While the Convergence Review’s final report put forward a radical rewriting of the basis for media diversity regulation, on local and children’s content this is a strongly status quo report.

Currently we impose content requirements on broadcasters by regulation: commercial television broadcasters must meet Australian content and children’s content levels, calculated based on the hours they put to air, and Australian content levels for advertising; subscription television broadcasters must meet content requirements based on expenditure; commercial radio broadcasters must meet Australian music levels, and both radio and television broadcasters must meet local content requirements.

The government also funds Australian content via tax offsets and Screen Australia, which invests in film and television production through the independent sector.

The traditional rationale for regulating levels of Australian content is that Australians should be able to see Australian content on their primary media, but local content is significantly more expensive to produce than it is to buy overseas content, particularly US and UK content where large markets mean there are greater economies of scale for production.

The review looks into the issue of the costs and ratings of local content, but never really gets to grips with the protectionist impulse behind the basic idea of imposing content requirements; because, apparently, all submissions except Treasury’s backed the idea of local content requirements, the review started from the position that continuing to impose local content requirements was a good thing.

The rationale for children’s content is different. There’s a clear case of market failure when it comes to children’s content on commercial television: if left to their own devices, broadcasters would be unlikely to run any children’s content except cheap material heavy on merchandising, interspersed with toy and junk-food ads.

The rationale for local content requirements in regional areas is different again. Many of those requirements are highly political: requirements imposed on regional radio licensees in 2006, particularly those relating to mergers, after which licensees have to maintain levels of staff and local coverage, were imposed by the Howard government at the behest of the Nationals, and particularly Queensland MP Paul Neville, who had been complaining about diminishing levels of local coverage and increasing levels of networked coverage on regional radio for years.

The challenge for all forms of regulated content of course is that Australians are getting much more of their movie, television, news and music content online rather than via traditional broadcasters, meaning the current mechanisms of producing and distributing local content faces obsolescence. To remedy that, the review proposes that current distinctions between free-to-air, subscription TV and radio be removed and replaced with a requirement for all “content service enterprises” of a certain scale to allocate a portion of revenue to either producing Australian and children’s content or to an independent production fund. That fund would also receive contributions from government, and might support non-traditional content such as games. The actual amount content service enterprises contributed would be determined by the new media regulator, but would be based on maintaining current levels of content.

As with media ownership laws, the thresholds have been carefully prepared to ensure only traditional broadcasters and subscription TV are caught, not online content sources. If, in the future, an online content provider (Telstra is the closest) crosses the threshold, it would be required to comply with the same requirement relating to directing a proportion of its revenue to Australian and children’s content.

The review also suggests opening up the Producer Offset scheme to high-quality TV production. On local content for regional broadcasters, and Australian music on radio, the review essentially recommends the retention of the status quo, albeit within the new framework of regulator-determined local areas rather than licence areas; it does recommend removing the current “trigger event” requirements imposed in 2006 as unnecessarily limiting licensees’ flexibility.

Necessarily, however, the recommended framework is a long way off. The review proposes a transitional set of rules for local content. Television broadcasters would keep their current 55% quota for Australian content and there’d be a quota increase of 50% for drama, documentary and children’s content, but content shown on digital multichannels would count toward the quota. Currently, only programming broadcast on a licensee’s main channel counts toward its quota, meaning Neighbours currently doesn’t count toward Ten’s Australian content quota. Subscription television children’s and documentary channels would also face a new 10% minimum expenditure requirement, on top of the current 10% requirement for drama channels.

Needless to say, neither free-to-air nor subscription television are happy with the transitional recommendations.

To go back to first principles on mandating content, there are two issues that haven’t been teased apart by the review. Children’s content, and to a lesser extent regional content, are examples of market failure: commercial broadcasters won’t provide that sort of content unless compelled to by regulation because of the costs and revenue implications of certain types of markets: regional licence areas lack population and economic size that would enable broadcasters to profitably provide local content; and children do not benefit from broadcasting content that is essentially an extended effort to sell them things.Australian content, however, does not represent an issue of market failure, any more than any other foreign manufacturers’ ability to produce goods more cheaply than us is a market failure. Moreover, we have two distinct policies to remedy it — not merely do we subsidise Australian production, a mechanism by which the costs of supporting local producers is clear, but we regulate broadcasters to produce it as well, a mechanism by which the costs are much less clear.

Given there is a tripartisan consensus that we should support local production, an alternative approach would be to shift the burden of supporting local content fully to Screen Australia, by increasing the amount of funding to that body (the review goes partly in this direction by recommending the expansion of the Producer Offset). Broadcasters could then make commercial decisions about what content Australian audiences wanted to see without the issue of the significant cost gap between imported content and local content.

The current local content rules were crafted in the days when commercial television licences were licences to print money. Those days are now long gone: two out of the three networks are in financial difficulty. If Australians want to see local content on their screens, they should be prepared to pay for it via government, rather than imposing requirements on broadcasters.

To an extent, that approach was the one adopted before to 2006 on regional radio content. As regional commercial radio local content declined, the Howard government pumped significant additional funding into the ABC to expand its regional radio footprint, providing additional genuine local content to regional communities; the ABC became the dominant source of local content in many regional centres, and the de facto emergency broadcaster in times of crisis.

The review indeed recommends that the ABC and SBS have Australian and children’s content quota imposed on them — currently neither have content quotas beyond the general mandates of their charters. The review recommends 55% for the ABC, like commercial broadcasters (55% was the level of Australian content on the ABC in 2010-11), but 27.5% for SBS. But mandating quotas has its issues: in some years the public broadcasters may struggle to reach their set quota, meaning either that need additional funding, or they reduce the quality of local content.