STATEMENT OF REASONS FOR DECISION TO MAKE THE EXEMPTION ORDER ST/EO-139 FOR TELSTRA PAY TV PTY LTD IN RESPECT OF THE SUBSCRIPTION TELEVISION SERVICE SKY NEWS BUSINESS PROVIDED THROUGH TELSTRA MOBILE FOXTEL
Issued pursuant to section 205 of the Broadcasting Services Act 1992 (BSA).
1. DECISION
On 12 March 2014, for the reasons set out below, the Australian Communications and Media Authority (the ACMA) decided to make an exemption order, under subsection 130ZY(3) of the BSA, for Telstra Pay TV Pty Ltd (the Applicant) in respect of the subscription television service SKY News Business provided through Telstra Mobile Foxtel (the Service), for the specified eligible period of 1July 2013 to 30 June 2014 (the Order).
2. LEGISLATION
2.1 Part 9D of the BSA introduced new legislative requirements for the provision of captioning services by subscription television licensees. Compliance with Part 9D is a condition of a subscription television licence. The enactment of these provisions indicates Parliament’s intention that the cost of providing captioning services by subscription television licensees is a business expense which must be borne by licensees, except where, on an application under section 130ZY of the BSA, a licensee can satisfy the ACMA that compliance with the captioning obligations would impose an unjustifiable hardship on the licensee.
2.2 Subsection 130ZV(1) of the BSA requires a subscription television licensee, such as the Applicant, to meet annual captioning targets for its subscription television service for each financial year commencing from 1 July 2012. An annual captioning target for a financial year is a percentage of the total number of hours of programs transmitted on the subscription television service during the financial year. The annual captioning target for a financial year is dependent on the category of subscription television service provided by a licensee. For the Applicant, the annual captioning target for the eligible period for the Service is 12.5 percent, as the Service is a subscription television news service.
2.3 Subsection 130ZY(1) of the BSA provides that a subscription television 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 :
- is expressed to relate to a specified subscription television service provided by the licensee in a specified eligible period; and
- 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.
2.4 The Applicant seeks an exemption order, which would have the effect of exempting the Applicant’s Service from the requirement to meet the 12.5 percent annual captioning target during the eligible period.
2.5 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.
2.6 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).
2.7 Section 204 of the BSA provides that an application may be made to the Administrative Appeals Tribunal (AAT) for a review of a decision to make an exemption order under subsection 130ZY(3) of the BSA, by a person whose interests are affected by the decision.
2.8 Section 205 of the BSA provides that if the ACMA makes a decision that is reviewable under section 204 of the BSA, the ACMA is to include in the document by which the decision is notified:
(a) a statement setting out the reasons for the decision; and
(b) a statement to the effect that an application may be made to the AAT for a review of the decision.
3. BACKGROUND
3.1 On 20 December 2013, 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 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 Australian National Business news service with live bulletins and live updates for stocks and financial markets. The Service’s genre is News which would normally attract an annual captioning target of 12.5 percent for the financial year commencing 1 July 2013.
3.4 On 29 January 2014, the ACMA published on its website a notice setting out a draft exemption order for the Service and invited persons to make submissions to the ACMA within 30 days (the consultation period).
3.5 This is the second application for this Service. The first application was accepted and order (ST/EO-82) was made on 13 March 2013, covering the eligible period of one year from 1 July 2012 to 30 June 2013, after considering submissions received in relation to a draft order during the relevant consultation period.
4. EVIDENCE AND REASONS FOR DECISION
4.1 In deciding to make the Order, the ACMA considered, pursuant to subsection 130ZY(5) of the BSA, whether the failure to make an exemption order would impose an unjustifiable hardship on the Applicant, having regard to 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, the supporting evidence submitted with the Application and two submissions received during the relevant consultation period. The submissions were from Media Access Australia and the Australian Communications Consumer Action Network.
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 due to a continued lack of technical capability to deliver closed captioning on the Service as it currently exists, and the inability to replace this with a new system that has the required capability within the time constraints of this financial year (2013-2014), the only option 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 services (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 service.
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 (2013-2014). The ACMA considers that this detriment, if suffered, would result directly from a failure to make the exemption order. 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 Service being discontinued due to the costs of providing captioning being unreasonably high relative to the income received from the service. In reaching this view, the ACMA has considered the information provided in the application including submissions made by the Applicant about the lack of technical capacity for closed captioning, the revenue, profit and loss from providing the service, the cost estimate for creating the duplicate channel, and the current viewer numbers for the Service and the Mobile Foxtel channels, as well as the relevant time constraints.
