STATEMENT OF REASONS FOR PRELIMINARY DECISION TO MAKE ATARGET REDUCTION ORDER FOR EASTERN AUSTRALIA SATELLITE BROADCASTERS PTY LTD IN RESPECT OF THE IMPARJA PRIMARY CHANNEL BROADCAST TO THE SOUTH EASTERN AUSTRALIA TV3 LICENCE AREA ON VASSL1130135

  1. PRELIMINARY DECISION

For the reasons set out below, the Australian Communications and Media Authority (the ACMA) has made the preliminary decision to make atarget reduction orderfor Eastern Australia Satellite Broadcasters Pty Ltd (the Applicant) in respect of the Imparja channel broadcast to the South Eastern Australia TV3 licence area on VAS (SL1130135) (the Service), for the specified eligible period of 1 July 2012 to 30 June 2015(the Order).

  1. LEGISLATION

2.1Subsection 130ZR(1) of the Broadcasting Services Act 1992 (the BSA)provides that each commercial television broadcasting licensee must provide a captioning service for television programs transmitted during designated viewing hours and television news or current affairs programs transmitted outside designated viewing hours.

2.2Subsection 130ZL(1) of the BSA definesdesignated viewing hours for programs transmitted before 1 July 2014 as the hours beginning at 6 pm each day and ending at 10.30 pm on the same day. Subsection 130ZL(2) of the BSA defines designated viewing hours for programs transmitted on or after 1 July 2014 as the hours beginning at 6 am each day and ending midnight on the same day.

2.3Subsection 130ZT(1) of the BSA states that a commercial broadcasting licensee must ensure that a captioning service is provided for not less than 90% of programs transmitted on the licensee’s core commercial television broadcasting service during targeted viewing hours for the period 1 July 2012 to 30 June 2013.

2.4Subsection 130ZT(2) of the BSA states that a commercial broadcasting licensee must ensure that a captioning service is provided for not less than 95% of programs transmitted on the licensee’s core commercial television broadcasting service during targeted viewing hours for the period 1 July 2013 to 30 June 2014.

2.5Subsection 130ZT(5) of the BSA definestargeted viewing hours as the hours beginning at 6am each day and ending at midnight on the same day.

Target reduction orders

2.6Subsection 130ZUA(1)(b) of the BSA states that acommercial television broadcasting licensee may apply to the ACMA for an order that is expressed to relate to a specified commercial television broadcasting 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.

2.7Subsection 130ZUA(15) of the BSA defines an eligible periodas a financial year, or consecutive financial years, up to five consecutive financial years.

2.8Subsection 130ZUAA(2) of the BSA states if a target reduction order is made, the effect of the target reduction order is that a commercial broadcasting licensee must ensure that a captioning service is provided for not less than the reduced annual captioning target for the service during targeted viewing hours for each financial year during the eligible period.

2.9Subsection 130ZUAA(4) of the BSA states if a target reduction order is made, subsection 130ZR(1) does not apply to the service during the eligible period.

Decision on applications

2.10Subsection 130ZUA(4) of the BSA provides that, if an application under subsection (1) has been made for atarget reduction order, the ACMA must, after considering the application, either (by writing) make the target reduction order, or refuse to make the target reduction order.

2.11Subsection 130ZUA(5) of the BSA providesthat the ACMA must not make a target reductionorder unless it is satisfied that a refusal to make thetarget reduction orderwould impose an unjustifiable hardship on the applicant.

2.12Subsection 130ZUA(6) of the BSA provides that in determining whether a failure to make a target reduction orderwould impose anunjustifiable hardship on the applicant, the ACMA must haveregard to the following matters:

(a) the nature of the detriment likely to be suffered by theapplicant;

(b) the impact of making the target reductionorder on deaf or hearing impairedviewers, or potential viewers, of the commercial televisionbroadcasting service concerned;

(c) the financial circumstances of the applicant;

(d) the estimated amount of expenditure that the applicant wouldbe required to make if there was a failure to make thetarget reduction order;

(e) the extent to which captioning services are provided by theapplicant for television programs transmitted on commercialtelevision broadcasting services provided by the applicant;

(f) the likely impact of a failure to make the target reduction orderon the quantityand quality of television programs transmitted on commercialtelevision broadcasting services provided by the applicant;

(g) whether the applicant has applied, or has proposed to apply,for exemption orders or target reduction orders under thissection in relation to any other commercial televisionbroadcasting services provided by the applicant;

(h) such other matters (if any) as the ACMA considers relevant.

