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Communications reform

March 17th, 2006

My piece in yesterday’s Fin is over the fold. I go into full free-market mode attacking the government’s deal with the monopolists. Ken Davidson in the Age goes the other way, arguing for tight regulation in the public interest, but I can’t see this ever happening to Murdoch or even Packer jnr. On the other hand, I guess we’re not going to see their spectrum taken away and auctioned off either. On the whole, though, I think the only useful intervention here is support for a strong public broadcasting sector. As far as the commercial networks go, the best hope is to encourage the kind of outside competition made possible by digital technology.

The point on which Ken and I agree, I think, is that we now have the worst of both worlds: lots of intervention, but in the interests of monopolists, not the public.

If we needed further evidence on the undesirability of a government having control of the Senate, the media policy announced by Communications Minister Helen Coonan is a perfect example. Although it takes the form of a discussion paper, there is little doubt that the main proposals will pass into law.

The policy is a cosy deal between the government and the media monopolies it has created through the grant of TV and radio licenses, and through the half-public, half-private chimera that is Telstra. The interests of the Australian public in diversity, choice and competition have been disregarded completely.

Such a deal could never have been pushed through an Opposition-controlled Senate. This is not because Labor is more devoted to consumer interests than Liberals. Rather, it is always in the interests of opposition parties to block a deal that is bound to secure favorable media treatment for the government. Standing up for consumers can only benefit them.

Looking at the proposal in detail, the big win for the industry is the removal of restrictions on cross-media ownership and on foreign ownership in general. Not surprisingly, there is an industry consensus in favour of these changes, which can only increase the value of existing media assets.

Another big win for the monopolists is the removal of the threat of a fourth free-to-air television network. Under the existing rules, the Australian Communications and Media Authority could have allowed such a network to commence in 2007. The government plans to take over this power, but not to exercise it. Consultations with the incumbents have revealed, unsurprisingly, that there is no need for any more competition in the free-to-air market.

The authoritarian plan to force consumers to abandon analog TV and video equipment, or pay for expensive converters, remains in force. It has long been evident that the planned date of 2008 could not possibly be met without inciting a mass revolt. But rather than rethink the issue, Senator Coonan has just deferred the problem until 2010 and promised a Digital Action Plan to enforce the change.

Such compulsion would not be needed if digital providers were allowed to offer services consumers actually want, instead of a bigger, brighter version of the status quo. The deferral of the phaseout has been accompanied by an extension of existing prohibitions on multichannelling, limitations on datacasting, requirements for high-definition TV broadcasting and so on.

It is dismaying to think about all the options that are being foreclosed here. We could have dozens of channels, limited only by the availability of content to fill them (a limitation that is becoming steadily less severe as the digital revolution reduces the costs of creating video). There are all sorts of possibilities for niche services, most of which will never see the light of day. Instead we are being offered the same half a dozen options we’ve had for more than a decade: three commercial free to air networks, two public broadcasters and Foxtel monopoly, with some grudging extensions for datacasting.

There is still time to change all this. Rather than continuing on the command-and-control path for another five to ten years, the government could announce that spectrum will progressively be freed from control and allocated to whatever use the market finds most valuable. The practice of giving spectrum away to favored monopolists should be replaced by an auction similar to that used for other parts to the telecommunications spectrum.

The decision as to when to cease analog broadcasts could be left to the commercial judgement of broadcasters themselves, while households could make up their own minds about whether to switch to digital, or stick with analog equipment and buy converters when the necessity arises.

The possibility is still open, but there is little hope that it will be realised. The government has come up with a deal that suits everyone that matters. The Packers, Murdochs and Trujillos will all be happy, and there are even some concessions to placate the ABC and SBS. It is only the public who miss out.

If this legislation had to pass a potentially hostile Senate, there would be some chance of beneficial amendments. As it is, and assuming there’s nothing here to cause Barnaby Joyce any difficulties, it will sail through the Parliament. We can look forward to waiting a decade or more before the whole system breaks down under its own weight and we finally realise some benefits from the digital broadcasting revolution.

