Review of digital transmission of community television
Print this pageA review of the regulatory arrangements that should apply to the digital transmission of community television broadcasting services using spectrum in the broadcasting services bands and how access to spectrum should be provided free of charge.
The Department of Communications, Information Technology and the Arts
June 2002
2.1.1 Australian Broadcasting Authority Evaluation
2.2 Response to Department of Communications, Information Technology and the Arts Paper
3.1 Options for CTV operation in digital
3.1.1 Transmission of CTV services by CTV operators
3.2 Timing of transition to digital transmission
3.3 Options for the regulatory arrangements that could apply to the digital transmission of CTV
Under clause 60C of Schedule 4 to the Broadcasting Services Act 1992 (BSA), the Minister for Communications, Information Technology and the Arts is required before 1 January 2002 to cause a review to be conducted into the regulatory arrangements that should apply to the digital transmission of community television broadcasting services (CTV) using spectrum in the broadcasting services bands and how access to spectrum should be provided free of charge.
To assist the review process, on 15 January 2001, the Minister for Communications, Information Technology and the Arts directed the Australian Broadcasting Authority (ABA) to conduct an investigation into the trial of CTV that has been conducted since 1992. The ABA submitted its report to the Minister on 31 July 2001.
The Department of Communications, Information Technology and the Arts (the Department) released a discussion paper on the digital transmission of CTV on 5 June 2001, and invited submissions from all interested parties. The discussion paper was circulated to all major stakeholders and posted on the Department's website.
Issues identified in the paper included spectrum allocation for CTV, funding for the sector beyond the allocation of spectrum, who should meet digital transmission costs, the nature of any carriage obligations, technical requirements, simulcasting, service coverage, and an appropriate licensing regime for the sector. The Department received 17 submissions in response to the discussion paper, as well as comments on the ABA's submission from other parties. The Department also employed a consultant (Convergent Consulting) to analyse the costs of digital carriage of CTV.
This review supersedes the earlier review required under clause 59(1)(e)(ii) of Schedule 4 to the BSA which also related to the digital transmission of community television.
2.1 Current status of the CTV sector
Since 1992, the ABA has licensed CTV services on a trial basis. There are six CTV operators currently licensed (Sydney, Melbourne, Brisbane, Adelaide, Perth, and Lismore). The vacant sixth high power television channel (Channel 31) was initially reserved throughout Australia for CTV, but in 1999 the reservation was removed for all spectrum other than that used by existing CTV operators for the purposes of digital television planning.
At the beginning of the trial period, no provision existed under the BSA for temporary community broadcasting licences. Accordingly, the ABA made the sixth channel available to community groups under the open narrowcasting category of service. Apparatus licences were issued under the Radiocommunications Act 1992 to community groups for a temporary period with the condition that services would be provided 'for community and educational non-profit purposes'. To allocate the apparatus licences, the ABA developed an Access Statement, setting out the criteria an applicant had to satisfy before a licence was issued.
The issues to be addressed were:
- the level and openness or non-exclusivity in membership and membership policy;
- the existence and fairness of any grievance mechanisms relating to membership exclusions;
- the equity of access for members to programming airtime and the existence of structures, including a grievance mechanism, designed to allocate airtime fairly;
- the flexibility of programming policy and format sufficient to allow new sources of programming to be incorporated; and
- the right of the community to participate in activities concerning the operation and management of the service.
CTV's narrowcast status has enabled stations to fund their operations during the trial period by accessing commercial revenue sources. Narrowcasting services are subject to the conditions set out in clause 11 of Schedule 2 to the BSA. These conditions are less onerous than the conditions applying to community broadcasting licences set out in clause 9 of Schedule 2 which, for example, prohibit broadcasting of advertisements and limit sponsorship announcements to five minutes per hour. The CTV sector voluntarily limited itself to the same restrictions on advertising and sponsorship announcements as under the community broadcasting category.
CTV operators have also been subject to a licence condition placed on their apparatus licences that services would be provided 'for community and educational non-profit purposes'. The 'community purpose' requirement may be interpreted restrictively :--in the BSA, community broadcasting services are broadcasting services that are not operated for profit or as part of a profit-making enterprise (s.15(b)). It appears that some of the activities of CTV operators, such as entering into partnerships with a dominant commercial entity or using surpluses to repay debts to benefactors or significant commission fees to managers, may not meet this requirement.
