Convergence Review Interim Report: recommendations risk further uncertainty

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17 February 2012
Sophie Bradshaw

Expectations for the Convergence Review are high – that it will produce a new regulatory framework that is fair, flexible and doesn’t stifle innovation. The recommendations put forward in the Committee’s December 2011 interim report are indeed revolutionary. However, they potentially perpetuate a number of issues already existing in the Broadcasting Services Act while complicating others.

The Australian media industry has high hopes for the Government’s Convergence Review – that it will “crack the regulatory nut” by replacing the sector’s legacy framework with a new structure that treats traditional and new media fairly, doesn’t stifle innovation and promotes an even playing field. 

The changes put forward by the Review Committee’s December 2011 interim report are indeed revolutionary.  They include regulating “content service enterprises” on a platform-neutral basis, removing broadcasting licences, repealing media ownership and control rules and establishing a new “super regulator”. 

However, they fall short of cracking the proverbial regulatory nut by potentially perpetuating a number of issues that exist in the Broadcasting Services Act while complicating others.  

Key recommendations

  1. Replace silo-based regulation with platform and device-neutral regulatory framework.
  2. Introduce new concept of “Content Service Enterprises” or “CSEs”.
  3. Update existing media ownership and control rules with new diversity and competition measures.  
  4. Introduce a new regulator for content and communications.
  5. Reform spectrum planning and allocation arrangements, including introduction of a public interest test.
  6. Remove content-related licences (and licence fees) for content services
  7. Introduce new content rules that would apply to CSE providing linear and non-linear audio-visual content, including a converged content production fund for new media content.

Replacing regulatory silos and introducing “CSEs”

The most significant recommendation is the much-anticipated removal of the “silo” model for regulating audio-visual content.  Rather than content being regulated based on the means by which it is delivered (television, radio or online) or the device on which it is received, the Committee recommends content be regulated on a platform and device-neutral basis, built around a new concept of Content Service Enterprises (CSEs). 

Platform and device neutrality has a number of benefits, including applying consistent classification and other community standards to all content.  However, technologically-neutral regulation (as we have seen with reforms to Australian copyright legislation) can create unintended flow-on effects. (For further detail see Convergence Review – meeting the regulatory challenge

CSEs would have obligations in relation to content standards, media diversity and Australian content.  Whether or not an entity is a CSE would depend on the scale and nature of its content service operations - size of the viewer/subscriber base of the entity, whether the service originates in Australia, level of control over the content and the commercial scale of the entity.  CSEs would clearly include traditional media in Australia free-to-air and subscription television and commercial radio.  It becomes less clear when trying to determine which new media players would be caught and how the regulations would be enforced.  The interim report states that ‘emerging services’ and ‘start-up businesses’ would not be considered CSEs, but offers no further clarification of these terms. 

There is a risk that the concept of CSEs would simply perpetuate the regulatory uncertainty that currently exists for online providers of audio-visual content – an uncertainty that many hoped the Committee would clarify.  For example, are all IPTV service providers with television-like services “CSEs”?  Or is this an “emerging service”?  What about newspapers providing streamed content?  Or YouTube, Facebook and other social media sites that provide content services to Australian subscribers? (The Committee acknowledges the challenges in attempting to regulate overseas enterprises). 

The Optus TV Now curve-ball

The enormity and complexity of the task of regulating Australia’s media (and particularly content services) in a converged environment was thrown into sharp relief by the Federal Court’s recent decision in the Optus “TV Now” case 

The Optus TV Now decision is a clear example of why the law (not only broadcasting regulation, but copyright and related laws) needs to be reviewed and thoughtfully updated to reflect the technology and user realities of the converged environment.  Not an easy task.  

We will be closely following the Australian Law Reform Commission’s Copyright Inquiry.  Any review of the time-shifting exception and other provisions of the Copyright Act will need to be considered hand-in-hand with the recommendations in the Convergence Review Committee’s final report in order to deliver an effective and fair solution for rights-holders, broadcasters and the public alike.

Media ownership and control rules  

Also significant is the Committee’s recommendation to repeal the following media ownership and control rules in the Broadcasting Services Act, replacing them with new diversity arrangements:

  1. the ‘75% audience reach rule’ for commercial television licences;
  2. the ‘2 out of 3 rule’ in relation to commercial radio broadcasting licences, commercial television broadcasting licences and newspapers associated with the commercial radio broadcasting area;
  3. the ‘2 to a market rule’ in respect of commercial radio broadcasting licences; and
  4. the ‘1 to a market rule’ in respect of commercial television licences.

The Committee proposes introducing a public interest test to ensure diversity considerations are taken into account where CSEs with significant influence at a national level are involved in mergers or acquisitions.  There has been increasing speculation in the press as to increased M&A activity in the media sector, following the release of the interim report. 

Establishment of a super-regulator

A new “super regulator” for content and communications industries, not unlike Ofcom in the UK, would be established.  Independent of government, the regulator would have power to make directions and rules (within the revised regulatory framework).  It would also deal with content-related competition issues, including making rules to promote fair and effective competition in content and communications markets.  

Industry participants have criticised this proposal saying it would add another layer of regulation, which is contrary to the Committee’s goal of removing unnecessary regulation.

Implementation and next steps

The call for submissions in response to the interim report closed on 10 February 2012, in advance of the Committee’s final report due in March 2012. 

Despite several key industry players publicly stating they would not respond to the interim report, a significant number of responses were received.  The expectation is that the Committee will use these responses, together with  recommendations from the independent media enquiry and the national classification scheme review, to refine its recommendations to Government.  This is critical.  As we noted at the outset of the Convergence Review, the Committee’s ability to recommend regulatory reform that achieves a balance between regulatory certainty and creates a level playing field requires close engagement with industry and the public.  Based on the recommendations in the Interim Report, the nut is yet to be cracked.


For a more detailed discussion of the Convergence Review Interim Report, click "Download" at the top of this article.

 



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Contacts

Sophie Bradshaw

Special Counsel. Brisbane
+61 7 3228 9399

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