Opening the door to the digital era: regulating Australia's future broadcast and new media industry

While we cannot predict the future with any confidence, the advent of a new technology, one which opens up a new broadcasting spectrum, necessarily requires public authorities to act. Some aspects of regulation will continue into the new digital area. This will be especially true of those rules enunciating ethical principles. Just because news or current affairs is being broadcast by radio or television, in analogue or digital, does not change those principles. For example, we would still expect news to be distinguishable from comment. We would still expect a proper respect for people's privacy.

At the very least, public authorities will have to legislate to enable broadcasters to migrate to the new spectrum with appropriate legal protection. It is universally agreed that digital transmission offers many advantages – improved reception, resolution and sound, and the ability to transmit more information than before. With compression, the digital spectrum can accommodate more services than analogue.

But what else can public authorities do?

It is relevant at this stage to recall that the public authorities can do three things about the market. First, they can seek to control the conduct of those in the market. Second, they can seek to change the structure of the market. Third, they can provide public participation in the market itself for some regulation to be effective. Unilateral action may not be sufficient. It may have to be through international co-operation and harmonisation. (Otherwise the dominant world power could become the effective de facto world regulator.)

Why should the public authorities act? For one reason only: the public benefit.

An assessment of the public benefit will no doubt include what are perceived to be desirable economic outcomes – about the structure of the market, competition, intellectual property law, foreign investment, employment, and in geographically larger countries, regional considerations.

Then there will be desirable social and economic outcomes. Above all, these will be concerned with policies to promote basic rights, especially freedom of speech and the press. There will be other concerns – consumer protection, and the advancement of the nation’s culture.

For example, it is common in many countries to specify a minimum number of hours of local content. Technology allows or will soon allow the streaming of TV broadcasts through the Internet. Would it be fair to impose those restrictions on domestic broadcasters if foreign broadcasters were to gain significant ratings in the market? How likely the entrance of such broadcasters will be has yet to be seen, particularly where a domestic market is protected by language. Communities like to see news and entertainment that is about and involves that community. We have yet to see the extent to which streamed or satellite foreign broadcasts can conquer domestic markets. Certainly, dubbed foreign films have been successful in the world’s cinemas.

In any event, public authorities who wish to maintain local content will have to consider the range of options open to them. Mandatory broadcast requirements of local content by commercial broadcasters may no longer be viable. Only time will tell. But other options may need to be considered, for example, direct assistance to producers and public broadcasting.

The point of all this is that it is desirable that advisors and regulators attempt to sketch out all the most likely scenarios for the future, and then suggest policy options to achieve those outcomes which are believed to be of public benefit.

Introduction of Digital TV in Australia

Broadcasters began to transmit in digital mode in all mainland capital cities in Australia on 1 January 2001. With minor exceptions, other areas are to have digital TV by 1 January 2004. They are required to transmit in high definition within two years a minimum period of 20 hours each week.

Australian digital television is based on the European DVB set of technical standards, rather than the US ATSC system.

Each of the five broadcasters has received an allocation of bandwidth sufficient to broadcast in digital mode: 7 megahertz. This is on the basis that they "use it or lose it".

The two national or public broadcasters, the ABC and SBS, may use their bandwidth to broadcast three or four different programmes simultaneously – as we say, "multi channel". Three commercial broadcasters in each city do not have this option, with one small exception, which allows different aspects of the same sporting contest to be broadcast or a sports broadcast to continue when it overruns and clashes with the scheduled news.

These restrictions have been put in place after seeing what has happened in the US. There, the broadcasters campaigned for sufficiently wide bandwidth to broadcast in high definition, but are under no obligation to do so. In other words, they potentially have a windfall.

Simulcasting analogue and digital broadcasting is to continue for a least eight years. Nor can there be new entrants into commercial TV until 31 December 2006. This moratorium was adapted by Parliament in recognition of the cost to existing broadcasters in introducing digital television. Until then, spare channels will be auctioned for datacasting, which by definition cannot equate to television. Datacasters may be allowed to convert into television stations from 2006, but this is subject to enabling legislation.