2.1.1 Australian Broadcasting Authority evaluation
The ABA has evaluated the performance of the CTV sector during the trial period. The report identifies a range of significant problems that have emerged for CTV operators during the trial period:
- Most CTV operators are financially vulnerable due to high capital and operating costs. Some are overly reliant on a limited range of revenue sources, thus increasing their financial risks. The sale of large amounts of airtime or reliance on benefactors/creditors may lead to circumstances where the commercial entity or benefactor involved may, in practical terms, be taken to control the licence, and who may influence editorial and access policies. Such circumstances may also lead to a breach of the licence condition of operation for community and educational non-profit purposes.
- Significant governance and accountability concerns have been raised about some members of the sector. These concerns centre on the extent to which operators, using free spectrum, offer open access to community groups wishing to make programs.
- The temporary nature of the trial and licensing regime has added to the difficulty CTV operators have had in obtaining sponsorship and savings from longer term contracting arrangements--for example, in relation to transmission. The lack of certainty has made it significantly harder to achieve financial stability and to generate surpluses for reinvestment in programs.
- CTV audiences are small. Research commissioned by the ABA indicates that on average only one in four Australians in CTV transmission areas watch CTV and close to one third of survey respondents had never heard of CTV services. The trial itself originally failed to attract significant interest in operating CTV services. Only eight groups expressed interest in the trial (Sydney, Melbourne, Brisbane, Adelaide, Perth, Hobart, Lismore and Bendigo) and only five of these operate continually (Lismore operates intermittently).
- The nature and quality of services provided by operators is highly variable:
- The ability to sustain regular transmissions has been difficult for some operators and is hampered by high transmission, equipment and maintenance costs.
- Poor transmission quality has been a major problem throughout the trial period. Picture quality has been hampered by low power transmissions, high maintenance costs, lack of funding for equipment upgrades, seasonal variations and the absence of back-up equipment.
- CTV original programming fills a niche not met by other services. However, no operator was able to fill its airtime with programming produced or provided by community groups, resulting in a significant amount of 'filler' or retransmitted programming.
While these are significant problems, the ABA also concluded that the trial indicated the sector had a future if these could be addressed. In the ABA's view, the CTV trial has demonstrated that CTV services have the potential to enhance program diversity and community access to program production and airtime. The sector produces innovative and niche programming and operators 'have played a role in meeting local information and entertainment needs'.
Some operators have used the experience gained by the sector during the trial in relation to governance, programming and revenue-generation, despite the restriction of lack of certainty, and have become relatively successful local broadcasters. The success indicates it is possible to identify and access CTV audiences and sponsors sufficient to warrant the continuation of CTV.
CTV in its present form has several access issues:
- It is confined to five capital cities and Lismore.
- It lacks profile, such that one-third of the community may not even be aware of the existence of CTV after nine years.
- Its transmission reach and quality are poor and well below that of national and commercial broadcasters.
These limitations prevent CTV services from reaching their full potential in relation to both audiences and possible sources of programming and revenue.
There are very few opportunities for regional centres beyond Brisbane, Sydney, Melbourne, Adelaide and Perth to obtain CTV services due to spectrum scarcity and transmission costs. However, as the ABA has noted, the CTV trial failed to attract sufficient community interest in other areas to enable operation of a service--the Department is aware only of interest in extending Perth's CTV service more widely in Western Australia.
The possible extension of current CTV services--perhaps across their respective States--would require operators to address the potential tension between the local and community aspects of existing services, and the State-wide nature of such services.
The Department's discussion paper sought stakeholder views on a range of issues surrounding CTV's operations in digital. These included:
- spectrum allocation for CTV;
- funding for the sector beyond the allocation of spectrum;
- who should meet digital transmission costs;
- the nature of any carriage obligations;
- technical requirements;
- simulcasting;
- service coverage; and
- an appropriate licensing regime for the sector.
