Technological Betrayal

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Free-to-air digital transmission and the limitless capacity of cyberspace are rapidly transforming media — internet, print, radio and television.

The rivers of classified ad revenues which were the baseload revenues of the newspaper industry are under competitive threat from a multitude of new players using the internet. Consumers increasingly prefer the instant gratification they can get as they scan job and real estate classifieds, eBay and entertainment online. The big print players now realise they are in the dot.com business as they develop their classified, archive and daily news websites.

Australians, as usual, are enthusiastic users of new technology from mobile phones to PCs to set top boxes to access higher quality broadcast audio and video. Digital free-to-air multi-channelling and digital radio are set to take off. Web TV is set to take off. So too is click-per-view video.

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Broadcasting will be transformed into cybercasting. You will be able to watch a program at a time convenient to you and not when a network scheduler has designated. There will still be a daily free-to-air broadcast schedule but you can access the programs via pod-casting (downloading to an audio or video player) or by clicking on your PC when the program is posted on the net by the broadcaster.

Last year at the National Press Club, former Telstra CEO Dr Ziggy Switkowski, put his finger on the enormous potential of the digital revolution for business and creative development. Significantly and courageously, given the power and influence of the Australian media policy gatekeepers — Murdoch and Packer — Dr Switkowski recommended that the federal government should subsidise the cost (about $440 million in 2008 dollars) of giving a digital set top box to each Australian household. This would allow the analogue transmission to be switched off sooner, rather than later. (Since January 2001 the Australian free-to-air television industry has been simulcasting in both analogue and digital. In the Australian Broadcasting Corporation’s case this is at an annual cost of $143 million of taxpayer money).

Dr Switkowski said:

Once you’ve got digital broadcasting and an available market of 100 per cent of all households you can let your imagination go. New broadcast licences can be issued, presumably under a competitive tender process, which might be national, could be regional or even more micro. Content and application developers can proceed in the confidence that a national market will be available for their products. New media players might see or invent business models that marry content with interactive applications and access to internet sites and databases — in ways few of us can anticipate today. And a vibrant competitive industry might emerge which will see today’s familiar media companies kick-start an era of product innovation which will go head to head in some cases, and in partnership with others, as they compete in an internet world.

Dr Switkowski said current media companies do not need to be protected: “They need to be liberated — free to follow strategies of innovation and growth within a logical set of rules and light-handed regulation.”

Peter Nicholson cartoon

Thanks to Peter Nicholson t the Australian

Australia has the capacity to exploit the extraordinary capacity of digital free-to-air (FTA) transmission. Currently a FTA set top box costs around $100. But in spite of FTA digital’s ability to split the frequency into 35 standard-definition television channels, the Federal Government has prohibited FTA commercial channels from doing so through what are called genre rules, and greatly restricted the public broadcasters, the ABC and SBS.

The subscription (pay) TV industry is currently pressing the federal government to maintain these restrictions indefinitely or until 2010-2012 at the earliest. If the federal government grants that industry’s wish, it will amount to the technological betrayal of the people of Australia.

The choice is clear: 35 free-to-air standard definition channels for the once only cost of $100 for a set top box, compared with Foxtel’s (or Austar’s) pay TV channels for $50 to $100 per month.

FTA is extraordinary. We could have English and other languages channels; multiple education, technical, skills and further education channels; community access channels; arts, culture, documentary and innovative channels; as well as fully commercial entertainment channels. The public broadcasters’ contribution to a digital Australia could be funded by the sale of the digital transmission spectrum to the commercial operators.

But significantly both the gatekeepers (News Corporation and PBL) want the Howard Government to ban multi-channelling by FTA TV networks in their latest submissions to Communications Minister, Senator Helen Coonan. Murdoch and Packer, with Telstra, own Foxtel, the pay TV company. As policy development currently stands Senator Coonan intends to extend the prohibition on FTA multi-channelling to 2010 or 2012. This would give Foxtel six more years to consolidate its monopoly in multi-channelling. Six more years!