When the Parliament does allow these datacasters to become television broadcasters, our existing commercial broadcasters will no doubt demand that the present cross-media and foreign investment restrictions be reconsidered. This will, of course, be a matter for Parliament. But it would be difficult to justify different regimes applicable to two different classes of commercial TV broadcasters.

The Australian requirement that broadcasters transmit in both High Definition (HDTV) and Standard Digital (SDTV) mode gives the viewer four options. These are:

• staying with analogue television for at least eight years, or
• acquiring a set-top box to use with an existing receiver, or
• acquiring a lower-cost SDTV receiver with a wide screen, or
• acquiring HDTV receiver at, of course, a higher cost.

Had the Parliament not mandated HDTV, and later simultaneous SDTV, it is highly unlikely the consumers would have had this choice, at least on free-to-air TV. This scheme has its supporters and its critics.

The critics include the Productivity Commission. In its report last year the Commission argued that HDTV receivers will be too expensive for most Australians. It is claimed that to enjoy the full benefits of HDTV the consumer will need to acquire a large screen and a surround-sound system, a virtual home cinema. I am not in the business of predictions but I would expect that many people, and not only in Australia, would be attracted to home cinema. This would be especially so in a community which places a high priority on sport.

In summary, it will be seen that this scheme is at least in part transitory, that is there is a moratorium as to new entrants and the date for the shutting down of analogue broadcasting is delayed. In any event, this has broad support across the political spectrum, although the media is divided.

The Future

I propose now to refer the medium and longer-term effects of digitalisation and convergence.

This new technology enables a move away from mass production. It is said not to favour vertical and horizontally integrated corporate structures, but some recent developments in the real world challenge this assumption. Further it is said to permit a move from a domestic market focus towards greater internationalization.

How should public authorities react to this or other technological developments? One school of thought seems to be that government must not stand in the way of the benefits which will accrue to humanity from significant technological advances. An extreme version of this is that the Internet, for example, is so sacred that the law must not touch it.

While it is impossible to predict the effects of digitalisation, it is appropriate to consider any likely developments, as far as we can see them. As I have said, public authorities quite properly have an agenda and they have ways to intervene to try to realise the public benefits.

Of course, public authorities could always do little or almost nothing. They could enable only the migration of existing broadcasters to digital and do nothing else.

If public authorities do nothing else about the consequences of digitalisation, its effects will be decided by market forces and by the existing regulatory infrastructure. This may not be at all desirable. The market is more likely than not to be dominated by a few players, perhaps domestic and possibly foreign. Will their interests be identical to the public’s?

Apart from leaving the issue to the market, the present raft of laws, regulations and polices may no longer be appropriate.

For example, any cross-media rules or restrictions on foreign investment, if restricted to existing commercial broadcasters only, may be of little public benefit. There is thus a need to review broadcasting regulation in the light of any significant technological development.

It is unlikely that nothing at all will change with digitalisation, streaming and other technological developments. It is possible that multinational firms will seek to gain even more influence. But there will also be scope for smaller domestic and foreign firms in providing niche services.

And larger multilateral firms may not have the influence we expect. While the AOL-Time Warner merger may concentrate in the hands of one corporation a wide range of delivery services, I suspect it will still have much the same content.

It seems that the digital spectrum, even if reserved for high-definition transmissions, will allow new entrants into the market. With cable, satellite and the Internet, spectrum scarcity, a pillar of broadcasting regulation, is being circumvented. But cable, much satellite broadcasting and the streaming of broadcasts through the Internet are not accessible without any noticeable cost to the viewer, unlike free-to-air TV.

In conclusion, I therefore suggest the following:

We shall regularly need to work out what are the likely scenarios resulting from technological change. We shall need to do this against the answers to three important questions.

First, what do we want to achieve, economically, socially and culturally? This will of course involve a reaffirmation of these ethical principles which should continue, notwithstanding the way in which the content is delivered to the public. As to other outcomes, it would be highly desirable that the answers to that enjoy a wide community consensus.

Second, what are the ways in which we as the public authorities of one state or jurisdiction (however defined) can still act unilaterally?

Third, what are the ways in which the public authorities of the region or the world can collaborate to achieve our ends?