THE OFFICIAL PUBUCATION OF THE COMMUNICATIONS B.U-L.LAND MEDIA LAW ASSOCIATION INCORPORATED

Print Post Approved pP: 234093/00011 EDITED BY ANDREW" LAMBERTAND JASON MAGAFf~-IUR Vo~ 17 No 3 1998

Retransmission Rights:The Free-to-Air Broadcasters’ View

Bridget Godwin reports on the free-to-air broadcasters’ views on the Broadcasting ServicesAmendment Bill 1998.

BACKGROUND

F ree to air broadcasters have beencalling for the introduction of aretransmission right since the e~rly

1990s. Around this time, it was firstrealised that with the imminentintroduction of pay television inAustralia, pay television operators wouldbe able to use the signals of free to airbroadcasters as part of their subscriptionservices without permission.

Both major political parties have sincerecognised the inherent unfairness of thissituation and promised to amend section212 of the Broadcasting Services Act1992 (Cth) to give broadcasters the rightto control retmnsmission of their services.

BROADCASTING SERVICESAMENDMENT BILL 1998

On 10 March 1998, the FederalGovernment announced that free to airbroadcasters would be provided withretmasmission rights which would enablethem to control their own signal. Tiffs wasthe implementation of a promise madein the 1993 election campaign.

Following this announcement, theBroadcasting Services Amendment Bill1998 (’the Bill") was passed by the Houseof Representatives and introduced into theSenate on 2 July 1998. The Bill wasreferred to the Senate Environment,Recreation, Communications and theArts Legislation Committee forconsideration, The Committee received

submissions and held a public hearing inCanberra on 21 August 1998.

The Committee was due to report backto the Senate by 9 September 1998.However, at the time of writing the callingof the Federal election has created a moreuncertain environment. The Bill’s futuredepends on whether the incominggovernment chooses to restore the Bill.

THEPROPOSED SCHEME

The retransmission provisions of the Billrequire pay television operators to obtainthe permission of the ABC, SBS andcommercial broadcasters before beingable to retransmit their signals.Commercial broadcasting services mayonly be retransmitted within their licenceareas. Retraasmission outside licencearea requires the permission of the ABA.

The Government has also announced tluatit intends to establish a statutory licencoscheme requiring pay television operators

to compensate owners of underlyingcopyright material in the retrartsmittedbroadcast.

The scheme contains special provisionsfor self-help groups who retransmitservices for the purpose of obtaining orimproving reception in a community.These groups may retransmit national orcommercial broadcasting services witl~utthe permission of the broadcaster. Selfhelp groups are also exempt from makingpayments to the owners of copyright inunderlying material.

The Bill allows the ABA to specify thatparticular areas are "declared remoteareas". Retransmission is permittedwithin these areas without the permissionof the broadcaster. However, payment tounderlying rights holders would still berequired.

In metropolitan/ regional overlap areasfor commercial television licensees, theBill places a mandatory obligation on paytelevision operators to retransmit all

INSIDE THiS ISSI~[ ....

Retransmission revisited - the opposing views

Datacasting defined

Internet telephony update

Local number portability

Cryptography policy

New copyright laws

CAMLA ESSAY PRIZE DETAILS!

CONTENTS

RETRANSMISSION RIGHTS: THE FREE-TO-AIR BROADCASTERS’ VIEWBridget Godwin reports on the free-to-air broadcasters’ views on the Broadcasting Services Amendment Bill 1998.

CAMLA ESSAY PRIZE DETAILS

ASTRA’S VIEWS ON RETRANSMISSIONThis is an edited excerpt from the recent submission of ASTRA to the Senate Environment, Recreation, Communicationsand the Arts Legislation Committee by Tom Meekddge, former Chairman of ASTKA and CEO of Foxteh

DATACASTING DEFINED, OR "DATA IS DATA IS BITS IS BITS IS BITS"Holly Raiche analyses the new digital conversion legislation.

UPDATE ON INTER_NET TELEPHONYMichael Mucller and Claudine Tinellis look at the current slate of Interact telephony in Australia.

LOCAL NUMBER PORTABILITY: "YOU MAY EXPERIENCE A SHORT DEI~4Y... "David Stewart considers the technical and regulatory challenges surrounding local number portability and some long-termbenefits of intelligent network solutions.

CRYPTOGRAPHY POLICY: OVERDUE FOR REFORMGreg Taylor of Electronic Frontiers Australia, looks at the regulation and policy surrounding cryptography and highlightsthe problems with current local export restrictions.

NEW COPYRIGHT LAWSKaren Gettens reports on the latest amendments to the Copyright laws and also discusses the recognition of moral rightsin Australia.

television programs of a regionalcommercial television licensee if thatoperator is also retransmitting thetelevision programs of a metropolitancommercial television licensee whoselicence area includes the overlap area.

This requirement operates if the regionallicensee is related to the metropolitanlicensee and the regional licenseeconsents to the retransmission. If norelated regional licensee exists in theoverlap area, the subscription televisionlicensee must retransmit all consentingregional licensees in the overlap area.

WHY BROADCASTERS NEEDA RETRANSMISSION RIGHT

All national and commercial free to airtelevision broadcasters strongly supportthe proposal to give broadcasters the fightto control their signals.

The current situation is based on a longstanding and unintended anomaly inbroadcasting and copyright legislation,which allows pay television operators toretraasmit free to air television serviceswithout seeking the consent of the

original broadcaster. This is clearlycontrary to copyright and broadcastingprinciples. It enables pay televisionoperators to appropriate broadcasters’property with impunity.

Commercial broadcasters argue that paytelevision is a serious competitor tocommercial free to air services. Paytelevision operators are permitted to usethe services their competitors as part of acompetitive package. As is the case withother owners of proprietary andintellectual property fights, free to airbroadcasters argue fltat fl~eir righ~ shouldbe respected and properly remunerated.

At present, a broadcaster is unable tocontrol the quality or channel number ofthe retransmitted free to air service. Norcan a broadcaster insist that teletext andclosed captioning for the hearingimpaired bc included as part of the paytelevision package.

In some regional areas, pay television haschosen to transmit network or capital cityservices rather than the regional afl-diatefree to air service intended for the area,placing the affiliate’s commercialinterests at risk and disturbing the

delicate balance between capital city andregional services established over manyyea rs.

Free to air broadcasters are concerned thatin many cases, pay television operatorsroutinely remove external free to airaerials, locking subscribers out of free toair access if they end their pay televisionsubscription.

Many new generation services, such asdigital terrestrial television and associateddate, multiview and multichannelservices will be delivered free to air.Removal of aerials, combined with aninability to negotiate acceptableretransmission conditions, threatens theviabili b’ of these new services. They areexpensive to implement and should notbe able to be misappropriated andsubverted by direct commercialcompetitors.

Free to air broadcasters do not want Inprevent the retransmission of theirsignals. It is in their interests to ensurethat their services are received by as manyviewers as possible at the best possiblequantity, These cotnmercial and publicintercst considerations will ensure that

page 2 Communications Law Bulletin, Vo117 No 3 1998

both sides have an interest in reachingan acceptable agreement.

IMPROVEMENTSTO THE BILL

While supporting the overall thrust oftbelegislation, free to air broadcasters havesuggested a number of modifications tothe Bill. The major concerns raised byfree to air broadcasters were:

The Bill does not currently contain adefinition of ....definition is needed to clarify thatretransmission must be simultaneous,

unaltered and of the whole broadcastsignal. This is necessary to ensure thatpractices such as cherry picking orthe stripping of aclvertisements do not

It is expected that in most cases, theABA will determine existing remotecommercial television licence areasto be declared remote areas.BetransmisMon in remote areas raisesa number of issues. The object of theremote area provisions is to ensurethat remote area residents receive afu!l suite of broadcasting servicesusing one set of domestic receptionequipmenL

In most remote areas, free to air and paytelevision services are delivered bysatellite, usually on competing systems.This requires the consumer to purchasetwo different types of domestic receptionequipment. However, the Federation ofCommercial Television Stations (FACTS)argues that the government’s proposedscheme may have the unintendedconsequence of diminishing competitionbetween satellite service providers. Eachsatellite would be able to transmit anysignal they wish without consent,removing the incentive for satelliteproviders to compete to providecomprehensive packages of services. Thescheme may also result in retransmissionof signals outside service areas, given thenature of satellite distribution of signals.

The ABC and FACTS are of the view thatthe consent regime established for non-remote areas should apply equally toremote area broadcasters. In the absenceof a consent regime, they have proposedthat remote area retransmissions requirespecial provisions to ensure thatretransmission occurs at an appropriate

.quality and that signals are not able to bemtereepted outside licance areas. SBS hasalso raised a concern that self helpproviders in remote areas may bedisadvantaged, as they are not exemptfrom payments to underlying copyrightowners in the same way as self helpproviders in other areas. At the very least,.SBS was of the view that retransmissionin remote areas for commercial purposesshould require the consent of thebroadcaster.

Concerns have also been raised thatretransmission of commercialtelevision services outside licencearea is permitted with the consent ofthe ABA. Commercial televisioninterests argue that these decisionsshould also require the consent of thebroadcaster and that the ABA shouldbe required to take the objects of theBroadcasting Services Act and inparticular itsplanning provisions intoaccount. This would preventauthorisations to retransmitbeconsing de-facto planningdecisions.

Broadcasters have commented oncommencement and enforcementprovisions of the Bill. The governmenthas expressed an intention that theBill will not be proclaimed until theenactment of companion copyrightlegislation establishing a paymentscheme for underlying copyrightholders. As copyright legislation isunlikely to be a speedy process, thiscould leave broadcasters waiting anumber of years for theirretransmission rights to come intoforce. Broadcasters believe that thiswould be unfair, and have pressed forthe commencement of the Bill withinthree months of enactment.

A related concern is that the Bill containsno provisions enabling broadcasters totake action in relation to breaches of theretransmission regime. There appears tobe no sanction or remedy against paytelevision operators retransmitting inbreach of the legislation. This omissionclearly needs to be rectified. Rights areof little value if they cannot be enforced.

PAY TELEVISION CLAIMS

Pay television operators have vigorouslyopposed .the introduction of aretransmission right for free to air

broadcasters. They claim that free to airbroadcasters will prevent them fromretransmitting, that subscriber rotes willincrease, that consumers will beinconvenienced, forced to buy externalantennas and unable to switch betweenfree to air and pay services. They alsoargue that the provisions will restrict thedevelopment of the pay televisionindustry and that it is therefore anti-competitive.

Free to air broadcasters reject thesearguments. To refuse retransmission.would be quite contrary to the commercialinterests of broadcasters, who are tryingto reach the maximum number of viewersat the best possible quality. Subscriberrates are clearly entirely at the discretionoftbe pay television operators themselves,not determined by free-to-airbroadcasters.

At present, the inability of broadcastersto control their signals gives paytelevision an unfair competitiveadvantage because of pay television’sunfettered ability to trade on the properlyof others. Commercial and nationalbroadcasters have invested millions ofdollars in their services, in anenvironment which places far moreregulatory requirements on them than isthe case for pay television. Unlike paytelevision operators they have investedheavily in the Australian productionindustry. Commercial broadcasters payhuge licence fees to government whichpay televisions are not required to pay.

To argue that giving broadcasters aretransmission fight, a simple mechanismto protect the value of the creativity andinvestment which goes into producing adistinctive broadcasting service, is unfairto pay television is to ignore the realityof an environment which already givessignificant concessions to pay televisionoperators. It is also to ignore a principleso basic we teach it to our children - theproperty of one person should not betaken by another without the owner’spermission.

Bridget Goahvin is Corporate Counselwith SBS. The use of submissionsprepared by FACTS and the ABC inrelation to the Bill is gratefullyacknowledged

Communications Law Bulletin, Vo117 No 3 1998

Page 3

COMMUNICATIONS AND MEDIA LAW ASSOCIATIONINCORPORATED (CAMLA)

ESSAY PRIZE

The Communications and Media Law Association is holding an essay competition in 1998.

The purpose of the competition is -

¯ to encourage high quality work in communications and media law courses; and

¯ to improve links between those studying and practising in the area.

The prize will be given for -

a previously unpublished essay which is the original work of the author;

an essay completed by a student enrolled in an undergraduate or postgraduate course, possibly aspart of that course;

¯ an essay on a subject relating to communications or media law;

an essay of 1000-3000 words. The 3000 word limit (inclusive of all footnotes, annexures,attachments and bibliographies etc.) is not to be exceeded.

A prize of $1000 and a one year membership of CAMLA will be awarded to.the winner. The winningessay, edited in consultation with the author, will be published in the Communications Law Bulletin.

The winning entry, to be selected by a panel of experienced communications and media law practitioners,is likely to demonstrate original research, analysis or ideas. The panel will not necessarily be seekingdetailed works of scholarship.

The award will be made at the annual CAMLA Christmas function.