There was broad consensus in stakeholder views on a number of the issues raised in the discussion paper. Almost every respondent raised the need for the CTV sector to be provided with certainty through the development of an appropriate regulatory framework and separate licensing category. There was also a consensus that an early commencement of digital CTV services was not appropriate.
The Community Broadcasting Association of Australia (CBAA) suggested that the 'opportunity to establish digital CTV services [should] be available within a timeframe that anticipates a substantial consumer uptake of digital television reception equipment' and suggested 'a target date for metropolitan markets of 1 January 2006'.
Operators suggested that the sector should be considered the third tier of broadcasting and as such should be treated equally with commercial and national broadcasters. Operators and sector supporters suggested that the sector:
- have access to digital spectrum Australia-wide;
- be given one full digital (7MHz) channel free;
- be given simulcast services until the analog switch off date; and
- that impediments to the development of new and/or regional analog CTV services be removed.
The ABA was of the view that the sector provided programming of a quality and type quite different from the other tiers of broadcasting, adding to the diversity of programming available. However, it was highly unlikely that operators would be able to produce or provide sufficient local programming to provide a 24-hour standard definition television service. In the ABA's view, setting aside 7MHz for CTV services would be inefficient and would provide an incentive for licensees to become involved in activities that do not meet community-broadcasting principles. The ABA was also of the view that carriage by a third party would enable CTV operators to concentrate on content provision rather than transmission which could be of benefit to the sector and the community generally.
The Special Broadcasting Service (SBS) and the Federation of Australian Commercial Television Stations (FACTS) were of the view that the sector should operate a standard definition channel and concentrate on content provision rather than being managers of transmission/spectrum capacity.
A number of submissions--mostly from the sector--expressed the view that the Government should fund the sector's digital transmission costs, at least through the transition phase. It is assumed this means meeting capital costs. Stakeholders suggested that digital transmission was a major additional cost imposition for the sector, which it was not in a financial position to bear. The sector and its supporters suggested an alternative funding mechanism--if CTV operators were granted 7MHz of free digital spectrum, operators could fund their transmission costs by selling excess capacity.
Other means of underwriting the cost of CTV digital transmission suggested by the sector included a direct Government subsidy to the transmission provider, or a must-carry requirement on a digital carriage provider. However, the ABA also suggested the imposition of a tradeable obligation on broadcasting networks as a means of placing the cost of CTV carriage on the television industry, but spreading that cost. Separately, a number of stakeholders proposed a levy on the commercial television industry to fund CTV digital conversion costs.
There was no clear consensus among stakeholders in relation to the appropriate digital carriage model for the sector. A number of stakeholders such as the CBAA, the South Australian Association for Media Education, the New South Wales Government, the Western Australian Government, Mr John Davey and Mr Michael Costello preferred CTV operators to control digital spectrum in their own right. However, a number of these stakeholders also suggested other models, such as a third party being required to provide an agreed amount of capacity for the operation of a digital CTV service. The ABA, FACTS, SBS, Imparja, ntl and the Aboriginal and Torres Strait Islander Commission (ATSIC) considered access to digital spectrum operated by a third party should be the preferred approach.
Separately, a number of submissions supported the National Indigenous Broadcasting Service (NIBS) proposal recommended in the Productivity Commission's Inquiry into Broadcasting. The Government has committed to exploring with ATSIC opportunities arising from the outcomes of the National Indigenous Broadcasting Strategy feasibility study conducted by that agency. While aspects of the NIBS proposal complement CTV, the issue of spectrum scarcity will need to be addressed if there are competing claims on remaining spectrum. This issue may be resolvable in a digital transmission environment where there are more opportunities for spectrum usage.
To enable better consideration of issues relating to digital transmission and carriage, the Department has sought to identify the costs of three scenarios under which the CTV sector's transition to digital transmission may occur:
- An existing operator converts its analog service to digital.
- An existing operator simulcasts its service in analog and digital.
- A new operator establishes a digital service.
