Federal Register of Legislation - Australian Government

Primary content

No. 1 of 2007 Declarations/Other as made
This instrument declares that for the purposes of the application of subsection 43C(1) of the Broadcasting Services Act 1992 to a regional commercial radio broadcasting licence, the applicable number of hours of material of local significance is that set out in item 4 of the instrument.
Administered by: Communications and the Arts
Registered 13 Sep 2007
Tabling HistoryDate
Tabled HR18-Sep-2007
Tabled Senate18-Sep-2007
Date of repeal 08 Aug 2017
Repealed by Broadcasting (Hours of Local Content) Declaration No.1 of 2017

Explanatory Statement

 

Broadcasting Services Act 1992

 

BROADCASTING (HOURS OF LOCAL CONTENT) DECLARATION NO. 1 OF 2007

 

Issued by the authority of the Minister for Communications,

Information Technology and the Arts

 

 

Purpose

 

The Broadcasting (Hours of Local Content) Declaration No. 1 of 2007 (the Declaration) is made by the Minister for Communications, Information Technology and the Arts (the Minister) under paragraph 43C(3)(c) of the Broadcasting Services Act 1992 (the BSA). 

 

The purpose of the Declaration is to declare the “applicable number” for the purposes of the application of subsection 43C(1) of the BSA to specified classes of regional commercial radio broadcasting licences.   The Minister is required by subsection 43C(4C) of the BSA to make one or more declaration(s) in relation to the “applicable number”.

 

Background

 

In 2006, the Government made a number of significant changes to the framework regulating the Australian broadcasting and media sector.  These included amending foreign and cross media ownership restrictions and introducing a range of countervailing safeguards to provide ongoing protection for local content.

 

Subsection 43C(1) of the BSA, inserted by the Broadcasting Services Amendment (Media Ownership) Act 2006, contains a safeguard relating to local content.  It provides that the Australian Communications and Media Authority (ACMA) must ensure that, from 1 January 2008, there is in force a licence condition requiring regional commercial radio licensees to broadcast minimum levels of “material of local significance” (as defined in the licence condition to be imposed by ACMA).  Each licensee will be required to broadcast “at least the applicable number of hours” of material of local significance.

 

Subsection 43C(3) of the BSA sets out the meaning of “applicable number” for the purposes of the application of subsection 43C(1).  It provides a default applicable number of 4.5 hours, which licensees must broadcast during daytime hours each business day.  Subsection 43C(3) further provides that the Minister may declare a different applicable number of hours to apply to regional commercial radio broadcasting licences generally (see s. 43C(3)(b)), or to specified classes of licence (s. 43C(3)(c)). 

 

The Government has decided that the diversity of the Australian regional commercial radio broadcasting landscape is such that a ‘one size fits all’ approach to the licence conditions that apply to regional commercial radio licensees is not appropriate.  Instead, the required minimum amount of material of local significance should be determined by reference to the characteristics and circumstances of a licence. 

 

Accordingly, clause 4 of this Declaration provides an applicable number of 0.5 hours for the following classes of licences:

  • racing service licences;
  • remote area service licences;
  • section 40 licences; and
  • small licences.

 

These classes of licences are defined in clause 3 of the Declaration.  Currently, there are five remote area broadcasters, three racing radio broadcasters, 36 small licences, and two section 40 broadcasters.

 

The applicable number of 0.5 hours is appropriate for these classes of licences for the reasons set out in the attached Regulation Impact Statement (RIS).  In summary, this adjustment reflects the fact that these classes of licences have a much more limited capacity to produce a significant amount of local content, considering factors such as the size and location of the licence area, or the radio service’s format, and the likely impact a higher applicable number would have on the licensee’s operation and viability.

Clause 4 of the Declaration also provides that the applicable number is three hours for all other commercial regional radio licences.  

 

The reasons for this applicable number are also set out in the RIS.  The adjustment of the applicable number of hours from 4.5 hours to three hours is intended to ensure that the local content requirement has little or no impact on the majority of licensees in terms of local content production costs. 

 

Consultation

 

ACMA has been consulted on the making of this Declaration.  Stakeholder views on the issue of appropriate levels of local content were sought by ACMA as part of the statutory review that the Minister caused to be conducted pursuant to subsection 43C(4) of the BSA (the Broadcasting Services (Local Content on Regional Radio) Direction No. 1 of 2006 refers).