John Quiggin is an ARC Federation Fellow in Economics and Political Science at the University of Queensland.

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  1. Katz
    March 17th, 2006 at 14:59 | #1

    Nice work JQ.

    You’ve presented a very strong basis for a case that the Coalition are the willing servants of media monopolies.

    The monopolies’ government-protected control of the severely rationed broadcasting spectra means that Australians will continue to be condemned to a diet of “radio with pictures”.

    One wonders how powerful the electoral threat must be before the Coalition dumps as a bad political risk their support for the broadcast monopolists.

    This may be an effective wedge issue for the ALP, were they ever to stir themselves from their torpor.

    I read that there has been a gold rush for plasma TVs recently. All those aspirationals have set up their home theatres only to discover the same old TV fare.

    It is likely that many of them would prefer to have a richer TV diet, a diet that can be so readily catered to by diversification of ownership and control of the much augmented TV broadcast spectrum.

    Perhaps the ALP could gain much needed traction by promising a televisual cornucopia to all those dissatisfied folks out there in TV Land.

  2. March 17th, 2006 at 15:05 | #2

    I’ll reveal my ignorance: Is digital TV that much better than analog TV?

  3. March 17th, 2006 at 15:27 | #3

    The DBA website has some useful info in their FAQ:

    http://www.dba.org.au/index.asp?sectionID=7#What_benefits_will_digital_tv_provide

    From a practical perspective as a current consumer of digital TV there’s two differences to talk about.

    Firstly there’s differences in content: broadcasters will typically chop off widescreen content in analog transmission, so you only see the full picture in digital. Also, there’s a couple of channels that are only broadcast on digital (ABC2 and SBS World News). Datacasting only just started here in January, though I’ve not tried it yet.

    Secondly, there’s a technical difference in what you can *do* with digital TV in your own home. At the moment, you can record TV just as if it was downloaded off the Internet. So it can then be saved off to DVD, or time-shifted (ie. you can pause the broadcast to go make a cuppa, come back and fast-forward through ads). These things scare the willies out of the MPAA and others in the US and they’re proposing “broadcast flags” and other such nonsense to prevent consumers from doing these things to their precious content.

  4. Terje
    March 17th, 2006 at 16:57 | #4

    There is still time to change all this. Rather than continuing on the command-and-control path for another five to ten years, the government could announce that spectrum will progressively be freed from control and allocated to whatever use the market finds most valuable. The practice of giving spectrum away to favored monopolists should be replaced by an auction similar to that used for other parts to the telecommunications spectrum.

    I do agree, however.

    If you think of Websites as being like TV channels then the Internet demonstrates that open access to all players does not result in the demise of quality. It may be the case that most websites are [email protected], however who cares when you can easily surf to the good ones. The fact that many people spend more time surfing the Internet rather than watching TV is testament to the quality of Internet content.

    Of course in wireless communications (TV broadcast, mobile phones etc) there is a need to ration bandwidth due to technical limits on the total capacity.

    One problem with Auctions is that you still need to decide how you carve up the spectrum for the purposes of the auction. Things such as how you recycle frequency from region to region and how much power people can transmit at. In essence you have to decide the lots in which the bandwidth will be auctioned. All of which makes some assumptions about the applications to which the frequencies will be put.

    For instance a microwave transmission from point to point may occupy a frequency that can be easily recycled in another part of town. Where as a TV broadcast will occupy an area defined by a large region dependent on the power of the transmission. Also a digital transmission using Code Division Multiplexing will allow bandwidth recycling in ways different to FM or AM transmissions. Different transmission techniques have a different roll off characteristic in terms of how they behave at regional edges.

