Nov 15, 2012

Revamp content regulation or risk monopoly, report warns

A new report suggests content access is too important to be left to standard competition regulation. The competition regulator has been warned to act.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

Australia risks a return to the era of telecommunications monopoly if the Australian Competition and Consumer Commission isn't empowered to specifically deal with exclusive content deals, a report released yesterday for the Competitive Carriers' Coalition has found. Content exclusivity is emerging as the most problematic competition issue in the digital era. The ACCC only approved Foxtel's recent merger with Austar after it committed to a series of (relatively weak) undertakings about exclusivity. The concern is, as the report by Scott Minehane and Simon Molly for the CCC demonstrates, exclusive access to premium content will be used by larger telcos -- read Telstra -- to crush competitors in telecommunications and broadband markets through bundled services. The CCC is a coalition of smaller communications providers. The current regulation of content access is left to general competition principles under the Competition and Consumer Act (the old Trade Practices Act), which relies on mergers and acquisitions as regulatory intervention points. The "substantial lessening of competition" threshold for intervention is also poorly designed for circumstances such as News Corporation's acquisition of Consolidated Media Holdings, which took it from 50% ownership of premium content provider Fox Sports to 100% and made Foxtel a 50-50 split between Telstra and News Corporation. The report considers the case for doing nothing, and concludes it is too risky: the primary threat to growing monopolisation via content exclusivity is the capacity of major premium content owners like the AFL to provide content directly to consumers themselves via broadband -- the NBN has already established a mechanism for this -- but the report also notes that FTA TV networks will play a decreasing role in competing for delivery of premium content as consumers increasingly consume content while mobile. The report notes Telstra's capacity to use its scale to undermine its competitors will be "further enhanced by its market-leading 4G mobile infrastructure which is uniquely well placed to capitalise on the rapidly unfolding mobile revolution". The report proposes that the ACCC -- not the media super-regulator proposed in the Convergence Review -- be given specific regulatory powers for content access, including the capacity to regulate on an ex-ante basis rather than having to wait for specific market transactions that trigger the CCA. The provision would stop short of an infrastructure access-style regime specifically aimed at regulating all content access (favoured by Optus) but leaves open the possibility of a formal content access regime. The government's response to the Convergence Review has been mooted for months but remains unresolved.

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