 


ATTACHMENT

 

REGULATION IMPACT STATEMENT

 

Summary

 

1.      Local content requirements for regional commercial radio licensees were introduced as an important component of the Government’s 2006 media reform package.  The requirement is currently set at 4.5 hours for all classes of regional commercial radio licensee and will commence on 1 January 2008. 

2.      The Australian Communications and Media Authority (ACMA) has considered the extent to which the impact of a 4.5 hours requirement on licensees and audiences would be consistent with the underlying objectives of the local content requirements.

3.      This Regulatory Impact Statement (RIS) considers options to ensure the level of requirement is consistent with those policy objectives.

4.      The RIS does not seek to consider the appropriateness of the local content requirements overall.  The local content requirements are a key part of the media reform package passed by the Parliament in 2006.

Background

 

Local content requirements for regional commercial radio

5.      In October 2006, Parliament passed the Broadcasting Services Amendment (Media Ownership) Act 2006 to give effect to the Government’s media reform package.  Schedule 2 of that Act introduced new local content requirements for regional commercial radio broadcasting licences into the Broadcasting Services Act 1992 (BSA).

6.      These requirements are intended to ensure that regional radio stations will continue to have a presence in their local communities, irrespective of any changes in ownership

7.      Under section 43C of the BSA, the Australian Communications and Media Authority (ACMA) is required to impose a licence condition (before 1 January 2008) on regional commercial radio licensees requiring the broadcast of the ‘applicable number of hours’ of material of local significance between 6am and 6pm on business days.

8.      Under paragraph 43C(3)(a) of the BSA, the ‘applicable number of hours’ is currently set at 4.5 hours.  Paragraphs 43C(3)(b) and (c) empower the Minister to change the level of the local content requirement by declaring a replacement number of hours for all or specific classes of licence, or, through regulations, prescribe different beginning and end times for ‘daytime hours’.

9.      On 27 October 2006, the Minister for Communications, Information Technology and the Arts (the Minister) issued a Direction requiring the ACMA to investigate and report on local content levels for regional commercial radio, including:

·        current coverage of material of local significance; and

·        Whether the minister should vary the required number of hours of material of local significance (currently 4.5) generally or for specified classes of licence.

10.  As part of its investigation, ACMA undertook extensive consultation through submissions from licensees, discussions with peak industry body Commercial Radio Australia Ltd and visits to licensees in all states and territories.

11.  ACMA provided its report to the Minister on 29 June 2007.  The options currently under consideration are based on the findings of ACMA’s report.

Regional commercial radio

12.  The local content levels requirement will apply to 224 regional commercial radio licences in 104 licence areas. These 224 licences comprise:

·          214 broadcasting services band licences;

·          five section 40 licences; and

·          five remote area services.

13.  Regional commercial radio broadcasting licences are licences in areas other than Sydney RA1, Melbourne RA1, Brisbane RA1, Perth RA1, Adelaide RA1 or Western Suburbs Sydney RA1.

14.  Section 40 licences comprise 12 commercial broadcasting licences issued under section 40 of the Broadcasting Services Act, with five being regional commercial radio licences. The remaining seven section 40 licences that contain the General Post Office of one or more of Sydney, Melbourne, Brisbane, Perth and Adelaide are not included under section 43C of the Broadcasting Services Act which provides for the licence condition.

15.  ACMA has advised that Worldaudio Communications Pty Limited has ceased transmission in Geraldton and Kalgoorlie and it is unclear whether Murrangi Holdings Pty Ltd is on-air in Emerald or its licence is valid.  This leaves the Albany and Margaret River section 40 licences, operated respectively by Pirate Broadcasters Pty Ltd and The Cow AM1611 Pty Ltd, as the only licences confirmed as being subject to the regional protections.

16.  Control of commercial broadcasting licences is limited to 35 individual owners.  Including joint ventures, the major regional radio licensees are Macquarie Regional Radioworks (85 licences), Super Radio Network (32), Grant Broadcasters (19), Redwave (9), Prime (10), Rural Press/Fairfax Media (9) and ACE Broadcasters (13).  74% of regional markets are radio monopolies; all but two of the remainder are duopolies.

17.  Significant variations exist in the attributes of different licence areas—for example, licence areas differ in their population size and density, concentration of licences, and media diversity.  These variations are compounded by varying attributes of licences (for example, format and network affiliation) to create an extremely diverse commercial regional radio sector.

18.  Sixty-nine licence areas (66 per cent of the 104 licence areas) have two licences;

·        15 licence areas (14 per cent) have three licences;

·        13 licence areas (13 per cent) have one licence; and

·        7 licence areas (seven per cent) have four licences.

