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National’s Broadcasting Policy: Expedient Fictions

National’s Broadcasting Policy: Expedient Fictions, Inconvenient Truths

Peter A. Thompson
Department of Communication Studies
Unitec Institute of Technology

April 8, 2009

The government’s formal announcement of its decision to discontinue the Reviews of Regulation for Digital Broadcasting and introduce no measures to regulate competition in the television market has again demonstrated its political determination not to allow the facts to get in the way of its predetermined policy agenda. The decision comes as no great surprise, but it will still disappoint many in the broadcasting industry - apart from Sky.

The government has ostensibly based its decisions on a newly-released report entitled ‘Departmental Analysis of Competition in Broadcasting’. (document download available here )

The report discusses a number of important regulatory matters stemming from the Review of Regulation for Digital Broadcasting and the Future of Content Regulation which was initiated last year.

But the most striking issue is the number of discrepancies between the government’s public statements and the actual contents of the report. Last month, the Minister of Broadcasting, Jonathan Coleman, indicated in a Media 7 interview that a report undertaken by the Ministries for Culture and Heritage and Economic Development had concurred with the government’s view that there was no need for regulation of competition in the broadcasting market. This was confirmed and reinforced by a stakeholder statement by the Minister of Broadcasting and a subsequent joint media release from Jonathan Coleman and Steven Joyce (the Minister of Communication & Information Technology).

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The stakeholder statement notes that the MCH and MED were asked to analyse the various submissions made as part of the Review of regulation initiative and assess the state of competition in the broadcasting market. It goes on to say that, “This officials’ analysis concluded that there is no strong case at present for the introduction of specific new regulation for the broadcasting sector. Further, that the report concluded that the current market appears workably competitive and that there are no compelling indications of future issues. We accept the officials’ analysis. (sic).” It goes on to note that other areas of the review “may have had merit” but are not priorities for the government. Those “other areas” include consideration of social cultural broadcasting outcomes as well as the framework for regulating content in a multimedia environment- issues central to the Review of Regulation, most of which will require policy decisions by government regardless of political ideology.

Meanwhile, the Ministers’ joint statement is entitled “Government Concludes Broadcasting Policy Review”. This notes that, “A departmental analysis of submissions made during the review process concluded that the current market appears workably competitive and that there are no compelling indications of future issues. It is also noted that there is currently no strong case for the introduction of specific new regulation for the broadcasting sector.” The statement subsequently notes that, with a few exceptions (including post-digital spectrum allocations for regional broadcasting and options for audiences with sensory disabilities), the remainder of the Review of Regulation would be discontinued.

Now anyone reading those statements at face value would be entitled to conclude that after due consideration of all the evidence, the government and all its policy advisors are satisfied that competition in the broadcasting market is fine and that with a few peripheral technical considerations, there are no issues of concern that require regulatory intervention. In fact, unless you have a professional interest in broadcasting policy, you probably wouldn’t even bother looking up the report. The authors of the initial press reports on the issue evidently didn’t, preferring to present the claims made in the Ministers’ news-release without further interrogation (see the NZPA piece in the NZ Herald or the Business Day piece on ‘Stuff’).

In fact, that’s probably how the government wants us to respond- (‘Move along folks- nothing to see here!’)- Because what the report actually says is something altogether different. Most obviously, the report reveals that there were substantial areas of disagreement between the analyses of the Ministry for Culture and Heritage and the Ministry of Economic Development. Indeed, you could be forgiven for thinking that there are actually two separate reports here: Contrary to the Ministers’ suggestion that the officials had concurred in their conclusion that there was no need for regulation, it transpires that the Competition in Broadcasting report identifies TWO potential government policy responses to the competition review’s conclusions about risks in the broadcasting market. Those two options are fundamentally different. The first option, supported by MCH, entails widening the definition of the 2001 Telecommunications Act to include broadcasting, and permit the Commissioner to proceed with an extended review of market competition (which MCH has been in favour of all along), and where required, permit government to ‘specify’ broadcasting services/ platforms to ensure access/ fair competition (‘designated’ services are similar but also incur price controls, such as Telecom’s ‘Kiwishare’ obligation). The second option, preferred by the MED, is essentially a ‘do nothing’ approach, involving no more than issuing a statement of government commitment to ensuring market competition and monitoring market developments.

The text from Paragraph 6 is;

“ Officials consider that there are two main options available to Ministers to address risks in the broadcasting market. These are:

Option One: Amend the Telecommunication Act to include broadcasting so that:
• A widened telecommunications Commissioner (a ‘Communications Commissioner’) may undertake market studies of broadcasting and make recommendations to ministers as to whether particular services (e.g. access to broadcasting platforms or premium content) should be regulated
• The Minister of Broadcasting (in consultation with the Minister of Communications and Information Technology) on the recommendation of the Commission, may add specific services to Schedule 1 by order in Council (The effect of this is that the Communications Commissioner may regulate the specific service or facility but only if Ministers have first agreed that the service or facility should be regulated).

