Bills Digest No. 132 2001-02
Broadcasting Services Amendment (Media Ownership) Bill 2002
Broadcasting Services Amendment (Media Ownership) Bill 2002
The specific controls over media ownership contained in the Broadcasting Services Act 1992 are as follows.
A person must not control television broadcasting licences whose combined licence area exceeds 75 per cent of the population of Australia, or more than one licence within a licence area (section 53). Foreign persons must not be in a position to control a licence and the total of foreign interests must not exceed 20 per cent (section 57). There are also limits on multiple directorships (section 55) and foreign directors (section 58).
Under section 60 a person must not control:
There are also similar limits on cross-media directorships (section 61).
A foreign person must not have company interests exceeding 20 per cent in a broadcasting subscription licence, and the total of foreign company interests in any licence must not exceed 35 per cent (section 109).
There are a number of controls on foreign investment in the media in addition to those contained in the Broadcasting Services Act. All direct (ie. non-portfolio) proposals by foreign interests to invest in the media sector irrespective of size are subject to prior approval under the Government's foreign investment policy. Proposals involving portfolio share holdings of five per cent or more must also be approved.
The maximum permitted aggregate foreign (non-portfolio) interests in national and metropolitan newspapers is 30 per cent, with a 25 per cent limit on any single foreign shareholder. The aggregate non-portfolio limit for provincial and suburban newspapers is 50 per cent.
The Government has long indicated that it is dissatisfied with the existing media ownership restrictions. On 1 October 1996 the Government announced a review of the cross-media rules and released an Issues Paper(2) on the subject. However, in October 1999 the Minister for Communications, Information Technology and the Arts indicated that the Government would not be attempting to reform the cross-media rules until the Opposition also supported such a move.(3) The Prime Minister made similar comments in an interview on 1 September 2000, as well as indicating that he had long believed the rules to be anachronistic.(4)
On 29 August 2001 the Minister for Communications, Information Technology and the Arts stated that the Government would consider a comprehensive review of the cross-media and foreign ownership rules. In particular, the Minister indicated that the Government would grant exemptions in respect of cross-media if it obtained undertakings that companies would maintain existing levels of locally produced news and current affairs in respect of radio and television and that separate and distinct editorial processes were put in place.(5)
This position was included in the Government's Election Policy on Broadcasting.(6) The Policy also states that foreign ownership restrictions on television and newspapers will be removed. The Government's preferred position is that media acquisitions be governed by the Trade Practices Act and the Foreign Acquisitions and Takeovers Act as well as the cross-media undertakings referred to above. Since the election, the Government has indicated that the relaxation of cross-media and foreign ownership rules must be implemented together, or not at all.(7)
In March 1999 the Government referred the broadcasting industry to the Productivity Commission, seeking advice on 'practical courses of action to improve competition, efficiency and the interests of consumers in broadcasting services'.(8) The Productivity Commission Inquiry into Broadcasting was released in April 2000. Part V, 'Diversity, Concentration and Competition', dealt with ownership and control regulation. The Commission recommended:
The Commission also recommended that the cross-media rules be repealed, but only after the following conditions were met:
The development of the Internet and the introduction of pay television have added to the diversity of the Australian media sources over the last decade. It could be argued that this has reduced the need for the media ownership rules, which are designed 'to encourage diversity in control of the more influential broadcasting services' (section 3(c)) of the Broadcasting Services Act). Access to the Internet and pay TV has increased considerably over the last few years:
However, new media access is well below the near universal household penetration of free-to-air television and radio, although it is now comparable to newspaper distribution. The nation's daily newspaper circulation is 3.01 million (2.4 million national/metropolitan and 0.6 million regional dailies).(11) There are generally two to three readers for each unit of circulation.
Although new media access is expanding, a closer examination of news sources available on the Internet and pay TV indicates that they are controlled by the traditional media. The only significant new Australian news service provided by the pay TV operators is Sky News Australia. Sky is owned by the existing networks, Seven and Nine, and British Sky Broadcasting. The latter is 40 per cent owned by News Corporation.
The most popular Australian Internet general news sites are also controlled by existing media operators, namely Publishing and Broadcasting Ltd (PBL), News Corporation, Fairfax and the Australian Broadcasting Corporation. This is to be expected, as the low levels of revenue associated with the Internet, together with the economies of scale experienced by the existing news providers, ensures that new operators will have great difficulty in emerging. The only major new operator in Internet news is Telstra Corporation. However, Telstra's Australian news service consists of AAP news stories. AAP Information Services is jointly controlled by News Ltd and Fairfax.
