The Final Report of the Convergence Review, delivered yesterday, restates most of the far-reaching reforms proposed in the Review’s Interim Report.  The Final Report provides important detail about the intended operation of the new regulatory framework but will be subject to continuing criticism from industry about the extent of new regulation and the powers of the proposed new regulator.  The Review proposes to apply a common set of standards, content and ownership rules to all large content providers, but relieves emerging online services from these obligations until they reach the scale of established media players.

Background

On 30 April 2012, the Federal Government released the final report of the Convergence Review (Final Report).  As reported in our earlier alert, the Convergence Review (Review) was established by the Government in 2011 to consider the impact of technological convergence on the regulation of media and communications in Australia.  

The release of the Final Report follows the Interim Report released in December 2011 and significant industry criticism of the recommendations in that Interim Report.  

The Review proceeds with proposals for far-reaching reform of media and communications regulation

The Final Report is consistent with the recommendations of the Review’s Interim Report and provides important new detail on the key components of the proposed new regulatory framework.

  • New regulator - ACMA would be abolished and replaced with a new independent statutory communications regulator.  The new regulator would have a broad remit to set and enforce rules and standards and deal with content related competition issues.  A separate body would be established to oversee journalistic standards for news and commentary and would eventually replace the Australian Press Council.  In contrast to the recommendations of the recent Independent Media Inquiry led by Ray Finkelstein QC, the Review proposes that this body be industry-led with no statutory powers.
  • Content Service Enterprises - the Final Report confirms that new regulation will consist primarily of standards, content and ownership rules applying to “Content Service Enterprises” (CSEs).  The Interim Report approach was heavily criticised for risking industry’s international competitiveness on the basis that the definition of a CSE could capture a wide range of non-traditional media players.  The Final Report now recommends that CSEs include only entities supplying professional content within Australia with significant Australian revenue and audience numbers, set initially at $50 million per annum and 500 000 per month respectively.  The Review estimates that this would exclude the likes of Google, Telstra and Apple, at least on their current revenue and audience numbers.
  • Media ownership - current media diversity rules would be repealed and replaced with a proposed single “minimum number of owners” rule applying to entities which provide a news and commentary service and which have a significant influence in a local media market.  The Final Report also proposes a public interest test which would apply to a change of control in any CSE of national significance and which would operate parallel to the ACCC’s merger clearance process.  The new regulator would need to prove that a merger was not in the public interest – the Review recommends that this test focus on whether:  
  • diversity of voices in relation to general content and news and commentary would be diminished at a national level;
  • the range of content services would be diminished at a national level; and
  • the acquirer would represent a significant risk that the CSE would not comply with its obligations.  
  • Spectrum - broadcasting licences would be abolished and broadcast licence holders given access to spectrum licences under harmonised spectrum allocation arrangements.
  • Australian content - existing Australian content obligations would be repealed and new content contribution requirements placed on CSEs generating Australian revenues from professional video content in excess of $200 million per annum and a monthly audience base in excess of 500 000.  These CSEs would be required to invest a percentage of revenue derived from television-like content in the production of Australian drama, documentary or children’s content.  

Likely reaction from industry

The Review’s moves to modernise and simplify Australian media and communications regulation are to be welcomed.  In particular, proposals to remove broadcasting licences and harmonise spectrum regulation have received wide support. 

More controversial will be the Review’s persistence with a number of Interim Report recommendations which attracted significant criticism from industry.  There remain areas of the converged framework where it is unclear how proposals will work in practice.  Debate is likely to continue over the evidentiary basis and policy justification for:

  • the concept of, and obligations on, CSEs - although the Review has limited the definition of CSE to players with a major Australian presence, questions will persist about the potential market distortions of a two-tiered regulatory structure, the justification for imposing Australian content requirements on new media providers and the impact of new regulation on Australian industry’s international competitiveness;
  • the powers of the new statutory regulator - the Review proposes that the new communications regulator have considerable discretion over the exercise of a wide range of new powers.  The Final Report has provided greater detail about the possible relationship between the independent regulator and Parliament.  However, questions about the operation of the independent model will remain, including how democratic oversight over regulatory priorities will be maintained, what safeguards will be put in place to constrain creep in regulatory scope, and how impacts on industry confidence and investment will be avoided; and
  • the operation of new content related competition powers and the relationship between regulators - debate will continue over the need for the new content related competition powers proposed by the Review given the existing powers of the ACCC.  It remains unclear how the multiple regulatory bodies with potentially overlapping powers contemplated by the Review will lead to a more, not less, efficient regulatory regime.  

Implementation

The Final Report has proposed a staged implementation of the new regime, with initial attention on measures such as:

  • establishing the new regulator and register of CSEs;
  • amending the media diversity rules and implementing the public interest test; and
  • inquiring into the need for new content competition rules.  

Major revision of communications legislation is reserved for later stages of implementation. The Government has indicated that it will respond to the Final Report and begin delivering reforms this year.  At this time, it remains unclear how much of the reform proposed in the Final Report will be put before Parliament prior to next year’s Federal election.