The future of the retransmission scheme

18.46 There are some indications suggesting that the retransmission scheme is no longer necessary. The scheme was originally intended to provide for the distribution of free-to-air broadcasts to areas which did not receive adequate reception. The regime facilitated self-help arrangements to enable individuals and communities to access free-to-air broadcasting services where the location or other reception difficulties meant that signal quality was not adequate or the signal was not available.^[46]

18.47 With the introduction of subscription television into Australia in 1995, operators began retransmitting the national and commercial television services as ‘free additions’ to their channels, without the permission or remuneration of either broadcasters or underlying rights holders.^[47] While underlying rights holders are now remunerated under pt VC statutory licensing, the agreement or remuneration of the broadcaster is still not required, despite the extension of broadcast copyright in 2000.

18.48 In addition to retransmission by self-help providers, since 2010, rebroadcast by ‘satellite BSA licensees’^[48] has been authorised, subject to a separate statutory licensing scheme under the Copyright Act.^[49] Under this scheme, the Australian Government-funded Viewer Access Satellite Television (VAST) service provides free-to-air digital television channels to viewers with inadequate terrestrial reception.^[50]

18.49 One possible reason for retaining the retransmission scheme, once it became apparent that subscription television operators could utilise it, may have been to assist in the early development of that industry, and to ensure competition in content provision across media platforms. If so, this rationale may no longer be relevant, given the market penetration of established subscription television services.

18.50 The retransmission scheme may simply provide subscription television platforms with additional content for their offerings at a lower cost than might be the case if a commercial agreement were required. Subscription television providers benefit commercially because they are able to provide free-to-air channels as part of their subscription packages without having to negotiate a commercial fee, or conditions, with broadcasters.^[51]

The unremunerated exception to broadcast copyright

18.51 Free-to-air broadcasters submitted that retransmission should be allowed to continue only with broadcasters’ permission because the rationale for the unremunerated exception for broadcast copyright no longer exists.^[52] That is, the retransmission scheme was introduced specifically to allow retransmission by self-help providers, and was never intended to allow new services to retransmit free-to-air broadcasts without authorisation.^[53]

18.52 Stakeholders also questioned the justification for recognising underlying rights but, effectively, not copyright in the broadcast itself.^[54] Commercial Radio Australia, for example, submitted that both the broadcast and the underlying works or other subject matter are creative products and there is no ‘reasonable basis for the current distinction between the protection of the underlying content and the broadcast’.^[55]

18.53 Free TV observed that broadcast copyright acknowledges the ‘creative and economic value of broadcasts’ and the ‘endeavours of a broadcaster in promoting, arranging and scheduling programming in a competitive commercial environment’.^[56] The retransmission scheme is seen to allow free-to-air television broadcasts to be exploited by competitors of the relevant broadcasters. Free TV stated that the business of subscription television providers

has been built around carriage of the commercial free-to-air television services, which account for over 50% of total prime time viewing in Pay TV homes. While a small fee is payable through Screenrights for the separate underlying rights, free to air broadcasters have not received any compensation for the commercial exploitation of their broadcast signal.^[57]

18.54 However, support for repeal of the unremunerated exception appears to be predicated on the continuation of the pt VC statutory licence and, to some extent, on the introduction of ‘must carry’ obligations on retransmitters.

The remunerated exception

18.55 If the unremunerated exception for broadcast copyright were repealed, so that the permission of the broadcaster would be required for retransmission, this has implications for the operation of the remunerated exception—the statutory licensing scheme in pt VC of the Copyright Act. If the unremunerated exception were repealed, the pt VC scheme would only come into effect if a market-based agreement were to be reached between a free-to-air broadcaster and a retransmitter. That is, if there were no agreement, there could be no retransmission and the need to remunerate underlying rights holders would not arise.

18.56 If the unremunerated exception were repealed, while underlying rights holders would not directly determine whether retransmission was allowed, in practice, they may be able to prevent it, despite the existence of the pt VC licence. An underlying rights holder may condition licensing of their content for free-to-air broadcast on the basis that retransmission will not occur, or that retransmission only occur on, for example, subscription television but not other technologies, such as mobile networks.

18.57 Significant content owners, such as major professional sports bodies, could impose such conditions in negotiations around the sale of exclusive broadcasting rights. Therefore, although retaining the pt VC statutory licence would mean that the retransmitter would not have to negotiate with all the underlying rights holders over retransmission, the broadcaster may have to negotiate in order for retransmission to occur.

