Statement of Reasons for Decision to Make Anexemption Order for Transact Broadcasting

STATEMENT OF REASONS FOR DECISION TO MAKE ANEXEMPTION ORDER FOR TRANSACT BROADCASTING PTY LTD IN RESPECT OF THE SUBSCRIPTION TELEVISION SERVICE: APAC COMMITTEES

1. DECISION

1.1 On 29 May 2015, for the reasons set out below, the Australian Communications and Media Authority (the ACMA) decided to make an exemption order for Transact Broadcasting Pty Ltd (the Applicant) in respect of the subscription television service APAC Committees(the Service), for the specified eligible period of 1 July 2014 to 30 June 2016 (the Order).

1. LEGISLATION

2.1Part 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.

2.2Subsection 130ZV(1) of the Broadcasting Services Act 1992 (BSA) requires a subscription television licensee (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 was 15 per cent for the financial year commencing 1 July 2014 and 20 per cent for the financial year commencing 1 July 2015, as the Service is a subscription television news service.

2.3Subsection 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 :

1. is expressed to relate to a specified subscription television service provided by the licensee in a specified eligible period; and
2. 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.

2.4The Applicant seeks an exemption order, which would have the effect of exempting the Applicant’s Service from the requirement to meet the annual captioning targets of 15 percent for the financial year commencing 1 July 2014 and 20 percent for the financial year commencing 1 July 2015, during the eligible period.

2.5Subsection 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.

2.6Subsection 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:

1. setting out the draft exemption order; and
2. 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).

2.7Section 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.

2.8Section 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.

1. BACKGROUND

3.1On 20March 2015, 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 two financial years from 1 July 2014 to 30 June 2016 (the Application).

3.2The Applicant is a subscription television licensee. It provides, amongst other subscription television services, the Australian Parliament - Committees service.

3.3The Service is one of 36 channels delivered over the internet and via set top box. The Service is provided over VDSL and fibre, via a specific set top box, to the homes of subscribers located in the Australian Capital Territory.

3.4The Service is a news channel, provided to the Applicant by the Department of Parliamentary Services (the Channel Provider).It provides, amongst other subscription television services, the Australian Parliament - Committees service.

3.5The Services is a pass through channel. Transact has no ability to compile channels itself or carry out post or pre-production on content.

3.6The Service’s genre is News which would normally attract an annual captioning target of 15 per cent for the financial year commencing 1 July 2014 and 20 per cent for the financial year commencing 1 July 2015.

3.7This is the second application for the Service. The first order (ST/EO-96) was made by the ACMA on 18 March 2013, covering the period 1 July 2012 to 30 June 2014, after considering submissions received in relation to a draft order during the relevant consultation period.

3.8On 24 April 2015, the ACMA published on its website a notice setting out the draft exemption order for the Service and invited persons to make submissions to the ACMA within 30 days of 24 April 2015 (the consultation period).

1. EVIDENCE AND REASONS FOR DECISION

4.1In 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, by 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. No submissions were received during the consultation period.

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 both financial and operational in that the Service would be removed from the Applicant’s range of channel offerings due to two reasons.

• Technical limitations: the Applicant stated that the set top boxes used by subscribers to the Service have technical constraints, limiting its ability to provide captions. The majority of the set top boxes used by subscribers to the Service have limited or no closed captioning functionality. The Applicant also advised that having regard to the restrictions on its network, there is no ability to migrate these subscribers to another set top box.

• Excessive financial cost: the Channel Provider does not provide captions for the Service and the cost for the Applicant to providecaptioning for the Service could not be justified having regard to the financial circumstances of the Applicant relative to the subscriber number of the Service.

From its examination of financial and operational information provided by the Applicant, the ACMA considers that the detriment of loss of the Service by the Applicant is realistic given the costs involved and the technical limitations. The ACMA considers the associated consequences listed above would directly result from a failure to make the order.

4.3From examination of detailed financial information provided by the Applicant and Channel Provider, 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.

