The past week saw two chapters in the drawn-out dismal pay-TV saga: an election and a court decision.
The story so far. Intelligent scientists and engineers invent new ways of delivering images on television screens inside lounge rooms. The owners of the lounge rooms and television screens will get many more channels delivering lots of specialist services and are willing to pay for them. Clever business people have worked with the clever engineers to devise a way to charge the people in the lounge room according to how much television they watch.
Around the world this has happened, broadening the choice of viewers, providing employment and keeping people off the streets and in front of television screens.
But not in the clever country. We have been waiting, waiting, waiting. There is only one reason for the delay: the misguided hand of government.
Now read on.
Many of those who wanted pay TV quickly hoped that the Labor Government would be tipped out at the election last Saturday. They thought the Opposition spokesman on communications, Warwick Smith, would be able to sort out the mess and get pay TV going. After all, it is technically and economically possible right now.
Alas, poor Warwick, he did not do well. He might not even get back into Parliament, let alone be Minister for Communications. The election result made it look like pay TV would be years, not months away.
But then on Thursday, despite the election result, some light emerged for frustrated television entrepreneurs and even more frustrated consumers.
In the Federal Court in Perth, Justice Lee brought down a decision that should be firm lesson to the Federal Government over pay TV. Justice Lee ruled that the Minister for Communications, Senator Bob Collins, had acted beyond his power in trying to stop a new technology that could have installed cheap, workable pay TV in all major cities in a matter of months.
The judgment itself had nothing much to do with the merits of pay TV. It was decided on a very technical legal point which for the sake of completeness I’ll explain later.
Of more importance is the message the Government should get from the judgment. The message should be: stop trying to pick winners and losers; stop trying to favour one technology over the other and stop trying to impose what it thinks is the best pay TV system.
But first some background.
Basically, there are seven methods of delivering pay TV: video (which is up and running, and more of that anon); satellite analog; satellite digital; cable; fibre optics; microwave (MDS); and through the present telephone network.
All except video require a decoder to receive the signal. The decoder also records how long the TV has been on and on which channels, so the customer can be charged. Decoders are about $400. Video, as well all know, requires a $400 VCR and payment of about $4 a movie from a hire shop.
Satellite requires a dish as well as a decoder: all up $1000.
Two of the technologies have not been developed to a workable state: satellite digital and delivery through the present telephone network, and the latter might never be better than receiving compacted movies down a phone line in a minute or two for playback later. The former has been piloted, but not is fully not fully operational.
Satellite digital will run many more channels from one satellite than analogue satellite, but Australia would have to wait for the technology to be perfected, perhaps until 1995. Analog satellite can go ahead as soon as a satellite is launched or for that matter on existing satellites.
Both satellite distributions would cover nearly the whole of Australia. Some areas, however, would be in shadow and require relators or other technologies to receive the signals.
MDS technology has a distance limitation. It only works in direct line of sight, so it requires numerous transmitters (multi-point distribution). It is only economic in dense populations, namely the capital cities, but it can go ahead now.
The Government decided before the election that digital satellite technology will be the method for pay TV in Australia. There have been many suggestions as to why it did that, from conspiracy to cock-up. The Government says that it made the decision in the best interests of consumers.
In trying to guess which technology would suit its purpose (whatever that was), the Government came gravely unstuck just before the election.
In the previous three years it had got through the Parliament an elaborate legislative scheme regulating broadcasting. The blueprint for satellite was highly regulated, largely because the Government thought (wrongly) that delivery by satellite was the only viable option for broadly based pay TV. It had not highly regulated MDS, thinking that this technology was only suitable for small-scale narrowcasting throughout small places like convention centres, hotels, prisons, schools and tiny outback towns.
Its MDS scheme provided for up to 19 licences in each major city. Steve Cosser bought 12 licences in Sydney and Melbourne quite cheaply over the counter. That left only six in each of those cities and between 14 and 19 in the other major cities (the capitals, Newcastle, Wollongong, Gold Coast, Cairns and Alice Springs). Cosser had gutted Sydney and Melbourne.
The MDS licences provided permission to transmit still pictures, text and graphics and non-entertainment video. It provided also permission to transmit entertainment video to domestic residences subject to Australian Broadcasting Tribunal licensing.
