STATEMENT OF REASONS FOR PRELIMINARY DECISION TO MAKE AN EXEMPTION ORDER FOR TELSTRA PAY TV PTY LTD IN RESPECT OF THE SUBSCRIPTION TELEVISION SERVICE TV H!TS PROVIDED THROUGH TELSTRA MOBILE FOXTEL
1. PRELIMINARY DECISION
For the reasons set out below, the Australian Communications and Media Authority (the ACMA) has made the preliminary decision to make an exemption order for Telstra Pay TV Pty Ltd (the Applicant) in respect of the subscription television service TV H!TS (previously known as TV1) provided through Telstra Mobile Foxtel (the Service), for the specified eligible period of 1 July 2014 to 30 June 2015 (the Order).
2. LEGISLATION
2.1 Subsection 130ZV(1) of the Broadcasting Services Act 1992 (BSA) provides that each subscription television licensee must comply with captioning requirements by meeting annual captioning targets that will increase over time in respect of particular categories of subscription television services that are required to be captioned.
2.2 Subsection 130ZY(1) of the BSA provides that a licensee may apply to the ACMA for:
a) an order that exempts from subsection 130ZV(1) a specified subscription television service provided by the licensee in a specified eligible period; or
b) an order that :
(i) is expressed to relate to a specified subscription television service provided by the licensee in a specified eligible period; and
(ii) for each financial year included in the eligible period, provides that a specified percentage is the reduced annual captioning target for the service for the financial year.
2.3 Subsection 130ZY(3) of the BSA provides that if an application under subsection (1) has been made for an exemption order, the ACMA must, after considering the application, either (by writing) make the exemption order, or refuse to make the exemption order.
2.4 Subsection 130ZY(6) of the BSA provides that, before making an exemption order under subsection (3), the ACMA must:
a) within 50 days after receiving the application for an exemption order, publish on the ACMA website a notice:
(i) setting out the draft exemption order; and
(ii) inviting persons to make submissions to the ACMA about the draft exemption order within 30 days after the notice is published; and
b) consider any submissions received within the 30-day period mentioned in subparagraph (a)(ii).
3. BACKGROUND
3.1 On 22 December 2014, the ACMA received an application from the Applicant in respect of the Service, seeking an exemption order under subsection 130ZY(1) for the eligible period of this financial year, from 1 July 2014 to 30 June 2015 (the Application).
3.2 The Applicant is a subscription television licensee. The Service is one of 34 channels delivered to mobile devices by the Applicant as ‘Mobile Foxtel’. These Mobile Foxtel channels, including the Service, are purchased in packages by subscribers.
3.3 The Service provides classic TV shows and re-runs of series and shows recently broadcast on free-to-air or pay TV. The Service’s genre is General Entertainment and is listed as Category A which would normally attract an annual captioning target of 55 percent for the financial year commencing 2014.
3.4 This is the third application for this Service. The second order (ST/EO-145) was made on 12 March 2014, covering the eligible period of one year from 1 July 2013 to 30 June 2014, after considering submissions received in relation to a draft order during the relevant consultation period. The first order (ST/EO-88) was made on 13 March 2013, covering one year from 1 July 2012 to 30 June 2013, after considering submissions received during the relevant consultation period.
4. EVIDENCE AND REASONS FOR PRELIMINARY DECISION
4.1 In making the preliminary decision to make the Order, the ACMA considered the matters specified in subsection 130ZY(5) of the BSA (see Attachment 1). The ACMA considered these matters in light of the written representations made by the Applicant in the Application and the supporting evidence submitted with the Application.
4.2 The Applicant submitted that, if an exemption order was not granted by the ACMA, the detriment likely to be suffered during the eligible period would be both financial and operational. It submitted that it is not technically possible to provide closed captioning on the platform that is currently used to deliver the Service. The Applicant indicated that funding has been committed to implement a new platform for the delivery of closed captions for the Service, however, the new platform cannot be implemented in time to deliver captioning within this financial year (2014–15).