Under each scenario, operators have access to 7MHz of spectrum. This assumption enables more accurate costing of the different components of digital transmission and does not reflect Government policy. There is also a range of variables that will affect each of these scenarios and, thus, significantly affect the cost of the sector's operation in digital. This includes:
- location of the analog to digital conversion point at transmitter site or studio;
- coverage and power level similar to analog or equivalent to commercial and national broadcasters;
- definition quality;
- site-sharing fees;
- digital commencement date; and
- simulcasting arrangements.
These factors can alter the likely costs of digital transition by several hundred per cent, depending on their interaction. The precise costs for operation in digital will depend upon the application of the variables. It is more useful at this stage to identify the broad range within which costs are likely to fall.
Scenario 1--an existing operator converts its analog service to digital
Under Scenario 1, an existing CTV operator--subject to prevailing licensing arrangements--would convert its existing analog transmitter to digital, and convert its signal from analog to digital at the transmitter site rather than at the studio. It would transmit with the same coverage and power as at present, not broadcast in full wide-screen, and incur no increases in site-sharing fees. This would cost each operator approximately $300 000, over 12 years, on average.
This scenario represents the lowest possible conversion cost and is based on upgrading the existing analog transmitter for digital transmission and making adjustments to the radio frequency chain. Although cheapest, this scenario may not represent the best option. The upgrade may disrupt analog services during transition; analog transmitters may be so old as to require replacement; and higher-powered transmitters may be necessary to give adequate coverage for some operators.
The range of variables that would increase the cost of this scenario include:
- operators purchasing a new digital transmitter of the same power as their current transmitter;
- converting the broadcast signal to digital at the studio, rather than at the transmitter site;
- increasing the power and coverage of the CTV service to match that of existing free-to-air television services (this would significantly increase the cost); and
- transmission of CTV services in full wide-screen quality standard definition.
It is estimated that costs for CTV operators under Scenario 1 would range from $2 million for the sector over 12 years--entirely composed of capital costs, which would be incurred prior to the commencement of digital transmission--to $29.5 million if the maximum variable costs were incurred.
Scenario 2--an existing operator simulcasts its service in analog and digital
Under Scenario 2, an existing CTV operator--subject to prevailing licensing arrangements--would continue using its existing analog transmitter to broadcast in analog, but from 2003 would also simulcast the service using digital transmission. It would convert its signal from analog to digital at the transmitter site, transmit in digital with the same coverage and power as it transmits in analog at present, not broadcast in full wide-screen and incur no increases in site-sharing fees. This would cost existing operators approximately $2.53 million over 12 years, on average. However, delaying the commencement of digital services by five years would decrease the cost for each operator by $300 000.
It is estimated that the additional costs for CTV operators for digital transmission under Scenario 2 would vary from $15.2 million for the sector over 12 years, to $38.4 million if all variable costs identified above were incurred.
Scenario 3--a new operator establishes a digital service
Under Scenario 3, a new CTV operator would:
- incur the capital costs of a new digital transmitter of similar power to existing analog CTV services, and digital microwave distribution links;
- establish studio facilities for the same historical capital investment as current operators have spent;
- transmit at equivalent power to analog CTV services; and
- not broadcast in full wide-screen but in SDI up-conversion quality only.
The cost of this is estimated to be $7 million over 12 years, but could rise to $10.7 million if all variable costs were incurred.
The Department has also sought to determine the factors that would affect the cost of carriage of CTV services by other digital providers. The factors identified include:
- the cost of digital spectrum to the third party provider;
- the proportion of the digital bandwidth taken up by the CTV operators, which could be anywhere between 1.5 and 6 Mbps of the digital provider's 19.4 Mbps of available bandwidth;
- site-share fees;
- the coverage area of the digital provider;
- the quality of service the digital provider chooses to implement; and
- the profit margin the digital provider elects to charge CTV operators.
Based on these factors, a preliminary estimate of the likely minimum cost of carriage by a third party digital provider, is a range of $250 000 per annum to $350 000 per annum for each capital city in which a CTV service operates.
3.1 Options for CTV operation in digital
In 2001, the Government made an election commitment to 'ensure that community broadcasters are provided with access to spectrum for digital. Spectrum for digital community television will be made available free-of-charge.' There are transmission costs involved in spectrum usage, and these will need to be met, either by the CTV operators, by government, or by other service providers. The commitment could be implemented by either the allocation of a 7MHz channel--with licensees responsible for their own transmission costs--or by providing for carriage of a standard definition community television service by an existing broadcaster or another digital service provider.
