STATEMENT OF REASONS FOR THE PRELIMINARY DECISION TO MAKE ANEXEMPTION ORDER FOR TRANSACT BROADCASTING PTY LTD IN RESPECT OF EACH OF THE 14 SUBSCRIPTION TELEVISION SERVICESCOVERED BY APPLICATION NUMBERS #339 to 352

  1. PRELIMINARY DECISION

1.1For the reasons set out below, the Australian Communications and Media Authority (ACMA) has made the preliminary decision to make an exemption order forTransact Broadcasting Pty Ltd (the Applicant) in relation to each of the following Services provided by the Applicant:

No. / Application number / Service / Channel provider / Category / 2016–17 captioning target
1 / 339 / APAC Committees / Australian News Channel Pty Ltd / News / 25%
2 / 340 / APAC House of Representatives / Australian News Channel Pty Ltd / News / 25%
3 / 341 / APAC Senate / Australian News Channel Pty Ltd / News / 25%
4 / 342 / Australian Christian Channel / Australian Christian Channel Pty Ltd / General Entertainment Category A / 65%
5 / 343 / BBC World News / BBC World Distribution Limited / News / 25%
6 / 344 / beIN Sports / BeIN Sports Australia Pty Ltd / Sports / 25%
7 / 345 / Bloomberg / Bloomberg LP / News / 25%
8 / 346 / CCTV News / China International Communications Co. Ltd. / News / 25%
9 / 347 / Channel News Asia / MCN International Pte. Ltd. / News / 25%
10 / 348 / CNBC / Business News Asia LLP t/a CNBC Asia Pacific / News / 25%
11 / 349 / CNN / Turner Broadcasting System Asia Pacific, Inc. / News / 25%
12 / 350 / EuroNews / Euronews Societe Anonyme / News / 25%
13 / 351 / Fashion TV / FTV Pty Ltd / General Entertainment Category A / 65%
14 / 352 / Nat GeoAdventure / NGC Network (Australia) Pty Limited / General Entertainment Category A / 65%

1.2The Exemption Orderfor each of the Serviceswould exempt the Applicant from the requirement to ensure that a captioning service was provided to meet the applicable captioning target in the financial year 1 July 2016 to 30 June 2017 (the Specified Eligible Period).

  1. LEGISLATION

2.1Part 9D of theBroadcasting Services Act 1992 (the BSA) provides that

  • a subscription television licensee that provides a subscription television service in a financial year must meet the annual captioning target for that financial year (ss130ZV(1)).
  • a subscription television licensee may apply for an order that exempts them from complying with the annual captioning target (s130ZY) for one to five consecutive financial years.
  • before making an exemption order the ACMA must publish a notice of the draft exemption order and invite submissions within 30 days of publication(ss130ZY(6)).
  • the ACMA must consider any submission received and may not make the exemption order unless it is satisfied after having regard to specified matters (Attachment A), that a refusal to make the exemption order would impose an unjustifiable hardship on the applicant (s130ZY(4)).
  1. APPLICATION

3.1On 28 March 2017, the Applicant submitted applications seeking exemption orders under paragraph 130ZY(1)(a) of the BSA in relation toeach of the 14Services for the Specified Eligible Period (the Exemption Order).

3.2The Applicant is a subscription television licensee. Each of the Services was one of 30 subscription television channels provided by the Applicant, known as TransTV collectively.

3.3TransTV, including each of theServices, was provided over the internet and via a specific set top box to the homes of subscribers located in the Australian Capital Territory.

3.4Each of the Services was a pass through channel delivered by the channel provider to the Applicant.The Applicant has no ability to compile channels itself or carry out post or pre-production on content.

3.5On 1 April 2017, the Applicant terminated TransTV, including each of the Services.