What the Howard Government is proposing with media policy is a regulatory protection for Murdoch and Packer. Pay television in Australia became a monopoly industry as a result of the demise of Australis and the acquisition of its subscriber base and program rights by Foxtel and the Foxtel/Optus content sharing agreement. Foxtel is now reporting a profit after years of start-up losses.

It is about to be given six more years to reap a revenue windfall as the rest of the FTA and online industry is held back.

In his recent book Inside Story, Greg Dyke, a former director-general of the BBC, unintentionally highlighted how the technological betrayal of the Australian public could take place. His account of why the BBC decided to make a major investment in digital programming and multi-channel network serves to pinpoint the difference with this country.

Reflecting on News Corporation’s modus operandi in Britain — where it has used its media outlets and market power to club, vilify or smear business opponents and marketplace rivals — Dyke writes:

It could be that Britain has grown to accept the power that Rupert Murdoch wields, but I still find it deeply offensive and worrying. It is extraordinary that, after having had cross-media laws in this country since 1963, we have ended up in exactly the position those laws were intended to prevent. The legislation was aimed at stopping anyone getting too much power over the media, and as a result having too much power over the politicians. Yet in Rupert Murdoch that is precisely what we now have. Controlling 35 per cent of the national daily circulation of newspapers in this country, and 41 per cent of the Sunday market, makes him very powerful indeed. By chairing and effectively controlling BSkyB (UK pay TV) he also runs Britain’s most financially successful broadcasting operation, which if unchecked, could in the years to come dominate broadcasting in the way Murdoch’s News International dominates the print media. British broadcasting is in danger of sleepwalking into Murdoch’s control.

While acknowledging Murdoch’s competitive drive and entrepreneurship, Dyke reveals that many of the moves he made as DG of the BBC were designed to counter and limit the power and influence of BSkyB. He says that perhaps the most important decision he took in his four years at the BBC was to launch Freeview — a digital free-to-air multi-channel service.

We started with Freeview (set top) boxes on the market for 99 pounds, although the price has now dropped dramatically. It is an easy sell. For a relatively small one-off payment you can get thirty television channels, including all the new BBC television and radio channels, and make no further payments. In twenty months, four million homes had boxes able to receive Freeview, making it the fastest take-up ever for a new consumer electronic product in the UK.

Through Freeview and the new BBC-produced content that came with it, Dyke asserts that he helped to build a strong position for the BBC and other content and multi-channel providers and thus challenged BSkyB’s dominance in multi-channelling. The British public has been given a choice between being locked into contracts for relatively expensive monthly payments for BSkyB’s channels or footing the once-only cost of digital fee-to-air multi-channels via Freeview.

In Australia an all party federal parliamentary inquiry (headed by Jackie Kelly MP) recommended that the Australian Government remove all restrictions on multi-channelling for commercial FTA networks on 1 January 2008.

It will be interesting to see ho w Minister Coonan and the federal cabinet now balances the competing vested interests against the clear national interest of deregulation to see where the technology takes both the private and public sectors.

The gatekeepers — Murdoch and Packer — have had a testicular hold on our prime ministers from Fraser to Hawke to Keating to Howard. (Although Keating fell out spectacularly with Packer over the Optus cable roll-out 1994-95.)

Significantly the Prime Minister said in February 2005 that he was not going to expend a lot of political capital on media policy reform if the media industry itself could not agree. This represents an abrogation of national leadership through the technological change which is driving the industry globally, a change which could transform the competitive, commercial, cultural, educational, creative and democratic life of Australia. It reveals that the status quo (tycoon dominance) is likely to prevail for the foreseeable future.

We are expecting the tycoons’ interests to be put ahead of the public interest in the coming enabling legislation to heavily regulate the digital revolution in Australia.

That always seems to be the mediocre Australian way.

Recommendations:

  1. That federal government subsidise the cost (about $440 million in 2008 dollars) of giving a digital set top box to each Australian household.
  1. That free-to-air digital transmission licences be sold to commercial operators with the proceeds used to fund the public broadcaster’s (ABC and SBS) participation in digital broadcasting.

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