Australia's Digital Television Saga
Australia's Digital Television ("D.T.V.") saga, which began in 1997 and continues to this day, has been a most instructive experience. Nothing could have prepared observers for the insight they were to receive on how the government and the media behave. Over the years since it began, the Digital Television debate came to intrude into my life more and more as I attempted from an industry and consumer perspective to dispel public misunderstandings.
The crux of the issue has been well documented. In early 1998, the government struck a preferential deal with commercial T.V. networks, where the commercial T.V. stations were given at no charge the lion's share of the available spectrum space, space that many independent authorities believed could have been sold for several billion dollars. As part of this deal, the most potent consumer benefits of D.T.V. were largely legislated away to avoid serious competition to the existing networks. Analogue broadcast was to be closed down in 2008.
Everything since then emanating from government quarters has been to defend this action, only altering course when to do otherwise was totally unavoidable. To this day it is unclear whether Senator Richard Alston is a politician of Machiavellian brilliance or naïve in the extreme. One thing is certain. He doggedly refuses to give ground regardless of the evidence. It has worked. He has still managed to get through what the network's wanted to preserve their position. The Opposition parties, having basically agreed to the policy during the initial euphoria, were not disposed to make any dramatic "root and branch" changes later.
For those unfamiliar with the subject of Digital Television, a quick rundown is in order. In 1997 the government announced Australia would adopt digital television. It subsequently announced, in 1998, a policy whereby H.D.T.V. (High Definition Digital Television) would be essentially the only form of D.T.V. broadcast in Australia for some years. This would necessitate, it said, the giving away of nearly all the D.T.V. spectrum space to the existing commercial television networks in return for the set-up costs that the networks would (supposedly) incur in delivering this service. No other form of D.T.V. would be permissible for some time.
Despite the best efforts of the government and the commercial networks, this policy was later changed to accommodate, in addition to H.D.T.V., S.D.T.V. (Standard Definition Digital Television), the form of Digital Television experienced in Europe where Digital Television had enjoyed its greatest success. Unlike H.D.T.V., this works successfully via existing television sets with the simple addition of a set top box , in much the same way as Pay-T.V. operates in Australia today. The likely cost of such a set top box with the full gamut of features most commonly sought today in Europe would be close to $1,000. Unlike Europe, however where the cost of such hardware is nearly always built in to subscriptions, the vast majority of Australian consumers are expected to pay for it up front.
Digital Television in Australia is not a Pay-T.V.-driven exercise. It primarily involves access to free-to-air broadcasts while further T.V. channels on the digital spectrum are effectively prevented by legislation. It is very expensive, considering the benefits on offer and the costs involved, and it would be unreal to expect consumers to rush to embrace the technology. Furthermore, the government intends to close down the analogue system by 2008, by which time it is unlikely sufficient people will have made the switch to digital by choice. Even fewer will have found quality H.D.T.V. a reason to switch, given that the cost of doing so will be around twenty times more expensive than that of the S.D.T.V. option.
Datacasting is to be allowed as an added incentive to consumers, but only in a form that does not resemble television too closely (a restriction on moving picture content) and does not use the television medium in order to entertain. If this all sounds too bizarre to be true, fact has since proved stranger than fiction.
The first lesson from these curious events is that what was said by government and politically powerful organisations like F.A.C.T.S. (the Federation of Commercial Television Stations) was so readily accepted by the media as fact. To get anything through to the public, contrary to the government line, proved incredibly difficult despite the fact it was borne from knowledge of both television manufacturing industry worldwide, direct experience with consumers and a vast array of documentary evidence both from independent experts and actual experience in other countries.
Interestingly, I have been unable to discover anyone with "hands-on experience" in television retailing mentioned as being on the advisory panels or bodies involved in the decision. I can only assume that, at best, real-life experience was deemed to be irrelevant, and at worst, was viewed as a potential handicap in achieving the desired decision.
Fundamental to the government and commercial networks' position was that H.D.T.V. (the spectrum hungry technology the inclusion of which would tie up the spectrum and conveniently prevent access by more potential T.V. operators) would drive the consumer change to digital. Our H.D.T.V. was to be higher quality than obtainable anywhere else, and Australia was to lead the world. While such pronouncements offered great "feel-good" headlines, from an experienced commercial point of view it was clear neither of these claims could be sustained in the real world.