  1. EVIDENCE AND REASONS FOR PRELIMINARY DECISION

4.1In making the preliminary decision to make the Exemption Order for each of the Services, the ACMA assessed firstly, whether a failure to make the Exemption Order for each Service would impose hardship on the Applicant and secondly, whether such hardship would be unjustifiable in light of the objects and purposes of the BSA. In making this assessment, the ACMA had regard to the matters specified in subsection 130ZY(5) of the BSA.

4.2The ACMA has relied upon written representations and supporting evidence submitted by the Applicant in its current and previous applications for an exemption order for each of the Services. Information provided to the ACMA on a confidential basis has not been reproduced.

Nature of the detriment likely to be suffered by the applicant (paragraph 130ZY(5)(a) of the BSA)

4.3The Applicantsubmitted that it would cease providing TransTV, including each of the Services from 1 April 2017. The Applicant providesevidence of its notification to TransTV’schannel providers that TransTV’s final broadcast date would be 31 March 2017.

4.4The Applicant submits that if it were required to provide captioning for each of the Services during the Specified Eligible Period,the detriment likely to besuffered by the Applicant would have been:

  • Technical difficulties: the Applicant states that the majority of the set top boxes used by subscribers to the Services have limited or no closed captioning functionality and provides supporting information on a commercial-in-confidence basis. The Applicant has also advised that because of restrictions on its network, there is no ability to migrate these subscribers to another set top box.
  • Excessive financial cost: Based on the available information, each of the Services was not captioned by its channel provider. The Applicant indicates that the cost for the Applicant to provide captions for each of the Serviceswould be unreasonably high, having regard to the Applicant’s financial circumstances,thesubscriber number of the Services, and the termination of each of the Services on 1 April 2017.

4.5As each of the Serviceswas not captioned and the Servicesare no longer broadcast, the Applicant would not be able to meet its annual captioning target for each of the Services for the financial year 1 July 2016 to 30 June 2017.

4.6Based on the information provided, the ACMA is satisfied that a refusal to make the Exemption Order for each of the Services would impose an unjustifiable hardship on the Applicant, given the technical difficulties relating to subscribers’ set-top boxes; the significant financial costs associated with providing captioning for the Services during the Specified Eligible Period and the cessation of the Services from 1 April 2017.

Impact of making an exemption order on deaf or hearing impaired viewers, or potential viewers of the broadcasting service concerned (ss130ZY(5)(b) of the BSA)

4.7The Applicant submits that it ceased providing each of the Services from1 April 2017 and it did not provide any captioned content for each of the Services while it was broadcast.

4.8Considering that the Applicant no longer broadcasts the Services, the ACMA is satisfied that making the Exemption Order would not have a detrimental impact on deaf or hearing impaired viewers of each of the Services.

Number of subscribers (paragraph130ZY(5)(c) of the BSA)

4.9The Applicant submits that it no longer broadcasts each of the Services from 1 April 2017.

4.10The Applicant has provided the number of people that subscribed to the Services at 28 February 2017 on a commercial-in-confidence basis.

4.11The ACMA considers that each of the Services had a small number of subscribers.

4.12The ACMA also notes that the Servicesare currently not available to any subscriber of the Applicant, as the Applicant ceased to provide the Serviceson1 April 2017.

Financial circumstances (paragraph130ZY(5)(d) of the BSA)

4.13The Applicant has submitted information about its financial circumstances.

4.14The Applicant is part of the Transact Group of companies, which are wholly owned subsidiaries of iiNet Limited as of 30 November 2011. The Applicant submits that following TPG’s acquisition of iiNet Limited in September 2015, the financial results of the iiNetGroup are disclosed within the overall TPG financial results.

4.15TPG financial results for 2015–16 provided by the Applicant indicated that the iiNetGroup’s earnings before interest, taxes and amortization (EBITA)for the year was $248.9 million. Over 90 per cent of this amount was from broadband, fixed voice and mobile services.Specific financial information about the Transact Group and the Applicant was not provided.

