CATCHWORDS Administrative Law -— Broadcasting and Television Act - refusal to grant supplementary FM radio broadcasting licence — recommendation to invite applications for additional licence - having due regard to need for commercial viability of existing station, need to determine reasonable likelihood of commercial viabililty of additional station - determination that having considered need for an adequate and comprehensive service and whether an undue concentration of ownership it 1s in public interest to invite applications for additional licence - whether use of range of levels of revenue and expenditure amounted to failure to determine likely revenue or expenditure of existing and additional station - whether failure to determine that concentration of ownership was undue. Administrative Decisions (Judicial Review) Act 1977 Broadcasting and Television Act 1942 s.83. SUNRAYSIA BROADCASTERS PTY. LTD v. THE AUSTRALIAN BROADCASTING TRIBUNAL and ORS vG 400 of 1986 Sweeney, J. Melbourne 20 August, 1987 Aree a et ne I OO ? Pn To -- ee - t a ae ee 4 . tet TF IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 400 of 1986 GENERAL DIVISION BETWEEN: AND AND AND PLACE DATE i ww ewer we wH SUNRAYSIA BROADCASTERS PTY. LTD Applicant THE AUSTRALIAN BROADCASTING TRIBUNAL First Respondent THE HONOURABLE MICHAEL DUFFY (as the Minister of State for Communications) Second Respondent MURRAY RIVER FM LTD Third Respondent THE COURT: Sweeney J. : Melbourne : 20 August, 1987 MINUTES OF ORDER The Court orders that —- i. 2. the decision and recommendation of the first respondent in the report dated 27 October 1986 be set aside the application of the applicant for a supplementary wa we nets me moe - a ' ne enna ape eee eee -* Sep ikon oneeneer aie weap oe ee eee > ' => pop re en ns rp ee t Sin ieieieha Lanne aatenaieimanentanee Note: broadcasting licence be referred back to respondent to be dealt with according to law. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. the first a eT a ne ren hats IN HE "EDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No. VG 400 of 1986 ) ) GENERAL DIVISION BETWEEN: SUNRAYSIA BROADCASTERS PTY. LTD Applicant AND : THE AUSTRALIAN BROADCASTING TRIBUNAL First Respondent AND : THE HONOURABLE MICHAEL DUFFY {as the Minister of State for Communications) Second Respondent AND : MURRAY RIVER FM LTD Third Respondent THE COURT: Sweeney J. PLACE : Melbourne DATE : 20 August, 1987 REASONS FOR JUDGMENT The applicant in these proceedings seeks an order to review the decision of the firstnamed respondent, The Australian Broadcasting Tribunal ("the Tribunal"), in a report dated 27 October, 1986, refusing to grant a supplementary licence to Sunraysia Broadcasters Pty Ltd ("the applicant") and, instead, to recommend to the secondnamed respondent the Honourable Michael Duffy (as the Minister of State for Communications) ("the Minister") that he should invite applications for a licence for an additional broadcasting station. The applicant currently 1s the operator of an amplitude modulated ("AM") radio service in Mildura under the call sign "3MA", and the decision of the Tribunal was made upon its application for a licence for a supplementary frequency modulated ("FM") radio service, to be operated by it in conjunction with its AM service. The application was made on 12 September 1984 pursuant to the terms of s.82A(1) of the Broadcasting and Television Act 1942 ("the Act") and was referred by the Minister under s.82A(3) of the Act for consideration by the Tribunal. It was the first application of its kind to come before the Tribunal. Sub-section (6) of s.83 of the Act provides that the Tribunal shall not refuse to grant a licence to a person unless it has held an inquiry into the grant of the licence and one of the grounds set out in the sub-section has been made out. The Tribunal did not seek to base its refusal to grant the supplementary licence on any of the grounds contained in paragraphs (a), (b), (c), (d) or (£) of sub-section (6), but rather upon paragraph (e), which reads as follows:- "(e) where the licence is a supplementary licence, the Tribunal, having due regard ee ee . -4, ae a Shae Ine Ae ~% FTI BT TG I rete ene ee on roa) sar feng too + «ap "" sub-paragraph (6)(e)(ii), the Tribunal shall have regard only to —-— to the need for the commercial viability of the broadcasting stations and television stations in the area to be served in pursuance of the licence, determines - (i) that an additional commercial broadcasting station or commercial television station, as the case requires, to serve that area is reasonably likely to be commercially viable during the period in which -the licence, if granted, would be in force; and (ii) that, having considered- (A) the need for an adequate and comprehensive service to be provided pursuant to the licence for such an additional station; and (B) whether, in its opinion, there is or would, if the supplementary licence were granted, be an undue concentration of the ownership or control, direct or indirect, of the media in the area to be served pursuant to the supplementary licence, it is in the public interest that applications for such a licence should be invited;" Sub~section 83(6A) of the Act provides:-— "(6A) The reference in paragraph (6)(e) to the media in the area to be served pursuant to the supplementary licence includes a reference to newspapers, journals and the like available in that area and to broadcasting stations and television stations licensed to serve that area". Sub~section 83(8) of the Act reads:- In considering the need referred to in (a) the nature of the community to be served in pursuance of the licence; -— fo aenlbaheiinet weniaater teat Vee = BR tn eet te oe een en ray, wy DT rt perce po te ese ens er x =e (b) the diversity of the interests of that community; and (c) the nature of the broadcasting and television services of which satisfactory reception is being obtained by that community". Sub-section 83(8A) of the Act provides: "(8A) The Tribunal shall, as soon as practicable