Please send three copies of the entry typed well-spaced on A4 paper. Only one essay per student may besubmitted. Entries will only be accepted by mail and must be received by 30 October 1998. The name,address, telephone/fax contacts and the tertiary institution and course in which the author is enrolledshould be included on a separate, detachable sheet. The author’s name should not appear on the pages ofthe essay.

Entries should be submitted to:

The Administrative SecretaryCommunications and Media Law AssociationPO Box 545GLEBE NSW 2037Australia

Entries must be received by Friday 30 October 1998.

Late entries will not be accepted.

ASTRA’s Views on Retransmission~’his is an edited excerpt from the recent submission of ASTRA to the Senate Environment,

Recreation, Communications and the Arts Legislation Committee by Tom Mockridge, formerChairman of ASTRA and CEO of Foxtel.

T he Australian SubscriptionTelevision and Radio Association(ASTRA) is the peak industry

body for subscription television andnarrowcast radio. ASTRA was formed inSeptember 1997 when industryassociations representing subscription(multichannel) TV and radio platforms,narruwcasters and program providerscame together to underpin and propel thenew era in competition and consumerchoice that these new services havebrought to broadcasting, communicationsand entertainment in this country.

Subscription broadcasting and open andsubscription narrowcasting services werenew categories of broadcasting servicesintroduced by the Broadcasting ServicesAct 1992 (Cth) ("BSA"). These services added to the mix of existingcategories of service, being the nationalbroadcasting services; commercialbroadcasting services (commercial TVand ~adio); and community broadcastingservices. Subscription (multichannel)television, the most prominent of thesubscription services, was first launched(satellite/MDS) in January 1995 withcable services launched in September andOctober 1995.

By the end of 1995 there were 85,000homes with 300,000 potential viewers bythe end of 1996 - 400,000 homes withapproximately one and half millionpeople. By the start of this year about750,000 homes were subscribing to payTV- about two and half million potentialviewers - a penetration rate of about 13percent of Australian homes.

This follows a 30 year moratorium beforepay TV was allowed to compete with thecommercial free-to-air terrestrial services.Once allowed in the original operatorswere required to use digital satellite andrestricted to only eight channels. Therewas an immediate requirement for newAustralian drama expenditure.Advertising was banned until 1 July 1997and there is still a limit on that advertisingrevenue. One of the major subscriberdrivers, sport, was nobbled by the anti-siphoning list. Now as well as a protectedmarket (with the decision having beenmade of no fourth commercial networkuntil the year 2006), the commercial

networks control the gateway to digitalterrestrial broadcasting.

However in three years, subscriptiontelevision has made a substantial impacton the way we experience entertainmentand information in the home in Australia.ASTRA members have made anenormous investment in relation tolieenee fees and capital costs to establishsubscription television, on-line andtelephony businesses in metropolitan,regional and remote markets andsubscription television has created anenormous number of jobs, investment,infrastructure and content.

Our membership includes the majorsubscription television operators as wellas more than twenty stand-alone channelsthat provide programming to theseplatforms. Other members includenarrowcast television and radio operatorssuch as racing TV and radio andinformation radio, and comlnunicationscompanies such as AAPT, OptusCommunications and Telstra.

Clearly we remain a long way short ofthe penetration rate in the world’s mostmature pay TV market in the US whereup to 70 per cent of homes are connectedto cable or satellite pay TV, but it isimpressive nonetheless in spite of therisks and costs involved with a rapidlychanging regulatory environment whichcontinues to put restrictions in the wayof the pay TV industry.

THE RETRANSMISSION BILL

These provisions are intended to amendthe retransmission provisions of the BSAto specifically address the relransmissionof commercial and national televisionbroadcasts by subscription televisionoperators.

Retransmission of free-to-air signals bysubscription television operators ispermitted under the current law. Forexample FOXTEL and Optus Visionretransmit (via cable) the national (ABCand SBS) and commercial televisionservices simultaneously and unalteredunder the current provisions of section212 of the BSA relating to televisionbroadcasting services within licence

areas. These channels arc free additionsto the suite of subscription channels andprovided as a service to subscribers.

The validity of the current law was testedin the courts when commercial televisionchallenged the cable operators’ right toretransmit under section 212. The 1996decision of the Full Court of the FederalCourt in Amalgamated TelevisionServices Pty Ltd and others v FoxtelDigital Cable Television Pry Ltd andanother confirmed that simultaneous andunaltered cable retransmission ofterrestrial television services is permittedwithin licence/coverage areas under theBSA and the Copyright Act.

The proposed legislation before theSenate makes ’illegal’ what subscriptiontelevision operators have been doinglegally for the past three years asconfirmed by the courts. Changinglegislation now unfairly disadvantagesexisting customers.

There are about 500,000 cablesubscription television subscribers. Theretransmission of free-to-air servicesarises at no cost to either broadcasters orunderlying rights holders; retransmissionincreases the reach of broadcasters andtherefore potential advertising revenue;and more importantly greatly benefitsconsumers not only in the conveniencewith which they can switch fromsubscription channels to free-to-air andvice versa but also in the improved signalquality of free-to-air reception and the factthey can remove unsightly aerials if theyso choose.

In retransmitting free-to-air signals, cableoperators have already addressed theinitial concerns of free-to-air operators byproviding each in its usual channelposition. The ABC is carried on channel2, the Seven network occupies channel7, the Nine network occupies channel 9,the Ten network is on channel 10 and SBSon channel 28.

In lobbying for these changes to thecurrent relransmission rules, COmmercialtelevision broadcasters have argued thatthey have a property right in theirbroadcast signal which they should havecontrol over with respect to retranmissionexcept in ’genuine self-help’ cases.

Communications Law Bulletin, Vo117 No 3 1998Page 5

ASTRA maintains that commercialtelevision broadcasters only have alimited right to broadcast by virtue oflicences which have been granted underthe BSA.

A subscription television operator, byretransraitting this signal, does notdecrease the value of this right. Becausethe value of the signal is dependent onthe number ofpaople who can receive thesignal, and because subscriptiontelevision can only increase the numberof people who reecive a signal within theliccncc area, it is more logical thatrcmmsmission increases the vahic of theoriginal broadcast rather than dccroasesthe value.

In addition commercial televisionbroadcasters arc compensated throughadvertising, not by the recipient of thebroadcast. If consumers paid fortelevision signal reception directly, thenthe argument by commercial televisionthat they arc unfairly ’uncompensated’might have some validity. Cablerctransmission improves the signalquality of reception and in turn increasestbe vahic of planed advertisements. Tbercis no nccd for pay TV operators tocompensate commercial televisionlicensees as they a~ already compensatedby advertisers.

The retransmission regime of the UnitedKingdom as it relates to copyright,reflects the no pay position advocated byAustralian cable operators. That is, thecopyright in a broadcast or any workincluded in the broadcast is not infringedby a cable retmnsmission that takes placein the licence area of the originalbmadeast.

This Bill contemplates complementaryamendments to the Copyright Act. Thefact that such proposed amendments havenot been released with this Bill raises itsown problems in terms of how the twoActs will operate together. Once again wearc IcR with an uncertain and incompleteregulatory framework. (’fhis was the easewith the digilal television conversionlegislation which provided a generalregulatory framework with much of theessential detail to bc determined insubordinate legislation).

It is assumed that changes to theCopyrightAct will see a new broad-basedtechnohigy-neutral communication rightto the public and pay TV operators willbe required to pay a licence fee tounderlying rights holders althoughwhether this will be a statutory licenceor subject to negotiation is unclear.

The proposed retransmission regimeincludes both a consent provision whichrequires subscription television operatorsto negotiate and reach agreement with allfree-to-air broadcasters ff they want toretransmit the signal and a limited mustcany provision in overlap areas (wheremetropolitan and regional licence areasoverlap, for example the Gold Coast)which imposes a mandatory obligationupon pay TV opemtora to retransmit theregional commercial television signal ifit is retransmitting a metropolitancommercial television signal. Howeverthis can only be done with the consent ofthe regional commercial televisionlicensee.

SPECIFIC CONCERNS

Under section 205N and 205V ofproposed Part 14B of the BSA, asubscription television broadcastinglicensee is required to reach agreementwith a commercial, community ornational broadcasting licensee. Thisrequirement rakes effect as soon as theamending ACt is proclaimed and does notprovide for a transitional period.

Pay TV operators currently providingretransmitted signals to consumers willhave to cease retransmission upon the Billcoming into force iftbey have not enteredinto agreements with the free-to-air.broadcasters at the time.

As long as parties are negotiating in goodfaith then those negotiations should beable to continue under a transitionalregime wilh no adverse affect toconsumers. ASTRA considers anappropriate transitional period to be 12months.

AMBIGUITY RE IMPACT OFPROPOSED AMENDMENTSTO THE COPYRIGHT ACT

It is unclear how the proposedamendments to the BSA will operate inrelation to the yet to be seen amendmentsto the Copyright Act. While there areassumptions frora the second readingspeech to this Bill on what the proposedcopyright amendments will cover (a newbroadly-based technology-neutralcommunication right and requirement tocompensate underlying rights holders),there is no indication of whether, inaddition to the compensation tounderlying rights holders, pay TVoperators will also be required to pay thefree-to-air operators any additional feesother than those agreed upon under theretransmission provisions. There is also

no indication of how the regime will beadministered and by whom.

The second reading speech implies thatthere will be a start/tory licence withrespect to underlying rights holders butdoes not expressly say so. A possiblesituation is that subscription televisionoperators would be required to pay:

a statutory licence fee to theunderlying rights holders* under theCopyright Act;

a liccnce fee to the free-to-airoperators under the Copyright Act;and

a fee agreed to between parties underthe BSA.

(*NB. free-to-air broadcasters will holdunderlying rights in some of the materialretransmitted, as such, under theseproposals, they will receive paymenttwice for the same material.)

The proposals assume that, in agreeingto allow a pay TV operator to rctransmitits broadcast, the free-to-air network isgranting a pay TV operator a copyrightlicence to transmit its service, howeverthe amendments only explicilly deal withbeing exempt from the regime prescribedby the BSA and does not refer to anypossible copyright breaches.

Subscription television operators couldfind themselves having to seek consentfrom the underlying rights holders, frmntwo broadcasters (metropolitan andregional) under both the BSA and theCopyright Act and seeking permissionfrom the Australian BroadcastingAuthority ("ABA") in terms retransmissions in declared remote areasor for providing particular programmingin regional areas which is substantiallythe same as programming on ametropolitan commercial televisionstation during particular times of the day.

MUST CARRY PROVISIONS:NO CONSIDERATION OF

CAPACITY TO CARRY

At present it is only viable for pay TVoperators to retransmit on cable.However, the must carry element withrespect to overlap areas will be a problemin terms of limited technical capacity.Section 205W of the proposed legislationdoes not take into account anyconsiderations of the technical capacityand capacity limitations of the different

Page 6 Communtcat(ons Law Butlettn, Vot 17 No 3 1998

delivery modes of subscription televisionwhether cable, Satellite or MDS (wirelesscable).

Subscription television systems do nothave unlimited channel capacity. Thereare restraints in terms of technicalcapacity and the channel nce~s oftbe payTV broadcasters take priority. There arelimited MDS channels available (11through to a maximum of 19 channels);satellite capacity is driven by cost pertransponder and is based on a nationalbeam, hence the cost becomes prohibitivein attempting to ’regianalise’ the signal;and cable capacity is limited by costeffectiveness.

MUST CARRY ANDSTILL MUST PAY

Section 205X of the proposed legislationprovides that pay TV operators mustcomply with the must carry provisions onsuch terms and conditions as are agreedbetween the related or unrelated regionalcommercial television broadcaster (orfailing agreement, as arbitrated). Thisleaves the pay TV operator in a situationwhere it will presumably have to pay toretransmit a broadcast which it iscompelled to carry. No other country inthe world has such a draconian impost.For example under the US regime, cableoperators do not have to pay theretransmitted free-to-air licensees whoelect must carry rather than the consentregime.

ASTRA welcomes the recognition of thedifficulties this may pose for pay TVoperators with provision of an arbitrationmechanism, albeit restricted to thisparticular circumstance.

NO ARBITRATIONMECHAHISM

ASTRA has long maintained that anyconsent regime should include provisionfor arbitration for circumstances where afree-to-air broadcaster and a pay TVoperator have failed to reach aretmnsmission consent agreement.

With no arbitration mechanism ASTRAviews this proposed legislation as

providing commercial broadcasters withunprecedented control over signaltransmission. While the Governmentseems to acknowledge some level ofcomfort from the free-to-air opomtors thatthey will not cextract exorbitant feesi,ASTRA has no such comfort especiallygiven their pt~,ious position on this issueand no legal requirement to ensure fairand reasonable negotiation.

As proposed, there are no proceduralrequirements in negotiating agreements,no time limitations and no disputeresolution procedures. ASTRA seeksprovision within the legislation to requirethe free-to-air operators "to make accessto their broadcasts available onreasonable terms and within reasonabletime of a request being made".