19.  Licence areas range in size from 1,089 km sq (Wollongong RA1) to 277,818 km sq (Longreach RA1).

20.  Of all regional commercial radio stations operating in a licence area, 85 per cent are ‘paired operations’—the same licensee owns two stations in the licence area. These usually operate as an AM/FM pair (62 per cent of all stations) but may be an FM/FM (21 per cent) or AM/AM (three per cent) pair. Only nine per cent of all regional commercial radio stations operate as a single entity in a licence area, either in direct competition with other single entity operators, or against ‘paired operators’. The remaining six per cent of all stations operate singularly within sub-regions of a licence area (for example, Campbelltown and Katoomba) or across multiple licence areas (for example, remote Queensland).

21.  Profitability also varies widely across the industry. Analysis undertaken by ACMA in preparing its investigation report indicates that average annual profit margin varies from 10 per cent in larger regional AM markets to 33 per cent in medium regional FM markets.

22.  Licence operators range from family-owned entities, both small (for example, Pinecam Pty Ltd in Charleville RA1) and medium (for example, Grant Broadcasters) to large networks owned, ultimately, by publicly listed companies (for example, Macquarie Regional Radioworks and Redwave Media, owned by Macquarie and West Australian Newspaper Holdings Limited respectively). Macquarie Regional Radioworks is the largest network with 85 licences.

23.  Ninety-three licences (42 per cent) are AM and 131 (58 per cent) are FM. FM licences tend to broadcast a predominantly music format and generally attract a younger demographic. AM or ‘heritage’ licences are more likely to broadcast a hybrid format (both music and talk) or talk shows. Some licences serve a special interest, for example, radio racing services such as 3BT in Ballarat and 3SR in Shepparton. In total, there are three licences that broadcast predominantly racing content.

Current levels of local content

24.  ACMA’s investigation has found that there is significant variation in the levels of material of local significance currently being broadcast by licensees.

25.  ACMA’s analysis indicates that a few large and many medium and small FM licences and a few large and some medium and small AM licences broadcast less than 4.5 hours of local content each business day.

26.  In addition, ACMA’s analysis relevantly found that the majority of licensees broadcast breakfast shows, most of which are locally produced or specifically tailored for the local area and on average, run for 3.6 hours.

Cost of producing local content

27.  The cost of producing local content is not the same for all licences and varies depending on the method of local content production adopted.

28.  Various factors combine to make it difficult to quantify the general cost of producing local content.  These factors include licence area size, broadcasting band (AM or FM) and associate radio formats, current profitability, current programming structure and reliance on publicly available aggregated data.

29.  For an increase in a licensee’s local content production levels, the cheapest option is to produce voice-tracked music programs.  This is estimated to require a part-time staff member (0.3 of a full-time equivalent employee) to produce the program with annual costs of up to $20,000.

30.  Live music-based programs require an additional 0.5-1.0 full time equivalent employee, at an annual cost of $30,000-$60,000.

31.  The most expensive way to produce local content is to produce hybrid or talkback programs. This is unlikely to be a practical option for isolated licences as they have difficulty attracting and retaining staff. Annual costs of introducing a hybrid or talk back program is according to advice obtained by ACMA $60,000 to $180,000 per annum, comprising an increase in staff of one to three full time employees.

32.  These costs assume facilities are present in the local area.  Those licensees without local facilities who network content produced from a centrally located production facility will gain scale advantages not available to locally produced content, resulting in a lower cost per hour of production.

Problem

33.  Levels of localism have been an ongoing concern for communities in regional Australian for several years.  In recent years, there has been a general reduction in the level of local programming on radio in many regional markets.

34.  The local content requirements which form part of the Government’s media reform package were introduced to ensure that the liberalisation of the media regulatory framework does not lead to further reductions in local content on commercial radio. 

35.  However, it is important to ensure that the requirements are such that they do not impose an unsustainable financial impost on licences to the extent that they are no longer commercially viable, which would result in a reduction in the number of regional commercial radio broadcasting services and a loss of locally relevant services overall.

36.  ACMA’s study suggests that while a majority of broadcasters produce around 3 hours of local content, a significant minority produce very little local content and very few produce 4.5 hours or more.

