Chapter 5
Regional Television Broadcasters
Effects on Rural and Regional Broadcasting
5.1 The Committee received a number of submissions representing the interests
of regional broadcasters (one from FACTS, one from a group of regional
aggregated broadcasters and one from several solus operators in South
Australia/ Broken Hill). [1] All had special
concerns about the implications of digital conversion for regional operators.
Solus operators had some extra concerns, which are mentioned below.
Extra Costs of Conversion for Regional Broadcasters
5.2 The Bill allows regional broadcasters up to three years more than
metropolitan broadcasters to prepare for digital broadcasting. [2]
Regional broadcasters argued that this concession alone does not make
sufficient allowance for the special challenges they face in digital conversion.
5.3 Regional broadcasters have far smaller population bases and advertising
revenue than capital city broadcasters. Licensees in aggregated regional
markets, on average, have little more than half the advertising revenue
per population reached of metropolitan licensees; in non-aggregated regional
markets, little more than a third:
| Commercial Television Industry: advertising
and revenue shares, 1997 |
| location |
population |
advertising revenue |
advertising revenue
per head |
| |
millions |
per cent |
$ millions |
per cent |
$ |
| capital cities |
11.8 |
65 |
1,864 |
79 |
158 |
| regional aggregated |
5.2 |
29 |
433 |
18 |
83 |
| regional other |
1.2 |
7 |
790 |
3 |
65 |
| regional total |
6.4 |
35 |
511 |
22 |
80 |
| Australia total |
18. |
100 |
2,375 |
100$ |
131 |
| Source: based on Submission No. 2 (Federation
of Australian Commercial Television Stations), Appendix 1. |
5.4 Furthermore, because regional broadcasters serve more widespread
populations, with far fewer viewers per transmitter, their costs of conversion
will be much higher.
For example, each Adelaide station operates one main transmitter and
one secondary transmitter (`translator') to reach a population of 1.2
million. To reach a population of 1.3 million, each Queensland aggregated
market station operates seven main transmitters, about 50 translators
and over 4,000 kilometres of microwave links to distribute its signal
between those transmitters. These differences are reflected in the respective
capital investment requirements for digital conversion. [3]
Regional television broadcasters in the Aggregated markets utilise almost
700 transmission and link sites to service 6 million people… In contrast,
metropolitan stations have 32 sites servicing 12.5 million people…
The digitisation of these sites and links will be a massive physical and
financial task for the regional industry, exceeding the effort required
to implement the equalisation policy in the early 1990s. [4]
5.5 According to FACTS, at least 75 per cent of the industry investment
in transmission facilities will be made by regional aggregated market
operators. [5] This may be compared with their
share of 29 per cent of population and 18 per cent of advertising revenue
shown in the table just above. Regional broadcasters estimate the costs
in the aggregated markets as: capital costs to replicate infrastructure:
$330 million; costs of simulcasting: $22 million per year times 8
years = $176 million; total: $506 million. They say it is beyond the means
of the industry to meet these demands unaided:
In the absence of such support [a `support package' described in the
submission and discussed below] major short term investment in digital
television infrastructure in regional Australia would not be viable….If
rollout targets were enforced in these circumstances, the result would
be the elimination of local programming activity, serious financial instability
in the regional television industry, and a loss of competition and diversity
as local news and current affairs is abandoned or some operators disappear
completely. [6]
5.6 Likely loss of local content under pressure of rationalisation was
a particular concern:
A lower cost option for the regional markets would be to feed all of
the transmitters and translators with metropolitan satellite feed. This
would be extremely detrimental to localism (both local content and local
advertising dollar) in the regional broadcast area. [7]
… the commercial stresses on the operators would ensure that all
localism was eliminated. It would be impossible to justify continued investment
in local programming (particularly news and current affairs) under such
unfavourable commercial conditions. The result would be the loss of local
news and reliance on national news services tailored to metropolitan viewers.
