The Independent Regional Radio association has slammed the government’s consultation process over media reforms as a sham in a submission arguing against some of the proposed media changes. The IRR Association represents licencees of 73 regional commercial radio services located in 42 of Australia’s 96 regional radio licence areas.
IRR wrote to Communications Minister Helen Coonan in October last year, but says she has not replied or even acknowledged that letter. IRR’s document, lodged last week, says the invitation to make submissions on this issue has been extended “merely for the sake of appearances, and that the process lacks integrity.
The submission is concerned with only the section dealing with media ownership and control in the government’s discussion paper on media reform options and argues against further relaxation of cross media ownership regulations in regional and rural areas.
The submission gives examples of three markets and hypothesises about how they would be affected if the media regulations change. The markets examined are Canberra (population 356,000), Bathurst (74,000) and Cooma (31,000) (see figure below).
The 4-voice floor opens the way for many different scenarios, but the submission takes one scenario as an example:
“Cooma, of course, would remain unchanged, but it is immediately apparent that in both Bathurst (Press plus Radio) and Canberra (Press plus Radio plus TV) one company (or voice) – and only one – would emerge in a strong, dominant position.
“Commercially, Voice 1 in each of these two markets would acquire substantial advantages not available to its competitors – economies of scale and scope, including staff reductions, substantially reduced competition in the sale of advertising, greater flexibility in setting advertising rates, substantially less competition for consumers’ attention.
“Worse, Voice 1 would also acquire a greatly increased capability to set the news and current affairs agenda and to determine what opinions will be served up to the community.
“Worse, yet again, Voice 1 would be entrenched in that position – immune to new players or serious competition – for years to come. In regional markets the consequences of the proposed relaxation of the media ownership laws would be diametrically opposed to the Government’s objective.”
IRR members say their stations are “committed to local service,” local station managements having the responsibility and autonomy to ensure the needs of their local communities are effectively served. For this reason, all IRR members’ main programs are produced locally, being neither dictated by, nor delivered from, some remote hub or headquarters organisation, according to the submission. Macqarie Regional Radioworks is not a member of the IRR Association.
The Director of the IRR Association is veteran radio consultant Des Foster, who argues in submission that the Government has “a closed mind” on the issue of cross-media rules in regional Australia, and the process of consultation it has adopted reflects this.
The submission says the real intent of removing the cross-media rules is to enable some existing media companies to increase profits through economies of scale and scope. It argues that there is no public benefit in removing cross-media rules in regional markets, but there is serious potential detriment.
Removing the cross-media rules in regional markets under present conditions ignores the advice of the Productivity Commission according to Foster, who says protections designed to offset counterproductive effects “will not work.”
The submission says:
IRR is deeply concerned by the lack of consultation on the issue of media ownership in regional areas, and by the process which will lead to a decision…
The government’s intentions have been clearly signalled for some time, but at no point has it acknowledged the potential counter-productive outcomes which have been drawn to its attention, nor has it engaged in any dialogue on the subject…
None of the issues here is being referred to independent examination by a body such as the Productivity Commission (which expressed views on the subject in 2000). Instead, submissions are being referred to officers of the Minister’s Department who are already on notice of the government’s preferences. There will be no response to or dialogue with submitters. In these circumstances, IRR has regretfully concluded that the government is not open to persuasion regarding cross media ownership in regional areas…
The submission responds to each section of the government’s discussion paper, taking issue with the assumptions made about regional markets, saying they are “broad generalisations, which are utterly unsupported by any kind of evidence.”
According to the discussion paper, the main arguments in favour of removing the cross-media ownership rules are that the rules:
1. increasingly risk growth of new services,
2. limit media companies from obtaining economies of scale and scope,
3. constrain media companies in addressing the challenges of emerging media forms, and
4. foreclose future developments in the market place.
Taking on each point in turn the submission says:
Risk to growth of new services
It is difficult to understand what this actually means. True, the discussion paper alludes to the encouragement of “new entrants, new investments and new services to contribute to diversity in a competitive environment.” But nowhere does it illustrate how the present cross-media rules in regional markets frustrate that objective.
The barrier to entry in regional commercial radio and television is not the existence of the cross-media rules, but of quite sensible planning decisions which rule out the possibility, for the foreseeable future, of more licences. The number of regional commercial radio licences has more than doubled since the present legislation was enacted and both the regulator and the government have recognised there are practical limits to the number of stations which a market can sustain if adequate service is to be provided, commercial viability being a key factor.