Scope of problem

37.  The local content levels requirement will apply to 224 regional commercial radio licences in 104 licence areas.

38.  Currently, 35 entities own licences and of these:

·        seven are networks that between them own 177 of the 224 licences (79 per cent of licences) affected by the local content requirement; and

·        28 entities own the remaining 47 of the 224 licences (21 per cent of licences) affected by the local content requirement.

39.  As a general rule local content tends to rise with the size of the population in the licence area or at least the largest community centre.  Local content is less likely to be delivered in the smaller and more remote communities and any exemption system is likely to operate to exempt from regulation those licence areas where ‘localism’ is most at threat.

Objective

 

40.  A priority for the Government in progressing its 2006 media reform package was to ensure that the liberalisation of the media regulatory framework would not lead to further reductions in local content on commercial television or radio and that, where possible, concerns about diminishing levels of local content should be addressed.

41.  The local content requirements were introduced to ensure that the liberalisation of the media regulatory framework does not lead to further reductions in local content on commercial radio. 

42.  However, the Government recognises that the imposition of greater regulatory requirements on regional broadcasters has the potential to involve additional costs.  The capacity of the regional media sector (particularly regional radio, the least profitable of the regulated media sectors) to meet additional obligations is ultimately linked to its commercial viability.  The Government is seeking to balance these competing considerations when considering the appropriateness of local content requirements.

43.  The appropriateness of local content requirements for regional commercial radio is not being revisited as part of the current regulatory proposal.  Parliament endorsed local content requirements for regional commercial radio when it considered and passed the Broadcasting Services Amendment (Media Reform) Act 2006.

44.  The objective of the current proposal is to ensure the current level of local content requirements for regional commercial radio (4.5 hours each business day) introduced as part of the Government’s 2006 media reform package, is consistent with the stated objectives for those requirements:

·        To maintain, rather than materially increase, existing levels of local content on regional commercial radio;

·        Allow licensees to meet local content requirements without changing the format of their services; and

·        Be such that it did not impose an unsustainable financial impost on licences to the extent that they are no longer commercially viable, which would result in a reduction in the number of regional commercial radio broadcasting services.

Options

45.  In assessing the appropriateness of the current level of local content requirement, the Government has considered three options, based on the findings of ACMA’s investigation into local content levels on regional commercial radio. 

46.  Under all three scenarios, it is assumed that ACMA’s definition of ‘material of local significance’ (to be determined by ACMA and included in the licence condition to be made by 1 January 2008) will remain close to that proposed in their report, including that ‘local’ content can be produced from outside the licence area.

Option (a) - Maintain the current statutorily required level of local content at 4.5 hours for all regional commercial radio licensees

 

47.  Under this option, the current statutorily required level of local content of 4.5 hours each business day would be retained for all licensees.

48.  This obligation would come into place from 1 January 2008.

Option (b)- Reduce current level - general requirement

 

49.  Under this option, the current statutorily required level of local content would be lowered to 3 hours each business day for all 224 regional commercial radio licensees.

50.  This obligation would come into place from 1 January 2008.

Option (c) - Reduce current level - various requirements

51.  Under this option, the statutorily required level of local content would be reduced to 30 minutes each business day for small licensees, licensees operating under a section 40 licence, racing radio broadcasters and remote area licensees.

 

52.  For all other licensees, the requirement would be 3 hours each business day.

 

53.  Under this option, remote area services (five in total), racing radio services (three in total), section 40 broadcasters (2 currently operating in regional areas) and small licences (36 in total) are considered a specific class of licence for which a significantly lower applicable number of hours is appropriate.

 

54.  Under this option, a small adjustment would also be made to the definition of ‘daytime’ hours for the purposes of the requirement from 6am-6pm to 5am‑7pm.

 

55.  These obligations would come into place from 1 January 2008.

 

Impact analysis

 

Option (a) - Maintain the current statutorily required level of local content at 4.5 hours for all regional commercial radio licensees

 

Licensees’ ability to meet requirement

 

56.  ACMA’s analysis indicates that a 4.5 hour local content requirement would require many licensees to increase their current levels of local content.  This varies from small to significant increases on current levels, depending on the licence and the type of programming licensees select to meet the requirement.

57.  ACMA’s surveys of licensees and analysis of publicly available program schedules indicates that the majority of licences currently broadcast 3‑3.5 hours of local content through regular weekday breakfast shows.  Therefore, any requirement in excess of this amount has the potential to require increases in local content production levels across many licence areas.