Television services in the solus markets would be reduced to the status
of relay stations for the metropolitan networks. [8]
5.7 On these grounds the regional broadcasters seek concessions from
the government to help their conversion:
- licence fee rebates
- rebate of sales tax for equipment required for digital conversion
- free site rental from the National Transmission Network (NTN) for
digital equipment during the simulcast period
- `a measure of flexibility on the rollout period'. [9]
5.8 They point out that these concessions are similar to concessions
which the government gave during the equalisation period, when the government
gave concessions totalling about $146 million over eight years, during
which the regional television broadcasters spent about $260 million on
capital works to implement the equalisation policy. [10]
5.9 For the aggregated markets they estimate the cost of these concessions
to the government as:
- license fee rebates: between $138.4 million (tapering from full rebate
to no rebate over eight years) and $276.8 million (full rebate for eight
years)
- rebate of sales tax for equipment required for digital conversion:
$55.2 million
- free site rental from the National Transmission Network for digital
equipment during the simulcast period:
…difficult to estimate without knowing the likely site rentals to
be charged in the future, possibly by a privately-owned NTN. The Department
of Communications and the Arts has estimated that the waiver of site rental
fees during the equalisation period was worth a total of $21.8 million
in 1995 dollars. [11]
5.10 In relation to the last point - proposed free site rental in the
National Transmission Network - the regional broadcasters acknowledge
that the planned privatisation of the network `may make some of these
measures difficult to implement.' [12] Presumably
this assistance could be in the form of rebates of fees, if the NTN is
publicly owned, or direct subsidy to cover fees, if the NTN is privately
owned.
5.11 Given the short span of this inquiry the Committee cannot comment
on the accuracy of the cost estimates provided. In any case cost estimates
are inherently uncertain because the technology is new. What is clear
is that the regional broadcasters face higher conversion costs than their
metropolitan counterparts.
5.12 The Committee believes that there is a good case for some form of
special assistance to the regional television broadcasters, including
solus broadcasters, to ensure that regional Australia continues to receive
a quality television service including suitable local programming.
Recommendation 7
The Committee recommends that the Government should consider the granting
of special licence rebates over a period of 8 years to regional broadcasters
to assist them with some of the costs of digital conversion.
Recommendation 8
The Committee recommends that the Government also consider means of
assisting regional television licensees with concessional access to digital
transmission equipment operated by the National Transmission Network whether
that Network is government-owned or privately owned.
What is `Enhancement'?
5.13 In the context of the scope of `enhancement', there was some discussion
of whether `incidental and directly linked' would allow enhancements going
to improving `local content' - such as adding local value to the evening
news bulletin. The Committee notes that the witnesses from the Department
of Communications and the Arts saw the definition of `incidental' in terms
of dictionary definitions adopted by the full Federal Court and the High
Court in recent cases. [13] The Committee notes
that the scope of `incidental and directly linked' will be decided by
regulations arising from a statutory review to be conducted before digital
broadcasting starts. As it has mentioned already, the Committee believes
that that review must be carried out as a matter of urgency.
Extra Issues for Solus Broadcasters and Remote Broadcasters
Cost of Conversion
5.14 The cost problems mentioned above in context of regional aggregated
markets apply even more acutely to the solus broadcasters. According to
FACTS:
Smaller stations in markets not affected by the regional aggregation
process of the early 1990s will face an even tougher challenge. In most
cases, they are in static or declining markets. Television licence fee
and sales tax relief will not provide a significant offset to their capital
expenditure requirements. [14]
5.15 The submission of Spencer Gulf Telecasters Ltd and some other solus
operators estimated their required capital expenditure per viewer household
as $342 - compared with $153 in aggregated markets and $64 in metropolitan
markets. [15]
5.16 The solus broadcasters did not propose special forms of financial
assistance, beyond those already mentioned above for the regional broadcasters
generally, but they urged that special attention be paid to their special
needs:
The solus operators making this submission strongly support the arguments
put by the regional operators in the aggregated markets regarding financial
assistance. Those arguments hold for solus operators to an even greater
extent. As a minimum any assistance ultimately offered to operators in
the aggregated markets should flow through to the two-station and solus
markets, and there should be provision for the individual circumstances
of operators to be taken into account when any assistance package is determined.
[16]
5.17 The solus broadcasters did have some other special requests, which
we now mention.
