Major foreign online media companies, such as Google and Facebook, will not be obliged to produce Australian content nor contribute to an Australian content fund if the findings of the Convergence Review Final Report (PDF) are adopted by the Federal Government.
The Final Report, released today by communications minister, Stephen Conroy, marks the end of the Convergence Review, which began in December 2010 as an attempt to examine the policy and regulatory frameworks that apply to the converged media, telecommunications and information technology industries in Australia.
Among many recommendations, such as the creation of a new independent content and communications authority with the authority to encourage competition and compliance, the Review has recommended the creation of a new category of media companies — Content Service Enterprises or CSEs — to better represent the move of telecommunications and internet companies into the media industry, and of media companies onto the internet and telecommunications industries.
Prior to the Final Report's release, companies such as Google and Facebook had expressed concern that the CSE proposal, first suggested in the Interim Report of the Convergence Review (PDF), would be subject to similar minimum Australian content standards which currently apply to major free-to-air broadcasters.
Under the CSE proposal, foreign internet and media companies that were unable to produce minimum levels of Australian content would be obliged to contribute to a 'converged content production fund' designed to subsidise Australia's film, television, radio and digital media industries.
According to the Final Report, internet, telecommunications and media organisations will now be defined as CSEs only if they have control over the professional content they deliver, have a large number of Australian users of that content, and/or have a high level of revenue derived from supplying that professional content to Australians.
The threshold for users and revenue would also be set at a "high level", according to the report, such that small and emerging content providers would not be subject to local content requirements.
"This proposed framework is only concerned with professional content," the report reads. "For example it would include ‘television-like’ services and newspaper content but exclude social media and other user-generated content.
"As a guide, modelling conducted for the Review indicates that currently around 15 media operators would be classified as content service enterprises. This modelling suggests that currently only existing broadcasters and the larger newspaper publishers would qualify as content service enterprises."
As in the Interim Report, the Final Report states that CSEs will be required to invest "a percentage of their revenue" in Australian drama, documentary and children’s programs, or contribute a percentage of their revenue to the converged content production fund for reinvestment in "traditional and innovative Australian content".
The clarification of which companies will be classified as CSEs is likely to be welcomed by major foreign internet companies.
In its submission to the Convergence Review's Interim Report, Google argued that the proposed content standards regime was "unworkable" for services such as YouTube and that subjecting companies such as Google to local content standards would "create real disincentives for internet industries to invest in Australia".
Facebook in its submission challenged the Report's review committee to explain why it should be burdened with content regulation, and further argued that "criteria that focus on user base, Australian audience, control and operating revenue for defining if a service provider qualifies as a 'content service enterprise' seem difficult to apply in an online environment, particularly for social media sites".
While the report suggests that only current, major Australian media companies will be subject to Australian content requirements, the Report's clarification raises questions about the ability of the government to come to grips with the full consequences of media, communications and information technology convergence.
For example, Australia's major telcos — Telstra and Optus — are increasingly offering 'television-like' services to Australian consumers, yet would appear to not be classified as CSEs.
Late last week Optus lost its appeal to be allowed to continue its TV Now service which enables users to record sports matches and view them on a device of their choice. Telstra also offers 'television-like' services through its stake in Foxtel and via its IPTV service T-Box.
Optus, along with challenger telcos such as TPG, iiNet and Internode, also resell the 'television-like' IPTV service, FetchTV, yet neither of these ISPs nor FetchTV itself would appear to fall under the category of a CSE.
The Final Report also appears to lack an investigation into the consequence of the National Broadband Network, with its faster broadband speeds and increased accessibility for Australians to digital media services, facilitating the creation of more 'television-like' services. This is a growing issue: More than one third of all subscription TV services will be provided over broadband by 2015, according to analyst firm Telsyte.
The apparent lack of application of common standards to both 'new' and 'old' media companies is another issue in that it would appear to distinctly run at odds with the Report's own objective that there be "a flexible and technology-neutral approach to content regulation that reflects community standards".
For its part, Telstra has argued against attempts to adopt a ‘technology neutral’ approach to regulation in the name of 'regulatory parity'.
"While attractive in principle, in practice the CSE framework will not remove inconsistencies, but merely move the boundary of regulatory inconsistency," the company argued in its submission to the Interim Report.
"In Telstra’s view, true regulatory parity of the kind being sought by the Interim Report is not achievable in a convergent environment because... metrics for reliably and objectively defining CSE thresholds are not available in the dynamic, internationalised and fragmented convergent environment; and enforcement of regulatory obligations against internationally based operators is likely to be high-cost and ineffective, resulting in unequal regulatory burdens in practice."
Existing major media players are also likely to feel aggrieved by the Final Report's finding that "content providers that are not of sufficient size and scope to qualify as content service enterprises should also be able to opt in to content standards or develop their own codes" while they will have no choice over whether they can "opt in" to minimum Australian content requirements and standards.
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