Recent research(12) commissioned by the Australian Broadcasting Authority (ABA) indicates that most people still rely on the traditional media as their source of news and current affairs. The ABA study reveals that:
There is no necessary connection between diversity of ownership and diversity of views. For example, it is possible for different licensees to broadcast the same networked program material. Alternatively, a single proprietor could maintain separate newsrooms for each of their media outlets. However, the maintenance of separate newsrooms would not ensure a diversity of views if their output was dominated by the proprietor. The relationship between proprietors and editorial staff, which is relevant to any discussion about media ownership and influence, is a particularly difficult subject for legislative action. The House of Representatives Select Committee on the Print Media report, News and Fair Facts The Australian Print Media Industry (March 1992) acknowledged the importance of editorial independence, but rejected calls for legislative requirements for mechanisms to support it.
The Productivity Commission's Inquiry into Broadcasting considered this issue and concluded that:
the likelihood that a proprietor's business and editorial interests will influence the content and opinion of their media outlets is of major significance. The public interest in ensuring diversity of information and opinion, and in encouraging freedom of expression in Australian media, leads to a strong preference for more media proprietors rather than fewer. This is particularly important given the wide business interests of some media proprietors.(13)
The Commission also noted that it was not necessary for proprietors to be heavy-handed about editorial direction, as self-censorship by journalists may achieve similar outcomes.
The ABA has undertaken research in this area. The ABA study(14) involved a survey of 100 news producers and in-depth interviews with 20 key news producers and media experts. Among its conclusions:
The bill contains provisions to ensure that the granting of exemptions from the cross-media rules does not result in reductions to local news services in regional areas. The maintenance of local regional programming first became an issue with the introduction of 'aggregation' in the late 1980s. This was the process of creating larger, more viable regional television markets by combining existing licence areas so that they could be served by three commercial services. Aggregation was introduced by the Broadcasting Amendment Act 1987. In his Second Reading Speech, the Minister (the Hon. Michael Duffy, MP) referred to 'the claim that aggregation will lead to loss of what is known as local content or localism'.(15) He argued that if viewers want local content, then competition would encourage localism. He also claimed that the larger service areas provided through aggregation would provide an opportunity for licensees to expand and develop regional content. The legislation was referred to a Senate Select Committee. The Committee noted that only 7 per cent of the programs broadcast by regional television stations were locally produced, consisting mainly of local news, community announcements and local sport. It considered that viewers' preference for localism would 'presumably provide some competitive incentive' for regional licensees to produce local programs.(16)
Aggregation commenced in southern NSW (March 1989), regional Queensland (December 1990), northern NSW and regional Victoria (December 1991) and Tasmania (April 1994). The 1988-89 Annual Report of the Australian Broadcasting Tribunal stated:(17)
The effect of aggregation on localism and what constitutes an adequate and comprehensive service is of concern to the Tribunal, since the amount of local programming on regional services, which the policy aimed to encourage, appears to be under considerable commercial pressure.
However, subsequent reports of the Tribunal did not raise the issue. The disappearance of localism as an issue have been due to the lack of evidence of viewer discontent. In September 1990 the Tribunal released a study into viewer attitudes to programming changes in the aggregated area of southern NSW. The study indicated that most viewers considered that the television service had improved, in particular because of an increase in the variety of programs. Viewers also considered that television was providing better information on their local area, despite the fact the proportion of locally produced programming had declined.(18)
The passage of the Broadcasting Services Act 1992 did not result in any additional requirements for local programming, although section 3 of the Act states that one of its objects is:
to encourage providers of commercial and community broadcasting services to be responsive to the need for a fair and accurate coverage of matters of public interest and for an appropriate coverage of matters of local significance.
In addition, commercial radio and television licences are subject to the following condition:
the licensee will provide a service that, when considered together with other broadcasting services available in the licence area of the licence (including another service operated by the licensee), contributes to the provision of an adequate and comprehensive range of broadcasting services in that licence area(19)
This condition was modelled on that applying under the previous legislation, the Broadcasting Act 1942. The major difference is that under the BSA a licensee must 'contribute' to the provision of an adequate and comprehensive range of broadcasting services, whereas under the previous act they were required to 'provide' an adequate and comprehensive service. It might thus be argued that the BSA represented a weakening of this licence condition, although the qualifications contained in s.4(6) of the Broadcasting Act 1942 would seem to have had the effect of moderating the requirement in a manner similar to the BSA condition. In any event, it would be difficult to construe this condition as a requirement for local programming by any individual commercial broadcaster.
