John Fairfax Holdings Limited
ACN 008 663 161

SYDNEY, June 16, 1999 – John Fairfax Holdings Limited [ASX:FXJ], in a new submission to the Department of Communications, Information Technology and the Arts, has called for regulations to ensure equal treatment for datacasters under "must carry" requirements, enable datacasters to use any statutory licence regime available to pay TV operators, and to require interoperable set top boxes which receive free and pay TV as well as data signals.

Mr Nigel Dews, Director, Electronic Businesses for Fairfax said:

"Competitive neutrality is a fundamental principle underlying the Government’s policies in this area, and to the success of digital television. We are calling for rules that will be true to this excellent policy objective.

"With regard to "must carry", there should be no discrimination between our datacasting signals and those provided by the television networks. Similarly, datacasters should be able to access any statutory licence regime used by pay TV operators.

"It is also imperative that digital TV signals be compatible with pay TV receiving equipment. If not, screens will go blank and consumers will pay a fortune for what should be built into the system from the beginning.

"Fairness and access by all pay TV subscribers to all available datacasting services, demand no less."

Fairfax is asking the Department to require that free-to-air (FTA) broadcasters always transmit their signals in standards which have already been mandated for satellite pay TV. FTA broadcasters have proposed the use of different transmission standards which cannot be received on lower-cost set top boxes likely to be affordable for most viewers.

"There is no reason why the FTAs cannot transmit their signals with standards compatible with digital pay TV. If they do not, screens will go blank for pay TV customers across the country," Mr Dews said.

The text of the Fairfax submission is attached to this media release.

For further information, please contact:

Nigel Dews, Director, Electronic Businesses (02) 9282 2268

Bruce Wolpe, Manager, Corporate Affairs (02) 9282 3640

Fairfax Submission to Retransmission of Digital TV Review

Throughout the Department’s digital TV reviews Fairfax has consistently argued that ensuring:

• fair treatment of datacasters; and
• technical standards which allow interoperability between pay TV and free-to-air TV,

are crucial to the success of digital TV.

This digital TV retransmission review again highlights the importance of these issues. Digital TV retransmission will be far more costly and difficult for all concerned unless free-to-air (FTA) broadcasters are required to transmit, either alone or in simulcast with a HDTV signal, a standard definition signal (MP@ML) which is compatible with existing and future pay TV transmission equipment and set top boxes (STBs).

Further, any ‘must carry’ requirement should apply equally to services provided by datacasters as to those provided by FTA broadcasters and any statutory licence regime for FTA broadcasts should be available to datacasters as well as pay TV operators. This approach is demanded by the principles of competitive neutrality which underlie the Government’s decisions in introducing datacasting.

Overall, this digital TV retransmission review is about ensuring consistency with earlier decisions - digital pay TV transmission standards and competitive equality for datacasters - rather than trailblazing new paths.

Interoperability between FTA and pay TV transmission and reception systems is crucial to:

• facilitate retransmission of FTA digital TV on pay TV; and
• allow the consumer to use one STB to receive both pay and FTA digital signals.

To achieve this the government must ensure that FTA broadcasters transmit a digital signal that is compatible with the transmission standards that the government has already mandated for digital pay TV.

In August 1995 the Minister for Communications declared a mandatory standard for satellite pay TV transmission that was effectively DVB using MP@ML transmission. There are now more than 250,000 pay TV subscribers with STBs based on this standard. Cable & Wireless Optus and Austar have recently completed phase I of the new Aurora digital satellite transmission system, which also uses DVB MP@ML transmission. The Aurora platform currently provides Remote Area Broadcasting of FTA services and in later phases will be used as the satellite pay transmission platform for Foxtel and Austar satellite subscribers. Cable pay TV transmission is not fully digital at present but Fairfax understands that both Foxtel and Cable & Wireless Optus intend to adopt a DVB MP@ML system when they convert to a fully digital transmission system.

The FTA broadcasters’ current proposals for digital terrestrial TV transmission are incompatible with the current and future digital pay TV systems in two critical respects:

• use of MP@HL rather than MP@ML transmission;
• use of Dolby Digital rather than MPEG sound.

The FTA broadcasters propose to transmit only a HDTV (MP@HL) signal during periods in which HDTV is required by regulation. This means that MP@ML STBs receiving the FTA signal directly will "go blank" and that pay TV operators will have to obtain expensive equipment to downconvert the MP@HL signal to MP@ML for transmission through the pay TV network.

A far preferable approach is to require the FTA broadcasters to transmit a MP@ML SDTV signal at all times and transmit the MP@HL HDTV signal in addition to the MP@ML signal when required. This can easily be accommodated within the 7MHz channel allocated to the broadcasters for transmission in digital mode.

Given that the vast majority of the FTA broadcasters’ HDTV programming will not be true HDTV, but instead will be upconverted from SDTV, this will impose little burden on the FTA broadcasters. In addition, technical studies have shown that upconverting SDTV material to HDTV and then downconverting it again to SDTV will result in a loss of signal quality compared to straight SDTV transmission.