2.13Subsection 130ZUA(7) of the BSA provides that, before making a target reduction order under subsection (4), the ACMA must:

(a) within 50 days after receiving the application for a target reduction order, publish on theACMA website a notice:

(i)setting out the drafttarget reduction order; and

(ii)inviting persons to make submissions to the ACMA about the draft target reduction 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).

  1. BACKGROUND

3.1On 19 December 2012, the ACMA received an application from Imparja Television Pty Ltd, as agentfor the Applicant, in respect of the Service, seeking atarget reduction order under subsection 130ZUA(1)(b) (the Application).

3.2Imparja Television Pty Ltd is co-owner and operator of the Imparja television service provided by the Applicant.

3.3The Service transmits to the South Eastern Australia TV3 licence area via the Viewer Access Satellite Television (VAST) system. The Service predominantly retransmits the Imparja IMP service (SL2898) broadcast to Remote Central and Eastern Australia TV1 licence area.

3.4The Applicant has submitted an application for a target reduction order for the Imparja primary channel broadcast on its VAN service (SL1130136) to the Northern Australia TV3 licence area (Application 8). In addition, Imparja Television Pty Ltd has also submitted an application for a target reduction order for its IMP service (SL2898) broadcast to the Remote Central and Eastern Australia TV1 licence area(Application 7).

  1. EVIDENCE AND REASONS FOR PRELIMINARY DECISION

4.1In making the preliminary decision to make the Order, the ACMA considered the matters specified in subsection 130ZUA(6) of the BSA in light of the written representations made in the Application by the Applicant and the supporting evidence.

4.2 The Service predominantly retransmits theservice from Imparja Television Pty Ltd. Imparja Television Pty Ltd sources programs from the Nine Network, with limited local programming (insertions include indigenous and locally produced programs – referred to as ‘breakaway programming’). Imparja Television Pty Ltd replaces all advertising inserted by the Nine Network with its own interstitial commercials and station identifiers, which are wholly retransmitted by the Applicant.

4.3The target audience of the Applicant and Imparja Television Pty Ltd is remote and regional Australians, with an estimated viewership of 685,000 people across all three services.

4.4The Applicant estimates breakaway programming occurs from the Nine Network programming feed on weekdays between 1pm to 2pm and on weekends between 10 am to 11am and 5 pm to 6pm.However, times and durations of the breakaway programming shift periodically to take into account sports programming and special events, such as primetime based major events within the broadcast area like the Mount Isa Rodeo, the Finke Desert Race and the Camel Cup.

4.5In addition, the Applicant hasidentified a proposed new program which, if commissioned, would also breakaway fromthe Nine Network programming feed. The proposed program would be transmitted for 30 minutes in primetime on weekdays. The program may be extended if circumstances later arise.

4.6The Applicant has submitted an application for a target reduction order for three consecutive financial years from 1 July 2012. The Applicant has requested the following reduced annual captioning targets:

1 July 2012 to 30 June 2013 / 80%
1 July 2013 to 30 June 2014 / 85%
1 July 2014 to 30 June 2015 / 90%

4.7The Applicant submitted that the nature of the detriment likely to be suffered if a target reduction order was not made by the ACMA would be financial and operational. That is, as the Applicant submitted, the costs involved in captioning the remaining programs would be substantial and unworkable, requiring the Applicant to significantly reduce breakaway programming (which is currently not captioned) in favour of a greater reliance on its Nine Network programming feed (which will be captioned to the level required by Part 9D of the BSA).

4.8The Applicant submitted that by discontinuing its local programming content and not introducing new local programming for the Service, the Applicant would suffer a substantial loss of advertising revenue with it being highly unlikely to receive similar remuneration from network sourced programming. The loss would impede the Applicant's ability to maintain its business model and viability, and restrict the contribution made to the licence area. The Applicant also stated that, by discontinuing breakaway programming, it would lose the investment made to date on proposed new content. The ACMA considers this potential loss of expenditure and revenue, on an ongoing basis, would significantly reduce the Applicant’s ability to provide a greater captioning service in the future.

4.9The Applicant submitted that raising and expending capital to meet the full captioning requirements was impractical given the Applicant was reliant on Government funding to function, that the operating company is a not-for-profit organisation and the estimated cost to caption the breakaway programming was loss-making to the revenue sourced from such content.