after making a determination under paragraph (6)(e) - (a) inform the applicant and the Minister, by notice in writing, of the determination and the reasons for the determination; and {b} make a recommendation in writing to the Minister that he invite applications for a licence for a commercial broadcasting station or a commercial television station, as the case requires, to serve the area that would have been served in pursuance of the supplementary licence". To enable the Tribunal to decide the issues before it it was necessary for it to construe the relevant sections of the Act and in particular paragraph (e) of sub-section (6), under which it is the Tribunal's duty to determine a number of matters. The dictionary meanings of "determine" include "to settle or decide", "to come to a judicial decision; to decide". (Shorter Oxford English Dictionary). The word "determines" in sub-section (6) is, I think, properly to be construed as "decides". The language of the statute referring to the existing station is to be contrasted with that referring to an additional station. The former speaks of "the need for the commercial viability" of iain As ie the existing station and the latter refers to the question whether an additional station is "reasonably likely Lo be commercially viable". The Tribunal must have "due regard to the need for the commercial viability" of the one, in determining whether the other is "reasonably likely to be commercially viable" during the relevant period. As the requirements of sub-paragraphs (e)(i) and {ii) are cumulative, unless the Tribunal determines that an additional station is reasonably likely to be commercially viable, within the meaning of sub-paragraph (e)(i), the applicant is entitled to the grant of a supplementary licence. If the Tribunal so determines that an additional station is reasonably likely to be commercially viable, it is required to consider the matters set out in sub-paragraph (e)(ii)(A) and (B). The latter requires the Tribunal to consider whether there is a concentration of ownership which it characterises as "undue". Having considered the matters set out in sub-paragraph (e)(ii)(A) and (B), the Tribunal is required to determine that "it is in the public interest" that applications for a licence for an additional station should be invited. The Tribunal held a public inquiry into the application for a supplementary licence, occupying 24 hearing days between July 1985 and February 1986. Three companies, other than the applicant, made submissions to the inquiry objecting to the grant of the licence, and each was given leave to participate in the hearing as a party. The Tribunal said of them - "in summary, each of the parties contended that an additional FM station to serve the Mildura area would be commercially viable and in the public interest, and each put forward a 8 He ere model for an additional station to support this contention". One of these companies, Murray River FM Ltd (MRFM), sought and obtained leave from Woodward J. on 17 December 1986 to be added as a respondent to the present application, and thereafter took a full part in the hearing. In its report, after stating its interpretation of "commercial viability", the Tribunal said:- "1.17 In order to assess commercial viability in this report therefore the Tribunal has had regard to projected revenue and expenditure levels of 3MA and potential independent stations. In doing so it has taken the view that the future commercial viability of an existing station cannot be assessed by having regard exclusively to the type and level of service currently provided by that station and the level of expenditure presently undertaken by the licensee in relation to that service. 1.18 Consequently, in considering the need for the commercial viability of 3MA, the Tribunal has taken into account, amongst other things, possible changes to 3MA's service and expenditure in the face of competition from an independent service. 1.19 --- As previously stated this report focuses upon the potential viability of an ongoing viability of 3MA". The Tribunal noted that each of the three objectors said that it would seek the grant of an additional FM licence if the grant of a supplementary licence were refused. The Tribunal then examined in detail the respective services which each proposed for the Mildura area. It summarised the differences between the various proposals as follows:- "3.56 --- Briefly 3MA propose that the supplementary station would be a primarily music orientated 24 hour service set up as an wwe we wt ten compre eae meee se roe sarees ee automated system from midnight to 6am and on weekends. Models of independent stations are for a conventional small region radio station put forward by CBS, a composite commercial/community radio station advanced by MNG and MRFM's proposal for an automated station which would eventually be part of a satellite-fed network". The Tribunal then turned to consider in detail "the various aspects of existing and proposed broadcasting services and the levels of service which might be able to be delivered, in the light of the models of service outlined. All analysis is based on the assumption of 3MA continuing to provide an AM service". it ended this consideration as follows: "2.72 On balance therefore the fTfribunal concludes that an independent FM _ station together with the continuation of 3MA albeit in modified form, would provide a commercial broadcasting service to the Mildura area which is more likely to accord with the public interest than a supplementary service provided by Sunraysia Broadcasters in tandem with 3MA". The Tribunal's next chapter, 3, dealt with "Expenditure", recognising as it said in para 3.1, that "an essential component in the determination of commercial viability is operating expenses". The Report continued "In this chapter the Tribunal examines the operating expenditure of the existing AM station, the proposed supplementary service and the FM station models put forward by the objectors. Chapter 4 deals