It is always utility which drives mass change, not quality alone. That is an observation that is based on retailing and wholesaling high-quality equipment for more than forty years. The technologies that enjoyed rapid mass consumer take-up have allowed people to do something radically different to what was possible previously. V.C.R.s and mobile phones are good examples. Improvements in quality alone have not prospered so well (for example, Beta vs V.H.S., Elcaset vs Cassette Tape, D.A.T. vs Cassette, and so on.) The fact is that most Australian television sets are worth around $500 and approximately a third of Australian television owners do not find spending money on outdoor antennas worthwhile. People often put up with poor picture quality even if they could readily afford something better. Yet a large proportion of these very same people were supposed to be happy to convert to H.D.T.V. in the five-figure bracket. The commercial reality was that H.D.T.V. has no hope of driving the change in sufficient numbers. To close down analogue we would need nearly everyone digital (the United Kingdom says 95 per cent). This is no small undertaking.
Why would H.D.T.V. be so expensive? The closest real world examples in existence were in the United States and sets nearest the supposed "world beating" Australian specifications would have to sell here for over $20,000. To make life even more difficult, the Australian system was a technological orphan. Yet the government somehow believed that a tiny market like Australia could dictate to the rest of the world how televisions of the future would be made. Also neatly avoided by government and F.A.C.T.S. in their rhetoric was the fact that H.D.T.V. had had only a very small take-up rate in the United States. Two years after the introduction of D.T.V. there, only approximately one receiver in 2,500 was D.T.V.: in Australia this would be equivalent to perhaps 3,000 D.T.V. receivers out of the millions of total receivers. Such figures could hardly endorse H.D.T.V. as a driver of mass consumer change.
At first little success was experienced getting many in the media to listen, but eventually media inquiries started to come. Various radio, television and press interviews ensued in which it was possible to point out that the information from F.A.C.T.S. and the government was provably wrong. These efforts at last began to have momentum, culminating in an A.B.C. news report that took a negative view of our proposed H.D.T.V. policy. The mood in the media became less favourable to H.D.T.V., though it still concentrated more on the Murdoch against Packer issue. News Limited and Fairfax were obviously keen to have access to the spectrum, but they were facing severe limitations by regulation in terms of the content they could offer. Not surprisingly, this occupied most of the media's attention.
The case for H.D.T.V. became clearly untenable, so with increasing pressure at the end of 1999, the government at the last minute included S.D.T.V., creating the triplecast system, and forgot its previous rhetoric. The basis given for "tying up spectrum" and giving it free to the commercial T.V. channels remained unchanged, however. It also remained unchallenged economically. The very idea that the spectrum was given away was justified on the basis of the huge costs the networks would have in equipping themselves for the change. Yet (as a government representative admitted at the Senate Inquiry into Digital Television) these supposed costs had never been subject to either rigorous government or independent scrutiny. That is a truly remarkable fact.
Yet even such revelations would not ultimately count. When I was giving evidence at the Senate Inquiry, I gained the distinct impression that what I said was widely agreed with privately, but that the die was cast. Nothing would change.
Further, despite the change of policy to the triplecast system, the Productivity Commission report was nonetheless predominantly ignored, as was the increasing body of evidence showing the impossibility of attracting consumers over to digital in sufficient numbers in order to allow analogue shutdown. Although more people were starting to protest and some changes in details were made to policy, strangely enough, in general the more evidence mounted against the system, the less the media seemed interested in the position of consumers. One reporter told me people were sick of D.T.V. "It `s old news", he said. That was the second lesson I learnt about the media. Scandal is only temporary. It is a lesson, one suspects, that politicians of every persuasion have learnt very early in their careers.
But if the government is to serve the best interests of its constituents, how can it have got it so wrong? Or is the government unashamedly serving the best interests of the commercial networks and hoping it will get its way eventually and that any fuss from any obstacle along the way will eventually fade away?