4.10The ACMA reviewed evidence provided in confidence regarding the detailed breakdown of expenses, and considers that the Applicant currently has no capacity to provide captions internally. The ACMA considers, having regard to the financial information provided (as outlined below), it would be unduly burdensome for the Applicant to incur this expenditure at this time.

4.11In regard to financial circumstances, the ACMA notes that, as a regional broadcaster, the Applicant’s business model is highly sensitive to fluctuations in advertising revenue which impact significantly on their Earnings Before Interest Tax Depreciation and Amortisation (EBITDA).The Applicant submitted detailed financial information on a commercial-in-confidence basis.

The ACMA has considered the Applicant’s submission that, in removing local content from the Service, the Applicant would forgo a revenue stream that supports its ability to maintain a viable business.

From examination of financial information provided by the Applicant in accordance with broadcast licence fee returns and estimated expenditure required to provide a captioning service, the ACMA is satisfied that failure to make a target reduction order for the Applicant would cause unjustifiable hardship to the extent that a large proportion of breakaway programming would no longer be transmitted and consequently revenue would be lost from breakaway programming affecting the overall viability of the Applicant.

4.12The Applicant submitted that, if a target reduction order was made, viewers who are deaf or hearing impaired would be able to view programs produced and shot around their local area, but may not be able to fully comprehend the program.The Applicant was unable to provide information on the potential viewers reliant on captions.

The ACMA does not consider the Applicant’s response compelling. However, the ACMA has formed the view that making a target reduction orderwould be of low to medium impact for viewers, or potential viewers, who are deaf or hearing impaired. In the ACMA’s opinion, this is because:

-the overwhelming majority of television programs transmitted during designated viewing hours and news and current affairs transmitted outside designated viewing hours are likely to be captioned (through contractual arrangements with the Nine Network)

-a proportion of the breakaway content will include indigenous content which, as per section 130ZM of the BSA, is not required to be captioned if in a language other than English

-there would be few, if any, potential deaf or hearing impaired viewers, because people who are deaf or hearing impaired in the licence area would already use the Service, on which a high percentage of programs are captioned in accordance with the BSA

-the Service is already provided at a significant cost-per-viewer ratio and, were the ACMA to refuse to make the Order, the Applicant would likely cease broadcasting local content; consequently viewers, or potential viewers, who are deaf or hearing impaired would not receive any local content, nor likely receive any captioned local content in the future.

4.13The ACMA also considered the likely impact on the quantity and quality of television programs transmitted on the Service, if the target reduction order was not made. As noted above, the Applicant submitted that the costs involved in captioning the breakaway content were likely to be in excess of the revenue generated from that content, resulting in the Applicant broadcasting more networked programming and less local content. The Applicant also submitted that, should it discontinue its local programming, it is highly unlikely that any other commercial television broadcaster would provide the services the Applicant currently delivers, for example the ongoing program to maintain culture and language of indigenous communities.

As stated in the Explanatory Memorandum which accompanied the Broadcasting Services Amendment (Improved Access to Television Services) Bill 2012, the priority for government is for television services to be broadcast, and wherepossible for those services to be broadcast with captions. It was not the intention ofthegovernment that services not be shown because captioning obligations resultin an unjustifiable hardship on broadcasters.

The ACMA recognises the logistical difficulties in providing ‘local’ programming to a large licence area, but considers any attempt to do so should be commended. In addition, while the Applicant’s television broadcasting service would likely continue with or without the making of a target reduction order, the removal of significant local content would diminish the quality of service and quantity of relevant and tailored content provided to regional viewers.

4.14The ACMA views the eligible period of three years as a suitable period of time for the Applicant to plan for future captioning requirements and for the ACMA to review the Applicant’s circumstances.

4.15In summary, the ACMA is satisfied that a refusal to make the target reduction order would impose an unjustifiable hardship on the Applicant.The ACMA is persuaded by the specific circumstances of the Applicant and has had regard to the incremental viewer benefit, likely to be obtained from captioning levels above the reduced annual captioning target set by the Order, compared with the viewer detriment likely to result were the Order not made and the Applicant broadcast more networked programming and less local content.

4.16Following consideration of the material referred to in paragraph 4.1, on 25 January 2013the ACMA has made the preliminary decision, under subsection 130ZUA(7) of the BSA, to make the target reduction order for the Applicant in respect of the Service, for the specified eligible period of 1 July 2012 to 30 June 2015.

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