BILLS DIGEST NO. 15, 2016–17                  29 September 2016

Broadcasting Legislation Amendment (Television and Radio Licence Fees) Bill 2016

Dr Rhonda Jolly
Social Policy Section

Date introduced: 15 September 2016

House:  House of Representatives

Portfolio: Communications and the Arts

Commencement: the day after the Act receives Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at September 2016.

The Bills Digest at a glance

Purpose of the Bill

•       The purpose of the Broadcasting Legislation Amendment (Television and Radio Licence Fees) Bill 2016 (the Bill) is:

–      to amend the Television Licence Fees Act 1964 and the Radio Licence Fees Act 1964 to reduce licence fees payable by commercial television broadcasting licensees and commercial radio broadcasting licensees by 25 per cent.[1]

Structure of the Bill

The Bill consists of one Schedule which is divided into two parts:

•       Part 1 of Schedule 1 proposes to:

–      reduce commercial television and radio broadcasting licence fees by 25 per cent and

–      insert a new provision to allow regulations to be made under the Radio Licence Fees Act in relation to rebates of radio licence fees.

•       Part 2 of Schedule 1:

–      provides for transitional arrangements regarding licence fees payable by commercial television and radio licensees.

Background

Free-to-air commercial television and radio licensees are required under the Broadcasting Services Act 1992 to pay annual licence fees.

The broadcasters have argued that the fees they pay are excessive; they are also considerably higher than those paid by their counterparts overseas. They have lobbied governments for some time for reduction and have achieved a number of fee reductions since 2010.

As part of its commitment to media reform the Turnbull Government announced in the 2016–17 Budget that it would further reduce fees by 25 per cent.

This Bill realises the Budget commitment.

Key issues

The free-to-air broadcasters would like to see licence fees abolished altogether. They argue this would better enable them to fulfil their local content obligations and assist them to remain financially viable in a new media environment where subscription and online media operators do not pay licence fees.

Subscription broadcasters argue that reducing licensing fees for free-to-air commercial broadcasters amounts to preferential treatment as the free-to-air operators are being given discounts to use the public resource of spectrum, while also enjoying market protection as the result of other government regulation.

Some stakeholders argue that licence fee reductions should be accompanied by reciprocal requirements to increase local content production, but this is not a feature of this Bill.

Purpose of the Bill

The purpose of the Broadcasting Legislation Amendment (Television and Radio Licence Fees) Bill 2016 (the Bill) is:

•       to amend the Television Licence Fees Act 1964 and the Radio Licence Fees Act 1964 to reduce licence fees payable by commercial television broadcasting licensees and commercial radio broadcasting licensees by 25 per cent.[2]

Structure of the Bill

The Bill consists of one Schedule which is divided into two parts:

•       Part 1 of Schedule 1 proposes to:

–      reduce commercial television and radio broadcasting licence fees by 25 per cent and

–      insert a new provision to allow regulations to be made under the Radio Licence Fees Act in relation to rebates of radio licence fees.

•       Part 2 of Schedule 1:

–      provides for transitional arrangements regarding licence fees payable by commercial television and radio licensees.

Background

Under the Broadcasting Services Act 1992 (the BSA) a person or entity providing a commercial broadcasting service (as defined by section 14) on radio or television must hold a commercial radio or television broadcasting licence.[3] Under the Radio Licence Fees Act and the Television Licence Fees Act, a licence fee is payable annually by the holder of a commercial radio broadcasting licence or a commercial television broadcasting licence respectively.

The BSA requires that within six months after 30 June each year (by 31 December), licensees must give the Australian Communications and Media Authority (ACMA) a broadcasting licence fee return to pay a proportion of their gross earnings as fees for using the scarce public asset of radio spectrum.[4]

Few changes were made to the commercial licensing fees regime before 2010 and those changes that were made were more likely to involve increases in licensing fees.[5]

Since 2010 there have been a number of reductions in licensing fees for commercial television licensees. In 2010, the Minister for Broadband, Communications and the Digital Economy, Stephen Conroy announced a rebate of 33 per cent for 2010 and 50 per cent for 2011.[6] The 50 per cent reduction was extended to the end of 2013 by regulation and confirmed in legislation at that time. [7] The reduction in fees from nine per cent of gross annual earnings to 4.5 per cent was justified as a move to protect local content, and it was argued it would help counter the significant financial pressures faced by commercial television stations as a result of emerging and convergent technology and an ‘increasingly challenging operating environment. [8]