ASTRA impresses upon the Senate theimportance of including a mediation orarbitration mechanism in the legislation,otherwise all negotiating leverage will liein the hands of the commercial televisionbroadcasters. ASTRA believes theCopyright Tribunal is the mostappropriate arbitrator in thesecircumstances and such arbitrationshould recognise the inequality of thebargaining positions of the parties.

COMPLIANCE WITH THE BSABUT POTENTIAL BREACHES

OF COPYRIGHT

Further to the must carry element of theBill, ASTRA maintains there should alsobe corresponding provisions in theamended Copyright Act in which pay TVoperators obtain a statutory licence toretransmit the copyright material ofunderlying rights holders. If there is nosuch provision, an anomalous situationis created under which pay TV operatorsare compelled to carry the broadcastunder tbeBSA (despite scarcebroadbandor spectrum capacity) and must pay a feeunder the Copyright Act or risk an actionfor infringement.

Another failure to cress reference withthe proposed amendments to theCopyright Act is the fact that the onlyinstance where the Government sees apublic interest in retransmission is indeclared remote areas. The Bill does not

address the copyright implications of payTV operators retransmitting a free-to-airsignal in a remote area. In suchcircumstances pay TV operators may fredthemselves complying with the regulatoryregime of the BSA but be in breach ofthe copyright of the underlying rightsholders under the Copyright Act.

IMPACT OFDIGITAL TELEVISION

It seems incongruous to introduce a newretransmission regime specific toanalogue transmission when Parliamenthas just passed the digital televisionconversion legislation to provide for theintroduction of digital terrestrialtelevision by 2001. Especially when thatsame digital legislation already providesfor a review of the retransmission rulesto consider what amendments would beneeded to take account of retransmissionof digital signals (inchiding capacity toretransmit HDTV, enhanced programmingand possible multichannels).

This Bill is silent as to the implicationsof digital television. The digital regimewill see commercial (metropolitan andregional) and national televisionbroadcasters required to transmit theirservices in digital format and during thesimulcast period, these services will betransmitted in both analogue and digitalformat.

This situation is only now being tackledby the Federal CommunicationsCommission (FCC) in the US, whichbelieves that the most difficult carriageissues arise during the transition periodwhen the digital and analogue signals areoperating simultaneously. (see attachedpress clipping at Appendix C).

Given the unknowns, why rush tointroduce a regime which has such alimited life?

Tom Mockridge is the Chief ExecutiveOfficer of FOXTEL and was Chairmanof ASTRA at the date of thls submission.

CommunlcaUon~ Law BulJefin, Yo117 No 3 1998 Pa~ 7

Datacasting Defined, or"Data is data is bits is bits is bitsm

~Holly Raiohe analyses the new digital conversion legislation

"r~ataoasting is a new term in the| ~lexicon of broadcasting. For the

-,t.~ Current free to air televisionbroadcasters, datacasting could be anadditional Wvenue raising service theydeliver when broadcasting in digitalmode, For pay television licensees andprovider~ of on-line set.ices, it representspotential competition to services theyprovide or plan to provide. ForParliamentarians debating the term, itrepresented a source of both technologioaland semantic confusion.

Datacasting services are provided for inthe recent legislative package2 coveringthe migration of terrestrial television fromanalog to digital transmission. The mainprovisions of the legislative packageinclude, relevantly:

¯ plans developed by the ABA for theconversion from analog to digitaltransmission for existing commercialand national broadcasters, inaccordance with listed policyobjectives;~

implementation plans for individualbroadcasters which are either drawnup by commereial broadcasters forapproval by the ABA or by nationalbroadcasters for approval by theMinister;~

a simulcast period of eight yearn~

during which:¯ the ACA will allocate an

additional 7 Megahertz channel,free of charge, to the free to airtelevision broadcasters toprovide digital terrestrialtelevision se~wices;*

¯ the free to air broadcasters mustnot broadcast programs in digitalmode unless the program is alsobroadcast in analog mode;7

¯ the free to airbroadcasters, whenbroadcasting in digital mode,must meet specified goals orlargets on the extent to whichprograms are transmitted inaccordance with high definitionstandards which will be set byregulation;*

¯ at the end of the simulcast period,the return by free to air broadcastersof one of their two 7 Mhz transmitter

licences (used for analog or digitalbroadcasting);9

¯ a further moratorium on theallocation of any new commercialtelevision licences until after 31December 2006;~°

¯ two series of Ministerial reviews, oneto be completed by 1 January 2000and one to be completed before 31December 2005."

Datacasting comes into this legislativeframework in two ways.

The transmitter licences which the ACAmust issue to the free to air broadcastersfor digital transmission must authorisethe transmission of dataoasring as wellas broadcasting services. ~: This provisionis legislative recogrfition that, even whenbroadcasting a high definition televisionprogram, there may he spare capacity inthe digital ’channel’ for the transmissionof other matter - datacasting. Indeed,when broadcasting a standard digitaltelevision signal, there will be enoughspare capacity for additional full programstreams)~ While broadcasters will not bepermitted to provide additionalprogramming streams during thesimulcast period, the legislation willpermit broadcaster use of spare capacityfor datacasting, or presumably thesublease of spare capacity to others fordatacasting purposes. ~’

The legislation also provides fordatacasting by organisations other thanfree to air broadcasters using broadcastingservice bands capacity not part of thedigital ’channels’ allocated to the currentbroadcasters. This was the policyresponse to very strong protests made byASTRA and other information providersincluding Fairfax, News and the InternetIndust~ Association that the broadcasterswere being given free transmissioncapacity - capacity which anyone elsewould have to purchase in themarketplace)5

Evidence given to the Senate Committeesuggested there is some capacity in tilebroadcasting services bands which mightbe available for allocation?6 Therefore,one of the tasks of the ABA in itsplanning is to identify such capacitywhich migbt be allocated for dataoasting

- capacity which must not be allocated tothe existing broadcasters." Amendmentsto the Radiocommunications Acttherefore also authorise the ACA to issuetransmitter licences for the transmissionof datacasting services to non-broadcasters..8

All of which begs the critical question:what is datacasting?

DEFINITION OFDATACASTING

Tile components of the datacastingdefinition are that:

it is a service - other than abroadcasting service;

it delivers information (whether inthe form of data, text, speech, imagesor in any other form) to a personhaving equipment appropriate forreceiving that information;

delivery of the service uses thebroadcasting services bands, t~

In ether words, services wMch are definedas not broadcasting services are, bydefinition, potentially datacastingservices - as long as they are deliveredusing the broadcasting services bands.

DEFINITION OFBROADCASTING

Tile definition of ’broadcasting service’is:

a service that delivers televisionprograms or radio programs toperson having equipment appropriatefor receiving that semice, whether thedelivery uses the radio frequencyspectrum, cable, optical fibre,satellite or any other means or acombination of those means.

It then excludes from the definitionservices which are:

a service (including a teletext service)that provides no more than data, orno more than text (with or withoutassociated still images)i or

¯ a service that makes programsavailable on demand on a point-to-point basis, including a dial upservice; or

page 8 Communications Law Bulletin, Vo117 No 3 1998

a service or class of services that theMinister determines, by notice in theGazette, not to fall within thisdefinition, zo

And ’program" is defined to be either’matter the primary purpose nf which isto entertain, to educate or to inform anaudience’ or advertising or sponsorshipmatter.2~

PROBLEMS WITH THEDEFINITIONS

The definitions of broadcasting servicesand datacasting services do not sit welltogether.

The exceptions to the definition ofbroadcasting service would confine non-broadcast services (therefore, potentiallydatacast services) to those which provideno more than data or no more than text(with or without still images). Yet thedatacasting definition assumes suchservices can be in the form of data, text,speech, images or in any other form.Those words suggest a far broaderconcept of datacasting than the’exception" to the definition ofbroadcasting service permits.

Further, the other stated type of non-broadcast service is a service that makesprograms available on demand on apoint-to-point basis, including a dial upservice. Yet datacast services are definedas services delivered by broadcastingservice bands - not generally consideredas delivering point-to-point services.

PARLIAMENTARIANCONFUSION

The Parliamentary debates and SenateCommittee hearings showcase theconfusion all participants displayed onthe exact boundaries of what is or is nota datacast service.

One Member of Parliament thoughtdatacasting charges would apply to’advanced information services linked toprogramming’.22 Another thought he wasdefining datacasting in calling it a serviceby which one can watch football, but ’usethe computer icon control’ to ’come upwith the player’s home page" and then’buy boots from Roeca’.~

One Senate Committee Member said adatacasting service ’helps deliver suchthings as home banking, home shoppingand a whole range of computing activities- services that are normally delivered ona computer through the Internet....’24

Another Committee Member said that thebroadcasters’ view of datacasting is that

’they would be moving into some formof broadcasting. ’~

Evidence before the Committee suggesteda wider definition. The Committee Reportnoted particularly submissions from theInternet Industry Association and JohnFaiffax Holdings Limited which defineddatacasting as anything that can carrendybe done on the Internet, And thoseservices go way beyond text and data, toinclude high quality video and audio.26

As ABA General Manager Giles Tannertold the Senate Committee, datacasting’is really any data - we are only talkingabout noughts and ones - other than datathat can be reassembled as a broadcastingservice’.~

As the Senate Committee Reportacknowledged, in the face of suchconfusion, there are mechanisms withinthe legislation to clarify what datacastingdoes or does not mean.

Und.er the BSA definition of broadcastingserwces, the Minister has the power tofurther define a service or services whichfall outside of the definition ofbroadcasting services - and thereforeinside the definition of what are possibledatacasting services.2* Further, one of the

Ministerial reviews to be held before 1January 2000 will examine whether anyamendments to Commonwealthlegislation should be made ’to deal withthe scope of the services that arecategorised us datacasting services’.~

The structure of this legislation allowstime for both mechanisms to be fullycanvassed.

Senate opposition members, in debates onthe legislation, voiced their concern at thevery short time in which legislation ofsuch importance was being debated. Asa result of Senate amendments, therefore,the only provisions of the Act that canproceed are those relating to thedevelopment of conversion andimplementation plans. Other parts of theAct await the outcome of the MinisterialReviews to be conducted by the year 2000and approval of both Houses ofParliament. 3o

For example, Part 4 of the Act providesfor regulations which set ’goals andtargets’ for HDTV broadcasting, setcaptioning standards, determine technicalstandards relating to transmission indigital mode, and set datacastingstandards. However, that Part has noeffect until a day fixed by Proclamation,xvhich cannot be made except by a

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Communications Law Bulletin, Vo117 No 3 1998Page 9

resolution of both Houses of Parliamentand not before a copy of a report on therelevant review has been laid before eachHoase of Parliament.~

Further, while amendments to theRadiocommunications Act require theACA to issue transmitter licences tocommercial and national televisionbroadcasters for both broadcasting anddatacasting purposes, those amendmentshave no effect until a date fixed byProclamation, which again cannot bemade except by a resolution of bothHouses of Parliament and not before acopy of a report on the relevant reviewhas been laid before each House ofParliament.~a

Similarly, lhe ACA cannot allocatetransmitter liccnces authorising thetransmission of datacasting services tonon-broadcasters until a Proclamationhas been made at~er a resolution of bethHouses and after the tabling in bothHouses of the result of the review reporL~

THE DATACASTI NGCHARGE

One final issue on datacasting: theimposition of a datacasting charge.

Again, protests were made that the freeto airs would be given capacity to transmitnot only a digital television programbeing broadcast in analog mode, but alsoto use any spare capacity to gainadditional revenue through the provisionof subscription services, the provision ofinformation services from whichadditional advertising revenue could beearned, or to sublease the capacity toanother for profit.

The policy response was twofold. Thereis a blanket prohibition on the free to airbroadcasters providing any other categoryof broadcasting service with theirtransmission capacity)4 There will alsobe a "Datacasting Charge’ if the ’digital’tmnsmirter licence is used to providedatacasting serviees)~

At present, there is no guidance as to thebasis on which a datacharge will belevied. Will, for example, the chargerelate to the actual capacity used fortransmission of datacast services, or willit relate to the ~venue gained from theprovision of capacity or services?

The Digital Act does allow the ACA todetermine principles upon which thedatacast charge will be levied. ~ However,when those principles arc set, and how,has not yet been determined.

CIoarly those principles must spell out thebasis for a charge. They should alsoconsider whether exemptions from the

charge should be made for the provisionof some services. For example, if the~ational broadcasters provide datacastservices which are witlfin their respectiveCharters and from which they derive norevenue, there is an argument that theyare doing no more fl~an providing servicesto the public for which they are fundedand should be exempt from paying acharge. Further, all broadcasters will besubject to requirements to providecaptioning for the hearing impaired.While captioning would fit within thedefinition of datacasting, there must bean argument that broadcasters should beexempt fi’om paying a charge for a servicewhich they are required to provide underlegislation and from which they deriveno revenue.

