Statement of Reasons for Preliminary Decision Telstra Pay TV Pty Ltd Cons #60

STATEMENT OF REASONS FOR PRELIMINARY DECISION TO MAKE ANEXEMPTION ORDER FOR TELSTRA PAY TV PTY LTD IN RESPECT OF THE SUBSCRIPTION TELEVISION SERVICE CH [V] HITS PROVIDED THROUGH TELSTRA MOBILE FOXTEL

1. PRELIMINARY DECISION

For the reasons set out below, the Australian Communications and Media Authority (the ACMA) has made the preliminary decision to make anexemption order for Telstra Pay TV Pty Ltd (the Applicant) in respect of the subscription television service Ch [V] Hitsprovided through Telstra Mobile Foxtel(the Service), for the specified eligible period of 1 July 2012 to 30 June 2013 (the Order).

1. LEGISLATION

2.1Subsection 130ZV(1) of the Broadcasting Services Act 1992 (BSA)provides that each subscription television 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.

2.2Subsection 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.

2.3Subsection 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.

2.4Subsection 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 theACMA 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).

1. BACKGROUND

3.1On 21 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 Applicant is a subscription television licensee. The Service is one of 35 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 music clips and music news.

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 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,if an exemption order wasnot 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 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 (2012-2013), 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 aduplicate channel with open captions would render the Service commercially unviable.

Further, the Applicant submitted that the Service is one of 35 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 allMobile 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 receivedfrom 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(2012-2013). The ACMA considers that this detriment, if suffered,would result directly from a failure to make the exemption order.

4.3As 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 context of the application.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 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 inthe Mobile Foxtel service (including the Service)being discontinued due to the costs of providing duplicate channels with open captioning beingunreasonably high relative to the income received from the Mobile Foxtel service (which includes the Service). Current financial statements of the Applicantwere submitted on a commercial-in-confidence basis for the ACMA’s consideration in support of the Application.

4.5As 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. As such, the expenditure required by the Applicant as a result of a failure to make the exemption order would be the cost of creating a duplicate channel for the Service and for each of the other 34Mobile 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 34Mobile Foxtel channels.

4.6The Applicant submitted that it is currently not streaming any captioned content on the platform used to provide the Service.

4.7The 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 thatthe Mobile Foxtel subscription television services (comprising 35 channels including the Service) would likely be discontinued. The ACMA accepts the Applicant’s claim.

4.8The Applicant has applied for exemption orders in relation to the 35 Mobile Foxtel channels listed in the paragraph below,as well as the subscription television sports service channel Speed.The Applicant has also applied for one target reduction order in relation to the subscription television sports service channel Fuel TV.

4.9The Applicant has applied for exemption orders in relation to the following Mobile Foxtel channels, all for the same eligible period of 1 financial year (2012-2013):

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1. ABC1

2. SBS1

3. SKY NEWS

4. SKY NEWS Business

5. BBC World News

6. CNN

7. FOX SPORTS News TV

8. Cartoon Network

9. National Geographic Channel

10. The Weather Channel

11. MTV

12. Nickelodeon Mobile

13. TV1

14. Discovery Mobile

15. Channel [V]

16. MAX

17. Eurosportnews

18. Disney Channel

19. Disney Junior

20. Nick Jr.

21. E! Entertainment

22. FOX8

23. THE COMEDY CHANNEL

24. Ch [V] Hits

25. Nat Geo Adventure

26. Arena

27. The LifeStyle Channel

28. LifeStyle YOU

29. A&E

30. SF

31. Footy TV (AFL)

32. League TV (NRL)

33.BigPond Sport

34. Fox Sports

35. EuroSport

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4.10 Based on the information provided by the Applicant in its application, the ACMA is satisfied that, despite the detriment to deaf or hearing impaired subscribers or potential subscribers to the Service, a refusal to make the exemption order would impose an unjustifiable hardship on the Applicant as:

(i)There is currently no technical capacity for closed captioning for the Service.

(ii)It is not feasible for the Applicant to procure and implement a new platform that would provide technical capacity to meet the captioning requirements within the time constraints of this financial year (2012-2013).

(iii)The only technical option available of creating a duplicate channel with open captions for the Service, as well as for the other34 channels which comprise the Mobile Foxtel service provided by the Applicant, in order to meet the captioning requirements for this financial year, would impose financial costs that would make the Mobile Foxtel service commercially unviable and would likely result in the Applicant discontinuing the Mobile Foxtel service, including the Service.

1. PRELIMINARY DECISION

5.1Following consideration of the material referred to in paragraph 4.1 above, on 25 January 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 2013.

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