To save local voices we need a different kind of deregulation

The Save Our Voices campaign was launched in August by the regional TV networks, Prime, WIN, Southern Cross-Austereo and Imparja. Its goal is to reform media laws that “prevent regional broadcasters from competing fairly with big city media and news available online”.

Backed by Fairfax Media and gilded by the recruitment of the former leader of the National Party, Tim Fischer, the campaign is misleading. So too are opinion pieces that argue existing rules “squeeze the life out of our regional TV networks”.

Simply put, if their proposed reforms go through, there’s no guarantee local newsrooms – and the jobs of journalists in those newsrooms – will be protected.

Tim Fischer at the National Press Club in Canberra, 2012.Alan Porritt/AAP

If successful, the campaign will remove the “75% reach rule” and the “two out of three” rule, the last vestiges of media regulations introduced between 1987 and 1992

The foreign ownership rules, created back then, were scrapped in 2006, throwing commercial television into turmoil and bringing Channel Nine to bankruptcy’s door.

These two rules limit any one licensee to owning free-to-air TV stations that cover more than 75% of the population and prevent one media business from controlling more than two of the radio, television or newspapers within a market.

The campaign cites the former Minister for Communications, now Prime Minister, Malcolm Turnbull’s description of the regulations as “horse-and-buggy legislation in the 21st century”. It’s true that reform is needed. But horse-and-buggy, Prius or Porsche, road rules still apply.

Declining revenues, declining audiences

The TV world has changed dramatically since the 1990s. Overseas video-on-demand services such as Netflix, and local competitors like Stan and Presto, have a growing impact on free-to-air, as will Plus7, Seven Network’s online service.

Advertising revenues for free-to-air are declining. Indeed, based on ABA and ACMA figures, the regionals' gross revenues for FY 2011-12 were almost exactly the same as 2000-01 in 2014-corrected dollars.

Audiences, too, are declining. Nevertheless more than 90% of Australians still watch TV at home. Penetration by smart phones and other devices is under 10% but growing. Pay TV take-up has stalled below 35% and is unlikely to break out without easing of the sports anti-siphoning rules.

News Limited’s Rupert Murdoch announcing the Seven Network’s AFL broadcast deal.Joe Castro/AAP

The Save Our Voices campaign argues these rules must be dropped but ignores the reasons the rules were imposed: Labor’s belated attempt to support diversity of content, especially news and opinion, and as a barrier to the further concentration of media ownership.

They came in the wake of Labor allowing Rupert Murdoch’s News Limited to take over the Herald and Weekly Times, so establishing News’ domination of newsprint media in Australia.

Save our Voices makes much of the identity of the regional broadcasters. But in reality, the 75% reach rule actually protects them from being gobbled up by their city affiliates.

The tough business of regional television

Neither rule substantially impacts on their profitability. But a key element that does is the usurious affiliation fees demanded by their city affiliates for programming. These fees substantially compromise their ability to deliver local content.

In 2013, WIN Corporation agreed to pay Nine an affiliation fee of 39% of advertising revenue, in a deal ending in December 2015. According to the Australian, Nine now wants an additional A$43 million a year, pushing the fee up 50%. Prime’s city affiliate, Seven, is entitled to 46% of advertising revenues until 2019.

Nine Network Australia.Dean Lewins/AAP

You can run a lot of newsrooms on a fraction of that money. The Save Our Voices website makes no mention of this as a factor affecting the delivery of local news.

For the city networks, this is money for jam. They buy the Australian right to programs in anticipation of on-selling them to their regional affiliates, so the income goes straight to the bottom line at little additional expense.

Now Prime’s participation in the Save Our Voices is starting to worry the Seven Network, as their affiliation agreement guarantees quality local news. Despite record earnings of A$35.5 million for FY2015, Prime has sacked senior journalists in the Wagga Wagga, Tamworth and Canberra.

But regional TV is a tough business. They reach about 35% of Australians but advertising revenues are below 25% of the television spend. In addition, they have far more transmission infrastructure than the city networks.

One option for the regional broadcasters is to follow Seven’s Plus7, if they have digital rights. But to be competitive, they have to have something to offer that the city stations cannot. A good choice is local news.

If the 75% rule is dropped, mergers will inevitably follow. Mergers will largely benefit the city networks at the expense of regional viewers.

At present, there are eight commercial television newsrooms covering Australia, if you regard NBN Newcastle as a separate entity to its owner, the Nine Entertainment Co. With mergers diversity suffers: eight newsrooms becomes five.

In addition, if the 60-year history of television in Australia is any guide, it’s always “Sydney or the Bush”. If economies are to be made then the cuts will fall in regional Australia.

Under the present rules, the regional broadcasters are required to screen minimum amounts of local news and locally significant material, but they are not required to gather it first-hand, nor run it as conventional bulletins.

For example, WIN Mt Gambier buys in two or three news briefs, one or two sport stories and a weather update from Mt Gambier’s Border Watch newspaper. WIN packages these as news updates without local vision and runs them in schedule breaks.

This re-branding of news seems to skate close to subverting the two out of three rule restricting ownership of radio, television and newspapers within the same market.

There would be financial benefits to the regional broadcaster if the two out of three rule was dropped. But would that deliver any diversity of news and opinion to a community?

Free-to-air television remains the modern market place of ideas. News and opinion, largely conveyed by TV, shape our thoughts, and we, in turn, shape our government and our country. It’s diversity or a slow death to democracy.

New Communications Minister and Arts Minister Mitch Fifield is congratulated by Governor-General Sir Peter Cosgrove, 2015.Lukas Coch/AAP

But what is the best way to protect local content?

This news starvation of regional audiences cannot continue. Senator Fifield could take a real free market approach, rather than appease the existing benign oligarchy.

Drop the “75% rule” but keep the “two out of three”. Outlaw the closed market in TV program rights in regional service areas and let the stations bid competitively.

Free the regional networks to stand as truly independent broadcasters, not country cousins of their city affiliates. Free their identities from the city network branding.

In this free market, licence fees would then reflect their advertising revenues, not the city networks' greed, and the regional broadcaster could exploit their one competitive advantage over other screen media, local content especially news.

That is real deregulation, Minister Fifield.

Vincent O'Donnell owns shares in Fairfax Media.