3.1.1 Transmission of CTV services by CTV operators
Under this option, CTV operators would be provided with digital spectrum, free of charge, with the responsibility of undertaking transmission themselves. While, as discussed in 2.3, it is difficult to estimate with certainty the cost of digital transmission, it is clear that under most scenarios the cost will be significant and probably, on an annualised basis, greater than the revenue currently generated by most CTV operators. The CTV sector would only be capable of funding the capital and operating costs required for digital transmission if it achieved significantly greater revenue and financial stability.
The CTV sector has argued that transmission costs could be funded either by the Government, or offset through the lease of additional spectrum. Under the latter option, operators would be provided with spectrum additional to that needed for one standard definition channel, with which they could multiplex, carrying other service providers and charging them commercial rates to fund the costs of their own transmission.
Such an arrangement could be seen as contrary to the concept of community broadcasting as essentially a non-commercial activity. Moreover, there is a concern that providing CTV operators with an additional commercial task of selling spectrum may reduce their focus on the core activity of providing programming relevant to the local community.
The Government has committed only to providing spectrum free of charge, not to funding the transmission costs of using that spectrum. Government funding of transmission costs would require support to be extended beyond free provision of spectrum. The Commonwealth does not own transmission assets to which it can provide access for the sector. It could be argued that Government subsidisation of transmission arrangements would mean that the sector would have no incentive to obtain the most cost-effective means of carriage. On this basis, any Government support for carriage may be less effective as a direct subsidy for costs within the sector than by some form of Community Service Obligation imposed upon, or subsidy provided to, other broadcasters to carry CTV.
3.1.2 Carriage of CTV services by other digital providers
As other digital providers, such as national and commercial television broadcasters, have access to 7MHz of spectrum, there may be sufficient spectrum to enable the carriage of a single standard definition digital channel in addition to other services. Under this option, CTV services would be provided with access to spectrum via free-to-air broadcasters' or other digital providers' spectrum. Free-to-air broadcasters or other digital providers could be required to broadcast a minimum amount of CTV services per day, with certain timing restrictions to prevent services only being provided during low-demand times.
Given free-to-air broadcasters' obligations in relation to High-Definition broadcasts, and the opportunities afforded by the multi-channelling provisions of the BSA for the ABC and SBS, the provision of a continuous CTV service via broadcasting spectrum may be made available more easily by other digital providers than by existing broadcasters. The sector has indicated that a continuous, branded CTV service is important--particularly to its sponsors. This may be assisted if a form of tradeable obligation was developed, allowing the broadcaster with most capacity to broadcast CTV services to be paid by the other broadcasters to meet their obligations. However, it should be noted that no existing CTV service provides a continuous service; indeed, current services feature considerable amounts of 'filler' or external programming. Further, the ABA has found evidence that CTV audiences are selective about their viewing and will watch individual programs rather than use the service continually.
Any must-carry obligation imposed on digital providers, other than current free-to-air broadcasters, would effectively be paid for by the Commonwealth, as the cost of the obligation would be reflected in reduced bids for the relevant spectrum.
3.1.3 Carriage of CTV services by other means
CTV services could be carried by pay-TV analog or--eventually--digital cable services. Pay-TV cable operators would have greater flexibility than free-to-air operators to add CTV services to their existing menu and enable a continuous, branded CTV service. However, carriage by pay-TV only would end CTV's free-to-air nature, depriving much of the current CTV audience of access to CTV.
Pay-TV carriage may, however, enhance the CTV audience beyond its current viewership. Many pay-TV subscribers would have access to CTV for the first time if it were added to the menu of services available by cable.
Carriage of CTV by any operator would be greatly assisted by improvements in the quality, appeal and local/community character of CTV services, with corresponding increases in CTV audiences and sponsor interest.
CTV services could also be provided online by video streaming, potentially as an adjunct to digital CTV. The increasing use of IT equipment in television production would complement such a service. Some existing CTV operators currently have detailed and interactive websites that complement their broadcasts. However, the IT equipment and bandwidth access required by online CTV services may not be available to many members of the current CTV audiences for some time.