Industry and the Government have atleast a yoar to complete the year 2000reviews, not only on the issues

surroanding datacasting, but on the largerissues it raises on the convergencebetween serviees we used to think of asbreadcasting or telecommunications. Theshort answer to the reviews may havebeen provided in reply to a challengeabout confusing broadcasting andtelecommunications issues: ’data is datais bits is bit is bits’.)7

Holly Raiche is a law lecturer at theUniversity of Ne~v South Wales

1 Quote by Bruce Meagher, Acting DirectorGovernment and Public Affairs, OptusCommunications, in evidence before the SenateEnvironment, Recreation, Communications andthe Ads Legislation Committee’s Inquiry into theTelevision Broadcasting SePcices (D~gitalConversion) Bill 1998 and the DatacastingCharge Impos~on B~11998, (Senate Inquiry) 1 June 1998.2 Television Broadcasting Services (DigitalConversion) Act 1998 (Digital Conversion Act)and the Datacasting Charge (Imposition) Act1998, which passed through Parliament in Julyand have received Royal Assent. The DigitalConversion Act amends both the BroadcastingServices Act 1992 (BSA) and theRadiocommunications Act 1992 (RA).3 BSA, Schedule 4, Clauses 6 and 194 BSA Schedule 4, Clauses 9 and 205 For oommercJsl broadcasters, under the BSA,Schedule 4, Clause 6(3)(c) the simulcast periodwill begin on 1 January 2001 in mebopolitan areasand no tater then 1 January 2~X)4in regional areas.Provision may also be made for a s~mulcast berindin remote areas for commercial broadcastersunder Clause 6(7). Similar provisions apply national broadcasters under Clause 19(3)(c) 19(7).6 BSA, Schedule 4, Clause 8(1) for commercialbroadcasters and Clause 23 for nationalBroadcasters.7 BSA, Schedule 2, Clause 7(1)(m) and Clause35(1 ). However, reviews required to be held beforef January 2000 may allow both commercial andnational broadcasters to provide programmingwhich is ’incidenta~ and directi’/ linked’ to theanalog programming, and may a~so allow nationalbroadcastem to use mu~t!.<:hannal capacity. BSA,Schedule 4, Clause 59(de-de).

8 BSA Schedule 4, Clause 37(1)g B SA Schedule 4, Clauses 6(3l(h), 8(4-6), and 23(4-6)10 BSA, Section 28 (as amended).11 BSA Schedule 4, Clauses 59-60.12 RA, Sections lOOA(t), 1008(2), 1{T2(3) I02A(3).13 See Parliamentary Library, Bills Digest No. 1781997.8, Tdevlsion Broadcasting Se~’ices (DigitatConversion) Bill 1998, pp 1-2.14 Ot~lectNes for the conversion sobeme for bothcommercial and national broadcasters includeprovision for the use of ’spare transmissioncapacity’ on digital channels for transmission ofdatacasting services. BSA, Schedule 4, Clauses6(3)(k) and 19(3)(k). The legislation suggests,however, that some additional programming willbe permitted. Reviews required to be held before1 January 2000 may allow beth commercial andnational broadcasters to provide programmingwhich is ’incidental and directly linked’ to theanalog programming, and may also allow nationalbroadcasters to use multi-channel capacity. BSA,Schedule 4, Clause 5915 Submissions to the Senate Environment,Recreation, Communication and the ArtsLegislatton Committee, May 1998, from theAustralian Subscription Television and RadioAssociation, Attachment 6: Principles for DTTB,- a summary of ASTRA’s position and reasons,p. 5, Submission from News Limited, ppfrom John Fairfax Holdings Limited, pp 2-3, fromInternet Industry Association, p. 5.16 ABA General Manager Giles Tanner, inevidence before the Senate Inquiry hearing on 1June t~gB.17 BSA Section 34(3) allows the ABA determine that a part or parts of the broadcastingservices band spectrum is or are available forallocation for the transmission of datacasting

18 RA, Section 13lAD.19 BSA Schedule 4, Clause 2. The Ex~acatoryMemorandum Tele vision Broadcasang Services(Digital Conversion) Bi~ 1999, Clause 2, p. 25 "adds nothing to the definition.20 BSA Section 6.21 BSA Section 6.22 Mr. 8illson, Member for Ounkley in House ofReprasentafwes debate on the legislatiun for 3June 1998.23 Member re/Hedh Sydney Mr. Hockeyin Houseof Representatives debate on the legislation for 3June 1998.24 Senate adjournment debate on the legislationfor 1 April 199825 Senator Tiemey (HSW) in Senate Inquirydebate on 26 June 1998.26 Senator Schacht, in Senate StandingCommittee on Environment, Recreation,Communications and the Arts LegislationCommittee, Television Broadcasting Services(Digital Conversion) Bill 1998 and DatacasO~gCharge (imposition) Bill 1998, June, 1998,Paragraph 4.7 to 4.10.27 ABA General Manager Giles Tanner, inevidence before the Senate Inquiry, on 1 June1998.28 BSA Section 629 BSA Schedule 4, Clause 59(dd)30 Listed in tSSA Schedule 4, Ckause 59.31 BSA Schedule 4, Clause 41A.32 RA, Sections 100A(1A), 100b(2A), 102(3A)33 RA Section 131AD(2)34 BSA Schedule, 2, Clause 7(1)(p) Schedule 4, Clause 36(1).35 Oatecast~g Charge (Imposition) Act 1998,Section 6.36 BSA Schedule 4, Clause 53.37 See fn 1.

Page 10 Communications Law Bulletin, Vo117 No 3 1998

Update on Internet TelephonyMichael Mueller and Claudine Tinellis look at the current state of Internet telephony |a Australia

Zwhe ability to make telephone callsover the Internet is a phenomenon

hich has sparked worldwideinterest and spawned huge industrygrowth in the last two years. Internettelephony is forecast to capture asignificant portion of the long-distanceand international call market by the turnof the century.

Continual improvements in technologyare expected to overcome the technicalshortcomings which are still inhibitingthe widespread adoption of thetechnology, These improvements.coupled with significantly cheaper rates,may well see more people turn away fromstandard telephony, thereby reducingtraditional revenue.

This paper examines the nature ofInternet telephony, the base technology,its growth, regulation and theimplications for thc long-distance callmarket. Products currently available inAustralia will also be discussed.

WHAT IS INTERNETTELEPHONY?

Internet telephony refers to the use of theInternet to make telephone calls.Although limited at one time In PC-to-PC communication, it now refers to thefollowing five applications:

(i) voice mail or email with sound a non real-time audiocommunication where one personsends a message to anotherperson;

(it) fax - a near real-timecommunication between twousers which stores and forwardsdata;

(iii) voice telephouy - real-time audiocommunication betwecn at leasttwo users;

(iv) desktop video conferencing - real-time audio and visualcommunication between at leasttwo users; and

(v) application and documentsharing - sharing of softwareapplications and/or documents, inreal-time, between at least two

Voice telephony over the Internet, inparticular, has developed in threedirections:

(i) PC-to-PC (communicating onlinethrough your PC);

(it) PC-to-phone (making andreceiving calls while cmmected tothe Internat); and

(iii) phone-to-phone (a call is madeand received using the normaltelephone handset).

IP TELEPHONY GATEWAYS

lnternet telephony gateways have enabledInternet telephony to extend beyond PC-to-PC communications. Gateways operateto bridge different networks. So, in thecase of the lnternet, gateways bridge thePublic Switched Telephone Network("PSTN") and the lnternet to facilitatecommunication between them. Moreparticularly, gateways facilitate voiceconversations between users withtelephones without needing computer orlnternet access.

Calls made using gateways are carriedover the local PSTN network to thenearest gateway server location. Thegateway then extends the call to thedestination local PSTN (the functionnormally performed bytelecommunications companies("telcos"). The gateways operate digitise and compress tile voice or faxsignal for transmission over the LocalArea Net~vork ("LAN") and then over theInternet to the destination gateway.

Consequently, gateways have enabledcommunications involving voice mail,fax and voice telephony to be carried overthe Internet despite that thecommunications may originate from andterminate to different devices includingtelephones, fax machines or PC’s.

CIRCUIT SWITCHED VSPACKET SWITCHED

Interact telephony differs from tiletraditional method of voice telephony inthat it is a "packet switched" network asopposed to a "circuit switched" network.This means that traditional voice

telephony via the PSTN transmits datathrough a circuit from the user’s handsetto the felon’s s’attch which is then, in turntransmitted to the receiver’s handset

Internet telephony, on the other hand,divides the data into short packets whicheach contain the destination address ofthe data. Each packet is transmittedthrough intermediate nodes (routera which direct the packets towards theirdestination) where they are briefly storedbefore being transmitted to another node.The structure of the packets is defined bythe lnternat Protocol CII’"), and therooting and transmission of the packetsis controlled by the Transmission ControlProtocol CTCP").

Depending upon the traffic over theInternet at any one time, each packet mayfollow a different route to the destinationaddress in order the achieve the mostefficient transmission. The packets arereassembled into the original messageonce they have all reached the destinationaddress.

RELIABILITY AND QUALITY

In circumstances where traffic conditionson the lnteroet are congested, touters candrop packets resulting in delayedreception of the data. Packet loss is anongoing problem with lnternet lelephonyas Internet usage increases. Packet lossresults in clipped speech. As large packetsof data are used, the loss of even onepacket has an impact on the intelligibilityof the transmission.

Clearly, for lnternet telephony to beeffective, it must be subject toimperceptible levels of delay and qualityreduction, with beth parties able to speakand be heard simultaneously. The realproblem here is that IP was designed fordata files and can tolerate delays, lostpackets and rot ransmissions. Hence whileInternet telephony uses an IP-basednel~vork, its quality will remain relativelypoor.

However, improvements in the quality ofInternet telephony are continuallyemerging. The enormous differencebetween bandwidth pricing for voice vis-a-vis data is too large an arbitrageopportunity for technological problemsnot to be overcome. The most significant

C0mmunl¢aUons Law Bulletin, Vo117 No 3 1998 Page 11

improvement came about through theintroduction of gateways. In addition toproviding the cOnvenience of being ableto use the telephone handset to make thecall over the Internet (ie ease ofConnectivity), gateways also improve thequality of the transmission by providingsilence and background noisesuppression, echo cancellation andforward error cOrrections.

Improvement in voice quality throughcodec technology, better compressiontechniques and PC sound cards enablingtwo-way simultaneous calls are factorsprogressively making Interoet telephonya competitive alternative to the PSTN. Atbest, at the moment, the quality of phonecalls over the Imernet is only as good asthat offered by mobile telephones.

Fiually, to be effective, Interoet telephonywill need to be able to locate and identifycustomers. Whereas traditional telephonyassigns numbers to locations orcustomers, IP networks do not. Thispresents problems for online and otherdirectory assistance.

ESTABLISHING INTRA-OPERABILITY STANDARDS

One difficulty preventing Internettelephony from becoming a realalternative to the PSTN is the currentincompatibility of Iaternet telephnnyproducts. Development and adoption ofstandards is the key to ensuringinteroperability between the products.

Progress is evident in Netscape’s supportof H.323, the telephony and videoconferencing standard that Microsoft andIntel have promoted as an Internettelephony standard. The development ofH.323 goes some way to facilitatinginteroperability of Internet telephonyproducts. H.323 is a framework ofstandards defining how voice, data andvideo will be transported over theInternet. In addition, the Real-TimeProtocol ("RTP") and the Real-TimeControl Protocol ("RTCP") form part this overall frmnework and define howdelay-sensitive voice and video data willbe given special priority - ensuring real-time communications.

IMPLICATIONS OF IPTELEPHONY

The major implication of Internettelephony is the cOmpetition it poses totelcos in the long-distance call market.Users can make long distance phone calls

via the Internet for the price of connectionto the Interoet Service Provider’s (or"ISP’s’) network.

Intcrnet telephony allows the placementofvoiec telephone calls which bypass partor all of the PSTN. So, in the case of long-distance or international telephone calls,users of Intcrnct telephony will only paythe fcc for Interact access which may wellbe fixed monttdy fee. This pricing regimewill apply irrespective of the duration anddestination of the call. This maysignificantly affect the revenue telcosgenerate from the long-distance callmarket (a major source of their revenue).

The impact of Internet telephony on thelong distance call market is evident inthe reduction of international tariffs byas much as 90%. Examples of the tariffsoffered by Internet telephony serviceproviders are: 25 cents per minute to theUS from Tokyo and Osaka; 24 cents perminute from Paraguay to the US; 10-20cents per minute for global calling fromItaly and South Korea; .07 cents perminute for a call to any point withinAustralia (in addition to a 25 cent accesscharge); and 35 cents per minute fromany point in Australia to the UK, USAand New Zealand (in addition to a 25 centaccess charge).