    Imagine if Sydney has a GSM network in the 1800MHz range and in Melbourne this bandwidth has been sold to a TV broadcaster. Then when you take your Sydney mobile phone to Victoria it will be trying to broadcasting a signal in a part of the spectrum that will not in general welcome such interference.

    As such I would claim that any given frequency auction will be biased towards certain applications. This is not to say that auctions are a bad idea, but rather to point out that they are imperfect (like most market based and most government based solutions).

    I would expect that bandwidth will continue to be allocated to particular applications according to a government policy framework and that auctions will occur within these allocations according to the technological rules that make sence for the anticipate applications that will use the bandwidth.

    In practice this will mean that an area of bandwidth is allocated to narrow band voice broadcasting (ie radio) and that within this allocation bandwidth will be subdivided and sold via an auction. Another part of the spectrum will be allocated to mobile telephone services and within this allocation bandwidth will be subdivided (according to the technological requirements) and sold via an auction.

    Amoungst the various allocations I think we need to retain the idea of a frequency commons for such things as remote control toys, cordless phones and WiFi networks which all currently use unlicenced frequencies.

    This idea of allocations is not overly different to what regional governments do with the zoning of land. Land may be allocated for industrial use or residential use but within those zonings the land is carved up and the detailed allocation sorted out in the market place.

    And as technology is changing and the applications available change I think that the types of bandwidth zones will also change. To me there seems to be little scope for the government to simply set up an auction scheme, forget the technology involved and take an entirely agnostic view of bandwidth allocation. Even though the libertarian within would wish for such a situation.

    For the really pro-market thinkers the government could simply carve out big allocations of bandwidth that cover the entire nation and then lease them long term to a small number of large private holders, that would in turn carve these up through sub-leases in the manner that they saw best fit to maximise their commercial yield. However even this has problems because low frequency bandwidth behaves differently to high frequency bandwidth and these large players would not be purely competative. High frequency electromagnetic radiation (like light) does not bend around corners well, whilst low frequency electromagnetic radiation (like an AM transmission) bends around all sorts of obstacles. As such frequencies at different ends of the spectrum are optimal for certain types of technology.

    And whilst we are remembering that visible light is also part of the electromagnetic spectrum we might want to remember to reserve it as a commons also.

  5. March 17th, 2006 at 19:06 | #5

    WRT plasma TVs and home theatres, don’t forget that lots of people hire DVD movies rather than consume the free-to-air offal. I read an article only the other day (share price of Hoyts perhaps?) indicating that the home theatre craze is killing the movies (NB: not cinema, I hope) because of high prices for entry and ‘candy’, and intolerably loud sound. I wouldn’t know, the last one we saw was Bowling for Columbine – no soundtrack as I recall.

  6. March 17th, 2006 at 22:35 | #6

    I would have to agree with Richard about the digital video recorders. I sometimes do the really geeky thing of recording the show and then taking out the ads and transforming it into a form that will go on my PDA. I can then watch the show, sans ads, on the train going to work.

    My wife, who could not program the old VCR, now regularly schedules recordings because digital TV has an electronic program guide that on my hard disk digital recorder you can just highlight the show in the guide and press record and it is scheduled. No more looking for tapes. You can also tape 2 shows at the same time.

    Digital for me is a huge difference.

  7. Dogz
    March 18th, 2006 at 10:39 | #7

    I completely agree that is just more of the same gutless, fawning, pathetic crap that suceessive Australian governments have foisted on the Australian public under the guise of “communications policy”.

    But it may not really matter anymore. I already download about 60% of the TV shows I and and my kids want to watch directly from bittorrent networks. About 5 or 6 hours a week of the stuff. I don’t have to wait the 6-8 months one typically has to wait in Oz to watch the latest seasons of the US shows. And I am not limited to the meagre programming the monopolists deign to broadcast.

    I have no doubt that without the artificial monopoly restrictions over TV in Australia at present, I would be able to access or purchase access to this content through the normal channels. So while technically downloading is copyright infringement, it is the government that gave away and maintains the monopoly rights over the public spectrum, so it is the government that made me into an outlaw. Therefore, I have no compunction whatsoever with regards to downloading.