with the other element in the viability equation: radio revenue likely to be available to the stations. Drawing on Chapters 2,3 and 4, Chapter 5 will discuss the commercial viability prospects of the Mildura service area. 3.2 Because the Tribunal is required to have due regard to the commercial viability of an incumbent station in the context of forming a judgement about the viability prospects of an "> .ory ? Fn re ne ep ee nn Tr ee ~f sweet or mene ann independent station, it is necessary to deal with the operating costs of both. In this I. context it is also helpful to consider the 1. operating costs of a supplementary service. There will clearly be similarities in operating costs of each type of station, and : it is equally clear that the operating costs - will depend to a large degree on the service ! offered. There are two component parts to any consideration of operating expenses. Firstly the expenses themselves and secondly the rate of increases of those expenses. Both elements are dealt with in this chapter". ae oe The Tribunal made a detailed examination of the establishment costs estimated by each objector in respect of its own proposal and the methods of each in estimating expenditure growth rates, together with those of 3MA. It then set out a table of the operating expenditure of all country Victorian stations and all country Australian stations, a table of average annual expenditure growth rates in two station radio markets, and examined a document entitled "Economic Analyszs of Commercial Broadcasting Stations" introduced by the applicant. is In paragraphs 3.48, 3.49, and 3.50 the Tribunal said a "3.48 As stated earlier, this report will formulate projections of the likely rates of increase in operating expenditure. I 3.49 The problem facing the Tribunal is to i formulate projections of likely future 7 operating expenditure growth rates for the . existing station and for an additional station depending on whether the additional station is : a supplementary or independent. In arriving at projected annual operating expenditure rates it is the antention of the Tribunal to 1 provide a range of low, middle and high average annual increases. - 3.50 Evidence provided by the parties. - relating to real annual increases in operating t expenditure for an additional station ranged : from minus two per cent by MRFM, zero and 2.5 ; per cent by 3MA; 5 to 8 per cent by CBGS and 6 r to 17 per cent (including inflation) by MNG". The Tribunal did not determine a reasonably likely level of growth in operating expenditure but chose to use one per cent per annum as the "low" range of increases in operating expenditure, set the "high" projection at five per cent, and the "middle" projection at three per cent. The Tribunal proceeded to set out in detail the estimated Capital costs of each proposal, noting that "Each party's proposal is essentially different and this is shown in their projections of existing expenditure". It dealt with the various estimates of operating costs, noting the fact that the applicant suggested areas in which the costs of "the Proposed independent stations" as the Tribunal called them had been understated, but did not say whether it accepted or rejected those criticisms. Similarly, 1t referred to the suggestion by the other parties that in certain areas the applicant's costs for the supplementary station were too high and expressed its belief that the expenditure for 3MA "is capable of reduction" (3.72). The Tribunal noted that the costs for the additional station proposals ranged from $180,215 to $246,000 (3.80). It set out its views on costs in paras 3.82 and 3.83 which read as follows: "3.82 Table 6 summaries the present operating expenses the Tribunal considers appropriate for each proposal and the predicted operating expenses for the range of annual growth rates assuming the additional station commences transmission on 1 July 1987. The Station 1984/85 1987/88 1% 3% 5% $'000 $7000 $'000 $000 3MA-AM 458 472 500 530 3MA-FM 179 184 196 207 CBS 246 253 269 285 MNG 180 186 196 208 MRFM 236 243 258 273 3.83 In any case as has been made clear in this and the earlier chapter a significant proportion of operating costs is management controlled and service related. Substantial variation to the figures provided in Table 6 may occur depending on circumstances mentioned in Chapter 2 and in the following sections of this chapter". conclusions at which the Tribunal arrived questions of costs were set out in paras 3.89 to 3.92, which are as follows: "3.89 In the Tribunal's experience' the operating costs of a station are significantly dependent upon the level of service provided by that station. Each of the parties have (sic) proposed different types of stations with different levels of service and have (sic) consequently provided varying projections of operating expenditure. 3.90 The operating expenditure of the existing and proposed stations calculated by the Tribunal on the information supplied by the applicant and objectors are shown in Table 6. 3.91 In projecting likely annual rate increases in operating costs the Tribunal has used the concept of a range of increases. The Tribunal considers that the annual increase would range between one and five per cent. 3.92 It is expected that in the event of an independent station entering the Mildura market 3MA would be able to reduce its operating expenditure while still continuing to provide an adequate and comprehensive service and without affecting adversely the overall adequacy and comprehensiveness of the rm ee service to Mildura. However the reduction in service should not be to a point where the combined services of 3MA and an independent station would be less than the existing service". Chapter 4 was entitled "Revenue Projections", by way of introduction to which the Tribunal said:- "4.1 The Act requires the Tribunal to have regard to the need for the commercial viability of existing stations, and to determine whether an independent station 'is reasonably likely to be commercially viable' before it can refuse to grant a supplementary licence; $s83(6)})(e). The Tribunal must therefore make a judgement on the level of revenue likely to be available to radio in the Mildura area. 4.2 The judgements which the Tribunal must make about revenue and viability are not projections about what will actually happen. These judgements involve degrees of likelihood, not firm predictions. 