department.

Senator Fifield: You have your assurance, Senator.

Senator PRATT: As the budget cut is—it is a down payment on further efficiency cuts, I think, for our broadcasting, what are the consequences for key stakeholders, in your view, for our broadcasters in the long term?

Mr Clarke : At the risk of appearing trite, a more efficient pair of national broadcasters. But, at this point, I really cannot comment beyond that. I am not meaning to trivialise the question, but at this stage, when we are still at the point of having done the study and presented it to the boards, there has not yet been the all-important consultation between the minister and the broadcasters.

Senator PRATT: I see.

Ms O'Loughlin : Senator, can I just add to that. The process at this stage is that, as the secretary said, the current version of the report is with the broadcasters for consideration and the minister intends to meet with those boards over the next month or so to discuss the report but also, I would expect, the issue you raised about whether and what parts of the report can be made public.

Senator PRATT: How do we know whether SBS and ABC have confidence in Mr Lewis's report and in their engagement? At which point will we know if it is not made public?

Ms O'Loughlin : As the secretary pointed out, the ABC and SBS had secondees in our team—in the department's team undertaking this study. So they engaged directly with Mr Lewis over those months. There were around 200 data requests, for example, that they responded to back into those organisations. We presented the reports to the MDs. They provided, as the secretary said, some small feedback back to us. I think that was also, from our point of view, a vote of confidence from the MDs that, indeed, the work that had been done was robust and we expect that we will get similar feedback from the boards.

Senator PRATT: So, in your view, the ABC and SBS have full confidence in this work that was done?

Ms O'Loughlin : I cannot speak on behalf of the ABC and SBS, but I think the process that we have used in the engagement that they have had throughout this process should give them the confidence that we have done a robust piece of work.

Senator PRATT: And yet we do not know if this study is yet going to be released or not?

Ms O'Loughlin : No, but, as I said, the minister will be meeting with the boards over the coming months to discuss the report and I would expect that they will also discuss whether the full report or some part of the report can be made public.

Senator PRATT: I hope for the sake of transparency that it is released. Thank you. I do not have any more questions. I will hand back to—

Senator THORP: Quickly on digital radio, if I may, I have a couple of things. Your discussion paper was released in 2013. Submissions closed in February of this year. I cannot see any submissions being published on the website. When do you expect that to happen?

Ms O'Loughlin : Senator, you are absolutely right—they have not been published on the website, but I expect that they will be published in the next week or so.

Senator THORP: Great.

Ms O'Loughlin : We had 15 submissions and they will be put up.

Senator THORP: Why don't you just put them up as you get them?

Ms O'Loughlin : We normally go through a process of reviewing them and also just testing back with the submitters whether there are any difficulties. You are right—I think there is an option to put them up earlier. In this case we have not put them up earlier because we tend to get them in and start studying them ourselves and doing the review work we need to do. Often we do not put them up until the report is released. The alternative is to put them up as they come in. In this case there is no reason that we have not put them up, but we will put them up in the next few days.

Senator THORP: I do not mean to close you down, but I want to move on. I am concerned about the lack of reference to digital radio in the roadmap.

Ms O'Loughlin : We specifically have not included digital radio in the roadmap, as it is not expected at this stage that there will be significant progress on the issue during this year.

Senator THORP: Okay, so nothing is really going to happen there?

Ms O'Loughlin : My understanding at this stage is that the industry itself will be potentially coming back to government later in the year with some new proposals on digital radio. We would be waiting—we are not initiating a process until we have heard from them.

Senator THORP: What I am really concerned about is: you would be quite aware that AM is the preferred option for a lot of emergency services because of its superior propagation characteristics and that these can be matched by DRM30. Why aren't we doing any trials on DRM30 instead of DAB?

Ms O'Loughlin : The industry itself has preferred DAB throughout this process, but we are very aware of the difficulties in replicating AM, specifically in regional areas. That is one of the core considerations. But there are a number of other considerations with the rollout of digital radio, some of them to do with spectrum availability, some of them to do with cost—the industry has previously put to the government that digital radio should be introduced and funded by the government. So there are any number of aspects emerging in the digital radio space. I think when I was here last time at estimates I also indicated that—

Senator THORP: And thank you for your answers to a lot of those questions too. It is appreciated. It is just a concern, really, when you know that DRM30 allows digital transmission of AM and that emergency services et cetera prefer AM because of what we have previously discussed.

