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Today Tony Abbot used one of the oldest tricks in the book. He said “don’t believe everything I say”. Apart from the paradox of making himself an honest man, he also exercised the  raging cynicism afoot concerning party politics. So honest, he happily admits to dishonesty — Check it out.

Last weekend, the CRA announced a bid to abolish Australian content quotas from digital broadcasts. I sent in the following submission. Now we need your help in supporting it. Agitate through your local federal member. Send letters to Stephen Conroy and Peter Garrett. Make sure our broadcasters pay back their fair share for the generous leases they receive from government. Send me your thoughts if you want.

best,

Phil

*************************

Senator the Hon Stephen Conroy

Minister for Broadband, Communications and the Digital Economy

senator.conroy@aph.gov.au

The Hon Peter Garrett, AM, MP

Minister for Environment Protection, Heritage and the Arts

Peter.Garrett.MP@aph.gov.au

Ms Joan Warner CEO

Commercial Radio Australia

codes@commercialradio.com.au

Email submission to the Communications Code Review of Digital Radio: Code 4

By Professor Phil Graham

Director, QUT Institute of Creative Industries and Innovation

Friday, 19 March 2010

Dear Rt Hon Members and Ms Warner

Please accept this submission to your review of code 4: Australian Content

Position: Removing Australian content quotas from the Australian Digital spectrum licenses is a severely damaging move and I ask that the review increase rather than diminish broadcaster obligations in respect of Australian domestic culture and its associated economy.

In the argument that follows, I lay out three broad bases for such an approach. First, I describe the natural resource character of electromagnetic spectrum and Australian audiences, and the obligations upon broadcasters that must ensue in any reasonable consideration of spectrum leases. Second, I describe the need for our broadcast industries to promote Australian offerings given the global implications of digital broadcast. Finally, I argue a cultural capacity case for increased quotas in the exploitation of Australia’s digital spectrum.

The real character of electromagnetic spectrum: It has long been recognised that electromagnetic spectrum has the same characteristics as real estate: it can only be occupied on an exclusive basis, its use is tied to geography, and it can be worked to extract multiple forms of value (Smythe, 1981; Childs, 1924; Graham, 2002). Where commercial broadcast is concerned, spectrum is like the land upon which mines for precious minerals and metals are operated. And because of these real characteristics, spectrum has also long been considered as integral to the common wealth of nations. It is on this basis that licenses to commercially occupy electromagnetic spectrum have been granted in Australia and elsewhere since the 1920s.

Upon the real estate of broadcast spectrum, audiences are harvested and sold to extract commercial and cultural value. Broadcasters are given a grant or lease on the spectrum in return for the ability to raise revenues on this basis. It is not a matter of simple rents, which is how the broadcasters seem to be presenting the problem in the current debate. It is more a combination of mining and farming uses of land and so should be treated like the leases that pertain to these activities.

The commercial broadcast business model relies upon a precious natural resource: the biddable attention, tastes, and cultural patterns of audiences. Put simply, broadcasters literally raise, tend, and otherwise produce audiences for sale to advertisers. In Australia, direct revenues from advertising are increasing monthly by up to 3 percent, a figure of $48 million in February 2010 alone (Commercial Radio Australia, 2010). This direct revenue figure is of course a small fraction of the total value ecology that is driven by the broadcast sector. Apart from associated retail sales there is a taste formation process upon which sales of cultural commodities (recorded music, videos, films, concert tickets, etc) are based. The very same activities also shape the composition of music licensing collections by APRA, AMCOS, and PPCA, which even extend to revenues drawn from the price of beer, wine, and food served throughout the hospitality sector.

Present quota arrangements are already demonstrably unsuitable and economically unfavourable, leaving Australia as a massive net importer of commercial culture. The Australian balance of trade deficit on music alone is presently enormous, with a 4:1 ratio between imports and exports (Letts, 2007). Such figures do not take into account the very close relationships between the music, film, television, live performance, fashion, and the many other lifestyle industries that are closely linked to cultural taste, and which are also hopelessly in deficit in Australia.

It is entirely unthinkable in any other sector that Australia would turn over its natural resources to a network of businesses that generate a massive and ongoing trade deficit for the economy while achieving record revenues. It would be akin to turning over all the leases held by BHP Billiton and Rio Tinto to foreign interests effectively rent-free and without further obligation, even where the employment of Australian labour is concerned. It is no less the case with cultural assets, and our spectrum should be treated as concretely valuable as the land from which precious minerals and metals are mined.

