Does the Australian Government encourage or discourage media diversity?

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WHAT IS THE FUNCTION OF THE MEDIA IN AUSTRALIA‘S POLITICAL LIFE?
LUKE MCGRATH
I. INTRODUCTION The media are the means or channels of communication in a society, such as radio, newspapers, magazines, television, and the internet and the mass media is the section of the media that has the capacity to reach large segments of the population. Because the media, or more specifically, the mass media, has the ability to reach large numbers of people, it is argued that the government has a pivotal role to play in regulating media ownership to prevent monopolisation and to encourage diversity. If the mass means of communication are dominated by a few firms they can unduly influence people‘s thoughts and, hence, actions. This is especially crucial in regard to matters of politics. A well-informed and educated citizenry is said to be an essential requisite for a healthy, functioning democracy. In this paper, though, I will argue that, contrary to accepted wisdom, governmental regulation of media ownership only serves to limit competition and encourage the monopolisation of the mass media by fewer and fewer firms. The recommendation that will be offered is, not reform of the existing legislation, but rather outright elimination of all laws that serves to regulate media ownership in Australia. II. THE LEGISLATION The Australian Communications and Media Authority (ACMA) is a statutory authority within the federal government portfolio of Broadband, Communications and the Digital Economy, tasked with regulating broadcasting, the internet, radio communications and telecommunications. The Commonwealth‘s legislative prescription as regards controls on media ownership can be divided into two categories. Issues related specifically to broadcasting fall under the Broadcasting Services Act 1992, while generic controls related to commercial activity are stipulated by the Trade Practices Act 1974 and the Foreign Acquisitions and Takeovers Act 1975 (Gardiner-Garden and Chowns 2006, 1). A paper prepared for the Australian Parliament, Media Ownership Regulation in Australia, outlines the reasoning behind this legislation: The major effect of the laws is to prevent the common ownership of newspapers, television and radio broadcasting licences that serve the same region. The purpose of the legislation is to encourage diversity in the ownership of the most influential forms of the commercial media: the daily press and free-to-air television and radio (ibid).
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We will take these two claims in reverse order and, by way of economic theory and empirical examples, show them to be false. III. CLAIM ONE: MEDIA OWNERSHIP REGULATION ENCOURAGES DIVERSITY OF OWNERSHIP Radio and television stations in Australia are only allowed to operate providing they have a Government-issued license. The holders of these licenses must then adhere to the codes, conditions, and standards set out by the ACMA. The Australian Government, therefore, discourages diversity in media ownership by creating artificial barriers to entry.1 How high are these barriers to entry? It was revealed in 2004 that DMG Australia had paid $481 million for just seven metropolitan city radio licences (Frew 2004). The license for the Sydney ‗Nova‘ radio station alone cost DMG $155 million (ibid). The annual license fees for television stations are calculated at 9 per cent of a broadcaster‘s gross revenue (Jackson 2008). It was reported in The Australian that in 2005-06, ―the average value of a capital city licence was about $120 million, down from about $230 million in 2003-04. For a non-capital city licence it was about $50 million, down from about $90 million two years earlier‖ (ibid). These figures are of course how much it costs per year to utilise a television license, the actual value of the licenses themselves would be in the hundreds of millions of dollars, and in the case of capital city licenses, far greater. Still, the value of commercial licenses has fallen considerably from what they were 10 years ago when ―the three TV networks value[d] their licenses at about $2.2 billion‖ (Fist 1998). In fact, since 2003-04, ―the value of commercial TV licences has been slashed by nearly $2 billion...as network audiences defect to the internet and pay-TV‖ (Jackson 2008). In the face of decreasing market share, the free-to-air (FTA) stations only have to turn to the ACMA; for instead of allowing the ―weeding out‖ process of the market to function and to permit the entrance of new players, i.e. encouraging the diversity of media ownership, the ACMA has in fact sought to impede competition. As reported in The Australian, ―Communications Minister Stephen Conroy looks set to protect free-to-air television networks from competition in the crucial three-year period that experts believe they have to make multi-channels a success…to consider technical and regulatory issues before auctioning the valuable digital TV spectrum on which rival services could be provided‖ despite the fact that the digital TV infrastructure group Broadcast Australia‘s managing director, Graeme Barclay, stated, "the technical issues are capable of being resolved relatively simply and at low cost‖ (Schulze, Sinclair, and Berkovic 2008). The net result of this Government created scarcity is to severely limit competition and prevent diversity of ownership (with the accompanying consequence of a concurrent
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―One form of partial product prohibition is to forbid all but certain selected firms from selling a particular product. Such partial exclusion means that these firms are granted a special privilege by the government...An example of this type of grant is licensing, where all those to whom the government refuses to give or sell a license are prevented from pursuing the trade or business‖ (Rothbard 2004, 902-903).