4.16The Applicant has submitted that the Services represented a small percentage of theTransact Group’s overall profit (and hence a small percentage of the iiNet Group’s profit).While the ACMA does not have evidence of the Applicant’s specific financial circumstances before it, the number of subscribers to the Services and the financial information provided by the Applicant in its previous applications support the Applicant’s submission.

4.17From its examination of the financial information provided by the Applicant, the ACMA is satisfied thata refusal to make the Exemption Order for each of the Services would impose unjustifiable hardshipon the Applicant.

Cost to caption the service (paragraph 130ZY(5)(e) of the BSA)

4.18The Applicant advises that if it were required to provide captions for each of the Services, the only feasible way would have been live captioning the Services. The Applicant provided the ACMA with a previous third party quote of theestimated costs of providing captioning should the ACMA not make an exemption order for each of the Services. The Applicant submitted the same third party quote in its previous applications for exemption orders for the Services for 1 July 2014 to 30 June 2016.

4.19A one-off establishment cost (infrastructure such as encoders, network routers and switches at the play out centre, the installation of fibre connection and other hardware required) was estimated at $120,000 per service plus recurring annual costs of $59,000 per service.

4.20To live caption each of theServices to meet the captioning target during the Specified Eligible Period would cost approximately $620,750 for a news serviceor a sport service (25% captioning target each) and $1,481,567 for a general entertainment Category A service (65% captioning target).

4.21Based on the available information, the estimated total costs for providing captioning to meet the captioning targets for theServicesduring the Specified Eligible Period would have totalled approximately10 million, which includesone-off infrastructure costs, recurring annual costs and live captioning costs.

4.22Based on the information provided, the ACMA is satisfied that the expenditure required by the Applicant if there was a failure to make the exemption order for each of the Services would impose hardship on the Applicant. Such hardship would be unjustifiable as the cost to caption each of the Serviceswould be disproportionateto the benefits of captioning the Services.

Captioning services for television programs provided by the applicant (paragraph 130ZY(5)(f) of the BSA)

4.23Based on the available information, no captions wereprovided on any ofthe Services.

4.24Captioning was provided on 11 of the 26subscription television services provided by the Applicant during the period 1 July 2015 – 30 June 2016.

4.25The ACMA acknowledges that where the captioning services were provided by third party channel providers, the Applicant exceeded the annual captioning targets in most cases.

Applications or proposed applications of exemption orders or target reduction orders in relation to any other broadcasting services provided by the applicant (paragraph 130ZY(5)(h) of the BSA)

4.26The ACMA has made the following exemption orders and target reduction ordersfor subscription television services provided by the Applicant:

Financial year / Exemption order / Target reduction order
1 July 2012 – 30 June 2014 / 16 / 1
1 July 2014 – 30 June 2016 / 19 / 0

4.27As at the end ofMarch 2017, the Applicant applied for 14 exemption orders for the Specified Eligible Period. Each of these applications relate to one of the Services.

The likely impact on the quantity and quality of television programs transmitted on broadcasting services provided by the applicant (paragraph 130ZY(5)(g) of the BSA)

4.28The Applicant submitted that it would cease providing each of the Services from 1 April 2017 and provided relevant evidence.

4.29Given the Services are no longer supplied by the Applicant, the ACMA is satisfied that a failure to make the Exemption Orderfor each of the Services would not have anyimpact, whether positive or negative, on the quantity and quality of subscription television programs transmitted on the broadcasting services provided by the Applicant.

Attachment A

Relevant provisions of the BSA

Part9D of the BSA — Captioning

Exemption orders and target reduction orders--unjustifiable hardship

Criteria for making exemption order or target reduction order

(4) The ACMA must not make the exemption order or target reduction order unless the ACMA is satisfied that a refusal to make the exemption order or target reduction order, as the case may be, would impose an unjustifiable hardship on the applicant.

(5) In determining whether a failure to make the exemption order or target reduction order, as the case may be, would impose an unjustifiable hardship on the applicant, the ACMA must have regard to the following matters:

(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.

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