Hence, where any spectrum license is granted, a cultural and economic return to the country should be expected and demonstrated; Australian culture and the quality of Australian cultural work should be enhanced; and the value of Australian cultural work should be increased as a result of the lease. None of these conditions is being currently met and therefore the digital spectrum should be worked harder in these respects rather than being entirely abandoned to a weak rental model of revenue.

The global character of Digital spectrum and its cultural implications: While the spectrum being effectively handed out to broadcasters by the Federal Government has geographically limited aspects, the related technologies gives the spectrum global characterstics. The relationship between these needs clarity: a broadcaster’s ability to offer attractive cultural goods depends on the geographical aspect first: that is to say, these activities are underpinned by value extracted from Australian audiences. In other words, the sole competitive advantage in global markets of any given broadcaster depends on its primary means of generating value from a local audience.

No doubt the argument can be made that to compete in a global digital environment requires material tailored to the tastes of various global audiences. A simple view would suggest US offerings for US audiences, Slovenian offerings for Slovenian audiences and so on. However, such a view is entirely simplistic and ignores the natural resource view of Australian spectrum, Australian audience labour, and Australian cultural labour. It also ignores our primary competitive advantage in the global cultural market: namely the unique character of our cultural offerings.

The Federal government ought not assign leases that have global returns attached without some clear plan for significant return to the Australian economy and culture. To do so is bad strategy and a wholesale waste of natural resources. Commercial spectrum leases should only be assigned as part of a global export strategy rather than as yet another addendum to the Australian trade and culture deficit that traditional spectrum leases have produced.

Spectrum obligations, balance of cultural capacity, and balance of cultural trade: Seen as a natural resource at the core of a global economic and cultural strategy, the Federal Government is bound to treat the country’s digital spectrum as far more than an inert rental opportunity, or worse, as simply more channels. Even in cases where we assign natural resource leases that return little direct revenue to the country, the “jobs” argument tends to prevail. For example, Chalco’s bid to extract bauxite from Arakun after Alcan’s lease was withdrawn (because it did not produce a return) was sold to the constitutency as creating 700 new jobs (Schwarten, 2006). Many other examples could be given on the “jobs creation” strategy of rationalising natural resource leases to the constituency.

However, broadcaster values drawn from spectrum lease exploitation offers no such direct dividend: regardless of audience size, broadcaster audience production capacity receives no pressure with increased audiences and the difference in employment pressures between servicing an audience of 100 thousand and 100 million are negligible if not zero. The only premium to the country that can increase in such a circumstance is cultural labour capacity and copyright rents. These outcomes should therefore be the focus of any strategy where the assignment of spectrum leases is concerned.

The question therefore needs to be posed to broadcasters in the assignment of any lease: “how will cultural labour capacity and copyright rental returns to the Australian economy be increased if we assign this lease to you?” A clear strategy would need to be articulated and the broadcaster would need to be concerned with the international promotion of Australian cultural goods, domestic cultural labour capacity, and a clear business model that demonstrates export returns to Australia. These are fair and reasonable expectations in consideration for effectively free expoitation of precious natural resources.

Summary: The present proposal to abolish cultural and economic premiums in respect of digital spectrum are deeply flawed. It ignores the natural resource character of spectrum, audience, and culture. It offers no strategy to address Australia’s cultural trade imbalance or its associated economic deficit. Our broadcasters are key in achieving this.

The CRA digital radio strategy contains no consideration in the form of returns to culture or economy. Copyright exports are increasing by the day, just as revenues to broadcasters are increasing. This is effectively the same as giving away mining  rights without any expectation of return in the form of revenue, jobs, or capacity,  while also paying for the infrastructure and importing 80% of the goods and services produced by those rights.

The basis of the broadcast business model is the use of spectrum to produce audiences for sale to advertisers; to shape culture in favour of specific consumption patterns; and to use music and other cultural content as the basis for these activities, which in turn generate rights distributions. Currently these aspects of the Australian economy all contribute to a massive deficit, whether directly as sales for cultural commodities, as rights generation activities, or in the development of cultural capacity.