4.3 As to the anticipated impact of the making of an exemption order for 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 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 accepts that the making of an exemption order would be detrimental to subscribers, and potential subscribers, to the Service who are deaf or hearing impaired.
4.4 In considering the financial circumstances of an Applicant, the ACMA has regard to the financial information provided, including the Applicant’s income and profit or loss, from providing the Service. 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 service (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 service (which includes the Service). Current financial statements of the Applicant 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. The expenditure required by the Applicant, if an exemption order was not made, 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 advised of its recent investment in technology which might accommodate captioning in the future. The Applicant indicated that this investment was only one component in the entire solution to provide closed captioning for the Service. The Applicant detailed the complexity of providing closed captioning on the Service and the significant changes required in various components of its mobile television platform. Details were provided on a commercial in confidence basis. The ACMA accepts the Applicant’s claim that it has continued to explore cost effective solutions to deliver closed captions on the platform currently used for the Service.
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 services (comprising 34 channels including the Service) would likely be discontinued. The ACMA accepts the Applicant’s claim. The ACMA notes that the cost of captioning was a factor in the decision made by Optus Mobile Pty Ltd to cease providing five television channels to mobile services from 28 October 2013.
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 (2013-2014):
1. A&E
2. ABC1
3. Arena
4. BBC World News
5. SportsFan (formerly BigPond Sport)
6. Cartoon Network
7. Ch [V] Hits
8. Channel [V]
9. CNN
10. Discovery Mobile
11. Disney Channel
12. Disney Junior
13. E! Entertainment
14. EuroSport
15. Eurosportnews
16. Footy TV (AFL)
17. FOX SPORTS News TV
18. FOX8
19. LifeStyle YOU
20. MAX
21. MTV
22. Nat Geo Adventure
23. National Geographic Channel
24. Nick Jr.
25. Nickelodeon Mobile
26. SBS ONE
27. SF
28. SKY NEWS
29. SKY NEWS Business
30. SKY NEWS Weather
31. Sports Play powered by Fox Sports
32. THE COMEDY CHANNEL
33. The LifeStyle Channel
34. TV1
4.10 The ACMA has considered the two submissions, from Media Access Australia and the Australian Communications Consumer Action Network relating to the draft Order, that were received during the consultation period. The ACMA considers that the submissions did not provide any significant new evidence relating to the statutory criteria which the ACMA is required to consider under subsection 130ZY(5) of the BSA.
4.11 Those submissions emphasised the detriment for deaf and hearing impaired people of limiting their ability to access and enjoy television services available for subscription in Australia. This is an issue well understood by the ACMA, and by the Parliament, which nevertheless saw a potential greater detriment to a greater number of people if the cost for a service provider of meeting the new captioning obligations on a particular television service was likely to make it uneconomic for the service provider to continue to provide that television service. This consideration underlies the provision made by Parliament for exemption orders and target reduction orders. Paragraph 63 of the Explanatory Memorandum to the Broadcasting Services Amendment (Improved Access To Television Services) Bill 2012 states: “The priority for government is for television services to be broadcast, and where possible for those services to be broadcast with captions. It is not the intention of the government that services not be shown because captioning obligations result in an unjustifiable hardship on broadcasters.”
4.12 Media Access Australia’s (MAA) submission suggested that it could be useful for the ACMA to adopt an approach similar to that used in the UK and the USA for determining when a service provider may be excluded from meeting captioning obligations. MAA also asked the ACMA to make public the exact criteria for approving applications based on financial hardship. The ACMA notes that in jurisdictions like the UK and the USA, the exemption processes are different and are based on correspondingly different legislative frameworks. In addition, the ACMA does not have the power to mandate specific financial or subscriber thresholds for television services for the provision of captioning services. The criteria applied by the ACMA in making the Order are the criteria which the Australian Parliament has specified in subsection 130ZY(5) of the BSA, referred to in paragraph 4.1 of this document and listed in Attachment 1 below. Certain criteria require the ACMA to have regard to an applicant’s financial circumstances and the estimated amount of expenditure that an applicant would be required to make if the Order were not made. These matters have been discussed in preceding paragraphs.