STATEMENT OF REASONS FOR PRELIMINARY DECISION TO MAKE AN EXEMPTION ORDER FOR FETCH TV PTY LTD IN RESPECT OF THE SUBSCRIPTION TELEVISION SERVICE AL JAZEERA (ENGLISH)

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 Fetch TV Pty Ltd (the Applicant) in respect of the subscription television service Al Jazeera (the Service), for the specified eligible period of 1 July 2012 to 30 June 2014 (the Order).

2.  LEGISLATION

2.1 Subsection 130ZV(1) of the Broadcasting Services Act 1992 (BSA) provides that each subscription television licensee (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 20 December 2012, the ACMA received an application from the Applicant in respect of the Service, seeking an exemption order under subsection 130ZY(1) (the Application).

3.2 The Service is a 24 hour English language news and current affairs channel reporting on global news.

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 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 the nature of the detriment likely to be suffered if an exemption order were not granted by the ACMA, would be financial and operational in that the channel would be removed from the Applicant’s channel offerings due to excessive financial cost, resulting in:

·  subscribers being deprived of Al Jazeera programming;

·  the value and appeal of the Applicant being diminished; and

·  the relevant channel provider losing a platform for distribution of its channel.

The ACMA considers that the detriment of loss of the Service by the Applicant is realistic given the costs involved. The ACMA considers the associated consequences listed above would directly result from a failure to make the exemption order.

4.3 As to the anticipated impact (of making an exemption order) for deaf and hearing impaired viewers, or potential viewers, of the Service, the Applicant submitted there would be limited impact. The ACMA accepts evidence provided in confidence about the number of subscribers viewing the Service.

The channel provider, Al Jazeera Media Network, also submitted that the significant amount of text-based content (including on-screen news tickers and scrolling text headlines) on the Service means that captioning would not add a significant amount of additional content to the existing textural support.

The ACMA considers that the text based content broadcast on the Service would ameliorate the impact of failing to provide a captioning service. However, it may also be possible that the audience size of the Service would increase if a captioning service is provided.

4.4 From examination of detailed financial information provided by the Applicant, the ACMA is satisfied that failure to make an exemption order for the Service would cause unjustifiable hardship to the extent that the channel would need to be removed from the Applicant’s service.

Current financial statements of the Applicant’s parent company, Media Innovations Pty Ltd (MIPL), were submitted as evidence on a commercial-in-confidence basis.

The channel provider, Al Jazeera Media Network, advised that it is impossible to provide closed captioning for Australia, as no other country has made such a requested, nor does it make financial sense to do so for only one country and moreover for the smallest subscriber bases in that country. It advised that returns from licensees in Australia would not be enough to recoup the costs for closed captioning. The channel provider explained that should there be a failure to grant the exemption order, it could result in the withdrawal of the Service from the Applicant’s channel offerings.

4.5 The Applicant advised that, unless captioning comes from the channel provider “at source” there is no way for the Applicant to caption the channel unless it obtains live captioning services for the Service. Evidence was provided of the cost involved by way of a quote for the establishment and ongoing provision of live captioning.

A 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 $1,140,000 (whether one or 35 channels are to provide captioning) plus recurring annual costs of $10,200 per channel.

To live caption the Service (being a news channel and therefore required to caption 10% of its transmission in order to meet the 2012-2013 captioning target) was estimated at $247,000 for the 2012-2013 year.

The Applicant advised that it was unaware of how many hours of work are required in providing one hour’s broadcast of captioning as it is technically unable to produce pre-prepared / offline captioning or process / prepare purchased captions for a pass through channels.

4.6 The Applicant advised that currently no captioned programs are transmitted on the Service. The Applicant advised, however, that captioning is provided by the channel providers on 13 of the 35 channels including its most popular and most watched channels. The Applicant relies on information received from channel providers to identify the times at which captioned programs are shown. An average of 15% or 833.73 hours per week were captioned in the last six months – all of which was provided by the channel providers.

4.7 As to the likely impact on the quantity and quality of television programs transmitted on the Service, the Applicant indicated that if the ACMA does not make the exemption order applied for, that would result in the Service no longer being provided to subscribers. The ACMA accepts the Applicant’s claim. The ACMA will also need to consider claims made by persons making submissions under subsection 130ZY(6) in response to this draft exemption order.

4.8 The Applicant has applied for 21 exemption orders and one target reduction order for 22 channels including Baby TV, Fashion TV, Nat Geo Adventure (target reduction), Ovation, Travel Channel, BBC World News, CNBC, Al Jazeera, Bloomberg, CCTV News , DW-TV, Fox Sports News, Euronews, France 24, NDTV 24x7, ESPN 2, Australian Christian Channel, Chelsea TV, Manchester City Club Channel, Real Madrid TV, MUTV and Setanta Sports.

4.9 Evidence provided by the Applicant supports its claim that the provision of captioning services would impose unjustifiable hardship on the Applicant as:

·  there is currently no captioning infrastructure in place at Fetch TV.

·  the provision of captioning would impose significant financial costs and would likely result in the removal of the Service.

The Applicant is a recent starter in the home entertainment industry, still in an early developmental stage of establishment. To impose significant additional costs would therefore impose unjustifiable financial hardship on the applicant in a vulnerable time of building its business.

Having regard to all the above considerations, the ACMA is satisfied that it would impose unjustifiable hardship on the Applicant if it were to refuse the Order.

5.  PRELIMINARY DECISION

5.1 Following consideration of the material referred to in paragraph 4.1 above, on 18January 2013, 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 2012 to 30 June 2014.

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