Option Two: Take no further action at this time, but
• Make a general statement about the government’s determination to maintain a competitive and diversified broadcasting market, and
• Continue to keep a watching brief on market developments. “


So the two policy options recommended to the government are diametrically opposed- chalk and cheese. But the government’s policy statements only acknowledge the MED’s laissez-faire alternative, while the MCH arguments are studiously ignored. This seems disingenuous at best, but the extent to which National is being ideologically selective in its presentation of the facts becomes even more apparent when one examines the reasoning behind the respective Ministries’ positions.

Paragraph 7 notes several reasons why the MCH prefers the pro-regulatory approach including;


“Pro-actively manages risks relating to anti-competitive behaviour by Sky in relation to premium content and terms and conditions for access to its platform (satellite capacity, set-top box and EPG) including the cumulative effects of incremental increases in Sky’s position in the market. The Sky platform is arguably an essential facility as any national broadcaster seeking to enter the market must have a presence on the Sky platform to be viable, due to the large share of households that access television via that platform.
• Enables the Commerce Commission to consider future potential market issues relating to a converged telecommunications and broadcasting market including the provision of broadcasting-type services over next-generation networks (NGN).
• Incentivises market participants to avoid anti-competitive behaviour.
• Enables faster responses to the development of competition issues: delaying responses until problems have occurred may be too late.

Paragraph 8, meanwhile, notes several reasons why the MED prefers the laissez-faire approach, including;

“There is no strong case for regulating the broadcasting market at this time. The current market appears adequately competitive and there are no compelling indications of future issues [NB- This carefully worded extract was directly quoted in the Ministers’ media statement as if it were an agreed conclusion].
If the government has concerns about the commercial viability of FTA broadcasters there is a range of options available to it.
• General competition law is adequate to deal with many potential competition issues relating to anti-competitive activity (such as exclusionary contracts). While general competition law is not up to the job of dealing with issues relating to terms and conditions for access to essential facilities, no such facilities have been identified at this time. MED does not agree that the Sky platform is an essential facility for new broadcasters, as alternative transmission options are available.
• There are costs and risks with regulation and extending regulatory powers (including direct costs, the tendency for regulation to increase in scope and complexity over time, and the potential chilling effect on investment and innovation), so the case for new regulation needs to be strong.
• If it proves necessary in practice, it would be possible to extend the scope of the Telecommunication Act to include Broadcasting in relatively short order (if necessary as a matter of urgency).

It is not difficult to discern the different philosophical and normative assumptions underpinning the MED and MCH positions here. However, whether one is predisposed towards neoliberal or social democratic political values, one indisputable point emerges unambiguously here: The analyses of the various stakeholder submissions on the Review of Regulation have not provided sufficient empirical evidence to permit firm conclusions to be drawn about the state of competition in the broadcasting market. The report cannot provide a definitive answer to the questions it was intended to address based only on the evidence of stakeholder submissions.

The submissions from Sky and TVNZ were the most extensive on the market competition issue and they put forward very different arguments which are partly reflected in the evidence presented in the report. Both have vested and conflicting interests in the policy outcomes, and so it is not possible to draw any objective conclusion about the risks to market competition from this evidence alone. The question then becomes whether the appropriate response to that uncertainty is to collect more independent data to make an informed decision (which is what the MCH has been calling for) or to use that uncertainly as a pretext to do nothing (which is what the MED recommends, and what the National government prefers).

Paragraph 13 (also para 64) accordingly acknowledges that the report “Is not a full competition study which would involve detailed review and analysis of the different markets in broadcasting, covering market structure, conduct and performance. Rather, it is a review of the case put forward in submissions for and against new regulation for the overall television broadcasting sector.”

The report’s scope is further circumscribed by the focus on market competition which precludes any detailed consideration of broadcasting policy concerns such as social-cultural / public service outcomes. The assumed terms of reference therefore preclude consideration of the need for broadcasting regulation on non-economic grounds. Paragraphs 25-34 are devoted to providing technical/ legal definitions of market competition under the current legislation. It becomes apparent that this imposes an assumption that very specific conditions need to be fulfilled in order to justify regulatory intervention. In effect, this allows the MED to “beg the question” on the need for more regulation; according to the existing definitions of competition and the pretexts for regulatory intervention, one can find evidence to suggest that the conditions for intervention have not yet been met. The problem is that this precludes more substantive consideration of the more fundamental question of whether those conditions are appropriate, not only in the present moment, but for the future (note also the careful emphasis on present tenses and adverbs in the Ministers’ statements). Indeed, the report notes in paragraph 160 that there are doubts about whether the current legal framework is appropriate to the task in hand: “The Commerce Act (s.36 in particular) is acknowledged to be inadequate to deal with the competition problems that MCH considers are likely to arise. The timeframe for any remedy under the Act is likely to be ineffective.”