Ms O'Loughlin : Absolutely. I do not think at this stage—and certainly none of the discussions we have had with industry to date would lead us to believe that they would stop broadcasting AM in the foreseeable future. AM is a very robust technology. It belts out signals for miles and it is particularly useful in regional areas. So it is not like digital television, where we turned off analog. The proposals from industry to date and the way digital is being introduced internationally is that it is usually a complementary service. We see that as very much how it would be in Australia, because we would see, not for the foreseeable future, any changes to the AM network.

Senator THORP: So I should not be concerned about the fact that there is no trial of DRM contemplated?

Ms O'Loughlin : I do not think so at this stage, given that there is no intention to look at turning off AM in the foreseeable future. I do not think we have received any—the industry has not been approaching us to start any trialling on DRM at all.

Senator THORP: Is there anything further you would like to add to that trialling issue?

Ms O'Loughlin : We are aware that DRM is being used internationally and there is a debate about whether DRM or DAB is the best model for Australia. Currently I think the industry is still of the view that their preference is DAB.

Senator THORP: So why wouldn't you put it in the roadmap as an issue to deal with?

Ms O'Loughlin : I think it was mainly because we were not proactively thinking that we would do any big work on it between now and December. The roadmap only takes us up to the end of this year. We will be updating that roadmap as we tick off things and as we—

Senator THORP: There is concern that it is not appearing and it seems there is not much action in the area. That is something we can look forward to seeing in the future?

Ms O'Loughlin : Absolutely. I can assure you that, while it may not be something on the roadmap, it is an issue that the department is well across and that is still on our radar—about how this technology might emerge in the future.

Senator THORP: Thank you.

Senator Fifield: I will add to a previous answer to Senator Pratt in relation to ABC Ramp Up. I wrote to Mr Scott in my capacity as the minister for disabilities on 8 January this year reiterating the expectation of the previous government and also the expectation of the incoming government that the ABC would incorporate Ramp Up into its core business and drawing his attention to the point, as was made clear by the previous government, that the funding which had been provided was seed funding. There was, a couple of weeks ago, some commentary in the media that the current government was in some way stopping funding for the ABC Ramp Up. So I issued a press release on 15 May which made clear that the funding which was provided to the ABC for Ramp Up had been provided on the understanding that it would conclude in the middle of this year and that that funding was seed funding, and reiterating the expectation of this government and the expectation of the previous government that the ABC would incorporate Ramp Up into its core operations.

CHAIR: Thank you, Minister. I am sure Senator Pratt is very pleased to hear that.

Senator RUSTON: Could I go back to the ABC-SBS efficiency study and fill in the gaps between the answers that you gave to Senator Pratt. Why did the minister decide to commence the study in the first place? Was there something that triggered it or was this just something that is being done across many agencies?

Ms O'Loughlin : I think the minister's intent in commencing the review was basically saying that all government agencies need to, over time, review their efficiencies and that, as a minister with a broad portfolio, he would expect each of the agencies in that portfolio to review their efficient use of taxpayers' money on a regular basis.

Senator RUSTON: Is it a regular thing, to your knowledge, that a minister would seek to have a study into—we have been very specific that this is about back-of-house activity. It has nothing to do with outputs; it is about the back-of-house finances. Is this something that is normal—that you would just do a study into that?

Ms O'Loughlin : Over the years there have been various looks at the ABC and SBS and their efficiency. This one is very targeted on back office. The minister was very clear that that is where he wanted the attention. Some of the previous reviews have been a bit of a mix of both but this one was very targeted on just day-to-day back-office operational expenditure.

Senator RUSTON: I will understand if you cannot answer this but I am interested. From the review that you have received so far, did it provide any great insights into whether there was anything interesting in the report in relation to the operations, or have we got an organisation here that operates much the same as any other similar—

Mr Clarke : The broad take-out is that there are efficiencies available to the broadcasters from their back-office functions that would not affect outputs. This is the broad take-out. But, as we said to Senator Pratt, the choice of achieving any of those and what is done with the savings is a matter for the government and the board. Both have a role in that question.

Senator RUSTON: It is interesting that that was the broad take-out in the context of comments that we have heard from the managing director of the ABC that there were no efficiencies to be achieved and therefore he was going to have to cut programs. But this review is obviously showing that there are savings to be had. Were the ABC or SBS required to pay for this study, or was it met out of departmental funds?

Ms O'Loughlin : It was met from departmental funds. We also covered Mr Lewis's costs. But of course there was the significant contribution in kind from the ABC and SBS by two officers from the ABC being seconded to our team and one officer from SBS—plus, of course, all the work that both broadcasters would have had to do in responding to the various data requests and information provision that we required.