In Australia, Internet telephony chargescompared with the charges of telcosTelstm and Optus, in 1997, are as follows:a 15 minute call from Sydney toMelbourne during business hours - $1.25over the Internet compared with $4.21 forTelstra and $4.00 for Optus; and a 15minute call from Sydney to the US overthe Internet - $5.50 compared with$19.32 for Telstm and $17.97 for Optus.

IMPLICATIONS FOR THECORPORATE SECTOR

Corporations can jump onto the Internettelephony bandwagon by utilising theirown networks (intranets) to bypass thePSTN. In so doing, some US companieshave reported savings of 80% off theirtelecommunications bills.

IMPLICATIONS FORTHE PSTN

Not only does the emergence of Intemettelephony threaten to erode revenuesderived from long-distance phone calls,but it also potentially undermines theexisting infrastructure. By allowing end-users to bypass the PSTN partially ortotally, lntemet telephony may remove

incentives to upgrade networks and investin new infrastructure.

In addition, ever-increasing Internetusage is resulting in lengthy local calls,causing significant congestion of thePSTN.

IMPLICATIONS FORINTERNATIONAL

ACCOUNTING RATES

By providing a mechanism to avoid usingthe PSTN, it is said that, at aninternational level, Internet telephonymay also provide a method of evadinginternational accounting rates forinterconnection with the networks offoreign carriers.

GROWTH IN INTERNETTELEPHONY INDUSTRY

Two years ago, ]n/ernet telephony was alittle known ’toy’ used only by Internethobbyists. Since then the industry hasseen phenomenal growth - and thatgrowth is set to continue.

Frost & Sullivan, an internationalmarketing consulting firm, published astudy in 1997 indicating that software andhardware manufacturers will earn US$1.89 billion in Internet telephonyrevenues worldwide by the end of 2001.

Between 1995 and 1996, the industry sawa 997% growth. In 1995, there was onlyone company selling Internet voicesoftware. However, by the middle of 1997,there were at least 38.

A British report in 1997 predicted that15% of all voice calls would be made viathe Internet by 2000. While a US reportvalued 1997 sales of Intemet telephonyproducts at US$80 million. In addition,the market’s worth is estimated to reachUS$500 million by 1999.

Another US study published in 1997foreshadowed that Interoet telephony willsteadily evolve into a reliable and broadlyadopted technology for three reasons:

quality will quickly approachacceptability;

the economics are compelling; and

huge markets are ripe for poaching.

The report concluded that US carriers willlose more than $3 billion to Internettelephony in 2004. Out of this, Consumers

Page 12

Communications Law Bulletin, Vo117 No 3 1998

and businesses will spend nearly $2~illion on Internet telephony services andequipment (about 4% of the total long-distance calls) and save more than $1billion.

COST SAVINGS:DRIVING GROWTH IN

INTERNET TELEPHONY

The economics of Internet telephony areindeed veo’ compelling. One can squeezebetween five and ten voice calls over thesame bandwidth as compared totraditional, ci~-uit switched voice, and aneven a greater number of fax sessions.The cost savings achieved by the use ofInternet telephony derive from thefollowing:

Simple arbitrage

ISP’s lease high-capacity lines at lowrates and provide lnternet telephonyat prices which are lower than thoseavailable from traditional voicecarriers to end-users. The savingspresented to ISP’s by this process issimilar to that provided to longdistance resellers using traditionalPSTN technology and leasing highcapacity lines at T-I and T-3 rateswhich are lower than purchasinglines separately. The opportunity forsavings exists because the market forhigh capacity lines is competitive (asthere is an oversupply of capacitywhich, therefore, increases buyerpower), and the market for singlelines is not.

Benefits of advances in technology

The technology which Internettelephony capitalises on enables realcost savings as compared withstandard telephony. Digitalcompression and packet switchingreduces bandwidth consumption andallows other services to use thenetwork at the same time. The abilityto functionally integrate voice, dataand fax over a single link will creategreater efficiencies in the use ofaccess bandwidth.

Regulatory regime imposingobligations on telcos but not ISPs

For example, ISP’s are not subject tothe Universal Service Obligation("USO"). The situation is similar the United States where ISPs are freeof the local access fee and Internettelephony providers generally are not

required to contribute to theUniversal Service Fund. Theregulatory impost on ISPs vis-a-vistelecos in Australia is discussedbelow.

FLEXIBILITY OFINTERNET TELEPHONY

Apart from cost savings, using theInternet to cany voice calls gives telcesgreater flexibility in routing calls. Forexample, Telstra’s voica-internet gateway(yet to be released) allows twosimultaneous phone calls - one data, onevoice - to be routed over the one domesticphone line. The same gateway could be-used to integrate the phone system andthe worldwide web, so that a user couldplace a voice call to a company simplyby clicking on a button on the company’sweb-page.

In the future it is arguable that the furthergrowth and widespread adoption of theIntcrnet telephony will be driven moreby its inherent flexibility than the costsavings it offers over traditionaltechnologies. This is particularly so giventlmt charges for more traditional telecomsservices are closing the gap on voice-on-the-net charges. Indeed, Pulver.cem’s MrGeoff Pulver and MCI’s senior vice-president of data architecture Mr VintonCerf argue that it will be the greaterflexibility of services and not price, thatdetermines the success of Internettelephony.

AUSTRALIANTELECOMMUNICATIONS

REGULATION AND IPTELEPHONY

An ISP providing Internet telephony willbe a carriage service provider within themeaning of section 87 of theTelecommunications Act 1997 (Cth) (the"Act").

In addition, such ISPs will be eligiblecarriage service providers within themeaning of section 245 of the AcL as theysupply "a carriage seoAce that enablesend-users to access the Internet"(paragraph 245(a)(iii)). Paragraph245(a)(i) is probably not applicable as enquiries ~vith the TelecommunicationsIndustry Ombudsman ("TIO") indicatethat the provision of Internet telephonyis not considered to be a "standardtelephone service" within the meaning ofthe Act.

TELECOMMUNICATIONSINDUSTRY OMBUDSMAN

As eligible service providers, ISPs mustenter into the TIO scheme establishedunder Part 10 of the Act: section 246(1).The TIO scheme enables the Ombudsmanto investigate, make determinations andgive directions relating to complaintsabout carriage services by end-users ofthose services eg. a complaint aboutbilling or the manner of charging for thesupply of carriage services.

UNIVERSAL SERVICEOBLIGATION

Carriage service providers, unlikecarriers, arc not subject to the USO.Consequently, carriage se~wice providersare not required to contribute to the netuniversal service cost (a contribution tofunding of losses incurred in fulfilling theUSO in any financial year). This is oneof the reasons why Internet telephony canbe a more cost effective alternative totraditional voice telephony.

INDUSTRYDEVELOPMENT PLANS

Unlike carriers, carriage service providersare not required to prepare an IndustryDevelopment Plan and then comply withthat plan in relation to their R&Dactivities, in addition to the specifiedreporting and consulting obligations (seePart 2 of Schedule I to the Act).

INTERCEPTION CAPABILITYREQUIREMENTS

At this stage, only carriers are requiredto prepare and lodge an annualinterception capability plan with theAustralian Communications Authorityand the agency coordinator - a relativelyburdensome obligation. No carriageservice providers have yet beennominated by the Attorney-General undersubsection 331(3) of the Act.

SPECIFIC REGULATION

Internet telephony may raise issues ofpricing regulation in the future. Debatewithin the US context suggests that accesscharges will provide a subject for debateand, in turn, pressure for regulation inAustralia.

Some people are calling for the USFederal Communications Commission to

Communications Law Bulletin, Vo117 No 3 1998 Pa~e 13

take a lead in developing roles for Interacttelephony providers worldwide. Theintention here is to prevent the emergenceof a myriad of country-specific Internettelephony regulations which is alreadyoccurring in the Czech Republic, Icelandand the European Commission. At themoment in Australia there are noregulations relating specifically toInternct telephony.

INTERNET TELEPHONYSERVICES IN AUSTRALIA

There are already a variety of serviceofferings on the Australian market whichmake use of Internet telephony¯

In early 1997, ISP OzEmail launchedwhat it said was the first commercialservice in the world to provide Interacttelephony using a standard telephone.The product is OzEmail Phone and it canbe used to make long distance phone callsbetween most Australian cities, to NewZealand, the United States and Britain.OzEmail plans to offera domestic servicein the US this year, in addition to offeringservices throughout Europe, Japan andHang Kong. OzEmail’s Internet-basedpro-paid card costs 35 cents a minute toany of its 70 international destinations¯

In April 1997, Sydney-based ISPKnowledge by Design Pry Ltd became thefirst ISP to offer handset-to-handsetphone calls over the Internet betweenSydney and Hong Kong.

Australian company, Dynamic Bell, alsooffers an Internet telephony product -Net2Phone. This product allowscomputer to handset long-distance andinternational calls over the Internet.Dynamic Bell claims to offer savings ofup to 85% off international call rates¯Net2Phone uses a US central telephoneswitch which means that rotes are notdependant on the country of origin.Effectively all calls originate from theUSA. Some of the rotes are as follows:Canada - US$0.13 per minute; UK -US$0.18 per minute; Australia - US$0.20per minute; Singapore - US$0.26 perminute; and Japan - US$0.29 per minute.

Also, US-based company, USA GlobalLink plans to offer overseas and longdistance phone calls in Australia for aninitial price of 28 to 62 cents per minute¯ In addition, the company hopes to gain5% of the Australian domestic andinternational long distance telephonemarket in its first year - increasing to 15- 20% in the future.

While much of the early focus has beenon ISPs, other more traditionaltelecommunications companies haveexperimented with lnternet telephony.RSL Corn is one of the first of what isexpected to be a host of telcos offeringInternet-based alternatives to theirregular services.

RSL Com has released a prepaid phonecard that uses internet technology to routecalls at between half and one-third thecost of regular calls. It offers phone-to-phone and PC-to-phone lnternettelephony services. RSL Corn’s servicerelies on a private version of the lnternet,known as the Delta Three global i ntranet,rather than the public Internet. Calls tothe US and Canada in Australia will costa flat rate of 37 cents a minute, and callsto the UK and Ireland will cost 48 centsa minute, plus local charges to thegateway.

AT&T and Deutsche Telekom have bothannounced intentions in relation toInternet telephony that will impact onusage within Australia. Similarly, Optussaid it was developing a voice-on-the-Internet system, and was looking torelease it as a prepaid phonecard, butrefused to say when such services wouldbe available.

In 1997, Telstra unveiled its first twoInternet telephony products: virtualsecond line ("VSL") and icon calling.VSL enables incmrfing calls to be divertedthrough Telstra’s Internet PSTN gatewaywhile the user’s phone line is tied upbrowsing the Net. It also enables users tomake outgoing calls. The icon-callingenables people browsing in organisation’swebsite to use Telstra’s popular 1800FREECALL service to immediately talkto a person from that organisation". Iconcalling is what Telstra’s General Manager

of Internet Access Products, JohnRolland, describes as a "convergencetelephony product", that is, a productwhich bridges the gap between the ’voiceworld’ and the ’web world’.

Telstra is also trialing a service whichallows customers in Sydney to maketelephone calls to London over thelnternet. The trial, which will involveabout 250 Telstra customers and last 6months, is designed to provide Telstrawith essential information to aid futureproduct development decisions. Calls aremade direct from one telephone handset,to another handset; no computer isrequired. So far the trial, in both customerand technical terms, has been extremelysuccessful.

John Rolland has said that it is Telstra’sintention to continue to play a leading mlein all forms of telephony in Australia. MrRolland stated that "telephony across theInternet Protocol opens up a newtechnology option for Telstra over whichwe can continue to offer the range oftelephony products." Once Telstra issatisfied that this technology can be usedto offer customers reliable service, thenit will consider whether to go to the nextstage of integrated technology to offer acommercial service.

CONCLUSION

A new cost and revenue paradigm hasarrived to challenge traditionalmethodologies. The Internet telephonyrevolution xvill have a significant impacton call revenues, as the industry channelsmore of its resources into embracing theopportunities that ’voice over theInternet’ can provide. While advocateswould concede that Interact telephony isnot quite ready for mainstreamcommunications, its capacity to reducecosts and integrate voice and data isalready capturing the imagination oftelcos and consumes alike.

Michael Mueller and Claudine ~nellisare lawyers in the Sydney o~ce of BlakeDmvson Waldron.

Page 14 Communications Law BuIleUn, Vo117 No 3 1998

Local Number Portability:"You may experience a short delay..."

David Stewart considers the technical and regulatory challenges surrounding local numberportability and some long-term benefits of intelligent network solutions.

A round the time of publication oftiffs paper, the ACA is expectedto have finalised its assessment

of what constitutes the standard of ’full’local number portability under theNumbering Plan 1997. That decision~presents a vital opportunity for the ACAto require Australian carriers to adopt anintelligent network (’IN’) platform forcall routing - as has been required byregulators in the US and Hong Koag. Ifthat opportunity is lost, consumers(particularly business consumers) mayhave to bear the costs of a stop*gap,second-best solution which could delaythe introduction of truly up-to-datetechnology in the largest network inAustralia for years to come.