58.  The following table demonstrates ACMA’s findings in relation to licensees’ ability to meet a 4.5-hour requirement based on current levels of production:

 

Small licence area (population <40,000)

Medium licence area (population 40,000 – 100,000)

Large licence area (population >100,000)

FM

Many will not meet

Many will not meet

A few will not meet

AM

Some will not meet

Some will not meet

A few will not meet

 

Costs of producing additional content to meet requirement

59.  Costs for licensees in making up a shortfall in local content would be dependent on the approach licensees choose to adopt in order to meet requirements.  This is a significant variable, as radio operators may choose to commission an additional 3-hour program to meet even a small short-fall in local content levels, as 3-hours is the typical program length for most radio formats.  It should also be noted that in submissions to ACMA’s report, licensees suggested it would be problematic to extend a breakfast show beyond 9.00am.

60.  Another significant variable is the kind of programming radio operators may choose to commission.  The most significant cost component is employing additional staff.  This varies from 0.3 full time equivalent staff for voice‑tracked, music-based shows (at a cost of around $20,000 per annum) to 1-2 full time equivalent staff for hybrid or talk-back shows (at a cost of $60,000-$120,000 per annum). 

61.  ACMA’s investigation report found that, broadly speaking, licensees currently producing a locally hosted or tailored breakfast program would not incur any additional compliance costs in producing up to three hours of local content.  Once a requirement exceeds three hours, the costs can be as high as $60,000 per annum in large licence areas and $20,000 per annum in small and medium licence areas.  There is no difference between the cost of producing 3.5 hours of local content and 4.5 hours of local content.

Impact on licensee profitability

62.  ACMA’s investigation report considered the potential impact on individual station profitability through various case studies, based on commercial-in-confidence information, to conclude that the costs arising from a requirement to increase current levels of local content production have the potential to affect the profitability of many licensees.  ACMA’s analysis indicates that the impact on the profitability of licences, would not be the same extent for all licences, with small licences likely to feel the greatest impact of option (a).

63.  Publicly available aggregated industry profit information demonstrates that profit margins for licensees range from 10 per cent (medium AM licensees) to 33 per cent (medium FM licensees). 

 

Large FM

Large AM

Medium FM

Medium AM

Small FM

Small AM

Average revenue per licence ($000,000)

3.2

1.1

1.0

1.0

0.4

0.5

Average expenditure per licence ($000,000)

2.3

1.0

0.7

0.9

0.3

0.4

PBIT per licence ($000,000)

0.83

0.10

0.32

0.09

0.11

0.12

Average profit margin (PBIT/revenue)

26%

10%

33%

10%

28%

24%

 

64.  As noted above in relation to the variables applying to production costs, the probable impact on profitability of option (a) is linked to licence characteristics, particularly the current program structure of the service. 

65.  Costs would range from $20,000 per annum for voice-tracked content (where an announcer pre-records entire programs or parts of programs that are later incorporated into programs along with advertisements and music) to the most expensive format of hybrid talk shows, costs for which can exceed $60,000 per annum, depending on the number of additional staff recruited. Live music-based programs are estimated to fall somewhere between, with estimated annual costs of $30,000 - $60,000.

66.  In addition, profit margins vary between licences, further complicating an aggregated assessment of the impact of additional costs on profitability. 

67.  Based on the average profitability figures (provided above), the greatest impact would likely be on AM licensees, who, due to the typical format for AM services, would likely choose to commission the more expensive formats of content production.

68.  However, it is clear from ACMA’s analysis of current local content levels that all licences potentially face additional compliance costs and therefore, reductions in profits as a result of option (a).

69.  Option (a) therefore has a clear negative financial impact on regional commercial licensees.

Impact on audiences

70.  It is difficult to accurately quantify the threat to viability that increased local content production costs would have on regional commercial radio licensees in terms of a potential loss of services.  However, any level of threat to the ongoing viability of any number of services has the potential to result in a loss of services and therefore stands to have a negative impact on regional commercial radio audiences

71.  However, there is no recent experience of any licensee handing back a licence.  The greater risk is probably the loss of popular networked programs (sourced from metropolitan broadcasters) which are replaced by ‘local’ programs with reduced production values in order to minimise costs.

Administrative and enforcement costs

72.  In terms of administrative costs for industry relating to compliance, it is expected that ACMA will formalise its approach to enforcement and compliance monitoring in the process of developing the required licence condition (required to be in place before 1 January 2008).

