Another fine mess: digital terrestrial TV in Australia

Julian Thomas
20 August 2002

Digital terrestrial television (DTT) is an expensive mess around the world but, as shown by the comments from David Elstein and Hernan Galperin on the UK and the US, each country is free to get it wrong in its own particular way. The common elements are enormous public and private expense, a highly political technology, millions of unenthused consumers, questionable policy intentions, and a myth of the inevitable digital future.

In Australia, this mix has produced a system that has failed as rapidly and decisively as any other. The interesting thing is that this is not just another struggling technology, a new millennium laser disc. The strange fate of DTT also marks a turning point for the politics and policy game of the television industry.

The US script, bending to the networks

As in the US, the key ingredient for failure here has been the reactive willingness of the government to shape digital television around the demands of the incumbent free-to-air networks, despite bitter opposition from other quarters of the media. The basic elements of the scheme will be familiar to followers of digital broadcasting everywhere – incumbents have been provided with additional spectrum at no cost to transmit a digital channel alongside their analogue service during a notional period of transition. At the end of this period, the story goes, broadcasters will hand back their valuable analogue spectrum, which will then be freed for use by others.

In Australia, the incumbent broadcasters read from the US script. They were able to argue for far more digital spectrum than was necessary to transmit a digital version of their analogue broadcasts. They rejected any UK-style arrangement where a number of services would share a ‘multiplex’. Instead they demanded extra spectrum, claiming that bandwidth-hungry high-definition broadcasts would provide the consumer ‘sizzle’ to drive digital take-up.

High-definition broadcasting, it was said, was the format of the future, which would allow the television networks to compete with emerging alternatives: cable, satellite and DVD. There was no actual evidence that consumers wanted high-definition television, or were prepared to pay substantially more for it, but that didn’t bother the government or the broadcasters – it was the manufacturers’ problem. And, in return for spending the money on digital conversion, Australian broadcasters demanded a prohibition on any new commercial services until 2007.

Broadcast policy: a lose–lose situation

Around this defensive, derivative shell of a strategy, the government has constructed an elaborate, shaky, policy edifice. The competing interests of the cable television industry, the Internet and telecommunications players have somehow all had to be accommodated. No problem. Australian media policy has long been an additive process of dispensing obligations and privileges in turn upon the various sectors of the industry. These obligations and privileges justify otherwise anomalous provisions, including sweeping protection for incumbents. Over time, as the broadcasting system has become more complex, the quid pro quos have become increasingly costly, discriminatory and intricate.

While the overall direction of policy is supposed to be towards lighter-touch, co-regulatory systems, the complex politics of the industry has been contained by creating ever more elaborate (and futile) rules. A recent inquiry into Australian media policy summarised the regulatory outcomes of this horse-trading: ‘barriers to entry are balanced against programming obligations; free-to-air networks are prohibited from multi-channelling to help subscription services which in turn are disadvantaged by restrictions on advertising and anti-siphoning rules; free-to-air networks are required to broadcast in high definition because they have been lent the spectrum to do so; and so on and on.’

Australia is now the only country in the world to make high-definition digital broadcasting mandatory; if the broadcasters want it so much, why not make them do it? Why not make it difficult for them to do anything else? Australian law requires broadcasters to transmit a minimum number of hours of high-definition television per week, not because there is any demand for this service, but in the name of fairness to the cable television companies.

The result is a system with nothing to offer consumers, and therefore no real prospect of delivering a switch over from analogue to digital. The argument that high-definition television is of interest to a comparatively small group of affluent home cinema devotees is irrelevant. Nor does it matter, from this perspective, that the high-definition quota increases costs for all free-to-air broadcasters (many of whom are now receiving generous government subsidies to help them pay for the required hardware), as well as for programme producers and for consumers.

Offering nothing, at a price

All this has led directly to the current failure to map a future for broadcasting. At least in the UK a broad strategy has been articulated and discussed. Far from devising a plausible plan for encouraging a switch over to digital transmission, the Australian government has been so constrained by media industry politics that it is unable to say what any new digital services might do.

The original plan for digital television provided for new ‘datacasting’ channels, without saying what they would offer. But with multi-channelling banned, datacasting could not be a means of multi-channelling. And, since new commercial broadcasters are banned, datacasting cannot not be broadcasting. The result is that the new services have nothing to offer; auctions for datacasting licences collapsed in 2001 due to lack of interest.

G’Day? Setting new standards for unfriendliness

In this situation, governments can either keep juggling the myriad industry interests at stake, or attempt to change the way the game works, from treating everyone differently to treating everyone the same. Instead of weighing up the quid pro quos, the policy problem becomes a question of quantifying regulatory neutrality. In a well-known discussion of universal service provision in telecommunications, the US media economist Eli Noam noted that policy reforms require certain attributes of ‘friendliness’ if they are to succeed.

Firstly, they should possess political friendliness – they should deliver no shocks, windfalls or unilateral advantages to some competitors. Secondly, they should possess collection friendliness – they should offer stability for targeted revenues. Thirdly, they should offer administrative and user friendliness – as Noam says, ‘keeping things simple is a key requirement’. He goes on to note that policy reforms should be friendly towards pre-existing regulatory schemes, and should possess productivity friendliness – they should include incentives for efficiency.

Australia’s digital television regime may set new standards for unfriendliness in most or all of these fields. It delivers shocks, windfalls and unilateral advantages. It jeopardises future public revenues from the spectrum sale. It is complex, and has proved unworkable.

…any public interest?

The wider significance of the issue extends beyond its consequences for the corporate winners and losers concerned. The public interest lies elsewhere – in the efficient use of the spectrum as a valuable public resource, and in the achievement of longstanding social and cultural policy goals for the media.

In an industry where the cliche of convergence remains the dominant contemporary metaphor, digital television is often presented as if it were the ultimate convergent medium, delivering the bandwidth and universality of broadcasting together with the interactivity of the Internet. DTT appears to offer broadcasters an escape route from the declining business of free-to-air television, while at the same time holding out to telecommunications and online service providers the prospect of a market beyond personal computer users.

Whether the flexibility of the platform can produce successful commercial applications beyond the established models is not yet known. We don’t yet know how convergent DTT will prove to be – not much, if next to no one buys a receiver. But the powerful image of convergence invites all media interests to see their future selves reflected in the idea of digital television, and this has created new potential for conflicts of interest in media coverage, and new problems for government. In the face of sustained media criticism in the last three years, the Australian government has often had to shift the ground to protesting against the self-interest of the discontents.

If the game of media policy is no longer contained within a small circle, the way the game is played has to change. Quid pro quos no longer work when media industries become more complex. Each new adjustment to the rules threatens the last. The policy debate becomes an argument about revisiting the privileges granted to others, rather than an evaluation of the public interest or broader industry directions.

In the UK, with all the criticism of the Communications White Paper and its consequences, there has been at least an attempt to formulate an overall statement of policy intent and to invite public debate. In Australia that capacity has been lost. The game has not changed. Every itty-bitty review or legislative amendment is an opportunity for the interested parties to return to the starting point.

For its participants, these arguments are seen as a vivid, exciting struggle between monopolists and freebooters. On the outside, it looks like a quarrel over the distribution of obscure regulatory dispensations. The result is that the debate is dominated by the attempt to modify recent or impending government decisions. The argument over the future is conducted without a future tense.

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