John Fairfax Holdings Limited
ABN 15 008 663 161

The Media Industry in Australia: Public Policy Choices

Excerpted Speaking Notes: AN Smith Memorial Lecture, University of Melbourne, October 30, 2001

Frederick G. Hilmer, AO
Chief Executive Officer
John Fairfax Holdings Limited

Thanks to Professor Gilbert and the University of Melbourne-it's an honour to be here with this distinguished group to deliver the 2001 A.N. Smith Memorial Lecture.

When I taught, which seems a long time ago, I started my classes with a piece of advice I try to live by, namely: "The answer is in the question." I felt it far more important to teach students to ask their own questions than to simply learn how to answer those posed by other people. This perspective is well recognised in university, and also in journalism where the best reporting is the result of the best questions.

Hence, in discussing media policy I don't want to just advocate a position. Instead, in keeping with tonight's university environment, I want to ask and explore some questions. The core question is: "Given the widespread dissatisfaction with media regulation, why hasn't reform occurred, and why is it so hard?"

Buried in this question is an assumption that there is widespread dissatisfaction with current regulation, in particular restrictions on cross ownership of different kinds of media, the issuance of new licences and foreign ownership. Since embedding assumptions into questions can be dangerous, I'll start by outlining why this assumption is reasonable. There are two parts to the argument.

First, all serious commentators come to this conclusion. The Productivity Commission has laid out a thoughtful roadmap for the staged removal of anti-competitive legislation and restrictions, including cross, foreign and limits on the number of new television licenses. The Liberal Party platform is explicit in its call for removal of the cross media and foreign investment limits. While Labor supports the cross media rules, its platform is silent on the foreign investment restrictions. The Democrats have concerns about diversity - as we all do - but diversity without quality (i.e., the ability of the media to provide in-depth content and coverage) is meaningless.

Second, the industry today is not delivering the benefits it could and should for our community. The key goal for media in Australia is to provide an accurate, timely, high quality, engaging, unbiased and uninterested flow of information and ideas vital to the functioning of our democracy, our society and our market economy.

The current situation in this regard is deficient. If I had to grade how well our media in total are achieving this goal, the best that could be said is "B grade".

Our papers certainly reach world class status at critical times-and our coverage of 11 September and the current crisis is exemplary, as is our coverage of the election campaign-but we are not world class every edition, every article, every day. Television is a universe of limited choices, from providers artificially protected from competition. Pay television is restricted, digital TV was almost still born, broadband internet is limited, and hence the industry's growth and contribution is constrained.

Moreover, organisations that deliver media have been weakened by current policies. The commercial incentive embedded in current regulation is to get out of media or out of Australia. News Corporation sees its real future elsewhere, and has developed overseas in ways that have been impossible in Australia. PBL has diversified outside of media, into casinos and investment. Fairfax has, until recently, endured years of instability, and, given its current size and scope of activities, does not provide competition for News Limited in a number of key markets. Ten has settled into being member of a stable oligopoly only after a complex transaction that tested the limits of existing regulation of media ownership. The ABC is schizophrenic, unable to win substantially large public funding and unclear with respect to potential commercial opportunities or roles versus its role as a public broadcaster.

This brings me back to the key question: why has there been no significant reform of our media laws? There are two parts to this question:

1. Despite recognised defects, are the restrictions on new licences, cross and foreign better than the alternatives? My answer is a clear "no". There are at least two alternatives preferable to the current situation. The first is the Productivity Commission's phased reform aimed at introducing more competition and supplanting the rigid cross and foreign regimes with oversight by the Australian Competition & Consumer Commission (ACCC) and the Foreign Investment Review Board (FIRB). The second is for government to act as catalyst to an industry restructuring that creates one or two additional major firms. Structural reform is attractive because the current structure is relatively uncompetitive with few players and an enormous gap between the two biggest players, News Limited & PBL, and the rest of the field. It is easy to see us heading towards an effective duopoly in media. In addition, industry structure is frozen by current regulation at a time when technology is changing extremely rapidly. I note that structural reform has been used in banking, electricity and telecommunications.

2. Is the reform process is flawed? The answer is a clear yes. The process today is preoccupied with personalities, to the detriment of the development of sound policy. When it comes to media regulation, there is insufficient transparency in how the big decisions are made. In addition, there is no critical assessment of objectives such as "diversity," and no realisation that diversity without quality produces more noise than meaning. Finally, it is hard to escape the thought that politicians actually like the influence over the media that regulation provides. This is perhaps the strongest reason for reform!

CONCLUSION

In short reform is not proceeding because the reform process is flawed. In these circumstances, bad policies triumph over good policy. The key then is to fix the reform process.

From my perspective, any of the thoughtful reform proposals discussed earlier would be better than no reform. But if I had to choose, a structural intervention followed by ongoing ACCC/FIRB oversight would be my first choice. How might this occur? I reiterate my call for a special commission, established by and reporting to Parliament with a 1-year time frame. The commission would follow a four-part process:

1. Carefully and clearly outline the goals and criteria for media policy and deregulation including not just diversity but quality as well as ongoing development of this exciting and prospective industry.

2. Seek proposals from participants and potential participants to structural initiatives that conform to those goals and criteria. I would expect a wide range of possibilities will be tabled.

3. Decide which of the proposals submitted should be allowable in the context of the policies established.

4. Determine the future regulatory regime most appropriate to the new industry structure.

Are such proposals just wishful thinking? Not when seen against the major reforms introduced by a succession of Australian governments over the last 15 years. And are proposals like this important enough to justify the time and attention of our political leaders? Unquestionably, for what could be more important to a free, vibrant society than a media industry structured to deliver an "A grade" performance. 
 

Fairfax > Corporate Affairs & Media Releases > Announcements > A N Smith Memorial Lecture