The free-to-air networks have not been satisfied with the licence fee reductions granted since 2010. They consider that ‘onerous and restrictive licence fees’ should be removed completely as they consider this will deliver a fairer competition environment and give them capability to invest in Australian jobs and production.[9]

As part of its commitment to media reform the Turnbull Government responded to the commercial broadcasters call for more licence fee relief by announcing in the 2016–17 Budget that it would further reduce fees by 25 per cent.[10] In announcing the reductions the Minister for Communications, Mitch Fifield said:

The Government's decision to reduce the fees recognises that the Australian media market has changed significantly since broadcasting licence fees were first introduced, with the move to online and on-demand content fragmenting the market for media services and increasing competition for audiences and advertising dollars.

In turn, this is placing increasing financial pressure on Australia's commercial broadcasters whose main competitors, including online operators such as Netflix and Apple, pay no licence fees.

The Government will consider further reductions in broadcasting licence fees later in 2016 as part of a broader package of reforms that will include consideration of the pricing of broadcasting spectrum.[11]

Committee consideration

At the time of writing the House of Representatives Selection Committee, the Senate Selection of Bills Committee and the Senate Scrutiny of Bills Committee have made no comment on this Bill.

Policy position of non-government parties/independents

Opposition

The Labor Opposition has made no comment on this Bill at the time of writing this Digest. However, it has been supportive of licence fee reduction in the past. With reference to the television licence fees component of its 2013 government legislative package, it argued that a decrease in licence fees would ‘enable commercial television broadcasters to continue to innovate and thrive in Australia's rapidly changing media landscape’.[12]

Greens/Independents

In the debates surrounding the previous fee reduction, the Greens were concerned that broadcasting fee reductions served only the interest of commercial television broadcasters and not the public interest. Greens’ Member of the House of Representatives, Adam Bandt believed that the ‘gift of public spectrum’ to be provided to commercial television broadcasters should come with increased Australian content obligations, and so proposed that these obligations were doubled from 1 January 2015.[13] Greens’ Senator Scott Ludlam argued also that a less significant licence fee reduction than had been proposed in 2013 would still have recognised the commercial pressures faced by the television industry. The Senator added to Mr Bandt’s comments that broadcasting spectrum was not a free gift, it was a public good, the use of which carried with it obligations, such as delivering Australian content.[14]

Senator Nick Xenophon has been supportive of reductions in licence fees for commercial free-to-air broadcasters. The Senator has argued for the imposition of a turn over tax to be imposed on outlets such as Google and Facebook who ‘cannibalise’ free-to-air networks’ revenue and for that to be used to offset the loss of revenue from licence fees.[15]

Position of major interest groups

Free-to-air commercial broadcasters

The Parliament is currently considering media reform legislation which proposes to remove audience reach and certain ownership regulations and owners of print, commercial television and commercial radio support these proposals. While there is no doubt that commercial free-to-air broadcasters are very supportive of this media reform legislation, some of them consider licence fee reform is more important.[16]

Indeed, one industry source remarked in in 2015 that licence fees are the priority issue for commercial free-to-air broadcasters.[17] Seven West Media’s Tim Worner has claimed that abolishing licence fees may do more to assist commercial broadcasters to remain financially viable than removing cross ownership and reach rules.[18] In arguing previously for the removal of licence fees, Seven West Media has pointed out that Australia’s licence fees are substantially more than those paid in other countries.[19] In Britain, for example, licence fees are 0.18 per cent of broadcasters’ revenues[20] (see a comparison of ten countries in Figure 1 below). In addition, Seven West Media has observed that Australia’s content obligations are greater than those imposed by many international regimes.[21]

Further to Seven West Media’s claims, Nine Entertainment has argued that multinational content companies, such as Netflix, pay no licence fees; nor do they invest in Australian content, talent or production staff.[22] On the other hand, Nine Entertainment argues, free-to-air television directly employs over 7,000 people and contributes $4.7 billion in direct value to the Australian production industry.[23]

In responding to the announcement of licence fee cuts in the May 2016 Budget the Chairman of the television lobby group Free TV, Harold Mitchell, called the degree of fee reduction ‘disappointing’.[24] Mr Mitchell added that although Free TV appreciated the ‘modest first step’ towards reform, the proposed 25 per cent fee reduction does not acknowledge that in the new media environment, action needs to be taken urgently ‘to make sure broadcasters can continue to invest in great Australian programming and in transforming [commercial free-to-air broadcasting] businesses’.[25]

