Chapter 1 - Background to the Inquiry
Introduction
1.1
Australian content quotas for commercial
television broadcasters were first introduced in 1961 and have been
progressively increased over the past 37 years, with strong support from the
general public and bipartisan political support. A recent study of Australian
content regulation found continuing widespread support for the current level of
domestic programming on television and moderate support for an increase in
local content.[1]
1.2
Several features of television conspire to
create the need for regulation. Firstly, television is a most important medium
for reflecting the tastes, concerns and aspirations of a society and as such,
it is the main means of transmitting that society’s culture through the
‘stories’ portrayed through the medium. Australians watch, on average, 3 hours
and 13 minutes of television per day. As noted in the government’s Explanatory
Memorandum for the bill for the Broadcasting Services Act 1992 -
‘...it is widely accepted that
television is a powerful medium with the potential to influence public opinion,
and that television has a role to play in promoting Australian’s cultural
identity...It is intended [in making an Australian content standard under section
122] that commercial television broadcasters broadcast Australian programming
which reflects the multicultural nature of Australia’s population, promotes
Australian cultural identity and facilitates the development of the local
production industry.’[2]
1.3
The implication of such statements is that
transmission of Australian culture through television should be encouraged
beyond what the private market would supply; or at the least it is too
important a matter to be left to the vagaries of the unfettered market.
1.4
Secondly, the cost structure of television
production is distinctive in that the fixed costs of producing programs and
maintaining transmission facilities are relatively high but, once the fixed
costs have been incurred, the extra marginal cost of selling a program in
another market, or broadcasting it to extra viewers, is very low. Thus there is
a strong incentive to show a program in as many places as possible.
1.5
Thirdly, the traditional structure
of the television production industry is such that producers typically aim to
recoup all or most of their costs in their primary national markets. Secondary
(foreign) markets are then supplied at prices that need to be little more than
marginal cost.[3]
This means that foreign programs can usually be bought for prices much cheaper
than local programs. For example:
‘In the USA, drama programs
typically cost $US1.2 million per hour to produce. There programs are sold to
US networks for $US800, 000 per hour, and subsequently sold around the world at
whatever price the secondary market will stand. This can be as little as a few
hundred dollars... a top-rating US drama still only costs Australian broadcasters
A$30,000 to $70,000 an hour. This far less than the price broadcasters must pay
for Australian drama programs. These range from a relatively low cost for series
and serial (approximately $50,000 to $200,000 per hour) to considerably higher
licence fees (approximately $200,000 to $400,000 per hour) for adult telemovies
and mini-series...’[4]
1.6
The result is that ‘...despite the popularity of
Australian programs, the comparative cost of making local, versus buying
imported, programs means that ratings alone are insufficient to ensure high
levels of Australian content on commercial television.’[5] In other words even if a
foreign program rates poorly, it could still be an attractive proposition for a
broadcaster (particularly outside prime time) if it can be bought very cheaply.
The Inquiry
1.7
The Senate referred the present inquiry to this
Committee on 3 July 1998. The terms of reference are:
The implications of
retaining, repealing or amending paragraph 160(d) of the Broadcasting Services
Act 1992, having regard to:
- the meeting of
Australia’s cultural objectives;
- the implications for
Australia’s international obligations and their implementation, for the conduct
of its international relations, and for its international trade and trade
policy interests;
- the object set out in
paragraph 3(e) of the Broadcasting Services Act 1992;
- the role and functions of
the Australian Broadcasting Authority in relation to the setting and the
administration of Australian content standards; and
- the Australian
Broadcasting Authority’s draft revised Australian content standard for free to
air commercial television
1.8
The Committee received 35 submissions (see
Appendix 8) and held one public hearing in Canberra (see Appendix 9). The
report of the inquiry, originally planned for the first sitting day after 31
October 1998, was delayed because of the general election on 3 October 1998.[6]
1.9
The need for a review of the implications of section
160 (d) of the Broadcasting Services Act 1992 through a Senate Committee
inquiry arose following a ruling of the High Court of Australia that the
current Australian Content Standard developed by the Australian Broadcasting
Authority (ABA) and applying to free-to-air commercial television broadcasters,
was in breach of the Broadcasting Services Act 1992 (BSA).
