Stephen Bartholomeusz
Will Conroy kill free TV?
The free-to-air networks will be feeling confused and concerned. The future is starting to accelerate towards them and, while there are some glimmers of hope within it, there’s also a lot that is threatening.
Last week the Productivity Commission reaffirmed its opposition to one leg of the regulatory settings that have sustained the free-to-airs' status as a protected species for decades, the anti-siphoning list, saying it was a blunt, anti-competitive and burdensome instrument that had produced perverse outcomes. It also maintained its opposition to allowing the networks to air programs on the list exclusively on their digital channels, saying this would impose another competitive disadvantage on subscription broadcasters.
It beseeched the Department of Broadband, Communications and the Digital Economy, which is conducting a review of the anti-siphoning scheme, to have regard for its recommendation that the list should be substantially shortened.
While the PC was again urging the government to free-up competition for programming – much of which, indeed most of which, the networks don’t actually broadcast – the minister, Stephen Conroy, fresh from dropping his bombshell on Telstra last week, was apparently giving the networks the welcome news that there would be no fourth commercial TV licence.
However, he also is said to have foreshadowed an early return of the analogue spectrum the networks have been hoarding and which should become surplus to their needs when the switchover to digital broadcasting is finally (and belatedly) completed by the end of 2013.
That spectrum represents a big, $1 billion-plus pile of cash for the government because it will be fought over by the spectrum-hungry wireless operators for their so-called 4G wireless broadband services.
As the government seeks to develop its digital economy strategy, it will have to consider the relationships and interactions between the networks, the pay TV services and the looming explosion of internet protocol television (IPTV) services within a 21st century regulatory framework.
The fourth licence issue is an anachronistic one. No-one in their right minds would want to establish another conventional free-to-air network, given the fragmentation of audiences that is already occurring and the likelihood that it will accelerate as the penetration of new distribution platforms, including wireless, continues to deepen. The debt-laden networks that once dominated broadcasting are in structural decline.
The wild card in the development of new policy settings is the government’s contentious commitment to building a new national broadband network, regardless of cost. Conroy’s willingness to do whatever it takes to buttress the questionable economics of the NBN – including using threats to undermine Telstra’s ability to negotiate the terms on which it might cooperate with the new network – ought to be a concern for the networks.
To make any sense at all of the cost of the NBN it needs, not just a monopoly and all Telstra’s customer base, but also new applications that drive traffic volumes beyond those of the industry today. Video – and IPTV in particular, given its mass market potential – is an obvious application.
It’s coming anyway, whether the NBN or the networks like it or not. Foxtel will offer a limited service before the end of the year, Telstra is bulking up its IPTV strategy and the early adopters are already downloading television and movie programming today. The wireless operators also see video content as an increasingly valuable higher-margin service.
While protecting the NBN, rather than the networks, would appear to be incompatible with a strategy of an early release of the analogue spectrum the networks are hoarding, fourth generation wireless would create a bigger distribution platform for IPTV content and help drive take-up and volume of IPTV services. It could be highly complementary to the NBN.
The prospect of that spectrum becoming available soon – it could be auctioned off, as occurred in the US, well ahead of the switch-off date to give the bidders time to plan their usage and to make their investments in advance – would also add potency and immediacy to the threat Conroy made to Telstra last week.
Telstra faces exclusion from that spectrum auction unless it cooperates with the NBN on Conroy’s terms. If it is excluded, that would ultimately destroy the competitiveness of its market-leading wireless business. If it succumbs to the threat, there would be enormous incentives for it to drive the development of a 4G wireless service to offset the forced, rapid and terminal decline of its existing fixed-line services.
If the free-to-airs faced broader competition for programming and audiences across multiple distribution platforms and without the protection from their ability to squat on the spectrum and a multitude of exclusive rights to broadcast sporting events, their residual oligopolistic rents would be under the severest of threats.
However, the network-centric regulatory framework is an anachronism in an environment where digital technologies are converging to create a new era for both content and distribution. They’ve slowed the tide but the future is now racing towards them.
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