WHAT’S ALL THEFUSS ABOUT?

Number portability is the ability ofcustomers of a carriage service to changetheir carriage service provider, whileretaining the same phone number. Underthe Telecommunications Act 1997, noformal distinction is necessarily madebetween a customer changing betweenswitchless service providers amongst asingle network, and customers whochange from being connected from onenetwork to another (they’re bothchanging ’provider’). However, it is thesecond form of number portability -changing networks - whicla is crucial tocompetition between network providers.

Without number portability, competitionbetween network providers for customersis chilled by the inevitable costs ofchanging telephone numbers which mustbe borne by a churning customer. Manybusinesses, particularly small to mediumbusinesses, invest substantial amounts inthe goodwill in and promotion of theirphone number. While the impact isarguably less severe on residentialconsumers, the costs of changingnumbers -which can include the indirectcosts of missed calls and sheerinoonvcniencc - mean that access to thelower prices offered by competitors maybe lessened unless a simple, workable andaffordable mechanism exists for the

customer to bring (or ’port’) their numberacross from their old provider to their newprovider.

TECHNICAL SOLUTIONS

There are two broad categories oftechnical approaches capable of achievingnumber portability.

The first category, ’call-forwarding’solutions, depend on the original networkattempting to connect calls to a portednumber, and then a subsequent re-routingof that call to the network of the newprovider when that call attempt fails.l~eeauso call-forwarding is only triggeredin the event of an unsuccessful call to theoriginal network, such solutionsinvariably produce performancedifferences in connecting users to portedand non-ported numbers. In particular,the two-stage call routing process tocustomers of a rival network takes longerthan connecting calls to one’s owncustomers. This process is experienced byusers as ’post-dial delay’.

One option for enhancing theperformance of call-forwarding solutionsis to engage in ’drop-back’, whereby thenumber of superfluous circuits within theoriginal network is reduced, though noteliminated. Nonetheless, such systemsstill have a process which relies on a’normal call plus something extra’approach to dealing with a rival’s traffic.

The second category, ’intelligentnetwork" solutions, use a database whichmatches particular users and theirtelephone numbers with their networkprovider. This database is interrogated forevery call, identifying whether the callneeds to be connected to a point withinthe originating carrier’s network, orelsewhere. Call routing, whether to adirectly connected customer or to a rival’snetwork, takes the same amount of timeirrespective of whether the caller isattempting to reach the customers of theoriginal provider, or their rival.

Call-forwarding solutions are generallycharacterised by the following features:

there can be only two (or at mostthree) carriers involved in the portingof numbers;

it is most effective where theproportion of calls to ported numbersis small compared to calls to non-ported numbers - put another way,where the call-forwarding networkenjoys overwhelming market sharecompared to its rivals;

it lends itseffto attempts by networkproviders to require their rivals tobear costs, in the form of a ’call-forwarding charge’ per call; and

operators of existing networks basedon technology similar to mostincumbent ex-monopolist’s networksaround the world (such as Telstra’sPSTN) are spared the cost ofupgrading their equipment toaccommodate the enhanced qualityand breadth of service asseciated withIN solutions (since, once installed,IN databases can be used to activatea variety of services, other than LNP).

By contrast, IN solutions generallyinvolve substantial set-up costs foroperators who use non-IN-basednetworks, generate little if anyincremental or ’per call’ cost and are,generally speaking, readily scaled toinclude multiple carriers. In addition, IN-solutions, although more expensive wherethe market share of new entrants remainssmall, do not create increased congestionwhere the market share of the incumbentfalls.

THE DIRECTION,THE PLAN AND THESEEMING LACK OF

DIRECTION OR PLANNING

Number portability is regulated by theNumbering Plan 1997, which is theregulatory instrument issued by the ACAunder Part 22 of the TelecommunicationsAct. Section 45g of the Act provides thatthe ACA may include rules for ’theportability ofallecated numbers’ provided

Comrnun|cab0ns Law Bu||e~ln, re| 17 ~o 3 1998 Page 15

(a) will not be apparent to acustomer," or

(b) if they are apparent to a customer

- will not affect the customer’schoice of carriage serviceprovider ’

that the ACCC has directed the ACA todo so.

The ACCC issued a draft direction to theACA canvassing the issues shortly afterthe commencement of the Act, and a finalDirection was issued to the ACA on 22September 1997. That Direction providedthat, amongst other things, the ACA mustinclude roles on the portability ofallocated numbers in the NumberingPlan, and laid out in detail what thoserules were to be.

The Direction provided for two forms oflocal number portability: ’limited"number portability, required to beprovided in the short term, and ’full’number portability (simply referred to inthe Direction as "number portability’).The ACA was directed to ensure that eachform of number portability was to offeredby carriage service providers at the’earliest practicable date’ for that to occur,as determined by the ACA.

In its Explanatory Statement to theDirection, the ACCC identified thestandard required for full numberportability as being that carriage serviceproviders could offer:

’equivalent services and featuresindependent of whether the end-useris using or calling a number that hasbeen parted from another carriageservice provide~ Any differences inthe quality or reliability of services... must not be apparent to end-usersin a way that may affect the choice ofcarriage service provider by

The Commission nominated IN-hosedsolutions as being capable of meeting fldsstandard. Call-forwarding (and, inparticular, Telstra’s ’facilities re-direct’service) was specifically identified asbeing able to discharge the standard of’limited’ nmnber portability (not fullnumber portability).

The requirement of equivalence wassubsequently set doxvu in the NumberingPlan in clause 11.4, which provides that:

’A carriage service provided inrelation to a ported number is onequivalent service if (and only iJ) anydifferences between it and a carriageservice provided in relalion to a non-ported number:

THE OVUM REPORT

The ACA has subsequently specified 1May 1998 as having been the earliestpracticable date for the provision oflimited number portability by all carriageservice providers (a requirementoverlapping substantially vAth the licencecondition imposed on Tclstra by theMinister in late 199’7) and 1 Janua~ 2000as the earliest practicable date for fullnumber portability. Following thisprocess, the ACA commissioned Ovumto produce a report identifying thetechnical solutions and issues associatedwith each of ’full’ and ’limited’ numberportability?

That report has been released for a secondround of industry consultation. Ovumstates in the report that it considers that"non-equivalence’ requires three things:

’Firstly, a difference in services,features, reliability or quality levelsmust be objectively caused by theimplementation of local numberportability. Secondly, this differencemust be perceived by end-users.Thirdly, the end-user perception of thedifference must be significant enoughto affect the choice of carriage serviceprovider ’

For reasons stated below, this thirdcriterion should not be considered by theACA and should not have formed part ofthe study.

WHAT THE LAW SAYS

It is not clear that an interpretation of theNumbering Plan which resulted in a call-forxvarding solution which yielded post-dial delays capable of affecting consumerchoice being an acceptable form ofnumber portability in the long-term couldbe reconciled with the specific wordingof the ACCC’s Direction andExplanatory Statement. It is an openquestion whether, in that ease, there needsto be amendment of the Numbering Plansufficient to bring it clearly into line withthe Direction.

The Plan is required under tbe Directionto ensure that the ACA does not permit

P~ 1(; Communlcatlon~ L~w I~ultean, Vat 17

carriage service providers to offer fullnumber portability in a way that interfereswith the provision of ’equivalent qualityand reliability’ of service, or access to’equivalent services and features’.Equivalence means, in this context, thatany differences are not apparent to end-users to the extent that such differences’may affect’ the choice of provider.Branding is permissible - perceptible andsubstantial post-dial delay is not.

The current wording of clause 11.4 of theNumbering Plan refers to differenceswhich either ’will’ or ’will not’ affect acustomer’s choice of carriage serviceprovider. Although the distinctionbetween this and the previous concept ofa difference which ’may affect’ consumerchoice is a subtle one, it is significant.Matters which may affect consumerchoice go to the issue of perceptibility -itselfa performance issue. Matters whichwill affect consumer choice are questionsdetermined as a matter of customerresearch and preference. A regulatorassessing the first question is focused onthe technical issues. The second requiresjudgments concerning subjectivequestions of quality and choice.

With all due respect to the Authority andits staff, the approach of the ACA incommissioning the Ovum report, and thematters addressed by the report, suggestthat the ACA has found itself on thewrong side of this logical divide. Byallowing themselves to be drawn intodebates about the relative impacts onconsumer choice of particular callholding times, the point seems to havebeen missed. More significantly, the ’two-tier’ approach, designed to deliver bothshort-term and long-term benefits to end-users, is in danger of being stalled at thefirst hurdle.

A final consequence of this approach tofull number portability would be thesomewhat bizarre scenario of the ACAhaving specified 1 January 2000 as the’earliest practicable date’ for the

introduction of a service which Telstra(at least) has been offering since I May1998,

WHAT SHOULD HAPPEN

The ACA should strongly affirm theconclusion that it reached in apreliminary form in its earlier Report onImplementation of Number Portability,that only an IN solution meets therequirements of the Numbering Plan, andthereby require all carriage serviceproviders to provide to themselves, oracquire, IN functionality supporting LNP.The principle benefits to end-users wouldbe long-term, but nonetheless real andsubstantial. This would deliver a ’seconddividend’ to end-users, complementingthe benefits arising from having thefastest possible introduction of limitednumber portability.

This is good policy, as well as good law.To focus overly on the arguments as tothe limits imposed by the ACCC’sDirection to the ACA miss the peint. Useof IN technology combines theadvantages of number portability as ageneral proposition which increasesaccess by consumers to the benefits ofcompetition, with the technologicaladvantages era network routing systemwhich is easily adapted to develop newand innovative services. The benefits ofnumber portability were reeagnised by theMinister when he described theintroduction of any form of numberportability as a ’major boost (ocompetition .., [wldch] will help to bringlower prices and improved services tomillions of Auslralians’~. The benefits ofIN include a common platform for themanagement of call routing information,a key precursor to wider availability ofthe kind of call management serviceswhich are taken for granted in thecommercial world.

It seems plausible that part of thereasoning of regulators in not being

explicit about specific technical solutionsin the Direction and Plan was theperceived need for the ACCC and ACA.to remain ’technology neutral’. While itrs both natural (and appropriate) forregulators not to be bullish about theirown ability to foresee and act upontechnologically-specific information, inthe case of LNP, the time has come totake the plunge- as OFTA in Hong Kong,the FCC in the United States andAUSTEL before July 1997 have alreadydone.

This is particularly true given that thedistinction between ’limited’ and ’full’local number portability in the Directionhas the distinct appearance of being adecision which is, on its face, implicitlyspecific about the technological issuesinvolved. Far better to be clear about thisissue, than to try and ’herd the flock’towards an end result that is not overflystated.

Both the ACA and ACCC (and AUSTELbefore them) have been well informed ofthe relevant issues, both domestically andby being able to observe regulatoryprocesses overseas. Granted that theACCC appeared to require a ’two-tier’approach to number portability in itsDirection, and that only lwo clearalternatives present themselves, whatpossible use is there in having thatapproach thwarted, and delaying theonset of local number portability onceagain?

David Stenvart is a solicitor with MinterEllison. The views in this article are theauthor’s alone, and are affributableneither to Minters nor the firm’s clients.

I Explanato,,y Statement to the D#ec~i~n to theACA on number Portability. ACCC, 22September 1997 at explanab~m of Direcffon 3.2 ACA letter to industry attaching the Ovumreport, dated I September 1998.3 Ministerial Media Re~ease on the decision torequire Telstra to provide LNP as a /icencecondi#~n dated 23 September 1997.

Communications Law Bulletin, Vo117 No 3 1998Page 17

Cryptography Policy:Overdue for Reform

~rog Taylor of Electronic Frontiers Australia looks at the regulation and policy surrounding

.¢,ryptography and highlights the problems with current local export restrictions

D ala encryption plays an essentialrole in secure transmission ofcommercial information over

public networks, yet its widespreademployment is being stifled by cold-warera regulations. Within the DefenceDepartment in Canberra, the arcanescience of cryptography is still beingtreated as ff it were a military searet,despite having moved into the academicand commercial sectors over 20 years ago.

Cqrptography is a technology used to"scramble" information into anunreadable form. Computers haverevolutionised cryptography and haveenabled incredibly powerful ciphers to bedeployed. Computer ciphers have twochief components: a method (oralgorithm) and a key. The two are usedtogether to encrypt a message or file. Thealgoritfun is generally public but the keyis kept secret. Anyone who has the keycan use the decryption algorithm for thecipher to unscramble a message or file.The key is usually just a large number.