This problem becomes evident in paragraphs 89-95, which discuss Sky’s growing market position. The Competition in Broadcasting report notes that: “On the access issue from a competition perspective, it does seem clear that Sky has secured a substantial share of key sports rights, particularly rugby, and that this is an important driver of the uptake of pay TV. This in turn puts considerable competitive pressure on FTA broadcasters.” (Para 90). But these concerns are then moderated by reference to the Commerce Commission’s 2005 review of Sky’s acquisition of Prime, which concluded that Sky was not able to prevent access to premium content by its FTA competitors. Apart from the fact that Sky’s market share has grown considerably in the four years since then, this assumes the validity of Commerce Commission’s framework/ criteria for assessing competition, when this is surely one of the central issues that needs to be examined by any meaningful review of market competition.

Moreover, the claims in the Ministers’ statements that the report found “no compelling indications of future issues” need to be treated very carefully. The emphasis on the need for ‘strong’ evidence to justify regulatory intervention is again premised on the presumed adequacy of existing competition law. Paragraph 128 notes that, “This review has not identified a strong case for introducing new regulation covering the broadcasting sector to address clear and current competition concerns. (The review has not addressed the achievement of public service broadcasting objectives and makes no comment on whether new measures are merited here)” (emphasis added). Of course, the government’s decision to discontinue the parts of the Review of Regulation dealing with social-cultural broadcasting outcomes removes the possibility of any forthcoming evidence coming to light that might justify new regulation on those grounds.

In other sections, the report actually acknowledges a strong degree of uncertainty about future scenarios. For example, paragraph 130 notes that “While there does not appear to be a good case for putting in place powers to regulate broadcasting to address current market circumstances, the question remains as to whether there are likely future developments that would warrant regulatory intervention for preventative or pre-emptive reasons.” (original emphasis). This is very much at odds with the Ministers’ decontextualised assertion that there are no compelling indications of any future issues needing regulation, partly because such claims overlook the fact that there is equally no compelling evidence indicating that there aren’t any future issues requiring regulation. Indeed, the avoidance of future issues may well require anticipatory regulation to be developed now.

The report proceeds to examine a number of possible future scenarios throughout paragraphs 132-161, but there is substantial attention paid here to outlining the significant differences in perspective between MCH and MED. Again, it becomes apparent that, in effect, there are two different reports compressed into the same document here. As the broadcasting market evolves into more complex digital multimedia forms, radical uncertainties emerge in regard to revenue streams, audience demographics, technical standards, and the overall shape of market competition. Nobody can be sure of the future, and both extending and rescinding regulatory arrangements can simultaneously create more certainty and more uncertainty.

The report’s conclusions (paragraphs 168-173) likewise point out that the MCH and MED have very different views on the appropriate government response to the evidence. Paragraph 168 notes that;

“Officials agree that there are no clear and present competition concerns that justify setting up new regulation for broadcasting at this time. However, departments disagree on:
• The extent of future risks to the achievement of the government’s objectives for the broadcasting market.
• Whether it is necessary or desirable to strengthen the regulatory regime for broadcasting and in particular extend the Telecommunications Act to cover broadcasting “ (emphasis added).

The literal meaning of the first sentence is highlighted in the Ministers’ statement, but it is evidently taken out of context, because there is no mention of the disagreement between MCH and MED. The supposed absence of “clear and present” competition concerns does not mean that there are no such concerns, and a cursory perusal of the Review submissions reveals very strong views to the contrary among several stakeholders. Meanwhile, the double-emphasis on present tenses /adverbs points to the depth of uncertainty about the future and potential for future risks to market competition. Neither the government nor the MCH nor the MED really know for sure.

In such a situation, surely the rational response is to seek further evidence, preferably from an independent source. It is important to note that embarking on a further study of competition does not necessarily entail any specific regulatory response, but it would provide a stronger empirical basis to make informed decisions on the matter. This option is intrinsically favourable neither to Sky nor TVNZ and the FTA broadcasters. However, deciding to do nothing on the absurd policy assumption that ignorance is bliss most certainly favours Sky (whose market growth and buying power was noted as a potential risk to the market position of TVNZ by the Crown Company Monitoring Advisory Unit’s briefing to the incoming Minister for broadcasting).