4.3 The Tribunal is required to find a practically useful position in the spectrum of certainty. The spectrum extends from inability to say anything about the future at one end, to total certainty at the other. The Tribunal has selected the appropriate place by the following method: 1. Available revenue data is used to make projections. These projections are not firm predictions of what will happen, but attempts to extend figures based on known financial data from the past to the future. 2. The place in the spectrum of certainty is not one point, but a range. Figures for low, middie and high growth in that range are provided. 3. Projections will be made on the basis of the existing broadcasting service with the addition of a new FM radio station. 4. The projections are subject to qualitative factors mentioned in section E of this chapter. They are called 'qualitative' because they involve a greater multiplicity of subjective judgements than do the numerical revenue projections, and they also involve the a . : 1 12 potential for multiple interactions between the factors affecting revenue. A description of these factors is given to provide, in as detailed a way as possible, a context within which the revenue estimates can be considered". The Tribunal went on to set out revenue projection methods and the need for consistency in calculations. It described the ways in which the projected revenue figures presented by the parties "varied in their method of derivation and their scope" (4.9). In para 4.10, the Tribunal said:- "4.10 The types of projections presented can be broadly classified into two groups: i. Projections of revenue for an additional independent FM station only and not for the Mildura market as a whole. These projections were generally calculated by experienced broadcasters who assumed various shares of existing advertising revenue in Mildura for the new independent FM station plus' likely revenue from new advertisers in the region for the new station. Some of these estimates were based on surveys of businesses in the local area. 2. Projections of revenue for the whole Mildura radio market. In making these projections, parties considered various factors such as the relationship of national advertising to GDP, poplulation growth, general trends in the industry and Mildura's position in relation to larger advertising markets. Projections however were not calculated using any of the above factors as a specific basis for the revenue projection, but rather the trends and relationships were used as a context by parties in making a subjective judgement on the likely level of future revenue". The Tribunal then gave a short description of the methods Sm ry ce pore es Vr oererao naa sey weaee haat aaa aia CO a EE SY TS rn ere en ne RN er *> used by each of the parties in projecting revenue (paras 4.12 to 4.15). The Tribunal then said, It went on to say in paras 4.17 and 4.18:- "4.17 For the purposes of this report, a projection of the total Mildura radio revenue will be required to consider the commercial viability of existing and additional radio services in Mildura. After reviewing all the approaches to projection of revenue by the parties, the Tribunal considers that the approach it adopted in projecting broadcasting revenue in Canberra would be more appropriate since it combined the following three features: 1. Tangible link between economic forces and revenue projections. 2. Minimum number of subjective judgements (as those judgements are best applied after an initial projection has been made). 3. Simplicity (which makes easier the comparison and testing of the figures projected). 4.18 The method used for the Canberra report first examines the relationship between growth in national broadcasting revenue and growth of private consumption expenditure (or GDP), then projects a likely level of private consumption expenditure growth based on Canbera's projected population growth, and then derives the level of broadcasting revenue growth. In the financial projections of that report, no figure was given for the possible impact of additional stations. This report will include a factor to reflect the likely impact of an additional station after other qualitative factors have also been taken into account". "4.19 In this section, a projection of the growth rate of radio revenue in Mildura will be calculated. In short, this will be done by analysing the relationship between national advertising revenues and national private consumption expenditure (or GDP), followed by a calculation of a likely projected growth rate of private consumption expenditure for Mildura, and from this, a projection of the growth rate of radio revenue in Mildura will be made". in Section C of Chapter 4, that:- woe a CN arene ne rea Pome or gn ocr en re te bee = ws The views of the Tribunal on the growth rate of radio revenue in Mildura were set out in Table 9 (para 4.45) whach is as follows: " TABLE 9 RADIO REVENUE PROJECTED ANNUAL GROWTH RATES IN MILDURA RADIO SERVICE AREA Private consumption Difference between radio Radio expenditure (Table 6) revenue and private revenue consumption expenditure {Table 8) % % % 3.0 plus 2.4 equals 5.4 2.6 plus 1.2 equals 3.8 2.3 plus 0 equals 2.3 In summary, the range of average annual rates of radio revenue growth is projected to be: High 5.4 Middle 3.8 Low 2.3 4.45 The resulting projected range of radio revenue growth rates compares with the past average annual growth rate of revenue for 3MA in Mildura between 1975 and 1984 of 6.1 per cent and in 1983-884 of 12.0 per cent. This comparison once again indicates that a conservative approach has been taken in these