How can the Government reconcile a free-market, "let the market decide" philosophy with providing a television system that prevents such fundamental market forces from coming into play as competition, innovation and utility? There is no satisfactory answer to these questions.
If the government is hoping the issue will go away, it can rest assured it will not for some time. Already the commercial networks' attempts to defuse the rather embarrassing prospect of no heralded specification set top boxes being available at the start up date has made front page news. It will in all likelihood come back to haunt the government when it becomes clear such boxes will only be a stop-gap measure, limited in capacity. Consumers dislike being misled.
Expert opinion indicates also that there may be problems with transmission, both in terms of coverage and in interference with other forms of communication and equipment currently in use. Such examples may range from people's present television sets to electronic equipment. Digital broadcast may well have an adverse impact on vast numbers of television set owners who have not the slightest interest in D.T.V. technology. Suddenly their television picture may be worse, and they will personally have to bear the cost of addressing the problem. Such problems may well be addressed in time but should have been considered in detail much earlier. This is a situation made even worse by effectively preventing any new players coming into the T.V. market with anything too attractive, by severely limiting through legislation what such new players can show.
Despite recent efforts of Sony Australia to support the government and the commercial networks' position by claiming that H.D.T.V. will be available, the proof remains elusive. These face-saving H.D.T.V. sets will supposedly cost around $10,000 (a far cry from the "similar cost to conventional T.V.'s" estimate espoused early on in the debate), yet the existence of even such a mythical product to match the original government performance statements cannot be found anywhere in the world. Challenges to produce documentary evidence on the matter are met with surprising silence — perhaps not so surprising when it is realised that to seize headlines is all-important, and that in media terms scandal loses its interest with time.
So just what has happened in our supposedly economically rational society? The market in this instance is not really permitted to decide. Consumer sovereignty is denied in terms of content and choice. Politicians from both sides have obviously distanced themselves from challenging the interests of the powerful television networks, and Australians are worse off financially and culturally as a result.
One must now compare the reality with the rosy future we were promised in 1998. Our new system would have an 80-90 per cent coverage for D.T.V. by start up at the beginning of 2001, set top boxes would be $200-$300, H.D.T.V.s would be at prices approaching conventional television sets. Australia would lead the world with technology.
Instead, come the start up date, no production H.D.T.V.'s were around, no integrated S.D.T.V.s or even set top boxes were available to the public and in fact some of the largest manufacturers say they will not build them for Australia. As for H.D.T.V., it is not clear that manufacturers will make a variety of H.D.T.V. sets for Australia at all. In the meantime, the government and F.A.C.T.S. sit quietly hoping something will get them out of the mess. Australians will have lost some billions of dollars of spectrum value, and will be increasingly expected to bear the hidden cost of digital broadcasting.
There were some simple means available to prevent this situation from occurring. One was to the work out clearly our objectives and formulate a policy to achieve them with a realistic time scale. This has not been done. Instead there have merely been woolly, feel-good statements — certainly not anything measurable.
Another available course was to sell the spectrum and make the provision of free set top boxes to all T.V. receiver owners an integral part of the sale. In independent estimates, this would have raised many billions of dollars to help Australia's financial position. Further, this bold policy would have impressed overseas markets far more than our current regressive and repressive D.T.V. legislation.
Fortunately for consumers, television sets last many years before they cease functioning. This is not so fortunate for the government. How can any government justify asking people to expend large amounts, merely to enjoy more or less what they already enjoy on sets that are performing to their satisfaction?
Governments that lose touch with the concerns of everyday Australians do so at their peril. The government's Digital Television policy does run this risk. If the full story were to come to light with the general public, it could well help to undermine any claim to sound economic management the government would want to convey leading up to the next election. Certainly many astute observers would say that at some time in the future the H.D.T.V. push will be abandoned, its purpose served. The commercial networks will then use the spectrum to deliver something with broader consumer and advertiser appeal. And why shouldn't they? The spectrum will then be theirs at a tiny fraction of its real value, and they will be able to shrug their shoulders and say they got it wrong with a new technology and are merely responding responsibly to market forces. By then the die will be well and truly cast, their oligarchy preserved, and history will have become merely old news.
National Observer No. 48 - Autumn 2001