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High powered open narrowcasters - Security of tenure - Regulation impact statement
Regulation Impact Statement
Department Of Communications, Information Technology And The Arts
December 2000
- Background
- Problem
- Objectives
- Options
- Impact analysis (costs and benefits) of each option
- Consultation
- Conclusion and recommended option
- Implementation and review
The Broadcasting Services Act 1992 identifies several types of radio operators. Apart from the national broadcasters, there are commercial, community and narrowcasting licences. Narrowcasting radio services are those which have reception limited in some way. This limitation is defined in the Broadcasting Services Act 1992 (BSA) in several ways including (but not restricted to):
- targeted at a special interest group;
- limited location (eg arenas or business premises);
- limited time period of transmission (eg a one-off or annual community festival); or
- programs of limited appeal.
Commercial operators are not similarly restricted, but are subject to much greater regulation than are narrowcasters (for instance commercial stations are subject to ownership limits and local content requirements in the BSA). Community radio licences are allocated by the Australian Broadcasting Authority to non-profit organisations through a merit-based process.
For practical purposes, two types of narrowcasting have evolved ' high powered open narrowcasting (HPON) and low powered services (LPON). High powered services operate on power levels up to 100,000 watts and, because of the coverage area of the signal, the channels for such services are allocated in Licence Area Plans (LAPs).
LPONs operate on much lower power levels, determined to be a maximum of 1 watt in residential areas and 10 watts in non-residential areas. Most of these services are provided in a narrow sub-band within the Broadcasting Services Bands (BSB) with power constraints which limit signal coverage sufficiently to allow a large number of services to share the same or adjacent frequencies.
The proposal outlined in this statement deals with HPON services alone. LPON services are the subject of a separate proposal and RIS.
Among the HPON licences, the most common service provided is racing radio, followed by ethnic and religious services. Similar services are also offered on community licences but are distinguished by the fact that narrowcasters operate on a commercial basis, while community services are not-for-profit.
HPON operators use spectrum that is not being used by either national, commercial or community broadcasters in a licence area. The ABA may determine, under paragraph 34(1)(f) of the BSA, that spectrum is available (or "dropped through") for a range of purposes, including narrowcasting. Thus potential narrowcasting channels are only identified once the requirements for national, commercial and community broadcasters have been addressed.
Narrowcasters operate under a class licence for broadcasting, a standing authority which allows any operator to enter the market and provide a service, subject to the class licence conditions. While narrowcasters are not required to apply for individual broadcasting licences, they do require apparatus (or transmitter) licences under the Radiocommunications Act 1992 (the RA).
Under section 129 of the RA, licence holders have a right to apply to the Australian Communications Authority (ACA) for renewal of their apparatus licences. At present, these licences are issued by the ABA, acting under delegation from the ACA. There is, however, no guarantee of renewal, although decisions not to renew licences are reviewable, firstly through reconsideration by the ACA itself, and then, if the decision is affirmed or varied, by the Administrative Appeals Tribunal.
Before spectrum is allocated for high-powered open narrowcasting under paragraph 34(1)(f), usually one of two circumstances applies:
- the ABA has issued a licence area plan (LAP) and spectrum remains unallocated after the requirements of commercial, national or community broadcasting (paragraphs 34(1)(b) and (c) of the BSA) have been addressed; or
- the ABA has not commenced or completed planning and allocation processes (paragraph 34(1)(d)).
According to the foregoing circumstances, HPON services can be identified as LAP services and "pre-LAP" services respectively.
- Where the LAP process has been completed, 169 HPON licences have been issued to date, all by auction. The first licences issued in this way expire in early 2002. A further 60 proposed licences were passed in at auction. Generally these licences were in small regional and rural centres where there may be limited demand. The last auction was in November 1999. The ABA has suspended further auctions pending the outcome of a review of the narrowcasting category (under section 19 of the BSA) and it is unlikely auctions will resume until 2001.
- For areas where the LAP process has not been completed, nine HPON licences have been allocated to operators. These licences were allocated by auction pending the finalisation of the LAP process. While intended to be short-term licences (generally two and half years), eight of these, where spectrum is available beyond the end of 2000, have been renewed until at least mid 2001.
HPON operators have paid sums at auction for licences which have ranged from $4,000 (the usual reserve price for licences) to over $200,000. Licences have been allocated for fixed periods of up to five years. While there is an annual renewal fee this is based purely on recovery of administrative costs ($33.80 per annum) and is not therefore related to the value of the spectrum.
Tenure of licences
HPON licence holders currently have uncertain tenure and continuity, despite the fact that they have in many cases made substantial investment in building audiences and serving segments of the public. Under the RA, the maximum period for which apparatus licences are allocated is five years, and many operators have had shorter licence terms.