18.58 Further, free-to-air broadcasters might decide to permit retransmission of only some of their channels and, for example, exclude sports channels from retransmission. The situation could also become more complex over time—a broadcaster might agree to retransmission at one point in time, and be placed in a difficult position later when subsequent underlying rights holders refuse to licence retransmission.

18.59 Rather than facilitating retransmission, retaining pt VC may simply make negotiating retransmission more complicated. These problems may mean that, if the unremunerated exception were repealed, the remunerated exception for underlying rights should also be repealed, and retransmission left to be determined entirely by market mechanisms.

18.60 The MPAA supported the repeal of the pt VC statutory licence, stating that issues surrounding retransmission should be left to marketplace negotiations about the terms and conditions of retransmission. The MPAA stated that statutory licences ‘inevitably harm copyright owners by limiting their control over their works and denying them the market level of compensation for their exploitation’ and should be ‘avoided or strictly limited to situations in which there is a demonstrable market failure’. Rather, the public interest in promoting access to content would be best served by

enabling copyright owners, broadcasters and retransmitters to develop the appropriate transactional framework for such dissemination in a free market environment. Such private licensing is already working effectively in many markets for scores of new distribution channels for audiovisual content, including over the Internet. MPAA knows of no reason why it would not deliver the same benefits in Australia.^[58]

18.61 Some underlying rights holders, while not favouring any change to the existing retransmission scheme, nevertheless preferred repeal of the retransmission scheme rather than its extension to other forms of communication.^[59] COMPPS, for example, stated that it had ‘no objection in principle to a retransmission regime which is determined by market mechanisms’.^[60] The AFL noted that this position is ‘consistent with the principle that owners of copyright should determine where and how copyright material is disseminated’.^[61]

18.62 Other stakeholders highlighted the importance of retransmission in ensuring the distribution of free-to-air television content.^[62] Ericsson Australia observed that statutory licensing of retransmission ‘provides an alternative means for a distributor to acquire rights for retransmission of linear content without the need for a direct licensing agreement with the broadcaster, thereby growing the addressable market which is viewed as a positive outcome’.^[63]

18.63 The Internet Industry Association stated that, while repealing the retransmission scheme would be ‘platform neutral and consistent with the right of broadcasters to control the retransmission of broadcasts’, it could be ‘highly disruptive in terms of existing services to the public and existing service providers’.^[64] In this context, around four million homes in Australia rely on retransmission to receive some or all of their free-to-air television and radio content, and retransmission to smart phones is the second most popular way for Australians to receive free-to-air television.^[65]

18.64 Broadcasters opposed the options for change proposed in the Discussion Paper. Free TV Australia observed that, while leaving retransmission to market mechanisms ‘takes into account the right of free-to-air broadcasters to control their broadcast signal’, if accompanied by the repeal of the remunerated exception for underlying rights, this would ‘make a consent scheme unworkable due to the large number of underlying copyright owners to be consulted in relation to any retransmission’.^[66]

18.65 Some stakeholders considered that repeal of the retransmission scheme would likely mean commercial retransmission of free-to-air broadcasts in Australia would cease.^[67] Any retransmitter would have to ‘engage in two sets of separate commercial negotiations—for the underlying content and for the broadcast copyright’.^[68] It was considered impracticable to obtain licences from the many underlying rights holders. ^[69]

18.66 ASTRA stated that, without the statutory licence in pt VC, even if a free-to-air broadcaster sought to have its entire service retransmitted on a subscription television platform it may not be able to, or may be forced to ‘black out’ certain programs from view on the retransmitted service.^[70] Foxtel submitted that repealing the retransmission scheme would be ‘practically unworkable and will have the effect of eliminating retransmission in Australia’ and have a ‘detrimental impact for Foxtel’s customers without any corresponding benefits’.^[71]

18.67 Fetch TV considered that, as a relatively small player, it was highly unlikely to be able to negotiate the range of licences required to retransmit a free-to-air broadcast. Further, ‘given the increasingly concentrated nature of the Australian media landscape, the protection of self interests may make the acquisition of necessary licences impossible’.^[72]

18.68 Many stakeholders opposed changes to the current retransmission scheme,^[73] including those who favoured extending the scheme to retransmission over the internet.^[74] Stakeholders considered that the current scheme facilitates choice for consumers; improves access to free-to-air broadcasts; has no negative impact on advertising revenue for commercial free-to-air television services; and ensures underlying rights holders are remunerated.