DEVELOPMENTS INCRYPTOGRAPHY

The two main developments of interest

secret key cryptography, also calledsymmetric cryptography because thesame key is used for enctyption anddecryption.

public key cryptography, also calledasymmetric cryptography becausedifferent keys are used for enctyptionand decryption. Public key systemsusually rely on key pairs, one ofwhich is a public key which can begiven to anyone, while the other is aprivate key which must be kept secretby its owner.

Public key cwptography, invented in thelate 1970s, has revolutionised thedevelopment of methods for securetransmission of information over publicnetworks. It enables two computers togenerate and exchange one-time keys ina way that is protected againstinterception.

Computer c .r~tography is already inwidespread use, although unknown tomany people. Common applicationsinclude:

protection of information transmittedduring electronic bankingtransactions, such as automatic tellermachine transactions, EFTPOSpurchases and Internet transactions.

encryption of email sent over theInternet for confidentiality (usingPGP or S/MIME)

encryption of files stored oncomputers - again to protect theirconfidentiality.

the use of digital signatures whichare an essential part of theauthentication process in electroniccommerce transactions.

Cryptography is now an essential tool formany businesses and governments toprotect valuable confidential informationboth when it is stored in their computersystems and when it is transmitted fromone location to another over publicnetworks. Without cryptography, it wouldbe very difficuh or expensive to protectthis information. For individuals, it is anextremely valuable tool to protect privateinformation or communications.

Sophisticated eryptographic software isreadily available now to virtually anyonewho wants it, and often at little or no cost,and is widely and legally available on theInternet. Much of this soft~vare is alsoextremely powerful - to the point whereit would be impractical for governmentsor their defence agencies to attempt to’break’ the encryption.

However, the strength of cryptography isan issue that is surrounded by controversy.On one side of the debate is the argumentthat free access to cryptography by thegeneral public enables them to fulfil theirright to protect the privacy and securityof their communications, includingcommercially ~aluable data. On the otherside, the government argues that it needsto control the use of cryptography toenable eavesdropping on

communications as part of its lawenforcement activities.

THE US EXPORTRESTRICTIONS

With certain exceptions, all softwareoriginating in the USA has limited ctyptostrength because of export restrictions.

Examplesinclude:

The major Web browsers (NetscapoNavigator/Communicator andMicrosoft lnternet Explorer), whichare limited to 40-bit keys in theexport version as opposed to 128-bitkeys in the US domestic version.

Some widely used ’office’ softwaresuch as Lotus Notes, the exportversion of xvhich is limited to aneffective 40-bit key. (The actual keylength is 64 bits but pan of the key isescrowed in the USA.)

In September 1998 the US relaxed itsexport controls, but only for export todefined markets or industries, with moreliberal exceptions being made availablefor licensed key recovery products (seebelow).

The US limits have obvious effects onAustralia. Because of the largeinternational market share held by someUS software companies, many of theproducts of these firms have becomedefacto standards. Since cryptographyrequires both the sender and thereceiver(s) to communicate using thesame protocols (ie, standards), any limits on cryptography can affectstandards, which in turn affect the typesor strength of encryption available tousers in other countries.

THE AUSTRALIANSITUATION

Within Australia, enctyption software canstill be freely used and exchanged withinnational boundaries. A number of localfirms also produce cryptographic sot~ware

page 18 CommunicaUons Law Bulletin, VQ117 No 3 1998

and hardware. Nevertheless, there aresome restrictions in place.

The Telecommunications LegislationAmendment Bill w~ passed by the Senatein November 1997. The purpose of theBill is to amend several existing Actsincluding the Telecommunications(Interception) Act of 1979. Theamendments will require carriage serviceproviders (CSPs) to provide, at the CSP’sexpense, access to any data orcommunications which they transmit fortheir customers. CSPs include a widerange of telecommunications serviceproviders including telephone serviceproviders and most Internet serviceproviders.

Importantly, the amendments require theCSP to decr~t any data which the CSPwas responsible for encrypting for acustomer. There is, however, apparentlyno requirement on the CSP to docryptdata or messages which the customerpersonally encrypted (ie. encryptionwhich did not involve the CSP).

Prior to the November 1997 amendments,the government still had mechanisms forgaining access to the plain text of anydata or messages encrypted by a CSP Forexample the government could withholdthe approval for any newtelecommunications service which a CSPproposed to supply unless the service wascapable of providing access for authoritiesto the plain text of any message. A recentexample was the roll-out of Telstra’srevamped ISDN OnRamp service in1997. Availability of the new service wasdelayed until systems were in place forinterception of any traffic transmittedusing this service. A similar delayoccurred with the introduction of GSMmobile phones.

AUSTRALIANPUBLIC POLICY

There has been silence from the federalgovernment for some time on broadercryptography policy. However, there havebeen some specific cryptography-relatedinitiatives mainly related to theestablishment of a legal regime forelectronic commerce. Several expertworking groups have been established -one by the Minister for Communication,the Arts and the Information Economyand another by the Attorney-General. Thelatter is dealing with the legal regime foronline transactions and informationexchange. Both working groups havereleased reports this year.

In 1996, the Federal Government madesubstantial steps towards developing apolicy on the use of cryptography inAustralia. A report was commissionedfrom Mr Gerard Walsh, a former deputyhead of the Australian SecurityIntelligence Organisation (AS/O).

However, the Walsh Report was withheldby the Attorney-General’s Departmentfrom publication. It was eventuallyobtained by EFA under the Freedom ofInformation Act and published on theEFA Web site (subject to the deletion ofcertain sections on grounds of nationalsecurity under the Act).

The Walsh Report comes out in favour offree access to cryptography by the public.The conclusions in the report areespecially interesting in view of Mr.Walsh’s background with ASIO. Somecommentators have suggested that thereport was withheld because it did notreach the "right" conclusions (ie., that useof cryptography should be restricted). Thestatus of current thinking in thegovernment is unknown, although allmajor parties have published policiessupporting relaxation of controls.

AUSTRALIA’SEXPORT CONTROLS

It is illegal to export any cryptographicsoftware products from Australia withouta license issued by the Department ofDefence. Australia’s export regulationsare amongst the most stringent in theworld, and closely parallel restrictionsimposed in the USA, although all licenceapplications here are evaluated on a cuse-by-case basis, rather than in accord withany published guidelines.

The controls are administered by theDirector, Strategic Trade Policy andOperations (STPO), a division of theDefeoce Acquisition Organisation. Withone major exception (the GeneralSoftware Note) the Australian controlsare based on obligations under theinternational Wassenaar Arrangement,discussed below.

The Australian regulation ofcryptographic export controls is set outin Schedule 13E of the Customs(Prohibited Exports Regulations) andSection 112 of the Customs Act 1901which deals with prohibited exports.Items prohibited under this legislation are

Communications Law Bulletin, Vo117 No 3 1998 Page 19

listed in the Defence and Strategic GoodsList (DSGL) of the Australian Controlson the Export of Defence and StrategicGoods. Crypto software is identifiedunder Part 3, Category 5/2 of thecontrolled goods list.

Under these regulations, all cryptographysoftware requires a permit or a licencebefore it can be exported. Evaluation oflicence applications is carried out byDefence Signals Directorate, the bodyresponsible for Australia’s externalseCUrily.

An exception to the rules is the PersonalUse Exemption, which allows encryptionsoftware to be taken out of the countrywithout a permit under specifiedconditions for persurmal use (eg., whereinstalled on a notebook computer). Thereare also exemptions for authentication-only products and limited applicationdevices such as ATMs and smartcardreaders.

There is a major loophole in theAustralian legislation in that the CustomsAct applies only to physical goods.Intangible exports via electronic networkssuch as the Internet are not covered bythe regulations. This has resulted in somecontroversial media coverage of late,particularly in regard to the availabilityon Australian websites of products suchas Cryptozilla, a strong-crypto version ofNetscape which used Australian-developed crypto suft~vare embedded inthe open source code provided byNetscape Communications.

Although there have been hints that theCustomsAct would be amended to coverintangible exports, there are no knmvnmoves at present to do so. In themeantime, the Defence Department isattempting to enforce export controls inthe electronic medium by means of"moral suasion", a strategy that is notmeeting with widespread support orSUCCESS.

THE KEY RECOVERYCONTROVERSY

A number of governments, in particularthe US and UK, have proposed keyescrow or key recovery schemes. The aimof the schemes is to allow authorisedofficials to decrypt intercepted messages.Law enforcement and intelligenceagencies argue that without this ability,criminals can abuse cryptography to

conceal illegal activity from the law.Australian policy is to encourage keyrecovery products for export purposes, butno official policy on this matter has beenpublished.

Under key escrow, it would be mandatoryfor everyone using encryption productsto provide a copy of their key to thegovernment for law enforcement access.Under key recovery, the key would be keptby a third-party, generally a commercialservice provider. Both systems generallyclaim that keys and/or plain text wouldonly be available to law enforcement witha court warrant.

The basis of key escrow and key recoveryis that all cncryption keys are stared inkey repositories where governmentofficials can obtain copies of them for usein decrypting messages. There aresignificant privacy concerns with thisapproach. There are also major risks inhaving large numbers of keys stored incentral locations. Honest mistakes,corruption and criminal hacking all posemajor threats.

THE WASSENAARARRANGEMENT

The basis for the export controls of mostcountries is a military-treaty officiallyentitled The Wassenaar Arrangement onExport Controls for Conventional Armsand Dual-Use Goods and Technologies(’Wassenaar Arrangement’) which is protocol intended primarily to controlweapons of mass destruction. There arecurrently 33 signatories to the WassenaarArrangement. The Dual-Use section ofthe Arrangement forms the basis for mostnational controls over the export ofcryptography products.

The Wassenaar Arrangement is thesuccessor regime to the Co-ordinatingCommittee for Multilateral ExportControls (COCOM) established by NATOin 1949 to control the export of militaryequipment and dual-use technologies toWarsaw Pact states. Negotiations toestablish a successor regime to COCOMcommenced in 1993 and COCOM wasterminated in March 1994. TheArrangement was not intended to impedebona fide civil transactions.

There is a preamble to the WassenaarDual-Use list called the GeneraISoflwareNote (GSN), which was intended exempt mass market and public domain

software form the scope of the controls.However, Australia explicitly disallowsthis waiver in respect of cncryptionsoftware. Four other countries, USA, NewZealand, France and Russia, also disallowthe GSN waiver.

The reasoning behind this stance byAustralia has never been explained,despite the fact that this policy positionmeans that Australian crypto developersare at a severe disadvantage comparedwith their European counterparts.

There are now moves afoot to furthertighten international restrictions oncryptography in a current review of theWassenaar Arrangement. The Australiandelegation is at the forefront of thismovement, although their position iswidely believed to be influenced by theUS government’s hardline stance.Amongst the proposals to be put forwardare a plan to inchide intangible exportsas controlled items, and removal of theGSN waiver.

CONCLUSION

Most technical and professionalorganisations involved in thedevelopment of network standards areopposed to the controls that are placedon cD~ptography, since they restrict thedevelopment of global standards, weakensecurity, encourage information warfare,and impose severe risks to human rightsand privacy.

Campaigns involving both industry andcivil liberties interests are active in manycountries. There is now an internationalmovement sponsored by the GlobalInteract Liberty Campaign (GILC) whichhas gained the support of many industryand civil liberties lobby groups, to call ahalt to what are generally perceived assilly and unworkable restrictions. Strongcrbptography is now widely available andis in the public domain. Export controlsare starting to be routinely circumventedby developers moving offshore. It appearsto be only a matter of time before thelegislature and the bureaucracy wakes upto the obvious.

Greg Taylor is a board member ofElectronic Frontiers Australia Inc. andchair of its cryptography committee.Further information is available fromthe EFA website: http:/,6wwv, efa.org.au

page 20 Communications Law Bulletin, Vo117 No 3 1998

New Copyright LawsKaren Getterts reports on the latest amendments to the Copyright Laws and also discusses thecurrent position of recognition of moral rights in Australia.

T he Copyright Amendment Act1998 and the Copyright

.i, Amendment Act (No.2) 1998commenced on 30 July 1998. All of theprovisions of these acts are now in force,except for the amendments concerningthe parallel importation of packaging andlabelling, that have been delayed for 18months.

THE ROAD TOCOPYRIGHT REFORM

Governments over the past decade havebeen struggling with the issue ofcopyright reform. In 1996 the CoalitionGovernment was elected on the promiseof long overdue copyright reform toprovide fair and adequate protection ofrights, including moral rights, inAustralian copyright law. The road toreform followed:-

18 June 1997 - the CopyrightAmendmentBill 1997 ("l]ill") was introduced to theHouse of Representatives.

27 June 1997 - the Bill ~vas introduced tothe Senate. The Senate promptly referredthe Bill to the Senate Legal andConstitutional Legislation Committee.The Commitlee held three publichearings concerning the Bill, andreceived 118 submissions.

27 October 1997 - The Committee’sreport was tabled supporting the Bill,including the issue of moral rights, hutcalled for various amendments.

