Allan Brown's paper was written before the publication of To Pay or Not to Pay?, the House of Representatives Standing Committee on Transport, Communication and Infrastructure's report on pay television and other new broadcasting-related services, in November 1989.
Chairman John Saunderson says that he has 'blazed a trail' for the successful implementation of pay television in Australia. His report has five major recommendations:
1. a hybrid system comprising optic fibre cable and MDS (multi-point distribution systems), and later cable alone, as the primary delivery mechanism for pay television, with Telecom as the common carrier; multi-channel systems operating in a large number of markets (up to 40 throughout Australia, with Sydney and Melbourne divided into four areas), with exclusive franchises for each operator (up to a maximum of eight per operator around Australia);
3. regulation to ensure each operator provides at least one channel for local and community programming, and contributes 2.5% of his or her revenue for this programming;
4. 10-year licences awarded to the highest bidder in an auction system with renewal of the licenses virtually automatic (with a role for the Australian Broadcasting Tribunal in vetting the bona-fides of providers of local and community programming);
5. minimal regulation because of the direct relationship between subscriber and operator.
As in its earlier report, The Role and Functions of the Australian Broadcasting Tribunal, the Committee has in its pay television inquiry once again emphasised the need for clearly stated objectives for broadcasting. It argues that the governing objectives for pay television should be:
1. increasing diversity of programming
2. promoting diversity of ownership
3. ensuring the commercial viability of pay television.
To Pay or Not to Pay is a document very much framed within the current crisis of broadcasting. The networks argued strongly against a decision to introduce pay television next year when the existing moratorium runs out; but in restructuring their networking arrangements so rapidly as to eclipse localism, it seems that they have the reverse effect of strengthening the arguments in favour of pay. With networks likely to offer increasingly 'more of the same', combined with the implementation of the policies of equalisation of commercial services in regional areas and aggregation of regional markets, it is not surprising that the Committee has fixed on a major new rationale for introducing pay television in this country: to enhance localism and diversity of programming.
The report's proposal for community access style programming on cable television is drawn from an American model of the 1960s. Saunderson has linked it to localism by recommending that each exclusive franchise holder throughout the country should carry 'non-commercial' community programming.
The Committee's report runs counter to global trends towards satellite-delivered pay television (DBS). While new pay services in New Zealand, Britain, and Europe are being hustled into existence by entrepreneurs within increasingly deregulated environments, the Saunderson Committee, with its objectives-based approach, has rejected satellite as a delivery mechanism 'because it cannot satisfy several selection criteria'.
AUSSAT configured its B-series satellites specifically for national pay television, and as a result would be unable to deliver either more diversity of ownership, or local and community programming. AUSSAT attempted a technological coup in the pay television debate by committing itself years ago to a particular configuration of its B-series satellites.
Saunderson has however agreed with the now widely held view that the future, not only of pay television services but of an enhanced range of telecommunications service, lies with fibre optic cable. The short-term hybrid delivery mode of cable-MDS is proposed as a way of enabling pay television to start within eighteen months of a Government decision-in-principle, which the Committee recommends be made forthwith, to introduce pay television.
Perhaps the most dramatic aspect of the report is the way it marries entrepreneurial commercialism with unapologetically non-commercial objectives. While To Pay or Not to Pay does not go into detail on the potential providers for, or the actual shape of, non-commercial programming for pay television, it clearly holds out to the public television lobby the opportunity to jump on the bandwagon of this model for new broadcasting services.
The report suggests that public television interests should not hold out for the remaining UHF frequencies in the major capital cities, an option which it sees as requiring open-ended federal funding and thus being difficult to place on a secure financial footing. Rather, they should take heart from the recommended legislative requirement that pay operators carry non-commercial programming and divert a proportion of revenue to this programming.
The report leaves some key areas undeveloped or hazy. Following the American franchise model for pay television, it breaks up the potential national aggregate into up to 40 franchise markets. But the franchise operators will have to be served, as 'retailers' of pay, by 'wholesaler' program providers/packagers. Very little is said about this wholesale level in the market structure for pay. Yet these 'middlemen' will play a crucial role, almost certainly operating nationally, and being able to enter into vertically-integrated relationships with any number of franchise holders. While there is a recommended restriction on the number of franchises any one interest can hold (eight nationally, four in any state, and one in any capital city, with no licensee being allowed access to more than 20% of the total Australian audience), the wholesale level is not subject to any similar constraints.
The environment for consumers is another issue which is left vague: in some cases consumers will have to contract with carriers (Telecom, MDS providers) for provision of the delivery mechanism, but also they will need to contract with the franchise holders as subscribers to services. This could make for a confused and complex 'direct relationship' between subscriber and the pay service.
Within the fragmented market structure proposed by the report, reaching critical mass to ensure commercial viability may also present a significant problem for the franchise operator. It is a problem which would flow on and diminish the possibility of fulfilling non-commercial objectives: 2.5% of not much means very little for community and local programming. In the short to medium term, it seems unlikely that revenue would be sufficient to meet the needs of community television outlets unless supplemented by sponsorship or other forms of revenue.
The report retreats from a major objective of the existing broadcasting system, namely Australian content regulation. It recommends that there be no local content regulation of pay television, but hedges its bets by recommending a review of the need for such regulation five years after the commencement of services. Lack of Australian content rules may produce programming diversity of a kind the Committee did not envisage in the form of a lot of forgettable American and European sport and light entertainment. The mainstream film and television production industry in Australia will find little to satisfy them in To Pay or Not to Pay.
Since the publication of the Saunderson report, little has happened publicly with regard to the introduction of pay TV, although lobbying by commercial interests for and against an in-principle decision to proceed once the moratorium period concludes in September 1990 has continued apace. Commercially funded and privately circulated studies of likely consumer demand for pay TV in Australia by the Strategic Management group last year and by information marketing consultants BIS Schrapnel in April this year (A Demand Study for Pay TV: a consumer perspective - a report prepared for commercial clients and costing $30,000 a copy!) have presented essentially bullish predictions for the medium-to-long-term viability of pay TV. The latter 'revealed' a 'huge and insatiable' demand for pay TV, and predict a penetration rate reaching one million households even in the short term owing to the perceived poor quality of commercial programming.
However, if anything, the months since the Federal election have seen the prospects of an immediate go-ahead for pay TV recede. The decision to limit foreign equity in the broadcasting networks to 20% on 22 May will certainly make the argument that pay TV should go ahead without allowing the financial state of free-to-air television to determine the issue much harder to sustain. Nevertheless, one of these options - to make an in-principle decision to proceed with pay TV, to extend the moratorium, or (most unlikely) to declare that pay is off the agenda - must be adopted by government by September this year.
Postscript: an interesting new development is the attempt by the Federal Opposition shadow minister for Communication Neil Brown to resurrect the pay debate by introducing a Bill into parliament (31/5/1990) calling for the immediate introduction of Pay TV in Australia.
New: 19 March, 1996 | Now: 15 March, 2015