calculations". The Tribunal did not determine a reasonably likely level of growth in radio revenue for Mildura but projected three possible annual rates of growth "High 5.4 Middle 3.8 Low 2.3" The Tribunal considered the "possible" effects of an additional broadcaster in Mildura (4.61) and regarded a one-off aeu ce ne oe co ' 15 uncrease in revenue as likely, whether an additional or a supplemenlary service is introduced (4.82). The Tribunal referred to the evidence which the parties had placed before it and made comparisons with other markets. The estimates of the witnesses, it said, "suggest a one-off growth factor ranging from zero to 15 per cent". It then said "4.83 As the evidence, which is primarily estimated does not provide a means of confidently predicting a single figure for a one-off increase in revenue with the introduction of a new FM station, the total range in growth rate from zero to 15 per cent will be used in these calculations. The same one-off increase will be used in the calculations for projecting the likely total revenue of the Mildura radio market whether an additional supplementary or independent licence is granted. The effect of the increase is assumed to be spread over the first two years of the new station's operation". Table 11 (para 4.84) was as follows:- TABLE 11 RADIO REVENUE PROJECTION FOR MILDURA, WITH AN ADDITIONAL FM STATION $'000 LOW MIDDLE HIGH REAL GROWTH RATE 2.3% 3.5% 5.4% ONE-OFF GROWTH FACTOR 0% 7.5% 15% YEAR 1984/85 691 691 691 1985/86 707 717 728 1986/87 723 744 768 1987/88 740 800 867 1988/89 757 861 979 1989/90 774 894 1032 1990/91 792 928 1087 1991/92 810 963 1146 1992/93 829 1000 1208 a SoS wee fe eee San ry The Tribunal in setting out low, middle and high columns, chose for the real growth rate the figures of 2.3%, 3.8% and 5.4%, and as the one-off growth factor the figures of zero, 7.5% and 15%. It is difficult to see why the Tribunal chose zero as its low one-off growth figure, bearing in mind its previously quoted opinion that a one-off increase in revenue will be likely (4.82). In Chapter vV, headed "Commercial Viability", the Tribunal said: "5.6 In making a decision about the grant of a supplementary licence, the Act requires the Tribunal to decide whether an independent station is reasonably likely to be commercially viable during the period for which a supplementary licence would be in force. In considering the likely viability of an independent station, the Tribunal is to pay 'due regard to the need for the commercial viability of the other radio and television stations' in the area. The requirement is to consider the need for the viability of existing stations. There is no requirement that the fribunal automatically reject an independent option for the expansion of radio because an existing station may be threatened. Moreover because of its nature, commercial viability is dependent on enterprise in a changing market place which can be neither guaranteed nor predicted by the Tribunal". In paras 5.7, 5.8, 5.9, 5.10, 5.11 and 5.12 the Tribunal said: "5.7 To make a judgement about' the prospective commercial viability of the existing AM radio and the likely viability for a prospective independent in the Mildura area the Tribunal must first make an assessment of the levels of revenue which appear likely to be available in the future in the Mildura market, and the levels of expenditure which might be made by incumbent and additional stations in order to deliver a service which is adequate and comprehensive. These assessments and their bases have been dealt nt w ee + ' -i- Sik eareunnduc deans netneenee anita anc aeamneader iaadakemetemensetaies taeacinetaretiammaanter ater atkeaeet meatier wat with in chapters 3 and 4. These assessments are not predicitions of what will actually happen, because of the uncertainty of the many relevant factors bearing upon these matters and their complex interrelationships. So for example, revenue patterns will be affected by trends in the national and international economy as well as growth factors in the local economy, which are also impossible to predict with any certainty. Expenditure patterns will be affected by individual management decisions concerning the type and level of service provided and the most cost efficient means of delivering the service. REVENUE AND EXPENDITURE CONSIDERATIONS 5.8 The Tribunal cannot accurately predict the future, and as indicated above does not regard the Act as requiring it to do more than estimate likely future trends relevant to commercial viability, and apply its estimation. What follows is a series of revenue against expenditure comparisons based on an analysis of the projected costs and range of revenue projections as set out in chapters 3 and 4 of this report. 5.9 Drawing on past experience, it can be reasonably assumed that radio revenue for Mildura is likely to continue to grow in the medium term at a rate not substantially less than the 6.1 per cent experienced by 3MA between 1975 and 1984. Conservative revenue growth projections are made in this report on the basis of a low to high range of 2.3 per cent to 5.4 per cent. Together with a one-off growth factor of up to 15 per cent spread over the first two years of operation of an additional service. 