18.69 A central argument for retaining the current arrangements is that they benefit consumers through competition in the market, by ensuring that free-to-air broadcasts are available across platforms, so consumers may access these services terrestrially, or via cable or satellite.^[75] ASTRA and Foxtel submitted that the existing retransmission regime works well for the benefit of consumers, has ensured access to free-to-air broadcast through commercial negotiation and that there is no justification for legislative reform.^[76]

18.70 Foxtel emphasised that retransmission is ‘an extremely limited right and the Copyright Tribunal of Australia has accepted that Foxtel retransmits the FTA services for the convenience of [its] subscribers’.^[77]

18.71 Generally, it was suggested that the scheme works well and there is no significant demand for reform.^[78] Screenrights stated that, from a commercial perspective, ‘access to the free to air broadcast channels is very important for a new entrant into the television market in Australia’.^[79] In its view, retransmission has fostered competition in the broadcast market and has ‘encouraged new and diverse services, that probably were not considered at the time the scheme was created’.^[80]

Repeal of the retransmission scheme

18.72 The Discussion Paper presented alternate sets of proposals. The first option was to repeal both the unremunerated exception applying to broadcast copyright and the pt VC remunerated exception in relation to underlying rights.^[81] This would effectively leave the extent to which commercial retransmission occurs entirely to negotiation between the parties—broadcasters, retransmitters and underlying copyright holders.

18.73 In theory, allowing retransmission to be determined by consent would provide for the value to broadcasters and subscription television services of free-to-air broadcasts to be established through normal commercial negotiations between the two parties. This would give free-to-air broadcasters control over the commercial use of their signal, while allowing subscription television services the choice of which broadcasts they wish to retransmit, subject to the permission of the broadcaster.

18.74 At the same time, it would provide for the remuneration of free-to-air broadcasters where subscription television services were willing to pay for retransmission, while allowing them to decline to carry free-to-air broadcasts where the price is considered to be too high. In some cases, ‘it is possible that carriage of the signals themselves could become the established market price for retransmission’—that is, no remuneration would need to be paid in either direction.^[82]

18.75 The ALRC recognises that, without the continuation of the pt VC remunerated exception, some retransmission will no longer be practicable, even with broadcaster consent, because broadcasters will not have a licence from underlying copyright holders to authorise retransmission. The effect of repealing pt VC may even be that retransmission will cease, at least for a time. From a consumer perspective, this would mean that some people who currently rely on cable or satellite subscription television to receive free-to-air television and radio content would have to use other technology (that is, for example, install a digital television signal amplifier).

18.76 This position may be addressed by underlying copyright holders, broadcasters and retransmitters developing new transactional frameworks. The MPAA observed that voluntary licensing is working effectively in many markets for the distribution of audiovisual content, including over the internet. Eliminating the retransmission exceptions, after an appropriate transition period, would give rights holders the opportunity to act on incentives to develop new licensing arrangements.^[83]

18.77 The ALRC has concluded that repeal of the retransmission scheme is the option most consistent with the framing principles for this Inquiry. Specifically, removing the retransmission scheme would promote rules that are technologically neutral, rather than favouring some retransmission platforms over others.^[84]

18.78 Removing the retransmission scheme would be based on the assumption that retransmission is no longer necessary to promote access to content,^[85] given the many means by which consumers may now obtain free-to-air television and radio. These include retransmission by self-help providers and the VAST service, which provides free-to-air digital television channels to viewers with inadequate terrestrial reception. In addition, there are new forms of internet and mobile transmission of linear programmed (that is, ‘streamed’) content and on-demand television.

18.79 Reform would be based on a view that the retransmission of free-to-air television and radio broadcasts no longer needs to be facilitated in a converging media environment, and the extent to which retransmission occurs can be left to be determined by market mechanisms. In contrast with the pt VA and pt VB statutory licensing schemes,^[86] there may be no continuing rationale for intervention to address market failure.

18.80 Importantly, removing the retransmission scheme would avoid the need to consider the extension of the scheme to retransmission over the internet or the scope of the internet exclusion. As discussed in detail below, the fact that the extension of the retransmission scheme to internet transmission is problematic provides another reason to suggest that the scheme is not fit for the future and policy makers should be considering how it might be phased out.

18.81 In contrast, continuing the scheme would be based on the assumption of a continuing need to facilitate the retransmission of free-to-air television and radio broadcasts—either to ensure access to free-to-air broadcasting or to facilitate market entry by television platforms—and that it would be impracticable for retransmitters to negotiate the retransmission of free-to-air broadcasts.^[87] The extent to which the convenience of retransmission on subscription cable and satellite television outweighs copyright and competition policy concerns is a matter that communications and media policy makers are better placed to advise upon than the ALRC.

