EXCLUSIVE: TV’S DIGITAL SWITCH-OVER SWITCHES OFF NON-COMMERCIAL TELEVISION

GUEST BLOG: David Beatson

New Zealand’s television system enters a new era with its total digital switch-over at the end of this month. But it’s an era that has no room for non-commercial free-to-air TV broadcasting. 

All existing non-commercial TV broadcasting licences will be terminated when the Big DSO happens. The nation’s largest non-commercial TV channel – Triangle Television’s Face TV – will no longer broadcast free-to-air to Auckland viewers.

Any new non-commercial channel – nationwide, regional, or local – will have to buy digital spectrum space and transmission services from one of the existing commercial broadcasting licence holders at commercial rates.

So, how did the digital switchover turn into such a digital switch-off for non-commercial TV? This story starts in 2006.

In 2006, Crown Agreements with BCL/Kordia, TVNZ and MediaWorks on Digital Television Broadcasting limited competition for the supply of digital spectrum to other broadcasters in the transition to the Digital Switch Over.

The 2006 Agreements provided licences to Kordia, TVNZ, and MediaWorks to simulcast nationwide and near-nationwide channels in analogue and digital form during the transition period leading up to the Digital Switch Over. At or before DSO, this privileged trio can convert these transitional licences into long-term licences securing their digital spectrum space for up to 20 years.

The Agreements also outlined the processes to be followed by the three organizations to allocate surplus digital capacity provided by their digital licences to other broadcasters.

Section 6.1 of Crown-BCL/Kordia Agreement stated that its digital licences “will be used to for free-to-air broadcasters that do not hold DTT licences”. Section 6.5.2 of the Agreements with TVNZ and MediaWorks required them to establish a process to see that “other broadcasters attempt to secure capacity from Kordia” before approaching them.

The 2006 Agreements effectively secured Kordia’s position as the dominant supplier of free-to-air digital television transmission services in the transition from analogue to digital television.

TVNZ and MediaWorks have retained all the capacity they were granted in 2006. A substantial amount of it is unused. These digital landlords have no incentive to let competitors for audiences and advertisers move into their digital space.

The 2006 Agreements not only stalled competition in the commercial free-to-air television broadcasting market broadcasting over the last seven years – they also set the scene for the termination of New Zealand’s fledgling non-commercial television channels.

The Ministry for Culture & Heritage – as the Crown Agent administering the Crown-Kordia Agreement 

– failed to enforce provisions intended to protect the interests of regional commercial and non-commercial television broadcasters.

The 2006 Crown Agreement with BCL/Kordia required Kordia to “use its best endeavors to enter into transmission agreements, within six months of the signing of the Agreement, to simulcast existing near-national analogue free-to-air Channels and services.”

After that six month period, Section 6.5 of the Agreement states Kordia “will issue a call for expressions of interest from broadcasters and will make available any unused capacity under the Licences, subject to BCL/Kordia’s commercial terms and condition”. Kordia did not meet this requirement.

A letter from Kordia’s general counsel Michael Jamieson, dated 12 December 2012, confirms that:

“Kordia did not issue any formal Expression of Interest info, or call for formal expressions of interest from, the market. Kordia did however extensively canvas current and prospective broadcasters to sell them capacity on Kordia’s mux*.I am advised that, through discussions and emails with the Ministry of Culture and Heritage, this normal (and on-going) sales process was sufficient for the purposes of clause 6.5, in terms of seeking interest from commercial and non-commercial broadcasters.”

*A mux is a multiplex, the digital technology that enables 8-10 standard TV channels to be broadcast simultaneously over a single TV channel band and then be separated by a digital home receiver.

The Ministry for Culture and Heritage failed to enforce sections of the 2006 Crown – BCL/Kordia Agreement that would have given non-commercial broadcasters first priority in the allocation of Kordia’s unused Digital Terrestrial Transmission capacity.

Section 6.5 of the Crown Agreement outlined the priorities to be followed by Kordia in making its unused digital capacity available:

“6.5.1 first, the Agent (MCH) may require BCL to give priority to non-commercial regional/local free-to air broadcasters;

“6.5.2 secondly, to commercial free-to-air broadcasters that do not have their own DTT licences;

“6.5.3 thirdly, to other commercial free-to-air broadcasters; and

“6.5.4 fourthly, to any other broadcasters.

Section 6.6 enabled the Ministry to give Kordia “reasonable notice requiring it to make unused capacity under the Licences available for non-commercial regional/local broadcasters.”

Section 6.7 required Kordia to establish, in consultation with the Ministry, “a suitable process for making unused capacity under the Licences available and determining the priority under clause 6.5 for access among non-commercial and commercial free-to-air broadcaster and other broadcasters who may be competing for limited capacity under the Licences.”

