Streaming negates media ownership laws: NBN chair

Ziggy Switkowski, the chairman of the company rolling out high-speed broadband across Australia, has said IPTV has caused obsolescence in decades-old cross-media ownership laws.
Written by Corinne Reichert, Contributor

National Broadband Network (NBN) chair Ziggy Switkowski has argued that Australia's cross-media ownership laws should are no longer necessary, as the advent of streaming video-on-demand services such as Netflix have rendered them "obsolete".

According to Switkowski, one of the primary needs for high-speed broadband is to provide consumers with a high enough quality connection to deliver over-the-top (OTT) video services, with the chair arguing that streaming is only going to grow in popularity, as demonstrated by telecommunications carrier Optus recently acquiring the exclusive rights to broadcast the English Premier League, taking them away from pay TV provider Foxtel.

"This train is only going to gather speed. We've seen the recent move by Optus to acquire the EPL soccer rights, and we're likely to see an increasing number of these kinds of deals in the future as the arrival of OTT and the national availability of high-speed broadband creates far more competition in the subscription and broadcast TV market," Switkowski said, speaking at Monday's CommsDay NBN Forum in Sydney.

The chair said the change in the TV industry has been "extraordinarily rapid", with consumers going from having only two TV sets in their households to having a dozen laptop, smartphone, and tablet screens streaming content in every home.

Switkowski identified streaming as a public policy issue that the NBN, as it continues its rollout, will "amplify" over the next five years, saying traditional media ownership rules -- specifically, the rule providing that a single entity may only own two out of three forms of media at maximum, and have 75 percent reach -- are no longer relevant.

"The cross-media ownership rules ... seem in a broadband world to be increasingly obsolescent. So does regulation by traditional content-delivery channels make any sense now, or might it make any sense at all in 2020?" he said.

The chair pointed out that these laws were written before high-speed broadband made alternative forms of broadcasting content readily available.

"At a time when the only media were broadcast television, radio, and print, and with concentrated ownership, which was the case in the 1990s, that environment gave birth to the two-out-of-three rule," he said.

"Now, with such a diversity of content-delivery options provided by availability of the internet in the first instance, but [high-speed] broadband in the second instance, one questions the continuing relevance of a two-out-of-three rule. I think that is a debate that is ongoing, and I expect that that will be a policy matter that will be revisited.

"My personal view is I don't see the continuing relevance of a two-out-of-three rule or the 75 percent reach rule in 2015."

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

"The two-out-of-three 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 two-out-of-three rule, from 30 years ago, redundant," said ACCC chairman Rod Sims.

"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 two-out-of-three rule and the 75 percent reach rule were introduced before the emergence of the internet."

Switkowski also addressed whether media anti-siphoning rules remain necessary, pointing out that they, too, predate not only widespread internet usage, but even pay TV.

"Anti-siphoning rules date back to 1992, with the Broadcast Services Act, and just ahead of the arrival of pay TV ... a very high proportion of video-on-demand households will challenge the continuing purpose of an anti-siphoning regime, and I've seen the chairman of the ACCC opine on this matter, and I think it is a matter worthy of continuing debate," Switkowski said.

Sims had also discussed this, arguing that the anti-siphoning rule may 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."

Government regulatory bodies are beginning to recognise the changes within the industry; last week, the Australian Communications and Media Authority (ACMA) announced the registration of a new Commercial Television Industry Code of Practice, written mainly in response to how streaming services have affected complaints handling, privacy, advertising, content programming, and classification.

"Since the previous code was registered in late 2009, there have been tremendous shifts in the media landscape. Many of the provisions in the earlier code had been around for 20 years or so -- from an analogue era where viewers could only source content from three commercial free-to-air channels and two national broadcasting channels," said ACMA chairman Chris Chapman.

"The new code reflects the reality that television is operating in a new, digital era in which content can be viewed from a wide variety of sources and on a wide variety of platforms. The digital era has brought many challenges for broadcasters, and there were aspects of the previous code which made it difficult for them to respond and innovate."

The ACMA's new TV code will come into operation from December 1, 2015.

Last month, the ACCC also 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, 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 government has also responded to the increasing popularity of streaming services by revealing draft exposure legislation that will see GST added to all digital products and services purchased online by Australians.

"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."

The law governing GST on digital products, if passed, is set to come into effect on July 1, 2017.

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