The legal framework for the Australian Content
Standard
The Objects of the Broadcasting Services Act 1992
1.10
The Broadcasting Services Act 1992 has as
one of its objects -
3 (e): to promote the role
of broadcasting services in developing and reflecting a sense of Australian
identity, character and cultural diversity.
1.11
Section 122 of the Act requires the ABA to
122(1)(a) determine
standards that are to be observed by commercial broadcasting licensees...
...
122(2) Standards under subsection (1) for commercial broadcasting
licensees are to relate to: (a) programs for children; and (b) the Australian
content of programs.
...
122(4) Standards must not be inconsistent with this Act or the
regulations.
1.12
Commercial broadcasting licensees must comply
with the standards as one of the conditions of their licenses (BSA,
schedule 2 section 7(1)(b)). As well, under paragraph 160(d) of the Act -
160 The ABA is to
perform its functions in a manner consistent with:
...
(d) Australia’s obligations under any convention to which Australia
is a party or any agreement between Australia and a foreign country.
The issue in the Project
Blue Sky High Court case was which of section 122 and section 160(d) of the BSA
took priority.
1.13
Under the requirements of the Broadcasting
Services Act 1992 (BSA) as stated in the above paragraphs, the
Australian Broadcasting Authority (ABA) is required to make a standard relating
to the Australian content of television broadcasting (BSA, section 122).
The current Australian Content Standard requires broadcasters to show
Australian programs at least 55 per cent of the time between 6am and midnight.
‘Australian’ is defined according to criteria that are specified in the
Standard. An outline of the current Standard follows:
The Australian
Content Standard[7]
1.14
The present Australian Content Standard under
section 122 of the BSA (the one that the High Court found was unlawful)
has been in force since 1 January 1996. In brief, each free-to-air commercial
broadcaster must -:
- show Australian programs at least 55 per cent of the time between
6am and midnight (tallied over a year);
- show a minimum quota of first release Australian
drama in prime time (5pm-midnight). Programs are given a point score weighted
for the perceived quality of the program type (for example, one-offs such as a
telemovie get more points per hour than a serial). The quota of 225 points per
year represents somewhere between 80 and 258 hours of programming per year,
depending on what mix of program types a broadcaster chooses.
- show at least 10 hours of first release Australian documentaries
each year;
- show at least 130 hours of Australian pre-school programs each
year;
- show at least 260 hours of children’s programs each year, of
which at least 50 per cent must be Australian; at least 32 hours must be first
release Australian children’s drama; and at least 8 hours must be repeat
Australian children’s drama.
1.15
A program is ‘Australian’ if -
-
it has a final certificate under section 124ZAC (Division 10BA of
Part III) of the Income Tax Assessment Act 1936; or
- it is made pursuant to a official intergovernmental agreement
between Australia and another country; or
- it satisfies a ‘creative elements’ test detailed in the Standard,
which requires certain of the personnel involved in production to be
Australians.
Australia and New Zealand CER Agreement
1.16
In 1983 Australia and New Zealand made a Closer
Economic Relations Trade Agreement (CER). On 18 August 1988 the two countries
made a Protocol extending the agreement to trade in services as well as goods.[8] The parts of it most relevant
to the present report are:
Article 4: Market
Access: Each Member State shall grant to persons of the other Member State
and services provided by them access rights in its market no less favourable
than those allowed to its own persons and services provided by them.
Article 5: National
Treatment: Each Member State shall accord to persons of the other Member
State and services provided by them treatment no less favourable than that
accorded in like circumstances to its persons and services provided by them.
1.17
Annexed to the Protocol are ‘negative lists’ of
matters that the parties wished to exclude. Australia’s negative list, for
example, includes ‘limits on foreign ownership as set out in the Broadcasting
Act 1942’ - but does not make any reference to the content of television
programs. Either party can remove matters from its negative list, but cannot
add to it.