Digital Convergence Australia has endorsed the simulcast of SDTV MP@ML and HDTV MP@HL signals in its submission to Standards Australia in relation to the digital terrestrial TV transmission standard and has highlighted a number of other advantages of this approach including better mobile reception and cheaper STBs.

The FTA broadcasters also intend to have the DVB standard modified to allow the transmission of proprietary Dolby Digital sound rather than the DVB standard MPEG sound. The existing DVB compliant pay TV STBs cannot decode Dolby Digital sound and thus pay TV operators will have to decode the sound signal from Dolby Digital to baseband and then re-encode it in MPEG. This will lead to significant additional equipment costs for pay TV operators and sound quality degradation for consumers. Alternatively, pay TV operators would have to replace the 250,000 existing STBs with more expensive STBs which would decode Dolby Digital.

Again the solution is to require the FTA broadcasters to always transmit MPEG sound and transmit Dolby Digital sound in addition when required. This approach has been endorsed by a large number of submitters to Standards Australia in relation to the digital terrestrial TV transmission standard, including the Australia Subscription Television and Radio Association, Digital Convergence Australia, Cable & Wireless Optus, the Community Broadcasting Association of Australia and Sharp Corporation.

While it is possible that these interoperability issues may be resolved satisfactorily by industry through Standards Australia, this is far from guaranteed, especially given the entrenched position of the FTA broadcasters and the consensus nature of Standards Australia decision making. Particularly in light of the previous Government decision to mandate MP@ML transmission for satellite pay TV, the Government should be prepared to use its standards setting powers under Part 4 of Schedule 4 of the Broadcasting Services Act to ensure consistency with the existing standard. FTA broadcasters should be required to transmit an MP@ML signal with MPEG sound, which can be easily retransmitted on pay TV, in addition to any HDTV signal with Dolby Digital.

The Issues Paper suggests that FTA broadcasting, datacasting and enhanced programming may be subject to a ‘must carry’ requirement on pay TV while independent datacasting services would be excluded, with pay TV carriage always being a matter for commercial negotiation. Fairfax considers that the principles of competitive neutrality must be applied in relation to all decisions relating to retransmission of FTA signals. If a ‘must carry’ requirement is mandated, datacasters and FTA broadcasters must be treated equally in relation to this requirement. Similarly, any statutory licence regime should apply equally to datacasters.

Unequal treatment of datacasters is a clear violation of the principles of competitive neutrality which underlie the Government’s original decision in relation to datacasting. In the Digital Conversion Act, the Government took a number of steps to create a level regulatory playing field between new entrant datacasters and incumbent broadcasters in relation to datacasting.

Firstly, while FTA broadcasters will be allowed to datacast, they will be required to pay a datacasting fee. Secondly, to prevent FTA broadcasters gaining a first mover advantage in datacasting, the Government provided that neither would be able to commence datacasting until a date proclaimed by Parliament.

A ‘must carry’ requirement that applied only to FTA services and not to new entrant datacasters’ services would breach these principles of competitive neutrality and undermine the level playing field that the Government has carefully constructed. Moreover, it would substantially disadvantage new entrant datacasters in the marketplace with consequent risks to the success of datacasting and the innovative new services and media diversity that it promises.

The distinction the Issues Paper attempts to draw between free and subscription services in relation to ‘must carry’ provides no justification for unequal treatment of datacasters. Firstly, not all datacasting services provided by new entrants will be subscription based. Datacasters may well choose to provide both an advertising funded service of broad appeal and a subscription based service with greater functionality and/or targeted to a niche market.

Secondly, because free and subscription datacasting services are likely to be closely linked, and indeed may have pay per use aspects (as seen in many of Fairfax’s internet sites) any attempt to distinguish between free and subscription datacasting in this context is fraught with difficulty. The consumer’s STB should receive the whole datacasting service with either existing pay TV conditional access systems (depending on negotiations with pay TV operators) or internet based mechanisms used to control consumer access to the subscription based parts of the datacast.

This principle of equal and competitively neutral treatment of datacasters should be reflected in other decisions in relation to retransmission. If, instead of ‘must carry’, pay TV operators are required to transmit FTA datacasting and enhanced programming along with the FTA TV signal, then they should also be required to retransmit the independent datacaster’s services.

Alternatively, if pay TV operators are given a statutory licence to retransmit FTA signals, competitive neutrality dictates that datacasters should also be given this right. This is particularly important to allow the provision of an independent Electronic Program Guide (EPG) which contains live video thumbnails of the current viewing on each of the FTA stations and allows viewers to select channels from these thumbnails. Unless datacasters are allowed to retransmit FTA signals, consumers may be unable to access an EPG that gives fair and equal treatment to all FTA channels. Indeed, the competitive rivalry between FTA channels may prevent a useful EPG (which contains information on all channels programming) being produced at all.

This digital TV retransmission review is far more about ensuring that decisions made in relation to retransmission of digital TV are consistent with earlier Government decisions than trailblazing new paths. Retransmission can only occur if it is technically feasible and for that to occur the Government must ensure that FTA digital television transmissions are compatible with the well established and Government mandated standards for digital pay TV transmission. Consistency with earlier Government decisions also dictates that competitive neutrality be maintained between FTA and new entrant datacasting and between datacasters and pay TV operators.

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