Convergence: regulating a “unified communications” market in New Zealand
6 December 2011
Fast broadband connections have paved the way for broadcasters and telecommunications service providers to enter into each others’ markets internationally. As a result, an Organisation for Economic Co-operation and Development (OECD) report in 2006 stated that the telecommunications industry was facing an identity crisis. The bundling of various communications services is becoming increasingly popular. Multi-service offerings may include dual play (fixed voice and fixed broadband), triple-play (fixed voice, fixed broadband and TV) or even quadruple-play (fixed voice, fixed broadband, TV and mobile services) bundled offerings. Countries such as the United Kingdom, Canada, Australia, Malaysia and Korea have responded by merging their broadcasting and telecommunications regulators. With UFB (ultra-fast broadband) now in New Zealand, a hot topic is whether New Zealand should also follow this seemingly worldwide trend.
A digital broadcasting paper (the Digital Broadcasting Review) was released by the Ministry of Economic Development (MED) and Ministry for Culture and Heritage (MCH) in 2008. The Digital Broadcasting Review considered the implications for regulatory policy of the convergence between broadcasting, telecommunications and the Internet.
This Review explored whether New Zealand should merge the regulation of content, distribution and networks into a single regulator. It also considered whether media regulation should be consolidated into a single act. In reference to what is happening in overseas jurisdictions, the Digital Broadcasting Review highlighted that:
In terms of structure, there is a clear trend towards meeting the challenge of convergence through the creation of a single media and telecommunications authority. … the remit and legislative basis of these authorities varies considerably and continues to evolve as full digital switchover becomes a reality and as new broadcasting-like services become established.
As an example, the Australian Communications and Media Authority (ACMA) was formed through the merger of the Australian Broadcasting Authority and the Australian Communications Authority in mid-2005. It regulates broadcasting, the Internet, radiocommunications and telecommunications in Australia. During a speech in Taipei in 2007 the Chairman and Chief Executive of the ACMA, Chris Chapman, expressed his views on the merger:
…we took what was effectively three telecommunications, broadcasting and radiocommunications silos, and created a more “horizontally” based organisation. …This better reflected the realities of an increasingly convergent communications industry, as opposed to the historically separate worlds of telecommunications, radiocommunications and broadcasting. ... Some 18 months down the track, I can say that the converged structure has been a useful mechanism for enabling us to think and deal with matters across all the sectors and legislation for which we are responsible. It has also extended our capacity to respond to changing needs, be proactive and facilitate new thinking. … However, our experience has also been that organisational restructure will be only one piece of the puzzle in transforming our operations…
A report on competition issues in television broadcasting by the MED and MCH (the Competition Report) was presented to the Minister of Broadcasting and the Minister for Communications and Information Technology in 2009. Out of the two main options considered available to the Ministers the MCH preferred the option of a widened Telecommunications Commission (a “Communications Commissioner”). MCH in making its recommendation considered that amending the New Zealand Telecommunications Act to include broadcasting would:
- pro-actively manage risks of anti-competitive behaviour by SkyTV
- enable the Commerce Commission to consider potential future market issues related to converged telecommunications and broadcasting markets, including the provision of broadcasting-type services over next generation networks (NGN)
- incentivise market participants to avoid anti-competitive behaviour
- enable faster responses to the development of competition issues (delaying responses until problems have occurred may be too late)
- be in line with the approach taken by other OECD countries.
When recommending the option of taking no further action the MED considered that there was no strong case for regulating the broadcasting market at that particular point in time and that the current market could adequately deal with potential competition issues.
Currently, regulation in the New Zealand telecommunications and broadcasting sectors includes a myriad of agencies and legislation which will need to be considered in light of convergence. Some of the organisations that govern the media and telecommunications sectors include:
- the Ministry of Economic Development
- the Ministry of Culture and Heritage (which funds organisations such as the Broadcasting Standards Authority and the Broadcasting Commission)
- the Commerce Commission
The legislative environment surrounding these sectors include the following acts amongst others:
- the Broadcasting Act 1989
- the Commerce Act 1986
- the Radiocommunications Act 1989
- the Telecommunications Act 2001
- the Copyright Act 1994.
The current regulatory provisions are unlikely to be sufficient to address the changing face of telecommunications and broadcasting in New Zealand. As a simple example, section 5 of the New Zealand Telecommunications Act adopts the same definition of broadcasting as in section 2(1) of the Broadcasting Act which states that:
Broadcasting means any transmission of programmes, whether or not encrypted, by radio waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus but does not include any such transmission of programmes–
- made on the demand of a particular person for reception only by that person; or
- made solely for performance or display in a public place …
Arguably non-linear services such as video-on-demand (VOD) services are not encompassed in this definition. VOD services give viewers more choice and control over what content to watch, when and on what platform and have been predicted to be a key driver of demand for UFB. With UFB rollout in New Zealand VOD services are expected to become increasingly popular, eroding the traditional concept of broadcasting as a one-to-many service. The provisions of our broadcasting and telecommunications legislation as they stand now do not adequately deal with this issue.
The OECD report on multiple play pricing policy and trends outlined some regulatory issues / concerns arising out of the convergence of broadcasting and telecommunications:
- increased competition will allow prices to fall and therefore regulators need to be vigilant about anti-competitive behaviour by companies with significant market power
- unfair competitive advantage may be obtained by infrastructure operators by putting bit caps for services by independent service providers
- by blocking ports or Web sites multiple play providers have the potential to create a “walled garden” where subscribers are restricted to the use of the operator's own services
- “must carry” obligations need to be addressed (network-neutrality may lessen the need for must carry obligations given content providers and consumers have access to alternative networks and content providers can efficiently host their own content)
- re-examination of existing regulations and their suitability to linear and non-linear content delivery
- difficulties of regulating OTT (over-the-top television) content from international jurisdictions
- Quality of Service (QoS) issues may arise since degradation becomes an issue as more services are included on the network - technical solutions such as packet data restrictions may lead to anti-competitive behaviour.
Other worldwide concerns surrounding convergence include:
- intellectual property issues over media ownership
- issues surrounding local-must carry obligations for broadcasters
- existing operators may have extensive powers restricting entry into the market
- conflicting interests between the different sectors creating issues for merged regulators
- network security
- licensing of content and platforms
- numbering and number portability in light of VoIP.
Convergence indicates a shift into an integrated “communications market” where instead of broadcasters we have “converged media operators” and telecommunications operators cross the border into delivering content services. With evolving technology and new services, particularly in light of UFB, laws, policies and regulations will also need to evolve in order to prevent problems up-stream instead of providing the ambulance at the bottom of the cliff. An approach that has been taken by many countries, including the United Kingdom and Australia, is to consolidate regulatory functions into a single regulator and / or legislation.