20 November 1997 - the CopyrightAmendment Bill (No.2) ("Bill No. 2")1997 was introduced to the House ofRepresentatives. The Bill provides thatnon-pirate CDs can be imported intoAustralia without the consent of theAustralian copyright owner.

26 November 1997-Bill (No.2) is passedby the House, and is subsequently referredto the Senate Legal and ConstitutionalLegislation Committee for report. DuringFebruary and March 1998 the SenateCommittee held seven public hearings onthe Bill.

1 April 1998 - the Senate Committeetabled its report on the Bill. The Reportsupported the Bill, but also made somesuggestions for consideration.

11-12 July 1998 - both Bills were passedby the Senate (at around 12:45am). The

Bill had been passed with 28 amendmentsthat were recommended by the SenateCommittee. Bill (N’o.2) was passed withthe support of Senator Harradine. SenatorColston had announced his opposition tothe Bill, but was not in the Senate at thetime the vote was taken. The vote was33-32.

15 July 1998 - at a special sitting of theHouse, the House of Representativespassed the amended bills.

30 July 1998 - The Bills were given RoyalAssent.

THE MAJOR AMENDMENTSAT A GLANCE

The Copyright Amendment Act 1998(Cth) ("Act") contains 10 schedulesproviding for wide-ranging copyrightreforms in a number of areus:

° employed journalists copyright(Schedule 1);

° commissioned photographs(Schedule 1);parallel importation of packagingand labelling (Schedule 2);

conversion damages and detention(Schedule 3);copying for the services of theGovernment (Schedule 4);copying for people with anintellectual disability (Schedule 5);

copying of works by educationalinstitutions (Schedule 9); and

border enforcement (Schedule 8).

The proposed amendments dealing withprotection of moral rights have beenwit.hdmwn, due to the debate over ul~frontwaiver. The forecast is that a new stand-alone bill introducing comprehensive.moral rights protection will be introducedm approximately three months time.

The Copyright Amendment Act (No.2)1998 removes the owner’s control overparallel importation of CDs.

THE AMENDMENTS.EMPLOYED JOURNALISTS

Under the 0id s.35(4) CopyrightAct 1968(Cth), a ne~vspaper proprietor only ownedthe copyright in articles written by theiremployed journalists for the purposes ofpublication in a newspaper or magazine,

or for broadcasting. Employed journalistsowned the copyright in all other uses oftheir works. This meant that whenelectronic means of publication wasdeveloped, the proprietors were not theowners of the copyright for this type ofpublication.

The new amendments to the CopyrightAct re’,m’ites s.35(4) to give proprietorsadditional rights to facilitate theelectronic publication and delivery ofnewspapers, magazines and similarperiodicals. Employed journalists retaintheir traditional rights of photocopyingand independent book publication, butproprietors are now classified as theowner of the copyright for all other uses,including publication on the Interact andon-line databases. Self--employed orfreelance journalists will continue toretain all rights to their copyright work.

These amendments were recommendedin the 1994 Copyright Law ReviewCommittee Report, and also reflectagreements between n~jor publishers andthe Media Entertainment and ArtsAlliance.

The original Bill also introduced aproprietor’s "right of restraint" to blockthe photocop~,ing of more than 15% of anewspaper or magazine (despite the factthat employed journalists owned thecopyright in photocopying of theirworks). This right was eriticised by theSenate Committee’s Report, arid has notbeen included in the Act.

These amendments will apply to all works

.created afler 30 July 1998.

COMMISSIONEDPHOTOGRAPHS

Under the old s.35(5), when a photograph~s commissioned, the commissioner is thefirst owner of copy~ght, subject to anyagreement to the contrary. This was anexception to the usual situation where theauthor of a work was the owner of thecopyright. This anomaly has now beenchanged, in the new s.35(5) so that thephotographer is the first owner of thecopyright, except where the photographsare taken for private or domestic purposessuch as weddings and family portraits.In these instances, the COmmissioner willretain ownership of the copyright.

These amendments to s.35(5) will nowenable commercial photographers to

Communications Law Bulletin, YO117 No 3 1998

Pal]e 21

liccncc future uses of their photographs,which they have sought for a number ofyears.

PACKAGING & LABELLINGOF IMPORTED GOODS

The amendments in Schedule 2 of the Actremove copyright control over paralielimportation of packaging and labelling.These amendments were considerednecessary to increase competition inrespect of branded goods, and to improveservice, reduce prices, and increasechoice. These amendments wereoriginally ~ecommended by the CopyrightLaw Review Committee ("CLRC") 1988. However the Governmentintroduced amendments to delay thecommencement of these provisions for 18months after the Act commences. Thiswill ensure that businesses legally usingthis moans of controlling their exclusivedistribution arrangements can havesufiqcient time to adapt their businessoperations. Thus, these amendments willnot commence until February 2000.

SPECIAL POSITION RE THEOLYMPIC SYMBOL

The Olympic rings symbol has beenexcluded from the effect of the packagingand labelling amendments. This symbolis specially protected under the Olympiclnsignio Protection Act 1987, whichaccords it perpetual copyright. With theexpress exclusion in definition of"accessory" in s.10(l), it stands in unique position vis-a-vis other copyrightmaterial.

CONVERSION & DETENTION

Due to past abuse of the remedies forcopyright infringement, the amendmentsunder Schedule 3 of the Act make theavailability and extent of the remedies ofconversion damages and delivery up ofgoods, subject to the discretion of thecourt, rather than being an automaticright. These amendments were inresponse to the recommendations of theCLRC’s 1990 Report on ConversionDamages. This Report found that wherean infringing copy was an insubstantialpart of an article (such as a badge on soccer ball), and was not severable fromit, the whole article had to be deliveredup, or damages given for the whole value,thus allowing abuse by copyright ownersand unfairness to defendants.

GOVERNMENT COPYINGPROVISIONS

Schedule 4 of the Act amends theCopyright Act to stroamline the system

for owners of copyright to be paid whentheir materials are copied by theCommonwealth, State and Territorygovernments. Payments b-ill now be madeon the basis of sarnpling, rather than thepresent method of full record-keeping,where there is a declared copyrightcollecting society.

COPYING FOR PEOPLE WITHAN INTELLECTUAL

DISABILITY AND PEOPLEWITH A PRINT DISABILITY

Schedule 5 introduces more appropriateterminology in the provisions of theCopyright Act that affect people with aprint or intellectual disability. Theamendments include replacing the term"handicapped readers" with "personswith a disability" and replacing"intellectually handicapped persons" with"persons with an intellectual disability".

The Act also amends the license forinstitutions who assist people with a printdisability under s. 135ZP, to have the samerights as institutions who assist personswith an intellectual disability. Both ofthese institutions ~vill now no longer berestricted to copying for the purposes ofresearch or study only.

COPYING OF WORKSBY INSTITUTIONS

Schedule 6 of the Act makes a number ofminor amendments to the statutoryeducational copying licenees under PartsVA and VB of the Copyright Act tofacilitate the effective operation of theselicences for the benefit of both therelevant collecting bodies, and theinstitutions. One of these changes amendss.135ZM, so that when an artistic workis copied along with text thataccompanies the artistic work, then theremuneration now payable to the author,will be shared with the visual artists.Visual artists have sought equitableremuneration for the copying of theirworks for some years nosy, and theseamendments mean that they will nowreceive payments to the some extent asother creators.

COPYRIGHT TRIBUNAL

Schedule 7 of the Act allows for theappointment of one or more additionalDeputy Presidents and for theappointment of former judges to theCopyright Tribunal. These amendmentsare designed to enhance access to, andthe effective operation of, the CopyrightTribunal.

IMPORTED COPIES OFCOPYRIGHT MATERIAL

Schedule 9 of the Act corrects minorerrors made in the 1994 TRIPSamendments, and makes other minorchanges to border enforcementprovisions. These amendments include afee for the lodging of a notice of objection,and authorisation for the CEO of Castumsto provide certain information toobjectors.

EDUCATIONALINSTITUTIONS

The definition of "educationalinslitution" has been broadened to includepre-schools and kindergartens, and therequirement that an educationalinstitution must be not for profit has beenremoved.

THE AMENDMENTSUNDER ACT NO.2

The Copyright Amendment Act (No.2)1998 (Cth) ("Act NO. 2") removes copyright owner’s control over "parallelimportation" of music CDs. This measurewas announced by the CoalitionGovernment in October 1997.

Sound recording prices in Australia arehigh by world standards. Restrictions onthe parallel importation of legitimatesound recordings prevented Australianretailers from being able to source lowerpriced recordings from overseas sourceswithout first gaining permission fromlocal rights holders (usually majorinternational record companies). Thisproblem was identified in the 1990 PricesSurveillance Authority’s report, Inquiryinto the Prices of Sound Recordings, buthas never been addressed.~

POLICY BEHINDTHESE AMENDMENTS

Parallel importation will increasecompetition between local and overseassuppliers of sound recordings in theAustralian market. It is expected thatlocal retailers will be able to sourcecheaper overseas product. This willencourage local suppliers to make soundrecordings available to retailers at similarwbolesale prices to those which could beobtained from overseas suppliers. Furtherlocal subsidiaries of global musiccompanies, which control 70 per cent ofthe world industry typically only release20 per cent of their titles in the Australianmarket. Parallel importation will meanthat Australian consumers will have agreater range of choiee.2

Page 22 Communications Law Bulletin, Vo117 No 3 1998

To allay fears that pirate CDs will floodthe Australian market, the Act No. 2includes a range of measures that improvethe protection for owners of copyfight insound recordings:-

In civil proceedings for importationofinffinging CDs, the onus is on theimporter to establish the CDs are notpirated;

Maximum monetary penalties haveincreased: $60,000 fines/5 yearsimprisonment for persons, $300,000fines for corporations, per offence;

The Government, through theDepartment of Communications andthe Arts, has allocated $10m overthree years to an Australian musicindustry promotion package.

MORAL RIGHTS

The major reform under the Act was tobe the introduction of a comprehensivescheme of moral rights for creators ofworks and films. However once the Billwas introduced, the justification forcomprehensive moral rights protectionbecame obscured by a debate over aprovision to allow upfront waiver forcontracted works and films. In October1997, the Senate Legal and ConstitutionalLegislation Committee recommended anextension of waiver at the time ofcommissioning a work or film. Since thistime, the Government has held lengthydiscussions with the film and televisionindustry to find an acceptablecompromise on the issue, that wouldsatisfy all interests and would stillmaintain certainty and confidence in theinduslry. A compromise was not possibleby the time the Bill was debated, so theGovernment withdrew the moral rightsprovisions from Schedule 1.

The Government is continuing to consultto develop a consensus on a workablewaiver provision, and will resubmit amoral rights regime as a stand-alone billin approximately three months lime. TheGovernment held a forum on the issue ofwaiver of moral rights in Sydney on18August 1998.

WHAT ARE MORAL RIGHTSAND WHY DO WE

NEED THEM?

Moral fights are personal rights of theauthor of a work, that are completelyindependent of the author’s economicrights, and continue to exist even afterthe transfer of economic rights. Moralrights include the right of the author to

be made known to the public as thecreator of the work (paternity); the fightto protect a work from distortion(integrity); the right to choose whetherto publish the work; the fight to restrainexcessive criticism of the work; and thefight to prevent violations of the author’spersonality. Currently, Australia haslimited moral fights protections in ssI89-195AA of the Copyright Act.

The call for a more comprehensive moralfights regime has been heard for over adecade now. Australia has an obligationunder the Berne Convention for theProtection of Literary and Artistic Worksto recognise moral fights under article6his. This was reeognised in the CLRC’sReport on Moral Rights in 1988, and thenagain in the 1994 Discussion Paper,Proposed Moral Rights Legislation forCopyright Creators.

The moral rights regime proposed in theoriginal Bill satisfies Australia’sobligations under the Berne Convention.Schedule 1 of the Bill, included:

a creator’s right to be identified asthe creator of a work (the right ofattribution of authorship);

the fight of a creator to take actionagainst false attribution (the right notto have authorship of a work falselyattributed); and

a creator’s right to object toderogatory treatment of his or herwork which prejudicially affects hisor her honour and reputation (theright of integrity of authorship of awork).

The rights will apply to authors of allliterary, artistic, dramatic and musicalworks and authors of cinematographfilms. Authors of cinematograph films arethe principal director and the principalproducer of the film. The current Part IXof the CopyrightA ct contained provisionsrelating to the false attribution of works,but did not require recognition orattribution of authorship. Cinematographfilms were also not included.

Karen Gettens is a lawyer with theSydney offtce of Blake Da~vson Waldron.

1 As outlined in the Regulatory Impact Statement- Options to Lower the Sound Recording Pricesfor Consumers, 1997.2 From Explanatory Memorandum to theCopyright Amendment Bill (No.2) 1997.

Communlcatlons Law Bulletin, Vo117 No 3 1998 Page 23

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