Streaming services outdating competition laws: ACCC

Australian Competition and Consumer Commission (ACCC) chairman Rod Sims has argued that advances in technology such as streaming television have gone beyond the scope of competition laws, with legal and policy framework needing to catch up to innovation.

The Harper Review, published in March, had highlighted that the laws surrounding competition policy in Australia need to be updated because "priorities will change as technology changes".

According to Sims, the Harper Review is the starting point for improving and modernising competition policy, particularly in regards to IPTV and intellectual property rights.

"Very little has been said, however, on two areas of Harper focus that can boost innovation. One is the need for all governments to review regulations to remove unnecessary restrictions on competition, and the other is in relation to intellectual property," Sims said on Thursday.

Sims argued that media competition laws are outdated thanks to the advent of streaming services such as Netflix.

"Under the first heading, I think our media laws would be an excellent place to start. Flowing from our analysis of the media market in our assessment of the Foxtel/Network Ten transactions, the ACCC is well placed to have views on these issues.

"The 2 out of 3 media ownership rules may be preventing efficient delivery of content over multiple platforms, and should be reviewed to see if they are still relevant for the preservation of diversity. Surely laws that restrict acquisitions need clear justification. Changing technology may have made the initial justification for the 2 out of 3 rule, from 30 years ago, redundant.

"The 75 percent reach rule has been undermined by the ability of commercial free-to-air television to stream their content nationally via the internet. Both the 2 out of 3 rule and the 75 percent reach rule were introduced before the emergence of the internet."

He added that the anti-siphoning rule may also need to be revised due to the increasing popularity of streaming, though this would need to be balanced against the risk of pay TV providers acquiring all high-value broadcasts and consequently being able to drive up pricing.

"The concern is that, without the anti-siphoning regime, Foxtel could acquire exclusively all premium sport and reduce competition in the television viewing market," Sims said.

"If the trend of streaming live sport is replicated in Australia, particularly via paid subscription models, the anti-siphoning regime may need revisiting, but we are not there yet."

Last week, the ACCC approved an acquisition deal between Ten Network and Foxtel, giving Ten the option to take a 10 percent stake in Australian video-streaming service Presto, while Foxtel acquires 15 percent of Ten.

While the ACCC had been initially wary of approving the deal, saying in September that it could reduce competition in the traditional TV broadcasting market, it last week announced that it was satisfied the deal would not have this effect.

In approving the deal, the ACCC said it also had consideration of encouraging competition among streaming services.

"The ACCC considers the other free-to-air television networks, pay television providers, and online service providers will continue to have sufficient alternatives to allow them to obtain content that is attractive to their viewers," Sims said.

"Foxtel and Ten will continue to face competition from the remaining free-to-air networks, and streaming services are also likely to become increasingly important."

The increasing popularity of streaming services has seen the Australian government recently unveil its draft exposure legislation that will see GST added to all digital products and services purchased online by Australians from mid-2017.

"This change will result in supplies of digital products, such as streaming or downloading of movies, music, apps, games, ebooks, as well as other services such as consultancy and professional services, receiving similar GST treatment whether they are supplied by a local or foreign supplier," the explanatory material [PDF] for the exposure draft says.

"When the GST was introduced in 2000, such transactions were relatively unusual, especially for consumers. However, cross-border supplies now form a large and growing part of Australian consumption.

"The growing importance of these types of transactions has highlighted the fact that the GST system was designed with a focus on Australian-based, rather than cross-border supplies ... This harms the integrity of the GST tax base and can disadvantage local suppliers."

Last month, Optus vice president of Corporate and Regulatory Affairs David Epstein accused the ACCC of being outdated, arguing that it is at odds with fellow regulators the Australian Communications and Media Authority (ACMA) and the federal government, which is having the effect of inflexible, contradictory policy that stymies innovation.

Epstein argued the need for a modernised single, unified industry-specific regulator, saying that preventing over-regulation and promoting innovation by staying abreast of technological advancements is crucial to competing within the global digital economy.

"Effective competition policy is critical to the future economic wellbeing of the nation, and yet the existing institutional structures put in place over two decades ago are failing to keep pace with the complexities and change in technologies that embody the modern digital age," he said.

Epstein said that if the ACCC were not disbanded, it could work alongside the unified telco regulator, but with shared rather than conflicting processes.

"Such a regulator could co-exist with the ACCC -- possibly sharing commissioners, fundamental guiding principles or even a supervisory board," Epstein said.

"The political time may be right. A federal government that was embarked on a fresh start, with a renewed sense of common purpose, could simultaneously pick up where Harper left off, draw on several telco-sector reviews, recognise that the ACCC is stretched for the foreseeable future, and begin to look to a world where NBN Co's job is done. This might be a big agenda, but is one a new communications minister could grasp with the backing of a well-informed prime minister."