By comparison, commercial licences are allocated by auction and commercial broadcasters have a right of renewal as long as they comply with licence conditions.
It is now clear that many HPON licence holders have well-developed services with significant audiences. Consistent with the provision of a high powered service, many licensees have made substantial investment in their facilities and enjoy strong community support. There is considerable interest in programs offered by HPON operators, including foreign language and sports services.
In June 2000, the House of Representatives Standing Committee on Communications, Transport and the Arts tabled its report into the Australian Broadcasting Corporation's decision to discontinue racing radio services. It found strong support for those services provided by open narrowcasters and recommended that:
"the Minister for Communications, Information Technology and the Arts should direct the ABA to renew existing open narrowcast licences held by racing radio broadcasters by way of application under section 100 of the Radiocommunications Act 1992 and make the period for which the licences are renewed five years". 1
Government action is required to amend the current framework for narrowcasting. The issue cannot be rectified by the industry alone.
The Government's objectives are set out in the Broadcasting Services Act 1992 (BSA), which aims to promote the availability to audiences throughout Australia of a diverse range of radio services offering education, entertainment and information. It will provide greater security for a more diverse range of services.
Objectives for increasing the security of tenure for HPONs are to promote the efficient use of spectrum, and to encourage increasing investment in their infrastructure and services for the benefit of their audiences.
Extension of tenure
Three options were identified in a discussion paper, Radio ' High Powered Open Narrowcasters: Security of Tenure, issued on 30 October 2000. The discussion paper was sent to all HPON operators and other industry groups and is available from the Department's website at www.dcita.gov.au.
The options identified in the paper were:
Option 1: amendments to the Broadcasting Services Act 1992
Under this proposal, the BSA could be amended to require a new category of high powered open narrowcasting licences to be established with a presumption of renewal. Consequential amendments would be required to the RA to ensure that apparatus licences are automatically issued to these services.
Under this option, existing high powered open narrowcasting licence holders would be able to elect to convert to new licences. Any future licences for new services would be allocated on a price basis.
Option 2: amendments to the Radiocommunications Act 1992
An alternative approach is to amend the RA to provide existing HPONs (including pre-LAP licensees) operating in the broadcasting services bands with the presumption of renewal of their radiocommunications apparatus licences.
This approach would leave intact the existing class licence provisions for narrowcasters within the BSA.
Option 3: Ministerial direction
Where the ABA has determined that spectrum is available for HPON services, it would be open for the Minister to direct the ACA, under section 12 of the Australian Communications Authority Act 1997, to renew transmitter licences on application. Renewals could be for up to the maximum period of five years currently allowed under the RA. They also need to be subject to:
- the existing ABA 'drop through' determination under section 34 of the BSA being in force to cover the period of the renewal (which means that if the drop through' is available for a shorter period than five years, the renewal term would need to be for the shorter period), and
- compliance with the requirements of the BSA and RA.
As well as these options, the discussion paper sought comment on how a renewal fee scheme for HPON operators should operate.
Impact analysis (costs and benefits) of each option
Affected parties include consumers as well as other broadcasters, pre-LAP narrowcasters and narrowcasters operating under an existing LAP. There are also administrative issues to be considered for regulatory agencies.
Tenure of licences
Under any option, the immediate effect of changed tenure arrangements on commercial broadcasters is likely to be low. There is no evidence over the past few years that HPONs have had any material effect on commercial broadcasters' profitability, which across the sector is continuing to rise ($107.5m in 1998-99, compared to $94.8m in 1997-98). Other operators such as community broadcasters (run on a not for profit basis) are also unlikely to be affected in a material way.
The introduction of tenure proposed through each of the three options will provide substantial benefits for operators. They will be able to attract greater investment capital because their prospects will be more certain. This will allow investment for the long term with considerable economic gains, eg from longer term leases or outright purchases of equipment.
By contrast, leaving current arrangements unchanged will result in fewer opportunities for strengthening the commercial viability of HPON operators and therefore represent a significant cost to this sector of the industry.
Consumers will benefit from all these options through the greater quality of service which operators will be able to provide with more secure revenue streams. For instance, listeners will be able to enjoy a greater range of programs of higher quality.
The roles of regulatory authorities will be differently affected by the different options presented. Some increased oversight by the ABA is likely under option 1 given the need for further clarification of the narrowcasting category.
Option 1
This option would provide security of tenure of spectrum within a consistent legislative framework. However, it would have much wider consequences for the radio industry as a whole.
