Two out of three rule needs reviewing, says ACCC boss Rod Sims

Sydney Morning Herald | Max Mason | 5 November 2015

Competition tsar Rod Sims has thrown his weight behind substantial media ownership reform calling for a review of the two out of three rule and flagging a potential need to change sports broadcasting restrictions to cope with the advent of live streaming.

In a speech to be delivered to the RBB Economics conference on Thursday, Mr Sims also renewed The Australian Competition and Consumer Commission's push for the removal of the reach rule preventing TV networks from broadcasting to more than 75 per cent of the population.

While the anti-siphoning regime seems pro-competitive now, however, and should be kept in place, this may not always be the case.

The two out of three rule prevents media companies from owning a newspaper, radio network and TV station in the same market, while the anti-siphoning regime essentially gives free-to-air broadcasters the first attempt to bid on sports rights on the list.

Mr Sims' comments come as the government is expected to fast-track moves to abolish the reach rule before Christmas.

"While there are serious questions to be asked about the two out of three and the 75 per cent reach rules, we believe that, also for competition reasons, some form of anti-siphoning regime continues to be required," Mr Sims said.

"The concern is that, without the anti-siphoning regime, Foxtel could acquire exclusively all premium sport and reduce competition in the television viewing market. Access to this content drives viewers and so advertisers. While the anti-siphoning regime seems pro-competitive now, however, and should be kept in place, this may not always be the case."

He noted a partnership between Yahoo and America's National Football League last month which saw 15 million users tune in to the first ever free global live stream of a match between the Buffalo Bills and the Jacksonville Jaguars.

"In addition to this NFL game, we've also seen YouTube secure live streaming rights for the Indian Premier League cricket, as well as select Major League Baseball and National Basketball Association games," Mr Sims said.

"If this trend of streaming live sport is replicated in Australia, particularly via paid subscription models, the anti-siphoning regime may need revisiting, but we are not there yet."

Some people believe that the recent approval by the ACCC of Foxtel, which is 50 per cent owned by News Corporation, taking a 15 per cent stake in Ten Network Holdings, puts News Corp in strong positions across print, radio, subscription and free-to-air TV, Mr Sims said.

"This, of course, is a reference to the two out of three rule, which prevents anyone controlling a radio broadcasting licence, a television broadcasting licence and a newspaper in the same licence area. You can control two of these mediums but not all three," Mr Sims said.

"As with the Foxtel-Ten transactions, of course, this raises the issue of what constitutes "control". The difficulty with this concept is one reason to question the two out of three rule.

"A larger reason is the diversity of news sources we have today."

Mr Sims said regulation that relies on particular mediums runs the risk of becoming redundant thanks to technology.

"This rule was introduced before the emergence of the internet. Now people can read overseas newspapers as easily as they can local ones, and they can stream or otherwise gain access to endless content."

"Indeed, we need to ask whether the two out of three rule is preventing the efficient delivery of content over multiple platforms, and should be reviewed to see whether it is still relevant for the preservation of diversity.

"Conversely, such a rule may give some firms the impression that they can be protected from technological change."

Laws that restrict acquisitions need clearly justification, he said, noting that changing technology may have made the two out of three rule redundant.

He said that Seven and Nine's live streaming of all their channels across desktop, mobile and tablet has undermined the reach rule.

View the article on the Sydney Morning Herald