Last December, Kordia stated that:

“To date we have not had any situation of contest between commercial and non-commercial free-to-air broadcasters for unused capacity. Therefore, we have not developed a formal process document under clause 6.7.”

The absence of any contest is hardly surprising, since the Ministry did not advise broadcasters, or the public, of the detail of the protective provisions in the Crown – BCL/Kordia Agreement – of its decision to waive these provisions.

Kordia quietly committed its Auckland region digital terrestrial transmission capacity to a new commercial broadcaster, TV33, while the Ministry was still in the formal process of consulting regional television broadcasters on “Planning for Digital Television” and their options for making the transition to digital broadcasting.

The incumbent Auckland region non-commercial broadcaster Triangle Television did not hear that it no longer had an option for digital terrestrial transmission until December 2009.At that point, it was still in the process of consulting with the MCH on digital options for regional TV.

Three years later, the MCH declines to provide information on its communications with Kordia over this issue. On 30 January 2013, it said that because “negotiations are currently in progress with Kordia over the provision of digital spectrum in Auckland” withholding the information requested “is necessary to enable the Ministry to carry on, without prejudice or disadvantage, negotiations.” No progress has been reported since then. A new request for the information was lodged this month.

Other material obtained under the Official Information Act indicates that the Ministry did not obtain Ministerial consent for its decision to waive the protective provisions of the Crown-Kordia agreement.

On 13 February 2013, Broadcasting Minister Craig Foss responded to a request for copies of the Ministerial consent and/or approvals given to the Crown Agent (MCH) to vary or waive the provisions of clauses 6.5-6.7 of the 2006 Crown Agreement. His response:

“The documents you have requested … do not exist.” 

In 2009, Government officials provided inaccurate information about “must carry” provisions in the Crown Agreements during their formal consultations with regional TV broadcasters on Planning for Digital Television.

Government officials initiated formal consultations with regional free-to-air television broadcasters on Planning for Digital Television in August 2009 with the publication of a “Digital Futures” discussion

Document that stated:

“In New Zealand, the government has not imposed, and would be unlikely to contemplate the introduction of ‘must carry’ rules. In 2006, however, when government granted the three digital terrestrial licences to TVNZ, MediaWorks and Kordia, it reserved the right to trigger ‘must carry’ provisions included in the agreements with the licence holders. The ‘must carry’ conditions would require them – Kordia in the first instance – to provide unused capacity to carry one regional service in each region.”

In broadcasting parlance, a “must carry” requirement is just that – a primary requirement that must be met. There is no “must carry” requirement in the 2006 Crown Agreements. The Ministry for Culture & Heritage (MCH) only conceded the fiction of the “must carry provisions” later in the consultation document, after it was challenged to invoke them to address the problem created when Kordia allocated its only regional digital capacity in Auckland to the new commercial broadcaster TV33 instead of the incumbent regional non-commercial free-to-air broadcaster Triangle Television.

The Ministry for Culture & Heritage denied non-commercial TV broadcasting licence holders the right to convert their licences to digital use – on the basis of flawed logic. 

During the 2009 consultations, all regional television broadcasters were reminded that their analogue broadcasting licences would expire in March 2010. Subsequently, these licences were all renewed on a transitional basis until the DSO.

What was not stated in the consultation was that the regional commercial TV broadcasters would be granted rights to convert their analogue licences for digital use, at or before the DSO, but regional non commercial TV broadcasters would not have the same rights.

Asked this month to explain the different treatments given to the commercial and non-commercial channel operators , a Ministry official says:

“The reason for the differing treatment was because the commercial regional broadcasters, like their network counterparts, have paid for their licences through resource charges, in some cases over many years, and it would have been unfair for them to have been treated differently to other commercial broadcasters. All commercial licensees were given the option to convert their analogue licences at a predetermined price rather than have to submit to a competitive auction process.

“Non-commercial licensees were not given the same option because it would have been an inefficient use of scarce digital spectrum to automatically grant single channel operators a licence capable of delivering multiple channels. There was also the issue of foregone revenue, given that those commercial broadcasters who did exercise the right to convert would be paying a resource charge for the spectrum rights, while non-commercial broadcasters would presumably be not paying a resource charge.” 

The logic underpinning the Ministry’s approach to digital conversion rights is flawed.

Commercial regional TV broadcasters are also single channel operators, just like their non-commercial counterparts. Therefore, they would also make inefficient use of a licence capable of delivering multiple channels.

The Ministry’s assertion that non-commercial licensees should be denied digital conversion rights because they do not pay the annual resource charges levied on commercial licensees is equally illogical.

Instead of resource charges, non-commercial licensees are required to bear the cost of delivering a unique range of public broadcasting services specified in the government’s Regional and Community  Broadcasting Policy Framework and in the terms of their non-commercial licences. There are no similar content requirements in the licences of commercial TV broadcasters.