Initially, it was thought that MDS would not provide the quality for a full-scale city-wide domestic pay TV service, so no-one much worried about it.
On January 18, tenders were called for the remaining MDS licences with tenders to close on January 29. Among the tenderers were Mr Cosser and Kerry Stokes’s Australian Capital Equity. (It should be stated that Mr Stokes owns The Canberra Times, but had not input into this article.)
Then the alarm bells began ringing. MDS it was realised could in fact go city-wide. Mr Cosser’s licences, if he got ABA licences as well, would be enough to cover Sydney and Melbourne with pay TV at least two years before the Government’s preferred satellite method got off the ground, as it were.
Shock, horror. Kerry Packer and Rupert Murdoch might have been scooped by Mr Cosser.
On January 29, Senator Collins did two things. He revoked the tender and he ordered the ABA not to grant licences to Mr Cosser or anyone else to transmit pay TV into domestic households.
This had nothing to do with the people interested in satellite delivery, he said. It was purely to protect consumers against the delivery of what he called an inferior pay TV system. Yes, minister, of course.
But the minister got his partial come uppance on Thursday. Justice Lee ruled that the revocation of the tender was invalid. With legal technical excellence, Justice Lee reasoned as follows. Generally, a quasi-legislative ministerial rule-making power such as that under the Broadcasting Act gave not only the power to create rules, but also to revoke them. But Senator Collins was wrong in thinking that the calling of tenders was the creation of a statutory rule. It was an executive act and reviewable. Once begun it created rights which could not be taken away arbitrarily.
And in any event, he ruled, the elaborate scheme contemplated in the Act indicated a contrary intention by Parliament to the general principle of delegated legislation that what the Minister does he can also undo. Justice Lee also hinted that the whole tender process might be invalid anyway and hinted at several other unsatisfactory things about the whole fiasco.
Next week ACE and the other parties will have to argue what are the consequences of Thursday’s ruling. Should the whole tender process be reopened? Should only those who put tenders in now be eligible? Or should some others be allowed in if they can prove that they were about to lodge but for the Minister’s action.
If the judge decides the first, Kerry Packer and Rupert Murdoch will, no doubt, put in some (very high tenders). But there are solid reasons for arguing that they are too late. If the Minister’s action was invalid, then the January 18-29 tender was at all times legally on foot and should proceed. Tenders are now closed. Perhaps there would be some justice in allowing those who could prove they were about to tender but for the Minister’s illegal interference; but that’s all.
So where does that leave us? Even if the existing tender goes ahead, it will not automatically mean Mr Cosser’s Broadcom or Mr Stokes’s ACE can launch pay TV. They would still have to overcome the Minister’s direction to the ABA not to give any domestic pay TV licences to MDS licence-holders. Remember, this is a two stage process. ACE has not joined Mr Cosser’s legal challenge to that directive. It can happily use the MDS licences for the lesser non-domestic purposes.
The Minister will want to wait until next week’s further argument before taking any further action, but he seems very determined to save consumers from what he calls an inferior technology. He seems determined, too, to ensure that the Government’s preferred option of satellite digital goes ahead. After all, the Government is obliged to Optus which has the satellite rights. It is obliged because when it allowed competition against OTC and Telecom it saddled the competitor with the AUSSAT white elephant and rights to put up a new satellite.
That elephant is looking whiter than white now. Unlike the Minister.
Optus attempted unsuccessfully to launch a new satellite last year and will have another shot at this year.
So we have failed satellites and undeveloped satellite digital technology and a Minister set upon stopping a pay TV system that could be up in months because he wants to protect consumers and arguably look after influential big players and honour its white elephant sale. The only thing that does not seem to be happening is getting pay TV into Australians’ homes.
Those Australian consumers must be truly grateful to Senator Collins for saving them from inferior technology.
But if Senator Collins and the Government are right, where were they in the early 1980s when the pioneer pay-TV system, video, was being introduced? Where was Senator Collins when the hundreds of video-hire outlets were opening?
Why wasn’t he there telling us that VHS was better than Beta? Why weren’t government officials in white coats checking the quality of the videos being hired out to see if the picture would be satisfactory? Surely, consumers should have been protected by Nanny State against the unscrupulous providers of inferior products.