Senator RUSTON: So the process from here is that the chief executive has got it on 24 April; on 9 May the chairs of the boards have received the draft review—

Mr Clarke : Correct.

Senator RUSTON: So do we know when the boards are meeting? One assumes that it is a priority for consideration at their next board meeting.

Ms O'Loughlin : I do not have the exact dates but my understanding is that they are both meeting fairly early in June.

Senator RUSTON: So we can expect to see something after that. In the study terms of reference there is a reference to work being done around the transmission services for the national broadcasters. Can you elaborate on the intent of that?

Mr Clarke : The transmission costs, which are a very large proportion of running the national broadcasters, are appropriated through a separate head to the broadcasters. So they are not inside their core budget. There is a separate line of appropriation. The budget rules around that are that the cost is the cost; it is a no-win, no-gain model. So as the contracts are negotiated the government appropriates the amount of a contract value and, if it is more or less than what was forecast, then adjustments are made. Given the particular nature of that, we undertook a separate review of transmission efficiency. So transmission efficiency was not in scope for the review we have talked about to date.

Senator RUSTON: Given that it is a separate budget line, who has the control or the capacity to actually influence transmission efficiency?

Mr Clarke : The broadcasters themselves negotiate the contracts with the service provider, because it is integral to their business. They have to own the contracts. But the financial treatment of those is on a no-win, no-loss basis. For that reason the department is, necessarily, reasonably engaged in that process.

Senator RUSTON: It sounds to me like a lovely way to have a budget run.

Mr Clarke : It was an arrangement implemented at a time of significant change in transmission technologies and expectations. There is a question as to whether that is the appropriate model for future years. I think it was a very appropriate model during a time of great transition in transmission. But there is a legitimate question as to whether it is appropriate for future years. That is being considered on the back of the separate review we have done on transmission efficiency.

Ms O'Loughlin : The total cost of transmission for ABC and SBS this year is $285 million per annum. So it is a considerable amount of money.

Senator RUSTON: How does that reflect in the ABC or the SBS budget?

Ms O'Loughlin : It is in the PBS; it is listed as a particular outcome.

Mr Clarke : It is essentially passed through. The cost is added, in effect. So they neither win nor lose from efficiencies in that area.

Senator RUSTON: I get that. But that is not to say that efficiencies for a government cannot be achieved through this space.

Mr Clarke : Yes.

Senator RUSTON: So can I assume from what you have just said that your separate review into this area has shown that there are potential efficiencies to be gained?

Mr Clarke : We are now talking about a specific contract. So we are in a much more sensitive area rather than the generality of reviewing a raft of back-office functions. We have undertaken a review around transmission but, given the nature of the market, it basically all relates to one supplier. So with your permission I would rather not speculate or comment on the outcomes of that review. But the fact that it is being done is, I think, quite proper.

Senator RUSTON: And that review has been provided to the managing directors of both of the broadcasters?

Mr Clarke : Yes.

Senator RUSTON: Okay. I will look forward to seeing the outcomes of all of this over the next little while. Can I ask you about internet radio simulcasts and the current situation with the dispute between commercial radio about the payment of royalties. Where are we at with that debate, particularly between CRA and the Phonographic Performance Company of Australia?

Ms O'Loughlin : Where this issue originally arose was through a Federal Court decision that radio simulcasts provided online were a separate service than their broadcasting service and therefore there should be a separate copyright payment made. At this stage both CRA and the PPCA are in negotiation about a longer term scheme to cover those internet simulcasts. It is fair to say that there has been quite a lot of robust discussion between the parties and that continues. That is in a framework of those two parties seeking a decision from the Copyright Tribunal. This is fundamentally a copyright issue and a copyright payment issue. So the most appropriate place for those issues to be dealt with is through the Copyright Tribunal.

Senator RUSTON: I understand that the determination of the court was on the back of the interpretation of a previous ministerial determination—from back in the Howard days, wasn't it?

Ms O'Loughlin : The Federal Court issue is slightly different to that. What Commercial Radio Australia put to the previous and the current government is that what is called the Alston determination, which says that internet services are not broadcasting services, should be changed by the government to address this issue. The government has taken the approach to date that it does not want to change that determination, that it has significant impacts beyond the issue that CRA has proposed, and that the preferred and appropriate approach for this issue to be resolved would be through a copyright process and the Copyright Tribunal process as the parties cannot come to agreement themselves.

Senator RUSTON: Is that the position of the previous government—is it the same position?

Dr Pelling : It is difficult for me to comment on the previous government's position but I am not sure that they had necessarily formed a view one way or the other on this.