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limiting of diversity of views).2 As the economist Murray Rothbard explains, ―Those who cannot meet the price of the license are barred from entry. Heavy license fees place great obstacles in the way of competitors with little initial capital‖ (Rothbard 2004, 1094-1095). IV. CLAIM TWO: OWNERSHIP REGULATION PREVENTS COMMON OWNERSHIP OF VARIOUS MEDIA The Broadcasting Services Act 1992 does stipulate certain criteria for media ownership in Australia. These include the degree of control that a person can exercise (e.g. ―a person must not control television broadcasting licences whose combined licence area exceeds 75 per cent of the population of Australia [Section 53]) and the amount of control over cross ownership (e.g. ―a person must not control a commercial television broadcasting licence and a newspaper associated with that licence area‖ etc [Section 60]) (Office of Legislative Drafting and Publishing 2008). Under the precise control measurements of the Broadcasting Services Act 1992, then, the Government can arguably be said to be successful in ―prevent[ing] the common ownership of newspapers, television and radio broadcasting licences that serve the same region [emphasis mine].‖ But if you take the Australian market as a whole, though, a different set of conclusions is reached. Two of the objectives of the Broadcasting Services Act 1992 are: (a) to promote the availability to audiences throughout Australia of a diverse range of radio and television services offering entertainment, education and information; and (c) to encourage diversity in control of the more influential broadcasting services (ibid). How does the media measure up then? Is the industry structure akin to that envisaged by the ACMA and the Government or is it more along the lines of that described by Rothbard – monopolistic with onerous high barriers to entry? Perhaps not surprisingly it tends towards the latter. The television industry is oligopolistic, there are a few dominant firms, i.e. Channel Seven, Nine Network, and Channel Ten, and they are cushioned from protection in the FTA market by government licensure. This policy has seen the value of licenses soar to hundreds of millions of dollars. This means that only those potential firms capable of raising hundreds of millions of dollars (to purchase one of the existing FTA networks) can compete. So much for encouraging diversity. Likewise, the industry structure for major newspapers is also oligopolistic. As can be seen from the figure below, News Corp and Fairfax Holdings dominate the industry.
―It is obvious that a monopolistic grant directly and immediately benefits the monopolist or quasi monopolist, whose competitors are debarred by violence from entering the field‖ (Rothbard 2004, 903)
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Figure 1. (Gardiner-Garden and Chowns 2006, 7)
V. WHY REGULATION? If Governmental legislation has only served to hamper diversity in media ownership—and this is precisely the opposite of the avowed claims by the Government—why do we have regulation? Who benefits? B.K. Marcus offers the answer in an essay exploring the ‗Economics, History, and Future of Wireless Technology.‘ He claims there are two parties who serve to prosper from this regime: Government and Big Business itself. Firstly, politicians benefit: ―Whenever allocation is moved from economic to political means, politicians will gain in a variety of ways: monetary and non-monetary, legal and extralegal.‖ Secondly, the censors benefit: ―And central regulation of any communications medium means that censors benefit from the political control they're denied under a private property regime.‖ And finally: ―Another beneficiary of regulation—obvious to free market economists but surprising to others—is the regulated industry itself. Through the phenomenon of "regulatory capture" the existing corporate interests use the regulatory body as a cartelizing agent. Not only does the regulatory body act as a barrier to entry, lowering competition and raising prices, but it also blocks innovations that might threaten industry leaders‖ (Marcus 2004, 1).