5.10 Calculations have been similarly made to project likely operational expenditure growth, based on a low to high range of one per cent to five per cent. 5.11 There are four options for an additional service to operate in the Mildura area. The options and their anticipated operating costs expressed in 1984/85 dollars are as follows: Option 1 3MA-AM/3MA-FM $637,000 2 3MA-AM/CBS $704,000 3 3MA-AM/MNG $638,000 4 3MA-AM/MRFM $694,000 5.12 As can be seen, options 1 and 3 are very close in cost, as are options 2 and 4. For ewer we SOUT MTR Grr tg ie ween pn ee ie tee ee TE a rn ee gt ee rey, = POO ree rere er eee ee ee ee 4, aa csp oe sy Root eee a The In paragraphs 5.17, 5.18 and 5.19, headed "Conclusions", the purposes of matching revenue with expenditure, the costs of option 2 and option 3 will be used as they represent the highest and lowest cost estimates 1f£ an independent licence was granted. Option 4 falls within this range and option 1 which is the grant of a supplementary licence is costed to be approximately the same as option 3. These costs are extrapolated to 1987/98 projected expenditure figures as set out in Table 6 of Chapter 3 using the low, medium and high estimates of annual growth rates as calculated in that chapter (see paragraphs 3.52 - 3.54). Using the same growth rates these figures can be further projected into the future. For each of the two cost options, the three calculations of growth in cost can be compared with the revenue projections set out in Chapter 4 and summarized in Table 11 of that chapter. These comparisons are set out in the following six tables". Tribunal after setting out the tables, "5.14 It can be seen from the tables that in the great majority of comparisons of revenue and expenditure, a surplus occurs for option 3. It is only when high expenditure growth is combined with low revenue growth that a net deficit is projected. 5.15 Similarly for option 2 it is only when the combination of high expenditure growth with low or medium revenue growth occurs that a deficit is projected. 5.16 As can be seen from the historical data in chapter 3 of this report the level of annual expenditure growth does not normally exceed the level of annual revenue growth. It is also relevant in such circumstances to take into account the availability of loans or overdrafts which will facilitate a positive cash flow during a period of loss-making in anticipation of profitability being achieved in the future. Thus a station can service a limited period of loss-making. Similar calculations can be made which illustrate that operating costs even higher than option 2 can be met and a surplus achieved within the range of revenues estimated". said:- the Tribunal said: "5.17 From these revenue and expenditure projections, the Tribunal 1s reasonably confident that within a five year licence period, there is likely to be sufficient revenue available within the service area to generate a surplus over projected joint expenditure of an independent AM service and an independent FM station. 5.18 On the basis of the above considerations and having regard to the need for 3MA'sS commercial viability the Tribunal concludes it is reasonably likely that a new independent FM radio station will be able to provide an adequate and comprehensive service and be commercially viable within a five year licence period. 5.19 In arriving at this decision the Tribunal acknowledges that 3MA is likely to have to rationalise the cost of its existing operations, This may involve some reduction in the level of its current service, having regard to the introduction of an independent station. However, in the Tribunal's view the introduction of an independent station is likely to improve the overall commercial broadcasting service in the Mildura area". Had the Tribunal construed paragraph (e) of sub-section (6) correctly, one would expect to find in its decision i. that, having due regard to the need for the commercial viability of the existing station, it determines that an additional station is reasonably likely to be commercially viable during the period in which the licence, if granted, would be in force. that, having considered A. the need for an adequate and comprehensive service to be provided pursuant to the licence for such an additional station; and B. whether, in its opinion, there is or would, if the ' 20 supplementary licence were granted, be an _ undue concentration of the ownership or control, direct or indirect, of the media in the area to be served pursuant to the supplementary licence, it determines that it is in the public interest that applications for an additional licence should be invited. It is, in my opinion, clear from a reading of the Tribunal's report that it did not correctly construe paragraph (e). It did not determine the total revenue which would probably be available to 3MA and an additional station. It did not determine either 3MA's probable share of that total, or that the lowest revenue which, on the balance of probabilities, 3MA would obtain was such that, when balanced against its probable expenditure, the need to have due regard to its commercial viability would be met. Before the Tribunal there was lively controversy in respect of the audience shares and revenue likely to be obtained by 3MA and an additional FM station. The applicant's case was that an FM station would attract 67 per cent of the revenue (para 4.65). MNG contended that a new FM station would achieve an audience rating between 22 and 26 per cent within two years of commencing service. The Tribunal said (para 4.66) that "It seems more likely, however, that a division of audience would occur somewhere between the estimates provided by 3MA and those of MNG. It 1s unrealistic to attempt to predict with any accuracy the audience split between AM and FM services in a_ regional market". Foal oe tia " ame \ se eee ee ne aI There is an obvious conneclion between likely audience split and likely shares of total revenue. By declining to attempt to determine the former, the Tribunal omitted a step which would, have been relevant to the performance of its statutory duties under paragraph (e). The Tribunal took into account "possible changes to 3MA's service and expenditure in the face of competition from an independent service" (para 1.18). In para 3.55 the Tribunal said:- "Without pre-empting how 3MA may react to such competition, one option is to reduce the hours of service and introduce other savings in station management so that the station operates at its pre 1983 level when a second station commences broadcasts. This base level of expenditure or operating costs is discussed in the next section. Annual increases in operating expenditure thereafter would be in line with the low, middle and high projections outlined above". In this paragraph the Tribunal