The Applicant submitted that it would not be feasible to migrate the Service (and other Mobile Foxtel channels) to the new platform until February 2015 and that the closed captioning functionality could not be rolled-out until the first half of the next financial year (2015–16). The Applicant indicated that the only option to deliver captioning within the time constraints of this financial year would be to create a duplicate channel for the Service with open captions. The Applicant submitted that the additional financial cost of creating a duplicate channel with open captions would render the Service commercially unviable.
Further, the Applicant submitted that the Service is one of 34 channels delivered as ‘Mobile Foxtel’ which are channels for mobile devices that are purchased in packages by subscribers. The Applicant submitted that if an exemption order is not granted the result would likely be that all Mobile Foxtel subscription television channels (including the Service) would be discontinued as the costs of providing the duplicated channels would be unreasonably high relative to the income received from providing the channels.
The ACMA considers that a failure to make the exemption order would likely result in the Applicant suffering the detriment of discontinuing the Service, given the additional costs, technical difficulties and time constraints involved with meeting the captioning requirements within this financial year. The ACMA considers that this detriment, if suffered, would result directly from a failure to make the exemption order.
4.3 As to the anticipated impact of making an exemption order on deaf and hearing impaired viewers, or potential viewers, of the Service, the Applicant submitted information about the current viewer numbers. The ACMA has considered the subscriber and viewer numbers provided by the Applicant in the context of the application, in particular comparing these numbers with those for the previous year. The ACMA considers that making an exemption order will be detrimental for viewers, or potential viewers, who are deaf or hearing impaired. However, the ACMA sees a potential greater detriment to a greater number of people if the requirement of meeting captioning obligations makes it uneconomic for the Applicant to continue to provide the Service.
4.4 From its examination of financial and operational information provided by the Applicant, the ACMA accepts the Applicant’s submission that failure to make an exemption order would likely result in the Mobile Foxtel channels (including the Service) being discontinued due to the costs of providing duplicate channels with open captioning being unreasonably high relative to the income received from the Mobile Foxtel channels (which includes the Service). Financial statements of the Applicant for the last financial year (2013–14) were submitted on a commercial-in-confidence basis for the ACMA’s consideration in support of the Application.
4.5 As outlined in paragraph 4.2 above, the Applicant submitted that it is not technically able to deliver closed captions on the platform currently used for the Service. As such, the expenditure required by the Applicant as a result of a failure to make the exemption order would be the cost of creating a duplicate channel for the Service and for each of the other 33 Mobile Foxtel channels provided by the Applicant (as well as the cost of providing open captioning on the duplicate channels). The Applicant provided an estimate of the cost of creating duplicate channels for the Service and the other 33 Mobile Foxtel channels.
4.6 The Applicant provided evidence of its commitment to implement a new platform for the delivery of Mobile Foxtel channels to accommodate closed captioning for the next financial year (2015–16). The details, including the Applicant’s commitment of funding towards migrating the Service to the new platform, were provided on a commercial-in-confidence basis.
The Applicant submitted that, on the basis of its scoping work, it would not be feasible to implement the new platform and roll out closed captioning capabilities in time to deliver captioning for the current financial year.
The Applicant provided a high level roadmap for the implementation of the new platform for its Mobile Foxtel service, which will enable it to deliver closed captions for the next (2015–16) financial year (see Attachment 2).
According to the implementation roadmap, all Mobile Foxtel channels (including the Service) will be transitioned to the new platform in February 2015 and the closed captioning capability will be available around October 2015. This means that closed captioning for the Service will not be available at any time during the 2014–15 financial year.
The ACMA also considers information provided by the Applicant in its previous application (from 2013) regarding the complexity of providing closed captioning for the Service and the significant changes required in various components of its mobile television platform.
The ACMA accepts the Applicant’s claim (subject to consideration of submissions under subsection 130ZY(6) in response to the draft exemption order) that it is not technically able to deliver closed captions on the platform currently used for the Service, and that, while work has progressed to develop the platform, the new platform will not be implemented in time to deliver captioning in the 2014–15 financial year.