One therefore has to ask why the government is being so selective in its willingness to listen to its own policy advisors. The government has ruled out further consideration of the need for regulatory measures on social-cultural grounds. This ideological circumscription effectively quarantines and de-legitimates any rationale for broadcasting regulation on the pretext of public service principles. This is ironic because the report does not provide sufficient evidence to draw clear policy conclusions about market competition and regulation on economic grounds alone. Nevertheless, by refusing to sanction a further economic study, it appears that National does not want to seek further information on the issue, just in case this provides answers to its policy questions that contradict its ulterior political agenda. This seems more like a comedy plot from Yes Minister than a serious approach to complex broadcasting policy issues in the 21st Century. The trouble is, it’s no laughing matter.

Although the Competition in Broadcasting report is not liable to instigate a war with global political-economic implications, it could have significant political-economic, social and cultural consequences for New Zealand. The government’s selectivity in its interpretation of the evidence is disturbingly reminiscent of the ‘sexing up’ of the WMD dossier in line with the Blair-Bush policy of ensuring the intelligence and facts were fixed around the pre-determined policy. There are three possible explanations for National’s apparent determination to ignore the evidence and suppress the debates on broadcasting policy, although these are not mutually incompatible:

The first possibility is that government policy could be being driven by an unrepentant neoliberal agenda to remove any vestiges of the state in the broadcasting market and restore the free reign of market forces- a ‘back to the 90’s’ approach. Despite the poorly-rationalised move to scrap TVNZ Charter, Jonathan Coleman has denied that he is motivated by neoliberal principles (although he alludes to other National colleagues holding such views.) The notion of an ideological approach to policy would certainly explain the government’s willingness to overlook the empirical evidence where it does not align to the preferred policy. But neoliberalism by stealth can only be a short-term approach to policy.

The second possibility is that the Ministers of Broadcasting and Communications & IT might have realised the complexity of the policy issues facing them and are basically unwilling to commit the time, energy and resources required to deal with them. This ‘do nothing’ approach (endorsed by the MED) would help explain the apparent preference for a laissez-faire approach where industry is left to sort out not only its own regulatory issues but also those involving conflicts of interest that only the government in is a realistic position to handle. If this is true, then there has been a serious abrogation of political responsibility.

The third is that National may be pursuing a broadcasting policy agenda which has somehow become strategically aligned to the business interests of Sky. The government’s disinclination not only to regulate, but refusal to seek further evidence that might provide a pretext for regulation is bizarre when CCMAU and the MCH are pointing to the risks posed by Sky’s increasing dominance (and even the MED concedes that potential problems may arise in the future). Sky is the principal beneficiary of the ‘do nothing’ approach because it will be able to pursue an expansion of its market share and strategic advantages on new platforms and in the content rights market without hindrance. This means that if any subsequent legislation were needed, it would have to retro-actively reclaim market ground from Sky that had ostensibly been won fairly and squarely under the existing regulatory arrangements. In such a context, there needs to be strong grounds not only to justify regulation but also to justify not regulating.

The Minister of Broadcasting’s admiring acknowledgement of Sky’s successful business model and reluctance to be seen to penalise the commercial interests of a major foreign corporation suggests retroactive regulation would be politically untenable for National. But only serves to underline the problem with the retroactive ‘do nothing’ approach; by the time the problems appear, and a politically acceptable pretext for regulation emerges, it will be too late for remedial legislation. This aversion to regulation may indicate that government wants to maintain an investor-friendly profile and is reluctant to tarnish that reputation by prioritising civic interests over corporate profits. Such political expediency is hardly satisfactory, but it would explain the alignment without requiring speculation on other possible forms of influence. Nevertheless, the exact reasons for this apparent coincidence of government policy and private corporate interest remain unclear, and the matter surely warrants ongoing scrutiny.

Ultimately, then, the Competition in Broadcasting report reveals deep-seated conflicts between the policy outlooks of the MED and the MCH and the ambiguity of the evidence currently available. The public statements made by the Minister of Broadcasting and the Minister of Communication & Information Technology are highly selective with the evidence and present parts of the report out of context. The intention is clearly to give the impression of policy consensus where none exists, and as such it can only be regarded as a calculated, cynical attempt to misrepresent the facts to the public. The government’s refusal to countenance further investigation into competition in the broadcasting market and its decision to discontinue the Review of Regulation process in regard to public service and content-related issues suggests a reluctance to deal with rational arguments and empirical evidence because it knows these do not support its current policy trajectory. Faced with complex policy issues and inconvenient truths, the government has bottled out of its civic obligations and elected to base its broadcasting policies on politically expedient fictions instead. The citizens of New Zealand surely deserve better.

*****

Peter Thompson is a Senior Lecturer in the Department of Communication Studies at Unitec in Auckland. He has written extensively on the government’s broadcasting policies since 1999, and chaired the working party which reviewed public submissions on the redrafted version of the TVNZ Charter. He has also undertaken policy research projects for the Ministry for Culture and Heritage (on broadcasting funding-setting mechanisms in OECD countries) and NZ On Air (on approaches to measuring broadcasting quality).

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