simply referred to this reduction in the hours of service by 3MA as "one option". It did not determine likely annual increases in expenditure thereafter, simply saying that they would be "in line with the low, middle and high projections outlined above". It is difficult to reconcile the statement in para 5.6 that "there is no requirement that the Tribunal automatically reject an independent option for the expansion of radio because an existing station may be threatened" with the language of the Act, which — ", ° Tr an 2 em Ro ne ae ern ye te ad sy am Sopra id Adee , 22 does not speak of a threat to the existence of the existing station, but rather of the need for its commercial viability. There is nothing automatic about the process, but a finding that the "existing station may be threatened" and the likely seriousness of that threat appear to be factors to be weighed by the Tribunal when, having due regard to the need for the commercial viability of the existing station, it determines the question in sub-paragraph (e)(i) and considers the matters in sub-paragraph (e)(ii) (A) and (B) in the process of determining whether it is in the public interest that applications for an additional licence would be invited. The Tribunal did not take the steps necessary to enable it to have due regard to the need for the commercial viability of the existing station. It did not determine on the balance of probabilities what lay ahead of 3MA in the prescribed period. It chose to use the following "ranges":- 1. for possible establishment costs of 3MA and_ the objectors, from $332,500 to $463,000 (para 3.58), 2. for operational costs for 3MA AM and FM and for 3MA AM together with those of the objectiors, from $637,000 to $704,000 (para 5.11) 3. for operational expenditure growth, from one per cent to five per cent (para 5.10) 4, for revenue growth, from 2.3% to 5.4% (paras 4.44 and 5.9) 5. for the one-off growth factor in revenue from zero to 15% (para 4.84). These ranges constitute variables, the possible combinations and een ane — rock ore wth pam a ' . - ' ' 4 ar ws Peer . : wh OF ied eee tees . 23 permutations of which may lead to greatly differing results. The Tribunal is obliged to determine, one way or the other, the questions which the Act poses for it, even though it finds the task to be fraught with difficulty, dependent upon attempting to form an opinion about future events, or subject to the risk of error. Courts frequently find themselves in such a position, as, for example, in assessing damages once and for all to encompass all the vicissitudes of the rest of the life of an injured party, the length of which it is often very difficult to assess, but they must perform such tasks as best they can. The obligation to decide the questions posed by the statute is inescapable. In its written submissions delivered after the close of oral argument MRFM conceded, as I believe, correctly, that "when it 1s making its determinations and recommendations pursuant' to s.83(6)(e)(i) and (ii), the Tribunal must form a positive opinion that 3MA will (as usual on the balance of probabilities) be able to survive commercially whilst complying with the Act... ". This concession was made in answer to the applicants contention in paragraph 8 of its written reply:- "In determining 3MA could operate on its costs applying in 1982 the Tribunal did not have due regard to the need for the commercial viability of 3MA because it did not have due regard to the effect on: (1) the level of operations of 3MA; (2) the adequacy and comprehensiveness of the service 3MA could offer; (3) the revenue it could generate". Te er er ar ee ere , "7 TI? a eae ae y per mee aw ee In my opinion, this contention has been established. The applicant submitted in its reply that MRFM was unable to point anywhere in the report to "where the Tribunal considered the position of 3MA in 1985 or the future if 3MA was operating on its 1982 costs". No answer was made to this contention in MRFM's written submissions, and I accept it as correct. The Tribunal did not determine that "an additional station is reasonably likely to be commercially viable" within the meaning of paragraph (e). It failed to determine its likely revenue or expenditure. It failed to determine what was reasonably likely to be the total revenue available to both stations or the additional stations's share of it during the period. It failed to determine what the additional stations's revenue was reasonably likely to be during the period. It did not determine whether an additional station was reasonably likely to receive sufficient revenue to be commercially viable, while providing an adequate and comprehensive service. This failure arose, in my opinion, through the failure of the Tribunal to construe the Act so as to appreciate correctly the duties imposed upon it. The applicant claimed that breaches of the rules of natural justice occurred in connection with the making of the Tribunal's decision. It relied upon s.5(1) of the Administrative Decisions (Judicial Review) Act 1977 ("the AD(JR) Act"), and also upon the provisions of ss.25(3) and 80A of the Act. er: Averaas . te or ee a on rt ee ee > . ; 2 sre . Section 25(3) provides: "25(3) Subject to section 19, the Tribunal shall ensure that every person having an interest in proceedings before the Tribunal at an inquiry 1s given a reasonable opportunity to present his case and, in particular, to inspect any documents to which the Tribunal proposes to have regard in reaching a decision in the proceedings and to make submissions in relation to those documents". In the present case no question arose under s.19, which refers to the confidential nature of any evidence or matter. Section 80A reads as follows: "80A. In the performance of its functions under this Part, the Tribunal shall act fairly and impartially and shall observe the rules of natural justice". The applicant gave particulars of this aspect of its claim as follows: "(a) In breach of s.25(3) the Tribunal did not give 3MA a reasonable