Free TV responded to the introduction of this Bill with a call for the complete removal of licence fees. Free TV’s arguments remained constant, with Mr Mitchell insisting that in an ‘unrelenting new media environment’ Australian free-to-air broadcasters can only continue to invest in Australian programming and transform their businesses to meet advances in technology and changing consumer viewing habits if licence fees are abolished.[26]

Figure 1: Licence fees comparison: fees as a percentage of revenue

Source: Venture Consulting.[27]

Commercial Radio Australia’s (CRA) Chief Executive Officer, Joan Warner, considered the May budget announcement would deliver ‘a welcome relief’, for broadcasters.[28] But from the specific perspective of radio broadcasters Ms Warner added that the radio industry body was disappointed that ‘the relief is not greater’.[29] Ms Warner noted further that fee relief was tied to a need for commercial radio ‘to be able to better compete against global players who are largely unregulated and do not carry the many costs, obligations and restrictions that local radio broadcasters do’.[30]

CRA had also previously noted the higher licence fees paid by Australian commercial radio broadcasters in comparison with those paid by their overseas counterparts.[31] In response to a review of spectrum by the Department of Communications, for example, CRA argued that it was important that the pricing of spectrum for commercial free-to-air radio is considered in the context of ‘heavy regulation, local and Australian music content requirements, advertising restrictions and mandatory tags required of radio broadcasters, as well as the key role of radio in emergency situations’.[32]

Subscription broadcasters

In contrast to the positive response from free-to-air broadcasters, when the commercial licence fees reduction was announced in the 2016–17 Budget, the Australian Subscription Television and Radio Association (ASTRA) lobby group was ‘deeply disappointed’.[33] ASTRA labelled the then proposed licence cut a ‘taxpayer-funded gift’.[34]

ASTRA’s Chief Executive Officer, Andrew Maiden, denied the validity of the free-to-air television broadcasters’ claims that they face significant financial pressures. According to Mr Maiden, the licence fees commercial free-to-air broadcasters pay actually ‘reflect the value of unusually significant protections and privileges enjoyed by the major broadcasters, rendering invalid any comparison with fees paid by their international peers’.[35] In Mr Maiden’s view, in exchange for paying licence fees, free-to-air broadcasters ‘enjoy a legislated ban on competition, guaranteed access to broadcasting spectrum and the world’s most protected market for sports broadcast rights’.[36]

Other responses

The Budget licence fees cuts announcement prompted the Australian Communications Consumer Action Network (ACCAN) to call for free-to-air networks to use the savings to improve accessibility features such as better captioning and audio description. ACCAN Disability Policy Advisor, Wayne Hawkins, considered the funding could be used to improve captioning on free-to-air television for people who are deaf or hard-of-hearing and to put in place technology that would allow the networks to introduce audio description for people who are blind or vision-impaired.[37]

Screen Producers Australia Chief Executive, Matthew Deaner, had previously called for any savings from licence fee reductions for free-to-air broadcasters to be accompanied by further obligations to invest in local content.[38] Following the Budget Mr Deaner stressed again that Screen Producers supported the reduction in spectrum licence fees:

… so long as these are balanced by content obligations and a commensurate increase in the level of expenditure on local production. In particular, commercial free-to-air's investment in drama, documentary and children's production is around $160 million annually, less than half that spent by these broadcasters on sports …[39]

Moreover, according to Mr Deaner:

From anti-siphoning to sub-quota obligations, there has historically been a delicate balance of Government regulation and interventions to ensure that commercial free-to-air investments in local production are wide ranging, across low cost per hour genres like news and current affairs to higher cost content like documentaries and drama. Diversity of programming is an obligation they must continue to carry.[40]

One free-to-air commercial spokesperson indicated that the commercial television networks would not be adverse to such conditions—as local shows rate highly.[41]

However, the Government has not responded to Mr Deaner’s suggestions. There are no reciprocal content commitments in this Bill.

Financial implications

The 2016–17 Budget papers predicted a cost of loss of revenue of $163.6 million from 2016–17 over the forward estimates to 2019–20.[42] This figure incorporates the effect of lower tax deductions resulting from the lower fees paid by broadcasters (see the table below).

This figure does not account for ongoing loss of revenue from the period from 2020–21.

Table 1: Loss of revenue from commercial broadcasting licence fee reduction

Revenue ($m)

2015-16

2016-17

2017-18

2018-19

2019-20

Australian Communications and Media Authority

-

-48.4

-48.4

-48.4

-48.4

Australian Taxation Office

-

-

10.0

10.0

10.0

Total — Revenue

-

-48.4

-38.4

-38.4

-38.4

Source: 2016–17 Budget papers.[43]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.