A remunerated exception for broadcast copyright

18.82 The second option proposed in the Discussion Paper was to continue the existing retransmission scheme while providing some recognition for broadcast copyright by introducing a remunerated exception, similar to that which applies to the underlying rights.^[88]

18.83 One model for such a scheme is pt VD of the Copyright Act.^[89] Unlike the pt VC licence, the pt VD licence extends to the copyright in the broadcast itself. For the satellite BSA licensee to be able to rely on the statutory licence to use that copyright there must be an agreement, Copyright Tribunal order or an undertaking covering payment to the broadcast copyright owner.^[90] A similar scheme could apply to broadcast copyright in relation to retransmission.

18.84 There was little support for any new statutory licence from stakeholders^[91]—and this support was predicated simply on preferring a new statutory licence over repeal of the retransmission scheme entirely.^[92]

18.85 The ACCC considered that a remunerated exception for broadcast copyright might mitigate the potential for free-to-air broadcasters to exercise their market power over retransmission, but stated that it would be important to consider ‘the value and costs of retransmission to various parties’ before any final view was reached.^[93]

18.86 Fetch TV stated that it would not oppose the replacement of the pt VC scheme with a statutory licence which set ‘reasonable licence fees for both broadcasters and underlying rights holders, taking into account that each are remunerated through other means’.^[94]

18.87 Screenrights stated that it could not ‘foresee any difficulties in including broadcast signal copyright within the Part VC scheme in the same manner as other copyright subject matter’, but did not express a view on the desirability or otherwise of an additional statutory licence.^[95]

18.88 Stakeholders opposing the idea of a new statutory licence for broadcast copyright included those representing both free-to-air and subscription broadcasters.^[96] ASTRA observed that free-to-air broadcast signals are universally and freely available in Australia. Therefore, where broadcasts are retransmitted on a subscription television platform, which just provides another way of ‘navigating’ to channels that are otherwise already able to be received, ‘there is no case for imposing new cost and administrative burdens’ by introducing an additional licensing scheme.^[97]

18.89 ASTRA submitted that no evidence has been provided to show any loss of advertising revenue or potential audience reach as a result of retransmission of commercial television services on subscription platforms. Rather, commercial broadcasters were seen as effectively seeking an additional revenue stream from subscription television consumers ‘for television services that are required to be both freely available and usually funded by advertising, and where those customers can already receive those services without payment’.^[98]

18.90 Foxtel considered that introducing a statutory licensing scheme for broadcast copyright would be ‘purely about establishing an additional revenue stream for services that are required to be freely and universally available’ when broadcasters already receive remuneration as underlying rights holders.^[99] In any case, the administrative costs of such a licensing scheme would ‘outweigh what we expect to be very modest distributions for broadcast copyright based on Screenrights’ current practices’.^[100] News Corp Australia agreed with Foxtel’s views and also observed that free-to-air broadcasters have been the beneficiaries of significant government investments in programs to ensure universal access to the Australian population.^[101]

18.91 The idea of a statutory licence for broadcast copyright was not supported by free-to-air broadcasters either. SBS favoured ‘direct remuneration of SBS’s broadcast signal’.^[102] Free TV stated that a licence fails to take into account the right of free-to-air broadcasters to control their broadcast signal and that it ‘opposes any right to retransmit broadcast television without the consent of the broadcaster’.^[103] In Free TV’s view, the retransmission regime

allows exploitation of the free-to-air broadcasters’ copyright in a manner that can be highly damaging to their strategic interests. The benefit received by Pay TV from the retransmission right cannot be compensated by a statutory scheme that simply places a dollar value on the broadcast copyright. This is because in addition to being a question of copyright ownership, the issues … are also about the integrity of the services provided by packaging the various copyright works and subject matter that make up a broadcast stream, including the skill and expertise in developing that packaged content.^[104]

18.92 The ALRC has concluded, above, that the Australian Government should consider the repeal of the retransmission scheme for free-to-air broadcasts. If the scheme is retained, however, the ALRC does not consider that any new remunerated (or, at least, remunerable) exception should be introduced.

18.93 Broadcasters already receive remuneration in other ways. Commercial broadcasters are ultimately remunerated for retransmission through higher ratings, which have a role in determining advertising revenue; and are often underlying rights holders and receive remuneration under pt VC.^[105] In any case, from the perspective of broadcasters, it appears that control of broadcasts rather than remuneration for retransmission is the major concern.^[106] That is, broadcasters would like to have the ability to refuse permission for retransmission in certain situations—and to require retransmission in others.