Non-commercial broadcasting licences require licensees to provide:

• Broadcasts fulfilling a priority community need or needs;
• Broadcasts increasing the diversity of programme choice for viewers, by complementing and providing alternative services to those offered by existing broadcasters;
• Broadcast operations providing access for local and regional programme makers to the airways, and/or for relevant stakeholders;
• Broadcast services that feature locally-generated programmes designed to attract a wide range of audiences in the coverage area, with a focus on previously unmet needs, including some, or all, of the following
  • Local news, information stories and history
  • Discussions of community issues, including political processes
  • Programming aimed to inform and involve a specified or under-served local community or communities of interest.

Non-commercial broadcasting licensees must operate on a charitable or not for profit basis, generate no more than 50 percent of their revenue from advertising, and have a funding mechanism that attracts enough revenue from other sources to deliver their mission. Again, none of these limits apply to commercial licensees.

Both commercial and non-commercial broadcasters have paid their dues to the government, albeit in different ways, and both should have been able to convert their analogue licences to digital use.

All non-commercial television broadcasting licences will be terminated at the Digital Switch Over, despite a requirement for these licences in the Government’s Regional and Community Broadcasting Policy Framework.

The Ministry states that the policy behind the allocation of non-commercial licences is the Government’s Regional and Community Broadcasting Policy Framework. This Framework was endorsed on behalf of the Government in September 2009, by the Minister of Broadcasting Jonathan Coleman and the Minister of Communications and Information Technology Steven Joyce. It has not been revoked, and its stated policy goals are to:

“enable a range of broadcasting services, content and formats for regional, local and community and minority audiences, including ethnic minorities, communities of interest and students.”

The Framework’s policy objectives are to:

• Promote local broadcasting services;
• Promote innovation and a diverse range of content and formats for different audiences, identities and interests;
• Facilitate wide technical, cultural and social access to broadcasting; and
• Provide for long term developments affecting broadcasting.

The Regional and Community Broadcasting Policy Framework states a feature of the policy is that

“there is licensing for local and regional commercial and non-commercial broadcasters owned and operated independently from national commercial networks.” 

In practice, the policy has been ignored.

The Government is well aware of the digital dilemma that will be created with the termination of all non-commercial TV broadcasting licences.

On 10 December 2009, Cabinet’s Domestic Policy Committee was advised by Ministers Coleman and Joyce that:

“Eight regionals operate on non-commercial licences provided free of charge, at an opportunity cost to government. A number of conditions apply to non-commercial licences, including a requirement to reflect the local community. The regionals will effectively lose this support under DSO as DTTspectrum licences will be for multiple channels and not granted to individal regionals. Instead, regionals within DTT coverage will be required to find a licence holder (most likely Kordia) to carry their broadcasts. Government will also lose the ability to influence the level of regional content through licence conditions.

“Officials will monitor the effect of the loss of non-commercial licences on regional broadcasters. If it proves difficult for the non-commercial broadcasters to access spectrum, it may be necessary to consider regulation to ensure such broadcasters can access spectrum on reasonable terms.”

The Coleman-Joyce warnings were not heeded. On 12 August 2013, the current Minister of Broadcasting was asked to provide copies of reports received on the viability of the Regional and Community Broadcasting Policy Framework after DSO. On 24 September, Craig Foss replied:

“I have received no reports … concerning the viability of the Regional and Community Broadcasting Policy Framework after the digital switchover which specifically address the provision of the services that non-commercial television broadcasting licence holders are currently required to provide.” 

On 31 November, Triangle Television’s analogue transmitter will be turned off. Triangle cannot access digital spectrum to continue free-to-air broadcasting across Auckland on reasonable terms. No regulation has been put in place to resolve its difficulties. After the Big DSO, Aucklanders will no longer have free-to-air access to the diverse range of local and international programme content that Triangle has provided 24/7 for the last 15 years.

Triangle’s Face TV channel will continue to be aired across New Zealand on SKY Television’s pay-to-view satellite platform. However, it will survive without the 140 hours a year of prime-time local current affairs content that has been funded by NZ On Air – including Bomber Bradbury’s Citizen A, Noel Cheer’s In Conversation, Lindsay Dawson’s Let’s Talk, Selita Millar’s Pacific Viewpoint, and The Beatson Interview. They will go because NZ On Air requires the local content it funds to be broadcast on a free-to-air platform.

Meantime, the Ministry for Culture and Heritage website continues to advertise the government’s Regional and Community Broadcasting Framework and the existence of non-commercial television broadcasting licences as if nothing was happening.

We could be optimistic – but it really looks like Catch 22 in the Digital Switch Over policy could kill non-commercial television broadcasting in New Zealand.