The Government considers that the Bill is compatible as measures in the Bill ‘apply only to corporations, as natural persons are not eligible to hold a commercial television broadcasting licence or radio broadcasting licence’. [44]

Parliamentary Joint Committee on Human Rights

At the time of writing the Parliamentary Joint Committee on Human Rights had made no comment on this Bill.

It should be noted that as part of an investigation into a package of Bills which included the Bill to implement the last television licence fees reduction, the Parliamentary Joint Committee on Human Rights accepted arguments that reducing television licence fees would increase regulatory certainty for the commercial television industry and enable broadcasters to continue to support the production of Australian content.

The Committee concluded that reducing television licence fees may, therefore, promote the right to participate in cultural life and the right to freedom of expression.[45]

Key issues and provisions

Radio License Fees Act 1964

Section 5 of the Radio Licence Fees Act states that commercial radio licensees pay licence fees ‘by way of tax in respect of the licence’ in accordance with the requirements set down in sections 6 and 6A of that Act.[46] Section 6 states that the licence fee amounts to a ‘relevant percentage’ of gross annual earnings.

Item 3 proposes to amend subsection 6(2) of the Act by including the words, ‘that is 75% of the amount’. The item does not change the formulae to calculate the gross annual earnings of licensees. Instead, it provides that only 75 per cent of the total amount derived under the formulae is payable as a fee.

Item 2 of Schedule 1 Part 1 proposes to insert a new subsection (2) in section 5 of the Radio Licence Fees Act to allow for regulations to be made which can provide for rebates of radio licence fees. Such a regulation making power already exists under the Television Licence Fees Act (subsection 5(2)).

Television Licence Fees Act 1964

Section 5 of the Television Licence Fees Act requires commercial television broadcasting licensees to pay licence fees, which are worked out in accordance with sections 6 and 6A of that Act.[47] The fees are calculated based on annual gross earnings. Item 4 of Schedule 1 Part 1 proposes to amend subsection 6(2) by inserting the words, ‘that is 75% of the amount’. The item does not change the formulae to calculate the gross annual earnings of licensees. Instead, it provides that only 75 per cent of the total amount derived under the formulae is payable as a fee.

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[1].              Television Licence Fees Act 1964 and Radio Licence Fees Act 1964.

[2].              Television Licence Fees Act 1964 and Radio Licence Fees Act 1964.

[3].              Broadcasting Services Act 1992.

[4].              Australian Communications and Media authority (ACMA), Broadcasting licence fee requirements handbook for commercial radio and television broadcasting licensees, ACMA, Canberra, September 2015; see Appendices B and C for licence fee formulae.

[5].              For example, costs associated with the conversion to digital television were recovered from the commercial television industry under an amendment to the Television Licence Fees Act in 1999 and legislation introduced in 2007 required that revenue earned from analogue and digital radio broadcasting services is counted for the purposes of calculating the radio broadcasting licence fee. B Jaggers, Radio Licence Fees Amendment Bill 2007, Bills digest, 144, 2006–07, Parliamentary Library, Canberra, 2007.

[6].              S Conroy (Minister for Broadband, Communications and the Digital Economy), Government moves to protect TV content, media release, 8 February 2010.

[7].              More detail can be found in the Bills digest for the legislation: A Holmes, Television Licence Fees Amendment Bill 2013, Bills digest, 95, 2012–13, Parliamentary Library, Canberra, 2013.

[8].              Conroy, Government moves to protect TV content, op. cit.

[9].              Nine Entertainment, Submission to Senate Environment and Communications Legislation Committee, Inquiry into the Broadcasting Legislation Amendment (Media Reform Bill) 2016, March 2016, p. 4. Submission cites information from Deloitte Access Economics, Economic contribution of the film and television industry in Australia, [report for] Australian Screen Association, Deloitte Access Economics , Canberra, February 2015.

[10].              Australian Government, ‘Part 1: Revenue measures’, Budget measures: budget paper no. 2: 2016–17, p. 8.

[11].              M Fifield (Minister for Communications), Supporting public broadcasting and creating a more competitive environment for commercial broadcasters, media release, 3 May 2016.

[12].              A Albanese, ‘Broadcasting Legislation Amendment (Convergence Review and Other Measures) Bill 2013, Television Licence Fees Amendment Bill 2013’, House of Representatives, Debates, 19 March 2013, p. 2629.