The High Court
case
1.18
In December 1995 (on the day the ABA’s new
Standard was determined, Project Blue Sky Inc., a company representing the New
Zealand film and TV industry and five New Zealand film production companies,
commenced proceedings in the Federal Court of Australia to have the ABA’s
decision to determine the Standard reviewed. The challenge was made on the
grounds that, because the Standard was inconsistent with the Closer Economic
Relations (CER) Protocol agreed to by Australia and New Zealand, it breached
paragraph 160(d) of the Broadcasting Services Act 1992, which requires
the ABA to perform its functions in a manner consistent with Australia’s
obligations under international agreements.
1.19
Davies J made a declaration that the Standard
was “invalid to the extent to which it fails to be consistent with the
Protocol” and ordered the Standard to be set aside from 31 december 1996 unless
revoked or varied by the ABA. [9]
The ABA appealed Davies’s decision to the Full Court of the Federal Court. The
Full Court of the Federal Court found in favour of the ABA, finding that
paragraph 122(2)(b) and paragraph 160(d) of the BSA were
‘irreconcilable’, and that the special provision in section 122 must prevail
over paragraph 160(d).[10]
1.20
Project Blue Sky sought and was granted leave to
appeal to the High Court of Australia. In the High Court appeal, it was common
ground between the main parties that the Australian Content Standard is
inconsistent with Australia’s obligations under the CER Protocol, in that it
discriminates against New Zealand programs, as compared with Australian
programs, in the Australian television market.[11]
The question for the court was whether the standard was ‘lawful’ in terms of
the BSA although it was admittedly inconsistent with the CER.
1.21
The ABA had argued in the Federal Court that
section 122 of the BSA, read with section 3(e), required it to make a
standard along the lines that it did, and that section 122 took priority over
paragraph 160(d).[12]
The ABA had considered the problem and reached this conclusion before making
the present standard: in a 1994 discussion paper it said:
‘...counsel was asked to advise
on the duties to be performed by the ABA pursuant to s122...the ABA is now of the
view that it is beyond the scope of the power implied by virtue of s122 to
provide that the meaning of an ‘Australian’ extends to a person who is a New
Zealander.’[13]
1.22
The High Court rejected the finding of the Full
Court of the Federal Court that the special provision in section 122 must
prevail over paragraph 160(d).[14]
It concluded that a section 122 standard ‘relating to’ the Australian content
of programs does not demand favouritism towards Australian programs and can
also relate to other matters [for example, New Zealand programs]; accordingly
the ABA can, and therefore should, make a standard consistent with both section
122 and paragraph 160(d).
‘It is of
course true that one of the objects of the Act is “to promote the role of
broadcasting services in developing and reflecting a sense of Australian
identity, character and cultural diversity” (s3(e)). But this object can be
fulfilled without requiring preference to be given to Australian programs over
New Zealand programs. Thus, the ABA could determine a standard that required
that a fixed percentage of programs broadcast during specified hours should be
either Australian or New Zealand programs or that Australian and New Zealand
programs should each be given a fixed percentage of viewing time. Such a
standard would relate to the Australian content of programs even though it also
dealt with the New Zealand content of programs. In any event, the existence of
the object referred to in s3(e) cannot control the dominating effect of
s160(d).’[15]
1.23
The High Court found therefore that the current
Australian Content Standard is unlawful in that it breaches paragraph 160(d) of
the Broadcasting Services Act 1992 which requires the ABA to perform its
functions in a manner consistent with Australia’s international treaty
obligations. [16]
1.24
Accordingly the ABA was obliged to review the
standard to make it lawful. In July 1998 the ABA released for public comment a
discussion paper which canvassed various options for making a lawful Australian
Content Standard.[17]
On 13 November 1998 the ABA released for public comment a draft new Standard.[18] The most significant change is
that New Zealand programs will qualify for Australian content quotas equally
with Australian ones.
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