Ms O'Loughlin : But I think there was a Senate committee report on it which said either you could go one way or you could go the other.

Senator RUSTON: What arrangements are currently in place as part of the interim licence scheme?

Ms O'Loughlin : From memory there are around 40 licensees who have already taken up the interim licence scheme. The tribunal determined the interim licence scheme in December last year. That stipulates the nominal fees payable by radio broadcasters for the use of music as part of the internet simulcast services. The fees range between $312.50—

Senator RUSTON: Per quarter?

Ms O'Loughlin : They range between $312.50 and $3,125 per quarter depending on the amount of music used as part of the service and whether it is a regional or a metropolitan station. So the scheme recognises different types of broadcasting services and what their audience is—whether they are in a small regional area or a large metro.

Senator RUSTON: In terms of those figures—which I must admit sound fairly reasonable—what is the scope for those fees to escalate? Who is in control of how those fees are set?

Ms O'Loughlin : That is really the debate that is being had between the PPCA and the CRA today. While the interim scheme seems to be quite reasonable their concern is that a longer term scheme may impose much higher costs on those broadcasters or, indeed, be retrospectively applied. That is the negotiation that those two parties are working through at the moment and that is the decision the Copyright Tribunal will make in the longer term.

Senator RUSTON: Retrospectivity must be a fairly terrifying thought for a small operator.

Ms O'Loughlin : It is very concerning for the operators, yes.

Senator RUSTON: I get the dilemma that is being faced there.

Ms O'Loughlin : We are hopeful that the parties will continue to negotiate in good faith and come to an outcome that is reasonable on all sides and that that process will be tested through the Copyright Tribunal process.

Senator RUSTON: What is our position in relation to retrospectivity? Are we concerned about it?

Ms O'Loughlin : We are certainly concerned about it. We understand the views of the rights holders as well. But that is why the tribunal is probably the best place to address this.

Senator RUSTON: It is a very good place for it to go, I would suggest. This has all been in relation to radio. Is there anything going on in the television space of a similar nature?

Ms O'Loughlin : Not really. Mainly because the television broadcasts are not doing as much straight simulcasting. A lot of their stuff is catch-up. But obviously those catch-up services would incur a copyright payment to the rights holders, and the broadcasters just pay that.

Senator RUSTON: So TV have accepted this as—

Ms O'Loughlin : I do not think the ruling specifically affects television but they have come to agreements with the rights holders about how they pay for copyright and catch-up services et cetera.

Dr Pelling : To the extent that we were to change broadcasting law to affect one particular sector of the industry, other sectors of the industry would be concerned about the implications of those changes for them. That is likely to be one of the areas that would cause concern in the television industry.

Ms O'Loughlin : And it is fair to say that, while copyright is obviously a matter for the Attorney-General, our rights owners and our broadcasters and internet service providers all have a view about how those copyright payments should flow through to them. It is an increasing area of interest.

Senator RUSTON: Indeed. On that basis obviously we are not the only country in the world that is facing this dilemma, because they are changing the space that we are in. Have other countries dealt with this in a way that provides us with a good example of how these sorts of issues can be dealt with, or are we still in groundbreaking territory?

Ms O'Loughlin : No, you are right. It is a fairly recent development because of the new use of technologies. So similarly the ways overseas jurisdictions have dealt with it are quite recent examples. But we are seeing examples out of the USA and Canada, for example, around dealing with this issue. In most cases there is an acceptance that there should be a payment for copyright in the broadcast and a payment for copyright in the simulcast. But then it comes down to the negotiation of what that payment should be. There are various models emerging overseas. Some are taking a per stream approach: a copyright payment per stream. Others are taking a revenue based approach: linking the payment to the revenue from the service rather than putting a flat payment on each stream. That is very much the debate that the parties are having in Australia as well.

Senator RUSTON: Do departmental records or research show whether listening to radio via simulcast is increasing, decreasing or remaining stable?

Ms O'Loughlin : There is not a lot of solid data on that but, as an observation, listening to radio over the internet and listening to the radio over digital television, as well as listening to radio through digital terrestrial radio—people are choosing to listen in different ways. We expect that, particularly with smart phones, people are choosing to listen to radio increasingly online.

Mr Clarke : Senator Thorp asked me a question earlier which I undertook to try to answer during the session regarding the response on Mr Turnbull's blog to a Senate NBN committee. I am advised that the response was not written by the department and that the question of the official—the government—response is still under consideration.

Proceedings suspended from 11:15 to 11:30