There are no artificial barriers to entry into the newspaper industry or internet-based media, and in the case of internet-based media, established media companies have not been slow to invest or to innovate. So far as regional media are concerned, the assertion of risk is just that, an unsubstantiated assertion.
Economies of scale and scope
The desirability of providing opportunities for existing media companies to achieve economies of scale and scope has been the most persistently repeated mantra in the government’s rhetoric. The benefits of such economies to business are obvious. What the government has never been able to explain is how such economies will benefit the public.
In its letter to the Minister IRR gave examples of the effects of economies of scale and scope in regional broadcasting. It pointed out how some regional radio stations had been “converted from local, autonomous operations into mere outlets for programs provided from some remote central point, or hub.” This was a classic example of economy of scale, which is the relative saving realised when the size of an operation is increased.
Economy of scope, where the cost of performing multiple businesses simultaneously is more efficient than performing them independently, is exemplified in the media context by sharing facilities or functions such as news rooms and program, accounting and sales departments.
It is true that cross-media rules limit regional media companies’ ability to effect economies of scale and scope. However, it also true that such economies offer nothing to consumers unless there is strong competition. Otherwise they are purely and simply means to increasing profit…
Challenges of emerging media forms
“Emerging media forms” is code for services capable of being provided by digital technology. What the discussion paper fails to explain is in what manner the existence of the cross-media rules constrains existing regional media from dealing with the perceived challenges.
Foreclose future developments in the marketplace
Apart from the fact that retaining the cross-media rules would prevent undesirable media takeovers in some regional markets, IRR has not the faintest idea what this impressive phrase means.
The submission also canvasses the possible consequences of removing cross-media rules, quoting the earlier Productivity Commission into regional media, which found that possible changes resulting from fewer retrictions would result in three possibilities in various markets:
“Because of the low numbers of media proprietors involved in these markets
(a) There would be little likelihood of change in 46 markets.
(b) In another 47 markets, one media proprietor could emerge in a position of dominance.
(c) Competition between equals would be possible in only three markets.”
Each of the 47 markets where one media proprietor would dominate would provide the opportunities for effecting economies of scale and scope. The submission says this would indeed add to the profits of the businesses concerned, but would also be “counterproductive in public interest terms,” because one company would become dominant and there would be less diversity of opinions on matters of local importance. Local businesses would also be subject to higher advertising rates.
The submission says: “It is impossible to reconcile potential outcomes such as these with the rhetoric of the discussion paper which talks of protecting the public interest in a “diverse and vibrant media sector.”
It acknowledges that there will be provisions to prevent some of these problems, but says it is “ironic indeed” that all of these measures are unnecessary under the current system.
On the issue of local content the submission says:
“While it is true that local content would probably be reduced substantially if and when a member station of IRR were taken over by certain other operators, the fact is that for the rest of the regional commercial radio industry this horse has already bolted. There are many instances of dissatisfaction in regional markets where local announcers have been sacked, programs emanate from some remote centre, local place names are incorrectly pronounced, weather information does not accord with what listeners can see for themselves, and local news and localism generally have been ignored.
“Since this systematic degradation of service for the purpose of achieving economies of scale and scope has long been tolerated by both the government and the regulator, it sets the standard to which local content can be reduced in other markets in future. This makes a farce of the implication that local content will be protected under the government’s proposed new regime…
“IRR strongly doubts whether most of the counterproductive consequences it has identified, and in particular a proprietor’s powers to influence public opinion, to increase advertising rates and to reduce the standard of services, would in fact be prevented by Trade Practices legislation.
The submission concludes that ‘reform’ is not the appropriate word for what is proposed in regional markets. It says removing cross-media rules in these markets will not lead to improvement, but to the degradation of media services in terms of localism, diversity, competition, jobs and influences on public opinion.
The submission has struck a chord with Nationals leader Mark Vaile who says local politicians, councils and community groups might struggle to have their voices heard if regional media are controlled by a small number of operators.
Vaile says there has to be a competitive regional media presence to ensure that different viewpoints are available to people and for businesses to have outlets for their advertising.
“If you only had one newspaper, one radio station and one local television station in a community all owned by the one entity, then there (are concerns). One is leverage in terms of the cost of advertising for businesses in the local area, where you have one entity controlling commercial advertising space on three outlets.”
The Nationals want a mature and expansive discussion about media ownership changes.
Communications Minister Helen Coonan has tried to ease the National’s concern, saying the Government is “committed to protecting diversity and local content.” She says the majority of regional markets will be unaffected by the changes.
“About 64 per cent would have absolutely no change and it’s likely to rise to about 85 per cent, about another additional 19 per cent are unlikely to have any change unless there was some further entry into the market.”