No incentive for ABC, SBS to cut broadcast costs: efficiency review

By Myriam Robin

Monday December 1, 2014

Australia’s two public broadcasters have little incentive to aggressively negotiate their transmission service contracts with Broadcast Australia, the Lewis Review into the efficiency of SBS and the ABC has found.

Transmission arrangements were outside the strict terms of reference of the review, but the report — released by the Communications Department over the weekend — nonetheless notes the current arrangements do not work efficiently.

As Crikey has recently reported, the contract with monopoly provider Broadcast Australia is currently negotiated by ABC and SBS, but funded directly by the government. This means the government will pay as much or as little as the broadcasters negotiate, with them getting no extra money if they play hardball with Broadcast Australia:

“It may be preferable for the ABC and SBS to share in the benefits of savings in transmission costs rather than the current funding arrangement which requires any savings (from digital and certain analog transmission services) to be returned to budget. For example, if it proves possible to reduce transmission costs by 20%, it would be desirable for the national broadcasters to retain at least a portion of these savings.”

The arrangements around how the broadcasters transmit their services to most of the vast Australian mainland are subject to a separate review currently being conducted by L.E.K. Consulting for the department. Ultimately, the findings of that review could mean more to the government’s funding levels of public broadcasting than the Lewis Review, as such transmission costs currently comprise a staggering 20% of the money paid for public broadcasting in Australia. Any efficiencies achieved in this would be substantial.

However, the structure of the market for broadcast services complicates things. The current provider, Broadcast Australia, is a monopoly. Crikey was told in September that TX Australia, whose chairman Paul Mullen is a former head of corporate development at Broadcast Australia, is considering lobbing in a bid for the contract to provide transmission services. This would represent the first real competition for the contract in many years.

Many of the report’s other recommendations have already been leaked to the media and were canvassed in the executive summary of the report, which was released last week. But the report’s release nonetheless satisfies the complaints of many opposition senators, who had been asking for some time for the report to be made public.

Over the weekend, Greens Senator Scott Ludlam received a leaked copy of the report and used it to tell the media that it made clear it was impossible for the ABC to find the savings needed without cutting into programming. Previously, sections of the report were selectively leaked to media organisations to counter arguments being made by ABC management.

This article was originally published at Crikey

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