In no other sector would such arrangements be acceptable. There are many examples of leaseholders who do not demonstrate value to the economy having their leases revoked. Commercial entities who extract massive value from the use of Australian natural resources and Australian labour need to contribute to the economy and to be seen to be doing so. The cultural sector is no different. By acting as primary agents for massive and growing deficits, our broadcasters are failing in their obligation to the community, culture, and economy. The code review should take the opportunity to rectify this.

I request that the review take the aspects I have outlined into account and ensure that the current trend is reversed; that the broadcasters demonstrate their strategic role in reducing our cultural trade deficit; and that the broadcasters are required to demonstrate that their use of our electromagnetic real estate increases rather than reduces  cultural capacity, copyright returns, and Australian cultural value.

Phil Graham

Friday, 19 March 2010

By email

References:

Childs, W. W. (1924). ‘Problems in the Radio Industry’. The American Economic Review, 14, (3): 520-23.

Commercial Radio Australia (2010, March 5). Radio ad revenue continues to grow – latest figures. Available online at: http://www.commercialradio.com.au/files/news/Feb%202010%20ad%20revenue%20PR.pdf

Graham, P. (2002). Space and cyberspace: On the enclosure of consciousness. In J. Armitage and J. Roberts. (Eds). Living With Cyberspace: Technology & Society in the 21st Century: pp. 156-164. London: Continuum.

Letts, R. (2007). Scale and structure of the music sector, and the need for better data. Music Council of Australia. Available at http://www.mca.org.au/web/component/option,com_kb/task,article/article,146/

Schwarten, E. (2006). Chalco wins bauxite mine bid. Diggy Manufacturing. Available at www.diggy-manufacturing.com

Smythe, D. (1981). Dependency road: Communications, capitalism, consciousness, and Canada, New Jersey, Ablex.

Press play and listen to tracks from Al’s Casino and Reunion by the Phil Graham Band. Join the mailing list for news, dates, and everything else.

Enjoy!!

Learn from Cuba’s health system, PM told – ABC News (Australian Broadcasting Corporation).

Apparently unthinkable, even if it works. Ideology is running rampant. It’s as if there is a chance that communism might make a comeback

The recent financial crisis is said by many to be over and that we are all in “recovery”. Yet only a year ago the talk was of a disaster on the scale of the Great Depression which, by some measures, lasted from 1929 until the end of WWII. So how did we escape such a fate? The truth is that we have not. And while there is already talk of a further downturn in 2010, none of the main pundits seems to be speaking frankly.

The looming trouble is a result of treating the whole crisis as purely financial. Attentive punters will have noticed amidst the crisis reporting emergent talk of effects on “the real economy”. Or, as presidential candidates put it, the distinction between “Wall St” and “Main St”. What this refers to is a relatively recent and tacit agreement to let the financial sector engage in a fantasy economy that is hedged out for decades into the future. The “over the counter” derivatives sector is alone worth in excess of a quadrillion (a thousand trillion, or a million billion) US dollars per year according to the Bank of International Settlements.

Things started to go wrong when the “real economy” started to connect with the fantasy economy. A friend and I used to joke that the whole house of cards would come unstuck because some person in Chermside with a fridge bought on “nothing down, nothing to pay until 2020″ style loan defaulted on a payment. As it turns out, it was not far from the truth. The culprit for the media turned out to be poor quality housing loans. Of course that was true in part, but there were (and are) a whole lot of other factors feeding in to the problem.

The massive derivative hedges are protected by very hard-to-prove conditions around the triggering of payments. In other words, derivatives typically carry a face value that only falls due in the case of a proven default (or credit event) in the “real world”. Theoretically, the derivatives market could go on ad infinitum without the instruments ever realising their face value. As they are exchanged, each seller makes or loses a small fraction of the face – the sheer size of the global market in these weird financial abstractions is what makes it worth the trouble and expense.

The fact is that none of this scam has been fixed. In fact almost all of the bailout efforts have been designed to “fix” the system by providing it with new liquidity. None of the underlying structural problems have been touched. Which makes weird historical sense. As John Ralston Saul pointed out: the Great Depression was not a crisis of production but rather a crisis of measurement: it was a “we can’t possibly make cakes because we have run out of ounces” type of problem. Meanwhile grain rotted in warehouses. And this is where the recent fix has been aimed. Instead of taking the opportunity to end the global scam that caused the problems, and which will be at the centre of the coming problems in 2010, central bankers and federal treasurers (however named) merely pumped cash into the coffers of the bandits in the continuation of a global racket that has long been out of control.

Mind the gap!