No Moratorium on New Commercial Broadcasting Licences in their Areas
5.18 The solus broadcasters were particularly concerned that the proposed
moratorium on a fourth commercial broadcasting licence until 2008, which
the Government proposes as a form of assistance to the existing licensees
while they meet conversion costs, [17] would
not help them, since they will remain open to competition from a second
or third licensee in their licence areas. They were also concerned that
the statutory review of `underserved' licence areas, which the Television
Broadcasting Services (Digital Conversion) Bill 1998 proposes, may seem
to be encouraging this competition, to the detriment of orderly digital
conversion: [18]
The issue of new television licences in solus markets during the digital
simulcast period would dramatically undermine any commercial case of investment
in digital technology. Even the potential for competitive entry would
undermine efforts to raise the necessary capital for digitisation. [19]
5.19 They argue that in their circumstances more competition is not necessarily
a good thing:
The legislation is flawed because it attempts to impose a particular
default approach - competitive supply - on markets where that approach
is completely unviable. A metropolitan-style policy based on multiple
infrastructures is simply not practicable in the solus market regions
for the foreseeable future - as the ABA found as recently as 1996. The
fundamental issue is whether a fragmented, undercapitalised television
industry in the solus market regions - the inevitable outcome of infrastructure
duplication in such a sparsely populated market - will really service
the interests of regional viewers. [20]
5.20 They propose that the moratorium on new commercial broadcasting
licences should be extended to solus and two-station markets until the
end of the simulcast period. [21]
5.21 The Committee sympathises with their problems but is not completely
convinced by their arguments. A ban on a second licence in one-licence
areas is more of a constraint on viewers' choice, and may seem more anti-competitive,
relatively speaking, than a ban on a fourth licence in three-licence areas.
And if, as they say, the economics of broadcasting in solus areas (including
the costs of digital conversion) are so fragile, new entrants are unlikely
in any case.
5.22 In the Committee's view, if the problems of the solus operators
in digital conversion deserve special assistance, it should be of the
same types as assistance to the regional broadcasters generally, as discussed
above (though they may well deserve assistance at a greater level).
5.23 The Committee also notes that the Bill's statutory review of `underserved'
regional licence areas defines `underserved' as having fewer than three
commercial broadcasting services - not licensees. [22]
This allows for the possibility of extra services being provided by multi-channelling
by existing licensees.
Multichannelling in Solus Areas?
5.24 Four regional broadcasters operating in solus markets called for
the opportunity to be allowed to provide multi-channel services from the
commencement of their digital services. These broadcasters expressed the
view that:
The technology of digital television technology is well-suited to these
markets and could deliver significant benefits to viewers if the policy
setting were appropriate. A single infrastructure can be used to deliver
viewer choice of services by virtue of the multichannelling capability
of the technology and the capacity to support other data services. [23]
…the licensee should have the discretion to broadcast a single high
definition channel for “prime time” or “blockbuster events”.
[24]
5.25 This was put forward as a better option than encouraging new licensees
with possible uneconomic duplication of infrastructure in sparsely populated
areas.
5.26 The Committee is concerned that allowing solus operators to provide
multichannel services would effectively limit the amount of HDTV which
would be able to be transmitted by these broadcasters to consumers in
regional areas. As these are, by definition, the only commercial operator
in these areas, consumers would be denied HDTV for a large proportion
of their television viewing. However, in view of the evidence put before
it by the solus market operators, the Committee believes that a balance
between those two alternatives (HDTV and multi-channelling in the form
of one extra channel for those particular markets) should be carefully
considered in the pre-2001 review of multi-channelling. (See Recommendation
9 below)
5.27 The Committee notes also that it is already possible for an existing
solus licensee to apply for a second licence under section 38A of the
Broadcasting Service Act 1992. In Griffith (NSW) an incumbent licensee
is providing two services under this provision. [25]
However, such a licence can be granted if and only if the ABA is satisfied
that there is unlikely to be interest from another potential licensee.
5.28 The Bill requires the Minister to conduct a review, before 1 January
2001, to consider whether any legislative amendments should be made to
ensure that underserved regional licence areas are provided with the same
number of commercial television broadcasting services as are provided
in metropolitan licence areas.
5.29 The Committee further notes that the intention of this review will
be to consider the most appropriate way in which new services to consumers
in underserved regional areas may be delivered.
5.30 As such, this review will need to examine carefully the issues,
including the commercial feasibility of new services, and the demand for
new licences in an area, and the availability of other services such as
satellite services.
5.31 The Committee concluded that it was appropriate for regional broadcasters
to be subject to the general prohibition on multichannelling services
for the moment. The Committee considers that the review into underserved
regional areas should consider whether new services in regional areas
could be introduced by allowing limited multi-channelling by broadcasters
in these areas.
Recommendation 9
The Committee recommends that the review into providing additional
services in underserved areas, to take place by 2001, specifically address
whether these services could be introduced through allowing limited multi-channelling,
subject to certain minimum conditions being met for the broadcast of high
definition digital television (HDTV).
Remote Area Services
5.32 The Committee was told that satellite-delivered remote area services
are particularly disadvantaged in meeting the costs of digital conversion:
These services rely on some degree of State or Federal Government subsidy.