The issue of localism resurfaced in 2001 because of the following developments:
On 6 December 2001 the Australian Broadcasting Authority announced the terms of reference of an investigation into the adequacy of local television news and information programs in regional and rural Australia. The investigation will look at what is meant by local significance, what constitutes adequate coverage of local news and information, and how commercial television services could contribute to the appropriate coverage of matters of local significance in regional and rural Australia.(23) The Chairman of the ABA, Professor David Flint, has been reported as saying that it was unclear as to whether the Authority had the power to force broadcasters to provide local news services, the ABA having received conflicting legal advice on the subject. However, he also noted that the ABA could always approach the Government and recommend legislative changes.(24)
As noted above, the Bill only imposes a requirement to maintain local news services on broadcasting licensees in regional areas that have the benefit of an exemption from the cross-media rules. The imposition of any more general requirement to maintain local news services is largely dependent on the outcome of the ABA’s inquiry.
It would appear that the process of aggregation (and consequent networking), coupled with the economics of the broadcasting industry, have resulted in a reduction of local programming in regional areas. The cost of producing local programming (when compared with the cost of a network feed) is such that it is difficult to recoup through any additional advertising revenue that might be generated because of the popularity of the programs. Regional stations that continue to provide local programming tend to do so because it enhances their profile in the community, which may have some longer term benefits, rather than for short-term revenue. When economic conditions worsen and revenue declines, local programming tends to be the first casualty.
Regional commercial networks still provide local news services in many areas:
Schedule 1 contains amendments to the BSA to remove restrictions on the foreign ownership of free-to-air and subscription television licences. Item 1 repeals the objective of the Act 'to ensure that Australians have effective control of the more influential broadcasting services'. Item 3 repeals Division 4 of Part 5 of the Act, which imposes limits on foreign company interests and directorships in commercial free-to-air television licences.
Comment: it might be argued that the repeal of the limits on foreign interests in television will have little real impact because these restrictions have been partly circumvented by creative corporate structuring over the last ten years. In December 1992 the Ten network was purchased by a consortium involving a Canadian company (CanWest). In November 1995 the ABA determined that subordinated and convertible debentures were not company interests in the terms of the legislation. Although CanWest financed 57.5 per cent of the equity capital invested in the purchase, its voting rights were restricted to 15 per cent. In April 1997, following a number of share transactions and Board membership changes, the ABA determined that CanWest now controlled Ten and ordered it to take action to remedy the breach. However, it was not until April 1998 (following a number of court challenges) that CanWest restructured its holdings to comply with the ruling.
Item 10 repeals Divisions 3, 4 and 5 of Part 7. These impose limits on the foreign ownership of subscription television licences, describe the offences for breaches of the limits, and provide for notification procedures.
Comment: the limits on foreign ownership of pay television licences are simpler than those on free-to-air television, as they consist solely of share limits and contain no reference to control. They are also much easier to avoid. News Limited has a 25 per cent interest in the pay TV operation Foxtel, which would appear to put it in breach of the 20 per cent limit on individual foreign interests imposed by section 109 of the Act. However, the company that holds the Foxtel licences, Foxtel Cable Television Pty Ltd, has ten shares: two are owned by Sky Cable Pty Ltd, and eight are owned by Telstra Media Pty Ltd. The ownership of Sky Cable is shared equally between News Corporation and PBL. Thus the 50 per cent of Foxtel not owned by Telstra can be bought and sold by foreign interests without breaching the Act, because Telstra owns 80 per cent of the licensee company.
Item 4 of Schedule 2 inserts a new Division 5A to provide for exemptions to the cross-media rules.
New section 61C provides that a person who has the benefit of a cross-media exemption certificate is exempt from the cross media rules in section 60 or 61 so long as the conditions attached to the certificate are satisfied.
New section 61D allows the ABA to issue cross-media exemption certificates to persons who present applications in an approved form containing:
The ABA may request additional information from the applicant if it considers that such information is required. An applicant who has been refused a cross-media certificate by the ABA may apply to the Administrative Appeals Tribunal for a review of the decision (see section 204 and item 9).
New section 61E requires the ABA to issue a cross-media exemption certificate to an applicant if it considers that the conditions included in the application are sufficiently detailed and that they will provide an adequate means of continuously meeting the ‘objective of editorial separation’ for the set of media operations to which the certificate refers.