73.  Hence, at this time, it is not possible to quantify administrative costs relating to compliance.  However, ACMA’s investigation report relevantly notes that “ACMA favours a ‘block’ programming approach where licensees would identify for their listeners (on their website, for example) those programs they claim as material of local significance.  This approach provides transparency while minimising compliance costs and allows ACMA to respond to any complaints about alleged non-compliance.”

74.  In this respect, it is expected that ongoing administrative costs relating to compliance would be low.

75.  Similarly, in that enforcement will be undertaken on a complaints‑based model, ongoing audit and monitoring costs for the regulator are expected to be low.

Option (b) - Reduce current level - general requirement

Licensees’ ability to meet requirement

76.  As already noted, ACMA’s analysis indicates that the majority of licences currently broadcast 3‑3.5 hours of local content through breakfast shows.

Cost of requirement

77.  Reducing the current statutorily prescribed level of local content from 4.5 hours each business day to 3 hours, will therefore impose no additional local content production costs on the majority of licensees.

78.  This finding is consistent with industry submissions to ACMA’s investigation.  Most submissions put forward 3 hours as an appropriate requirement, based on the typical duration of daytime programs and the duration of most breakfast shows.

Impacts on specific classes of licensee

79.  However, there are specific classes of licensees for whom a requirement of 3 hours would impose a financial burden, due to current lower levels of local content production.

80.  These classes are:

·        Remote area services – remote area services are a readily identifiable class of five licences with unique characteristics.  They provide commercial services to vast areas of outback Australia and contain many small towns, none with a population exceeding 20,000. 

·        Racing radio services – typically retransmit special interest content from a central location.

·        Small licences – licences in licence areas in the licence area is under 30,000.

81.  Remote area services (5 in total), who, due to the geographically large nature of the licence area, only produce limited amounts of material that can be counted as ‘local’ and, despite several remote area licensees currently maintaining local studios, would have to increase local content production levels to meet a 3 hour requirement.

82.  Whilst being quite large in terms of populations served, two of these remote area licences are operated by small family businesses with relatively lower advertising revenue and profitability.  ACMA’s investigation has therefore found that this class of licensee is likely to suffer a greater impact of increased costs of local content production.

83.  Racing radio services (3 in total) are typically networked from capital cities to regional centres with very little content able to be described as being locally relevant material.  Local content that is produced is likely to be incidental and a result of the coverage of race meetings in these districts, which are scheduled by local racing organisations.  It is highly unlikely this would amount to 3 hours, 5 days per week.

84.  ACMA’s report has found that these broadcasters, because of their highly networked nature and current low levels of local content could not feasibly meet a requirement for either 4.5 hours (option (a)) or 3 hours (option (b)) due to the prohibitive costs of producing an additional 3 - 4.5 hours of local content each day.

85.  Small licences (36 in total) have a comparatively small revenue base, attributable at least partly to the small population of their largest city or town.  Small licensees also face difficulties in attracting and retaining staff and have smaller profits.  Whilst those small licensees who currently produce a local breakfast program would face no additional costs from a 3 hour requirement, for those that don’t, ACMA’s investigation has found that a requirement of 3 hours of local content each day would have a disproportionate effect on smaller licensees with a potential to render them unviable.

Impacts on audiences

86.  As discussed above, in relation to option (a), option (b) may also have a potentially negative effect on audiences in small and remote licence areas, and audiences of racing radio services, although the scale of the impact would be potentially much smaller, given the smaller number of services which may suffer a negative impact under option (b).

Compliance and enforcement costs

87.  As noted above, it is expected that ACMA’s approach to compliance monitoring will involve minimal administrative costs for licensees and the regulator.

88.  The impact of administrative costs on licensees and the regulator under this option can be expected to be similar to that of option (a).

Option (c) - Reduce current level - various requirements

89.  Under this option, the majority of licensees (178 out of 224) would be subject to a requirement for 3 hours of local content each day.

Licensees’ ability to meet requirement and impact of requirement

90.  As noted above in relation to option (b), ACMA’s analysis indicates that the majority of licences currently broadcast 3‑3.5 hours of local content through breakfast shows, meaning that an adjustment of the current statutorily required number of hours from 4.5 hours down to 3, will ensure the local content requirement will have little or no impact on the majority of licensees in terms of local content production costs.

91.  However, there are three classes of licensees for whom a requirement of 3 hours would require an increase in local content production and a subsequent financial impact.  The relevant classes of licensee are remote area broadcasters (5 in total), racing radio broadcasters (3 in total), small licences (36 in total) and section 40 broadcasters (2 in total affected by the local content requirement).