[13].              A Bandt, ‘Second reading speech: Broadcasting Legislation Amendment (Convergence Review and Other Measures) Bill 2013, Television Licence Fees Amendment Bill 2013’, House of Representatives, Debates, 19 March 2013, p. 2632.

[14].              S Ludlam, ‘Broadcasting Legislation Amendment (Convergence Review and Other Measures) Bill 2013, Television Licence Fees Amendment Bill 2013’, Senate, Debates, 20 March 2013, p. 2261.

[15].              N Xenophon (Independent Senator), Deal or no deal: media law changes must include licence fee cuts and a fair tax on Facebook, Google and Netflix, media release, 1 September 2016. Note: A turnover tax is a tax levied on turnover (revenue) at a specific rate, irrespective of the source of revenue and whether or not the revenue is associated with any profit or loss to the entity (as defined by Economics Section, Parliamentary Library).

[16].              Parliament of Australia, ‘Broadcasting Legislation Amendment (Media Reform) Bill 2016 homepage’, Australian Parliament website.

[17].              D White, ‘Malcolm Turnbull expected to play hard ball on TV licence fee cuts’, Sydney Morning Herald, (online edition), 22 July 2015.

[18].              D Crowe and J Mitchell, ‘Forces massing to fight Fifield's media reforms’, The Australian, 2 March 2016, p. 6.

[19].              Seven West Media, Submission to Senate Environment and Communications Legislation Committee, Inquiry into the Broadcasting Legislation Amendment (Media Reform Bill) 2016, March 2016, p. 13.

[20].              Ibid., p. 43.

[21].              Ibid.

[22].              Nine Entertainment, Submission to Senate Environment and Communications Legislation Committee, op. cit., p. 4. Submission cites information from Deloitte Access Economics, Economic contribution of the film and television industry in Australia, op. cit.

[23].              Ibid., p. 5.             

[24].              FreeTV Australia, Budget licence fee change, media release, 3 May 2016.

[25].              Ibid.

[26].              Free TV Australia, Free TV calls for abolition of broadcasting licence fees, media release, 15 September 2016.

[27].              Venture Consulting, Placing a value on free to air broadcasting spectrum in Australia, report for FreeTV Australia, Venture Consulting, Sydney, 13 February 2012, p. 19.

[28].              Commercial Radio Australia (CRA), Commercial radio welcomes licence fees cut in Federal Budget, media release, 3 May 2016.

[29].              Ibid.

[30].              Ibid.

[31].              CRA, Commercial radio industry welcomes Government response to Spectrum Review, media release, 25 August 2015; and CRA, submission in response to open call for submissions to the Department of Communications Spectrum Review, pp. 40–41 (citing Venture Consulting, Australian Commercial Radio Licence Fees: International Comparison Study, 2011 as cited in Convergence Review Committee, Convergence Review: final report, Department of Broadband, Communication and the Digital Economy, March 2012, p. 93. Note: this submission is no longer available online or on the CRA website.

[32].              Ibid.

[33].              Australian Subscription Television and Radio Association (ASTRA), Taxpayers foot $150 million handout to ‘free’ television, media release, 3 May 2016

[34].              Ibid.

[35].              Ibid.

[36].              Ibid.

[37].              Australian Communications Consumer Action Network (ACCAN), Free-to-air networks should use budget windfall for improved accessibility features, media release, 4 May 2016.

[38].              M Mason and D White, ‘Free and pay TV row over licence fees’, The Australian Financial Review, 14 March 2016, p. 30.

[39].              M Mason, ‘Budget 2016: free-to-air and pay TV clash over licence fee cut’, The Sydney Morning Herald, (online edition), 3 May 2016.

[40].              Ibid.

[41].              Mason and White, ‘Free and pay TV row over licence fees’, op. cit.

[42].              Explanatory Memorandum, Broadcasting Legislation Amendment (Television and Radio Licence Fees) Bill 2016, op. cit., p. 3.

[43].              Australian Government, Budget measures: budget paper no. 2: 2016–17, op. cit., p. 8.

[44].              The Statement of Compatibility with Human Rights can be found at page 4 of the Explanatory Memorandum to the Bill.

[45].              Parliamentary Joint Committee on Human Rights, Fourth report of 2013, 20 March 2013, p. 26.

[46].              Radio Licence Fees Act 1964.

[47].              Television Licence Fees Act 1964.