    And I am not alone. Australia is the second-largest nation for downloading TV. In absolute terms, not per capita.

  8. Derick Cullen
    March 19th, 2006 at 15:02 | #8

    PrQ: “We could have dozens of channels, limited only by the availability of content to fill them (a limitation that is becoming steadily less severe as the digital revolution reduces the costs of creating video). ”

    Whilst I agree with the thrust of this argument, there is one area where we might be sadly disappointed. Brian Toohey on ABCTV today pointed out that news delivery was a very expensive business, and that we are unlikely to have any serious competition to mainstream news providers even if we had dozens of channels.

    He said blogs were opinion delivery media, not news delivery.

  9. jquiggin
    March 19th, 2006 at 19:55 | #9

    I must admit this is the weakest point in my argument. I think there are lots of opportunities for creative stuff to be done, but it’s very costly to match the production values of traditional TV.

  10. March 19th, 2006 at 22:54 | #10

    The production values of traditional TV like Dr. Who and Star Trek were vastly surpassed by their successors – but what made them work on their level was the artistic input which, among other things, had to transcend the earlier technical limitations. In the same way, once the right artistic input is there, “traditional” – i.e. quite newly realised, though long attempted – production values won’t be what makes the successes succeed, just what tips the balance between otherwise comparable efforts.

    It’s likely that once the creative types understand the new medium, they will do things better than traditional TV, without merely repeating its objectives. After all, TV started with cinema and radio concepts, and cinema with theatrical ones, but their power only opened up once they stopped trying to be what they weren’t. I suppose the Elizabethan dramatists found the same thing when they went beyond verse assisted, community involving religious stuff.

  11. Mork
    March 20th, 2006 at 09:42 | #11

    How many times have any of us been watching TV and thought “damn, I wish the picture and sound quality were higher”?

    How many times have any of us been watching TV and thought “damn, I wish there was something on worth watching”?

    If other people’s answers to those questions are the same as mine, then I think that crystallizes somewhat what’s really driving this policy.

  12. March 21st, 2006 at 17:00 | #12

    Part of the problem is that Australian television comes off a very cheap production base. We are trying to make shows for a fifth or a tenth the cost of our American competitors. The BBC has five times as much money to spend, on a per capita basis as the ABC does, without the same distance isssues.

    Meanwhile, SPAA keeps saying that Australian television is the most profitable in the world.

    In newspapers, it is pretty obvious that the mass market and the class end are quite different. A clever proprietor, pushed by only market forces, hives off the expensive bits, and dives for the mass market. If we set up the papers that work for our market, we can’t afford the cost because the size of our community is too small.

    But, generally, we would agree that Australia needs the Australian, The Age and the SMH in something like its current form. I don’t know how we defend them over time, because the newspapers aren’t using scarce bandwidth, or taking advantage of any resource we would say the community owns.

    In the long run the internet helps, because there are tools to keep our community together around a newspaper -polls, comments, precise advertising, delivery of selected bits tailored to individual consumers.

    I am sure we will overcome the reluctance to spend money on the internet. But the question still remains – how much money can you raise by subscriptions to create a publication big enough to replace a national newspaper? Can it be done?

    Will it be necessary? The papers are claiming the loss of advertising is very dangerous. I reckon our publication – Screen Hub – has tracked a noticeable decline in cultural commentary over the last twelve months.

    The sale and gutting of Knight-Ridder in the US is tragic, and maybe a portent of the future. (to blow my own trumpet, I did a piece about that here).

  13. March 21st, 2006 at 20:15 | #13

    “Interesting” policy statement from Beazley today – looks like another instance of Labor differing from the government. This one falls into my “wrong” category, as well as being muddle-headed.
    The government is not the only ones with some study to do on communications policy before the next election.

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