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VI. THE SOLUTION The ‗solution‘ is to simply get government bureaucrats out of the way and allow the market to freely function. There is no need for government to enforce thousands of regulations in an effort to curb monopolisation of the media because their policies only serve to promote the cartelisation of the media. In a free market there would be hundreds of competitors offering hundreds of various views and opinions with totally divergent outlooks on events. If the incumbent commercial media players really do offer a superior product, then in the ‗market for ideas‘ consumers will purchase their newspapers and magazines, watch their television programs, and listen to their news broadcasts. In all likelihood, though, they would face stiff competition from individuals and groups of people (whether they be for profit or non-profit) offering innovative products—niche programming, educational resources, local information, and analysing and presenting issues from diverse viewpoints catering to all segments of society (e.g. daily news reports from a wide range of perspectives, whether it be from a socialist perspective, or an anarchist, libertarian, Christian, Muslim, feminist, gay or environmental, etc., perspective). Perhaps it would be constructive to ponder this potential scenario for a moment and reflect on why it isn‘t already so. The incumbent media firms obviously wouldn‘t want this due to reductions in their market share and hence ad revenue. But could it also be possible that, despite assertions to the contrary of the importance and merits of diversity, when it comes to politics at least, government does not want any real departure from what are considered ‗mainstream‘ points of view because this has the potential to seriously upset the status quo. It could be argued that the current organizational composition of the mainstream media, i.e. large firms operating under oligopoly, suit the government just fine as it keeps the ‗locus of discussion‘ within ‗acceptable‘ parameters. VII. CONCLUSION In this paper we have seen that the justification for regulating media ownership rests on specious grounds, namely, that the government acts in the public‘s best interest by restricting entry into various media industries. The government then compels the different firms to adhere to their guidelines and prevents certain mergers and acquisitions from proceeding, ostensibly to prevent the homogenization of mass communication to the public. As was mentioned previously, a well-informed and educated citizenry is said to be an essential requisite for a healthy, functioning democracy and freedom of the press is understood to be a bulwark of this. But in the absence of a free market, how are we to know that what the media is delivering is truly reflective of the attitudes and values of the broad Australian public?
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REFERENCES Dictionary.com. 2008. "media". http://dictionary.reference.com/browse/media (accessed 21/05/08). Fist, S. 1998. Australia's Digital Television Decision. The Australian, 31 Mar 1998. http://www.abc.net.au/http/sfist/dtv1.htm (accessed 23/05/2008). Frew, W. 2004. DMG Radio's baby wants to be king. The Sydney Morning Herald, May 3, 2004. Gardiner-Garden, J., and J. Chowns. 2006. Media Ownership Regulation in Australia, edited by Parliament of Australia: Parliamentary Library. Commonwealth of Australia. Jackson, S. 2008. TV permits no licence to print money. The Australian, May 12, 2008. http://www.theaustralian.news.com.au/story/0,25197,2368105430540,00.html (accessed 23/05/2008). Marcus, B. K. 2004. The Spectrum Should Be Private Property: The Economics, History, and Future of Wireless Technology. http://www.mises.org/story/1662 (accessed 23/05/2008). Office of Legislative Drafting and Publishing. 2008. Broadcasting Services Act 1992 edited by Attorney General's Department. Canberra. Rothbard, M. N. 2004. Man, Economy, and State: A Treatise on Economic Principles. Auburn: Ludwig von Mises Institute. Schulze, J., L. Sinclair, and N. Berkovic. 2008. Conroy puts brakes on digital boom. The Australian, May 22, 2008. http://www.australianit.news.com.au/story/0,24897,237403465013040,00.html (accessed 23/05/2008).
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