Their path to digital transmission must of necessity be slower, and tailored
to their unique circumstances. The legislation, as it stands, does not
provide for a different approach for these stations. [26]
Imparja is a good example, delivering its services via a satellite channel…
It is just getting to the point where it is potentially possible for it
to operate at a profit because the satellite component can be compressed
to a point where they can cover under their current turnover, and suddenly
digital TV is going to require it to quadruple the amount of bandwidth
it has to use on the satellite and it becomes unviable again. [27]
Conclusion
5.33 The Committee notes that government amendments to the Bill passed
in the House of Representatives on 3 June 1998 allow the Australian Broadcasting
Authority to formulate and implement a different digital conversion scheme
for remote area broadcasting `taking into account the special circumstances
that apply to transmission of television broadcasting services to those
areas'. [28]
Footnotes
[1] Submission Nos. 2, 8, 8a, and 9, 9a. Regional
broadcasters may be divided into those operating in aggregated three-licence
markets, and solus operators - that is, broadcasters who are the sole
licence-holders in their licence areas. There are also some two-licence
areas.
[2] Metropolitan licensees will have to commence
digital transmission by 1 January 2001; regional licensees by a date to
be decided by the ABA being not later than 1 January 2004. The transmissions
will have to achieve the same level of coverage and reception quality
as present analog transmission as soon as practicable after those dates.
Television Broadcasting Services (Digital Conversion) Bill 1998, proposed
schedule 4 to Broadcasting Services Act 1992, clause 5(2) as amended
by the House of Representatives 3 June 1998
[3] Submission No. 2 (Federation of Australian
Commercial Television Stations), p. 15.
[4] Submission No. 8 (NBN Limited and others),
p. i.
[5] Submission No. 2 (Federation of Australian
Commercial Television Stations), p. 15.
[6] Submission No. 8 (NBN Limited and others),
p. ii.
[7] Submission No. 14 (Australian Subscription
Television and Radio Association), Appendix 4.
[8] Submission No. 9b (Spencer Gulf Telecasters
and others), p. 1.
[9] Submission No. 8 (NBN Limited and others),
pp. 12-13.
[10] Submission No. 8 (NBN Limited and others),
p. 11; Submission No. 2 (Federation of Australian Commercial Television
Stations), p. 15.
[11] NBN Limited, Prime Television, Southern
Cross Broadcasting, Telecasters Australia, WIN Corporation. Further information
by letter 11 June 1998. Refer Appendix 4.
[12] Submission No. 8 (NBN Limited and others),
p. 13.
[13] Transcript of evidence, p. 186 (Mr Stevens,
Mr Lyons)
[14] Submission No. 2 (Federation of Australian
Commercial Television Stations), p. 15.
[15] Submission No. 9a (Spencer Gulf Telecasters
and others), p. 4, amended by Submission No. 9b
[16] Submission No. 9 (Spencer Gulf Telecasters
and others), p. 8
[17] `This [the moratorium] will allow the
existing free-to-air commercial television broadcasters a transition period
in which to meet the initial costs of digital conversion…' Television
Broadcasting Services (Digital Conversion) Bill 1998 & Datacasting
Charge (Imposition) Bill 1998, Explanatory Memorandum, p. 20.
[18] The Bill mandates a review before 1 January
2001 into `whether any amendments of laws of the Commonwealth should be
made in order to ensure that underserved regional licence areas are provided
with the same number of commercial television broadcasting services as
are provided in metropolitan licence areas.' An `underserved' regional
licence area is defined as one wither fewer than three commercial broadcasting
services. Television Broadcasting Services (Digital Conversion) Bill 1998,
proposed schedule 4 to Broadcasting Services Act 1992, clause 56(1)(d)
[19] Submission No. 9 (Spencer Gulf Telecasters
Limited), p. 6.
[20] Submission No. 9 (Spencer Gulf Telecasters
Limited), p. 5.
[21] Submission No. 9a (Spencer Gulf Telecasters
Limited), p. 8.
[22] Television Broadcasting Services (Digital
Conversion) Bill 1998, proposed schedule 4 to the Broadcasting Services
Act 1992, clause 56(5)
[23] Submission No 9a (Spencer Gulf Telecasters
Ltd, Broken Hill Telecasters Ltd, South East Telecasters Ltd and Riverland
Television Ltd); p. 7.
[24] Ibid, p. 8.
[25] Transcript of evidence, p. 202 (Mr Stevens)
[26] Submission No. 2 (Federation of Australian
Commercial Television Stations), p. 15.
[27] Transcript of evidence, p. 111 (Mr Weston)
[28] Supplementary Explanatory Memorandum,
Television Broadcasting Services (Digital Conversion) Bill 1998, p. 2.