New section 61F defines what is necessary to meet the objective of editorial separation. This consists of separate editorial decision making for each of the entities that make up the set of media operations ie. the television station and/or radio station and/or newspaper that make up the set. The objective is met if, and only if, each of the entities have:
The sharing of resources and other forms of cooperation between entities is permitted providing these conditions are met.
Comment: some commentators have questioned what is meant by 'editorial policy', as the term is not defined in the legislation.(25) For example, the 'Editorial Policies' published by the Australian Broadcasting Corporation contain statements of principle and philosophy, program objectives affecting various areas of broadcasting, the mandatory Code of Practice, general policies and explanatory information.(26) Commercial television and radio broadcasters are already subject to Codes of Practice developed under the provisions of section 123 of the BSA. The Codes have sections on news and current affairs programs which enjoin licensees to present these programs accurately, fairly and impartially.(27) However, unlike licence conditions, the Codes are not legally enforceable and breaches attract no penalty, although the ABA can make compliance with a Code a condition of a licence under sections 43 and 44.(28)
New section 61N requires the ABA to maintain a Register of cross-media exemption certificates (including the conditions to which each is subject) and to make the Register available for inspection on the Internet. However, the ABA is not required to publish material which could reasonably be expected to prejudice substantially the commercial interests of a person and the ABA is satisfied that such prejudice outweighs the public interest in the publication of the material.
Comment: it is difficult to see how the publication of editorial policies, organisational charts and the details of separate newsrooms would constitute substantial commercial prejudice. None of these require the release of confidential financial data. The structure and organisation of news rooms is common knowledge within the industry. If the commercial confidentiality exemption is considered necessary, then it might be argued that the ABA should be required to report and justify all instances where it suppresses publication of material under this section.
New section 61P requires broadcasting licensees who are the subject of cross-media exemption certificates to ensure that the objective of editorial separation is continuously met in relation to their licence.
Comment: this provision operates in conjunction with Items 13 and 16 of Schedule 2, which make compliance with new section 61P a standard condition of commercial television and radio licences. Repeated breaches of these conditions can lead to loss of the licence under the provisions of section 143 of the BSA.
New sections 61Q to 61Y deal with the local news and information requirements for regional broadcasting licensees that have the benefit of a cross-media exemption certificate.
New section 61R sets out the minimum service requirements for local news, community service announcements and emergency warnings.
Comment: the news requirements are presented in two alternative formats – section 61R(1)(a) and (b), suitable for television and radio respectively (although the Bill does not stipulate a particular format for each medium). The format suitable for television requires five local news and weather bulletins each week, to be broadcast in prime time (between 5.00 pm to 10.30 pm) on different days, with each bulletin adequately reflecting matters of local significance. The format suitable for radio requires six or more bulletins each week, with at least five being broadcast in prime time (between 6 am to 10 am) on different days, with the bulletins (when considered together) adequately reflecting matters of local significance.
New section 61S empowers the ABA to define what is meant by the term 'local' with regard to specified licence areas. Such definitions are disallowable instruments.
New section 61U requires regional licensees who are the subject of cross-media exemption certificates to provide statements to the ABA containing:
for the year before the exemption certificate became active (referred to as the 'benchmark year'). The ABA is required to make these statements available for inspection on the Internet.
If the ABA is satisfied that a licensee who provided a statement under proposed section 61U has met the minimum service standards for local news in the benchmark year then, under new section 61V, it must require the licensee to:
If the ABA is not satisfied that a licensee who provided a statement under proposed section 61U has met the minimum service standards for local news in the benchmark year then, under new section 61W, it must require the licensee to:
Comment: new sections 61V and 61W are designed to ensure that broadcasters who are already exceeding the minimum service standards do not reduce their services to the minimum required, while those who are not meeting the minimum standard raise them to the level required. It might be argued that it is unfair to have, in effect, two standards depending upon a broadcaster's past programming history.
The requirement to meet these specified levels of local news content must be revoked by the ABA if licensee no longer holds an active cross-media certificate (new section 61X).
Items 12 to 16 amend Schedule 2 of the BSA to make the requirements placed upon licensees in new sections 61P, 61U, 61V and 61W standard conditions of a broadcasting licence. Failure to abide by these conditions can ultimately lead to the cancellation of the licence under the provisions of section 143 of the BSA.
A person who believes that a licensee has breached the objective of editorial separation or the requirements for minimum levels of local news and information may lodge a complaint with the ABA. If the ABA decides that an investigation is warranted it must make the results of its inquiries available on the Internet (items 7 and 8). The ABA is not required to publish material that would substantially prejudice the commercial interests of a person unless the ABA believes that the prejudice is outweighed by the public interest.