4.7 The Applicant submitted that it is currently not streaming any captioned content on the platform used to provide the Service.
4.8 The Applicant submitted that the likely impact on the quantity and quality of television programs transmitted on subscription television services provided by the Applicant would be that the Mobile Foxtel subscription television service (comprising 34 channels including the Service) would likely be discontinued. The ACMA accepts the Applicant’s claim, subject to consideration of submissions under subsection 130ZY(6) in response to the draft exemption order.
4.9 The Applicant has applied for exemption orders in relation to the following 34 Mobile Foxtel channels, all for the same eligible period of one financial year (2014–15):
1. / A&E / 18. / Fox Sports News TV2. / ABC1 / 19. / FX
3. / Arena / 20. / LifeStyle YOU
4. / BBC World News / 21. / MAX
5. / Cartoon Network / 22. / MTV
6. / Channel [V] / 23. / National Geographic Channel
7. / Channel [V] Hits / 24. / Nat Geo People
8. / CNN / 25. / Nick Jr.
9. / Discovery Mobile / 26. / Nickelodeon
10. / Disney Channel / 27. / SBS1
11. / Disney Junior / 28. / SKY News Business
12. / E! Entertainment / 29. / SKY News Headlines
13. / EuroSport / 30. / Sky News Weather
14. / Eurosportnews / 31. / SportsFan
15. / Footy TV (AFL) / 32. / The Comedy Channel
16. / Fox8 / 33. / The LifeStyle Channel
17. / Fox Sports / 34. / TV Hits
4.10 Based on the information provided by the Applicant in its application, the ACMA is satisfied that, despite the detriment to deaf or hearing impaired subscribers or potential subscribers to the Service, a refusal to make the exemption order would impose an unjustifiable hardship on the Applicant as:
(i) there is currently no technical capacity for closed captioning for the Service;
(ii) it is not feasible to implement a new platform that would provide technical capacity to meet the captioning requirements within the time constraints of this financial year (2014–15);
(iii) the only technical option available to meet the captioning requirements for this financial year is to create a duplicate channel with open captions for the Service, as well as for the other 33 channels which would comprise the Mobile Foxtel service provided by the Applicant; and
(iv) such duplication of channels would impose financial costs that would make the Mobile Foxtel service commercially unviable and would likely result in the Applicant discontinuing the Mobile Foxtel service, including the Service.
5. PRELIMINARY DECISION
5.1 Following consideration of the material referred to in paragraph 4.1 above, on 30 January 2015 the ACMA made the preliminary decision, under subsection 130ZY(6) of the BSA, to make the Order for the Applicant in respect of the Service, for the specified eligible period of 1 July 2014 to 30 June 2015.
ATTACHMENT 1
Subsection 130ZY(5) of the Broadcasting Services Act 1992 sets out the matters the ACMA must have regard to in deciding whether a failure to make the exemption order or target reduction order for a subscription television licensee, would impose an unjustifiable hardship on the applicant. These matters are:
(a) the nature of the detriment likely to be suffered by the applicant;
(b) the impact of making the exemption order or target reduction order, as the case may be, on deaf or hearing impaired viewers, or potential viewers, of the subscription television service concerned;
(c) the number of people who subscribe to the subscription television service concerned;
(d) the financial circumstances of the applicant;
(e) the estimated amount of expenditure that the applicant would be required to make if there was a failure to make the exemption order or target reduction order, as the case may be;
(f) the extent to which captioning services are provided by the applicant for television programs transmitted on subscription television services provided by the applicant;
(g) the likely impact of a failure to make the exemption order or target reduction order, as the case may be, on the quantity and quality of television programs transmitted on subscription television services provided by the applicant;
(h) whether the applicant has applied, or has proposed to apply, for exemption orders or target reduction orders under this section in relation to any other subscription television services provided by the applicant;
(i) such other matters (if any) as the ACMA considers relevant.
ATTACHMENT 2
High-level Mobile Foxtel platform roadmap provided by the Applicant