92.  Option (c) proposes a much reduced level of local content (30 minutes) for these classes of licensee as well as a reduced requirement for broadcasters operating under a section 40 licence .

93.  Section 40 of the BSA enables ACMA to allocate to a person a commercial radio licence for a service that does not use the broadcasting services bands (BSB).  The only operational services provided under section 40 licences affected by the regional protections operate in Albany and Margaret River, and are broadly comparable in size and licence area population to small licensees, making a 30 minute requirement appropriate.

94.  Whilst ACMA’s analysis indicates that racing radio broadcasters may be required to increase current levels of local content production to meet a 30 minute requirement, there is no evidence that a minimal requirement such as this is likely to have more than a minor impact on the operation of these services. 

95.  Given these services are either owned or operated by major racing interests and the services are intended to drive revenue through TAB operations rather than, for example advertising revenue, it is not apparent that a small requirement for local content (30 minutes each day) would threaten the ongoing viability of these services.

96.  Option (c) also proposes a small adjustment to the definition of ‘daytime’ hours for the purposes of the requirement from 6.00 am to 6.00 pm, to 5.00 am to 7.00 pm.  As discussed above, compliance with the local content requirement will be achievable for most licences if the applicable number of hours of ‘material of local significance’ is set at 3 hours.  Licensees generally broadcast breakfast shows of 3-3.5 hours duration and the cost impact will be significant at levels more than three hours of material of local significance.

97.  However, adjusting the definition of ‘daytime hours’ from 6.00 am to 6.00 pm (as is presently prescribed in the BSA), to 5.00 am to 7.00 pm, will further facilitate compliance for the 37 per cent of licensees which start their breakfast show between 5.00 am and 5.30 am, and for those licensees in areas where peak listening occurs after 6.00 pm (such as mining communities).

Impact on audiences

98.  The impact on regional commercial radio audiences under option (c) is likely to be positive overall.  Audiences will benefit from a maintenance of existing local content levels, and the potential negative effect on audiences resulting from options (a) and (b) (outlined above) will be avoided.

Compliance and enforcement costs

99.  The impact of administrative costs on licensees and the regulator under this option can be expected to be similar to that outlined above for options (a) and (b).

Consultation

 

100.    In undertaking its investigation, ACMA received 16 submissions on behalf of 147 regional commercial radio broadcasting licences, representing 66 per cent of licences.  In addition, the commercial radio industry’s peak body – Commercial Radio Australia (CRA) – made a detailed submission to ACMA.

 

101.    ACMA asked industry to address the following points in submissions:

 

·        Appropriateness of 4.5 hours and suggested replacement hours;

·        Suggested classes with different hours;

·        Costs of complying with requirement; and

·        Other comments.

 

102.    ACMA also visited a representative sample of licensees in regional, rural and remote Australia.  Authority members accompanied by staff from ACMA conducted visits over the course of 13 days, visiting each state and territory (16 licence areas in total).

 

103.    Industry was of the view that 4.5 hours is not an appropriate requirement and suggest replacement numbers of hours ranging from five minutes to 3.5 hours, with most submissions proffering three hours, based on the typical duration of daytime programs and the duration of most breakfast shows. Industry also supported the proposed extension of the definition of ‘daytime hours’ (option (c)).

 

104.    Industry representatives have held extensive discussions with members of the Government and their advisers.

 

Conclusion and recommended option

105.    Based on the impact assessment above, a requirement for all licensees to broadcast 4.5 hours of local content on each business day (option (a)) is not an appropriate requirement for licensees generally.

106.    Option (a) would require an increase in local content production from current levels.  This is clearly inconsistent with the policy objectives underlying the local content requirement, primary of which was to maintain current levels of local content.

107.    By requiring an increase in local content production levels, option (a) would also result in increased costs for licensees, with potential impacts on profitability and viability.  This outcome would be inconsistent with the objective that the requirements should not impose an unsustainable financial impost on licences.

108.    As any threat to the ongoing viability of the industry has the potential to result in a loss of services available to regional commercial radio audiences, option (a) is also inconsistent with the underlying objectives of the BSA, which relevantly include to “promote the availability to audiences throughout Australia of a diverse range of radio […] services.”

109.    Importantly, any loss of radio services overall would also impact negatively on the primary objective of ensuring local content levels are maintained.

110.    Option (a) is inconsistent with the objectives and is therefore not the preferred option.

111.    Option (b) would be largely consistent with the policy objectives underlying the local requirement in that it would implement a requirement (3 hours of local content each business day) that would maintain current levels of local content for the majority licensees.