The Applicant provided the ACMA with iiNet Group’s Annual Report for the financial year ended 30 June 2014. The Applicant is part of the Transact group of companies, which are wholly owned subsidiaries of iiNet Limited as of 30 November 2011.Financial information regarding the Transact group of companies for 2013–14 was provided by the Applicant on a commercial-in-confidence basis.The Applicant may have access to funds from the other Transact companies and/or consolidated iiNet group. The iiNet Group Annual Report indicated that for the group the net profit after tax for 2013-14 was $63,024k (2012-13: $60,938k). The Applicant has submitted that the Service represents a small percentage of the Transact Group’s (and also the Applicant’s) overall profit, having regard to the number of subscribers to the Service. While the ACMA does not have evidence of the Applicant’s specific financial circumstances before it, the number of subscribers to the Service supports the Applicant’s submission.

4.4The Applicant advised that the only feasible means for it to provide captioning on the Service is to live caption the Service. The Applicant provided the ACMA with details of the estimated expenditure it would be required to make, should the ACMA not make an exemption order.

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 $44,200per service plus recurring annual costs of $59,000 per service.

To live caption the Service (being a News channel) the Applicant would be required to

• caption 15 percent of its transmission in order to meet the 2014–15 captioning target, at an estimated cost of $386,100; and
• caption 20 percent of its transmission during the 2015–16 year, at an estimated cost of $496,600.

The ACMA considers that the text based content broadcast on the Service would ameliorate the impact of failing to provide a captioning service.

4.5As to the anticipated impact (of making an exemption order) for deaf and hearing impaired viewers, or potential viewers of the Service, the ACMA notes the following:

• the number of subscribers to the Service as at 28 February 2015, provided by the Applicant on an in-confidence basis;
• that the Service is broadcast only in the ACT; and
• the text-based content broadcast on the Service.

While making an exemption order may occasion some detriment for viewers, or potential viewers, who are deaf or hearing impaired, the ACMA considers that such detriment is likely to be minimal, andwould certainly be outweighed by the greater detriment to a greater number of people if the requirement of meeting captioning obligations make it uneconomic for the Applicant to continue to provide the Service.

4.6As 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, subject to consideration of submissions under subsection 130ZY(6) in response to the draft exemption order.

4.7The Applicant applied for 13 exemption orders for the eligible period1 July 2014to 30 June 2016 by the application due date (31March 2015). These services includeAPAC – Committees, Al Jazeera, APAC -House of Representatives, APAC - Senate, Australian Christian Channel, beIN Sports, CCTV News, Discovery Home and Health, Discovery Science, Euronews, EWTN, Fashion TV,Nat Geo Adventure.

4.8The ACMA is satisfied that a refusal to make the exemption order would impose an unjustifiable hardship on the Applicant. The ACMA notes thatthe set top boxes currently used by the majority of the subscribers to the Service have no or limited closed captioning functionality, that the Applicant currently has no infrastructure in place to live caption programs, and that the provision of captioning would impose significant financial costs and would likely result in the removal of the Service. The hardship that would be imposed on the Applicant would therefore not be justifiable in these circumstances.

1. DECISION

5.1Following consideration of the material referred to in paragraph 4.1 above, on29 May 2015 the ACMA, decided, under subsection 130ZY(3) 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 2016.

1. APPEAL RIGHTS

6.1Under section 204 of the BSA, a person whose interests are affected by this decision to make an exemption order may apply to the AAT for a review of this decision.

6.2Section 29 of the Administrative Appeals Tribunal Act 1975 states that an application to the AAT for a review of a decision, shall be in writing and must contain a statement of the reasons for the application, identifying the respects in which the applicant believes that the decision is not the correct or preferable decision. The application must be made within 28days of the decision being made.

6.3 Further information about making an application for review can be obtained through the Administrative Appeals Tribunal website at or by telephoning the Tribunal on 1300 366 700.

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.

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