3.2 Timing of transition to digital transmission
It is clear that there is little support for early commencement of digital transmission for CTV operators. There are several reasons for this:
- given the financial state of most operators, the costs of digital transmission, particularly simulcasting, are beyond their capacity at this time; and
- given the small audience for CTV and its current take-up rate of digital reception equipment, operation in digital-only mode would prevent access by much of CTV's audience, at least in the short-term.
The issue, therefore, is the basis and timing of the commencement of CTV digital services. The sector's financial stability must be improved if it is to meet the costs of digital operations. Financial stability could be assisted through the provision of greater regulatory certainty for the sector, and by improved accountability and governance arrangements, which will provide for community access while allowing the sector the freedom to raise revenue.
If financial stability can be improved, the role of CTV in a digital environment will be more easily assessed when decisions affecting that environment are being considered. Consideration of options for the digital carriage of CTV should also take into account the impact of digital transmission on audiences' access to CTV services. It may be several years before this impact can be accurately gauged in relation to the take-up rate of digital reception equipment.
The need for providing stability and preparing a long-term path to digital transmission provides the basis for considering regulatory options for the CTV sector. The regulatory options should take into account:
- the sector's request for greater regulatory certainty; and
- flexibility in the form of digital carriage the sector will eventually use.
Regulatory certainty for sector
While the CTV trial has been extended to December 2002, a permanent licensing framework is important for the sector. The open narrowcast licensing framework imposes limited accountability and governance requirements on the CTV sector--indeed, the CTV sector has been unable to register a separate sector specific Code of Practice as there is no provision under the BSA for it to do so. A number of concerns have been expressed since the commencement of the trial about some operators over the provision of community access.
CTV operators could be licensed under an existing licence category under the BSA, such as the community broadcasting category. A separate licence category for CTV will require significant amendments to the BSA. The ABA itself has proposed arrangements that will provide for a more rigorous regulatory framework--particularly in relation to a registered code of practice. However, the ABA did not recommend a prescriptive framework to address the sector's governance problems. Instead, it recommended the development of a CTV manual to disseminate guidelines on best practice to the sector. Whether issues relating to access and governance are handled on a self-regulatory basis or through licence conditions is an issue that may be best addressed in consultation with the sector.
Improved governance and accountability would also lead to greater community involvement, greater diversity in programming and, potentially, greater interest from sponsors.
In relation to the issue of licensing limitations on revenue raising, it is not apparent that the apparatus licence requirements impede the CTV sector's ability to raise revenue from sponsorship or airtime sales. CTV services are required to comply with the 'non-profit' condition of the apparatus licence. However, this does not prevent them from producing a surplus, as long as it is re-invested in the service, nor from associating with commercial entities.
The CTV sector's own Code limits sponsorship announcements to five minutes per hour. However, evidence provided to the ABA indicates that no operator routinely or even frequently fills the sponsorship quota. Nevertheless, given the financial problems of much of the CTV sector, any new licensing framework should not reduce the capacity of the sector to raise revenue from sales of airtime or sponsorship.
Flexibility in the form of digital carriage the sector will eventually use
As it is not yet clear what will be the best and most cost-effective means of providing the CTV sector with access to digital spectrum, a new regulatory framework will need to be technology neutral in order to avoid limiting options for digital operation.
Based on the issues considered above, it is suggested that:
- an immediate or short-term transition to digital transmission for the CTV sector is not necessary;
- consideration be given to providing an environment in which the sector will have greater regulatory certainty with stronger accountability and governance arrangements.
With a stronger CTV sector, the Government and the sector will be better placed to consider possible carriage options in the digital transmission environment. This environment will itself become clearer as digital reception equipment becomes more widespread, when digital television services develop, and the extent of spectrum usage by free-to-air broadcasters becomes apparent.
The role, needs, and access problems of the CTV sector could be considered as part of the Government's consideration of other aspects of the digital television framework. Digital carriage of CTV, and its funding, should be considered again in this context.
- Document ID: 8837 |
- Last modified: 6 February 2008, 2:17pm