Should a new class of broadcaster be created for HPON operators, further consideration would be required on a range of issues which need to apply to new categories of broadcasters. These issues include:
- how licences should be allocated;
- whether additional licence conditions should be imposed;
- whether there should be additional limitations, eg on ownership, as currently apply to commercial operators;
- the adequacy of the existing codes of practice for HPON operators specifically, compared for instance to LPON operators; and
- whether further standards should be imposed, for instance in relation to Australian content.
Decisions on these issues are more appropriately taken following more detailed investigation into narrowcasting as a category. The ABA has commenced a review, using its power under section 19 of the BSA, to clarify existing criteria for open narrowcasting radio services and, if appropriate, determine additional criteria of the current narrowcasting category. These findings would need to be considered in establishing a new category. The review is expected to be completed in mid 2001.
The costs and benefits of this option are therefore difficult to assess pending resolution of these other issues. As indicated above, it is clear that there would be a potentially significant cost to regulatory agencies in implementing major changes.
Option 2
This option is relatively straightforward by merely providing a presumption of renewal to a specific type of apparatus licence. Apparatus licences are not subject to the same regime as broadcasting licences, and so the issues which arise under option 1 do not need to be considered should this option be adopted.
There are already provisions within the RA specific to apparatus licences for particular purposes, such as the duration of apparatus licences for datacasting transmitters, and a right of issue for commercial and community broadcasters following issue of their broadcasting licences. The RA's provisions covering renewal of apparatus licences do not currently encompass presumptions of renewal as such for specific user groups. However the apparatus licences for commercial and community broadcasting continue in force during the duration of the related BSA licences, which themselves are renewed as a matter of course under the BSA, so the effect is the same.
As with option 1, such an approach may be seen as pre-empting the outcomes of the ABA's review of narrowcasting.
There may be some cost to regulatory agencies through changes to administrative workloads and systems.
Option 3
This proposal has the advantage of being able to be implemented quickly but Ministerial directions do not provide the legal certainty of legislative change. On the other hand, it allows for interim measures to be put in place, and this may be considered more appropriate given the ABA's review of narrowcasting.
This option addresses the immediate concerns of the pre-LAP group, whose licences have already been renewed more than once and who otherwise would face the prospect of auctions in the next twelve months. Importantly, it allows for further consultation to take place with the industry on a pricing scheme for HPON licence renewals. Consultation on a renewal fee scheme is essential for a successful scheme to be introduced.
This approach would also minimise additional administrative workload for the responsible agencies.
In implementing this option, it is important to ensure that a renewal scheme can be introduced in an equitable manner. The most appropriate course of action would be to introduce the scheme from the first time a licence is renewed under the proposed regime.
Following issue of the discussion paper, nineteen submissions were received. There was support for all options. HPON operators who had acquired licences through the LAP process generally supported option 2 but there was little firm conviction that any one option was superior to others. Operators whose licences remain subject to an ongoing LAP process, on the other hand, strongly supported option 1 in the long term, with option 3 as an effective interim measure. Representatives of the commercial radio sector opposed a decision on this issue being taken at this time on the grounds that completion of the ABA's section 19 review of narrowcasting was necessary before examining the issue of tenure.
Conclusion and recommended option
There remains some uncertainty about the state of the industry. While option 2 may be a viable solution in the long term, a number of issues remain to be resolved, such as the development of a renewal fee scheme for HPON licences. The level of support for Ministerial direction (option 3) as an interim measure was also a factor to be considered as well as the support for a final decision to await the outcome of the ABA's narrowcasting review. Amending the Broadcasting Services Act (as outlined in option 1) provides too many uncertainties about narrowcasting to be able to assess the costs and benefits at this time.
Early action is necessary to address the concerns of the pre-LAP operators whose licences in many cases expire in the next twelve months. The majority of HPON licences begin to expire in early 2002. However, for effective business planning to take place, the maximum period of advance notice is desirable. All operators should be planning well beyond the next twelve months, and an interim solution now (Ministerial direction) will allow for more secure planning to begin quickly.
It is proposed that a public announcement of the preferred option be made. Such an announcement would also indicate that further consideration will be given to legislative options. It would indicate that this consideration will take place in conjunction with the introduction of a renewal fee scheme and that the industry will be consulted on details of the scheme as it is developed.
Given the interim nature of this proposal, the need for further legislation relating to narrowcasters as a whole needs to be reviewed following the completion of the ABA's clarification of the category, which is scheduled for mid 2001.
1 House of Representatives Standing Committee on Communications, Transport and the Arts, Regional Radio Racing Services - Inquiry into the impact of the decision by ABC radio to discontinue its radio racing service, p 41