Consumers of high-tech about to invest up to $1000 in video-cassette recording equipment are far to dumb to decide on their own whether they should invest in it and whether there would be sufficient supply of program material.
Consumers are far to stupid to make those sorts of choices. Nanny State must make the choice for them. Nanny State must make sure they do not shell out $1000 for something that might not work. Senator Collins should have been there regulating us and ensuring that Australian consumers were deprived of video technology for at least five years while the Government protected them from spending their money on something that might not work.
Well we know why. Nanny State was not needed at all. Consumers made up their own minds and the result has been more than satisfactory.
The video industry is an apt comparison. Its turnover is now $650 million a year, according to industry sources, and it employs 6000 people. That is more than Steve Cosser says his MDS will do. Yet video did not need Nanny State’s interference that Senator Collins says is necessary to MDS. More pertinently 170 million videos are hired each year. If an average of two people watch each video, that is nearly 10 times the cinema audience and about 35 hours per person capable of paying per year. If everyone is watching the box an hour a day (as distinct from having it on as background noise), video now represents perhaps as much as 10 per cent of the acting viewing audience, certainly at least 5 per cent.
Yet this technology was introduced without any interference from Nanny State. The industry and consumers just got on with it. Some video outlets went broke. Some VCR machines broke. Some became obsolete.
If that is good enough for video why not other forms of pay TV delivery? And let’s face it video is just another form of pay TV.
The only reason the Government did not interfere with video was that it did not have the constitutional power to. Heaven help us if it had. We probably would still be arguing through parliamentary committees and the courts.
The Constitution gives the Federal Parliament power “”over postal, telegraphic, telephonic and other like services”, which the High Court has held includes television. And the Parliament has exercised it. And given we do not have pay television, one could say it has exercised it badly.
Clearly the Government has a role in fairly rationing a rare public resource, namely the broadcast bands, and in ensuring that the two public broadcasters get a fair slice of the cake. It also has a role in ensuring that cable delivery along the public streets is done reasonably. But why must it get involved in selecting delivery technology?
The sensible thing for a government would be ünot to chose which of the technologies is best for Australia. Rather it should permit all of them as the technology comes on line. The only government rationing should have been within each technology, not among them.
Thus if only 18 bands were possible under MDS, the Government should have auctioned or called tenders for them, allocating some, however, to the public broadcaster. Then it should have allowed the producers and consumers to get on with it, just like video.
The same with satellite analog and satellite digital when it comes on line, and any new technology as it is developed. If it thought isolated communities were not getting a fair go, it should have put out a we’ll-pay-you-to-provide tender to service them quite independent of the you-pay-us tenders for the other licences.
Instead, the Government has attempted to create and control an artificial monopoly over pay TV through dictating the technology to be used.
You can go for the conspiracy or the cock-up. Or both. you can argue the Government kept the monopoly to give to its friends the lions’ share of the pay TV market, cutting out other players or it kept it so it could get rid of the AUSSAT white elephant cock-up.
One thing’s for sure, there does not appear to have been any concern or urgency on the Government’s part to deliver pay TV to Australian consumers _ when there has been no technological reason for denying it.
In the meantime, consumers do not get pay TV. Under Senator Collins’s reasoning, however, they should be grateful. Nanny State has saved them from buying $400 worth of MDS equipment to receive what he calls an inferior product. Nanny State has also saved consumers the time and effort of discovering for themselves whether the technology is inferior and saved them from making their own decision about whether they would mind paying $400 for the inferior technology in the knowledge that another better or additional technology would come along. Doesn’t it always anyway, in every field.
In the meantime, unless the Government stops playing games and starts delivering to consumers, it might get a rude shock as the British Government did in the 1970s. The British Government’s stuffy insistence that the BBC retain its radio monopoly resulted in wholesale piracy by off-shore stations. It might well be repeated with television.
Though the Australian Government has banned pay TV on pain of heavy fines, off-shore companies can easily beam television signals into Australia via satellite and take payments through credit cards and the international banking system. If that happens and the value of the Government’s licensing asset is downgraded, it will only have itself to blame.