112.    By maintaining current levels of local content for the majority of licensees, option (b) would also be largely consistent with the objective of ensuring the local content requirement does not impose an unsustainable financial impact on licensees.

113.    Similarly, option (b) would be largely consistent with the policy objective of ensuring a diverse range of radio services continue to be available to Australian audiences.

114.    However, option (b) is a ‘one size fits all’ requirement that does not acknowledge the diversity of the regional commercial radio industry and the wide-ranging interests and needs of the regional communities it serves.

115.    The Explanatory Memorandum to the Broadcasting Services Amendment (Media Ownership) Act 2006 noted the importance of regulatory distinctions between the difference between larger and smaller regional media companies, and their ability to provide local content.

116.    Whilst, as noted above, option (b) would be largely consistent with current policy objectives, it nevertheless has the potential to produce negative outcomes for licensees and audiences.  To the extent that it would require certain classes of licensees to materially increase levels of local content production, option (b) is also inconsistent with the primary objective of maintaining local content levels.

117.    It would appear that option (b) may have a disproportionate effect on particular classes of licensee, with small licensees, remote area licensees and racing radio licensees being required to increase local content production costs.

118.    Whilst the impact of increased local content production costs on racing radio services should be considered in light of the fact that these services are owned or operated by large racing businesses and are used to drive gambling revenue, it is nevertheless clear that a requirement to produce 3 hours of local content a day would result in a change of format for the service.  This outcome would be inconsistent with current policy objectives.  Given the majority of these licensees pay little in terms of licence fees, some contribution to the local community beyond those interested in horse racing would seem appropriate.

119.    Overall, even though the expected negative impacts of option (b) would be limited to a small proportion of the sector, those impacts are nevertheless inconsistent with current objectives in that:

·        Option (b) would require some licensees to materially increase levels of local content production;

·        Option (b) would impose a financial burden on licensees in meeting the requirement, and, to the extent that this burden may threaten the ongoing viability of services, may result in a reduction in local services and diversity overall; and

·        Option (b) may require some services to change their format.

120.    Hence, whilst option (b) would provide greater consistency with the policy objectives than option (a), it does not fulfil those objectives entirely.

121.    By contrast, option (c) is consistent with the current policy objectives, and the underlying policy objectives of the BSA, in that it:

·        Maintains, rather than materially increases, the level of local content currently produced by regional commercial radio broadcasters;

·        Allows licensees to meet local content requirements without changing the format of their broadcasting services (these formats have evolved over time in response to audience preferences, commercial dictates and community needs); and

·        Will not impose an unsustainable financial impost on licences and will therefore not result in a reduction in the number of commercial radio broadcasting services.

122.    In providing for different levels of requirement for different classes of licensee, option (c) also recognises the distinctions across the regional commercial radio industry.

123.    Requiring smaller but still significant requirements for certain classes of license emphasises the need for all commercial licensees to address the audience for which they are licensed, and avoids the risk of creating an incentive to, or a tacit acknowledgement that broadcasters can completely withdraw from licence areas and simply provide content prepared for other markets.

124.    Whilst there may be some small increases in local content production levels for racing radio broadcasters, this needs to be balanced against the community’s interest in receiving locally relevant services.

125.    In addition, whilst the compliance costs of option (c) are low to none, it is noteworthy that option (c) also includes a measure to further facilitate compliance in the proposal to amend the definition of ‘day time’ hours.  The proposed new definition would maximise the extent to which many licensees can count existing local content production towards the requirement.

126.    Option (c) fulfils the full range of current policy objectives and is therefore the preferred option.

Implementation and review

127.    Implementation of option (c) would require the Minister for Communications, Information Technology and the Arts to table a legislative instrument (under section 43C(3)(c) of the BSA) that declares that the applicable number is 3 hours each business day for licensees generally; and that the applicable number is 30 minutes each business day for ‘small licensees’, remote area services, racing radio services and Section 40 broadcasters within regional licence areas.

128.    Amendment of the definition of “daytime hours” in section 43C(8), from the current 6 am to 6 pm to a new range of 5 am to 7 pm, will be effected through regulation.

129.    Subsection 61CT(1) of the BSA requires the Minister to cause to be conducted a review of the operation of the section 43C local content licence condition at least once every three years.  Subsection 61CT(5) requires the Minister to prepare a report of that review, with the report to be tabled in Parliament (subsection 61CT(6)).