opportunity to inspect certain documents to which the Tribunal had regard in reaching its decision and to make submissions in relation to those documents. (b) In breach of s.80A the Tribunal took into account facts, matters and issues not before the inquiry in making its decision without giving 3MA an opportunity to deal with those facts, matters and issues. Further particulars are annexed hereto". These further particulars were:- "The Tribunal failed to make its decision on the evidence presented at the inquiry and took into account and made findings upon facts, matters and issues not before the inquiry and of which 3MA did not have the opportunity to be heard. The Tribunal failed to give 3MA a os yee est peo eee ee ee ee ~ * as a rrovaice nr ar reasonable opportunity to present its case and the Tribunal had regard to documents in Leaching their decision without giving 3MA a reasonable opportunity to inspect the same and to make submissions in relation to those documents. The documents, facts, matters and issues not before the inquiry are the following: (a) the assue of the number of stations offering a 24 hour service and the other matters as referred to in paragraph 2.56; (b) the financial returns of the stations operating in Australia as referred to in paragraph 3.34; (c) the information relating to the six two station markets as referred to in paragraph 3.37 and Table 3 and the documents from which the information referred to therein was derived including the relevant ABT11s; (d) the information relating to Port Pirie/Port Augusta and Katanning/Narrogin as referred to in paragraph 3.38 and the documents from which the information as referred to therein was derived; (e) the operating costs of the stations operating in the ten smallest markets in Australia as referred to in paragraph 3.78 and the documents from which the information as referred to therein was derived including the relevant ABT11S; (£) the ABT, Canberra Supplementary Licence Inquiries, Interim Revenue Report as referred to in paragraph 4.75; (g) the McNair Anderson, Radio Audience Survey, June 1986 as referred to in paragraph 4.66; (i) the issue whether 3MA could operate on its 1982 cost structure without a decrease in its revenue earning potential as referred to in paragraphs 3.72, 3.73, 3.81, 4.84 and Chapter 5;". From a perusal of the Report, I am satisfied that the re eee ————o v a erp ten ' : 27 documents referred to in paragraphs (b) (c) (d) (e) and (g) of these particulars were documents to which the Tribunal had regard in reaching its decision. It is clear that the applicant was not given the opportunity to inspect any of them or to make submissions in relation to them. I do not find it necessary in this context to consider the issues raised by paragraphs (a) and (i) of the particulars. These breaches of s.25(3), standing alone, would require that the matter be remitted to the Tribunal. In these circumstances it is not necessary to consider the reliance which the applicant placed upon the same material in respect of s.80A. The applicant also claimed that: "The Tribunal did not determine whether, in its opinion, there is or would, if the supplementary licence were granted, be an undue concentration of the ownership or control of the media in the area because it did not properly 'construe and apply the meaning of 'undue concentration'". The heading of Chapter 6 of the Report was "Concentration of Ownership or Control" and the chapter began by setting out the terms of sub-paragraph (e)(ii)(B). It then said "6.2 The requirement for the Tribunal to consider the matter of concentration of ownership or coritrol in the context of an application for the grant of a supplementary licence was introduced by the Broadcasting and Television Amendment Act, 1984. The purpose of the requirement was stated by the Minister for Communications in his second reading speech on the Broadcasting and Television Amendment Bill 1984 as follows: "Honourable members will recall that, in a statement to this House on 30 November 1983, I indicated that the supplementary licence sa T Yor ty ee eee ees Topp tn yee or oor —— " scheme would. proceed. I also foreshadowed the antroduction of legislation to make explicit the need for the Australian Broadcasting Tribunal to take concentration of media ownership in an area into account when deciding whether it should grant a supplementary licence or recommend to me that I should invite applications for an independent commercial licence. I pointed out that, just as the Government is committed to the proposition that the greatest possible diversity of programming ought to be available to audiences wherever they live in Australia, so we are also committed to the proposition that, in any area, programming diversity ought to be provided by as wide a range of competitively and independently owned media outlets as possible. The Labor Party, when in opposition supported the broad thrust of the supplementary licence scheme. However, at the time, concern was expressed that the scheme had the potential to exacerbate concentration of media ownership in a number of areas. For example, in some areas, one company could own or control the sole commercial radio station and the sole commercial television station and, in some instances, the local newspaper as well; Sub-section 83(6) of the Broadcasting and Television Act requires the Tribunal to have regard to specific public interest criteria when it is considering whether to grant a supplementary licence application or to recommend that applications be invited for an additional commercial licence. This Bill will add concentration of media ownership or control in the area to be served to the public interest criteria to be considered by the Tribunal. The term "media" has been defined so as to include Press, radio and television. This amendment is consistent with the Government's policy of encouraging diversity in programming and control.' Parliamentary Debates (vol H of R12) 3 October 1984 p. 1495-6". Para 6.3 read as follows: "6.3 The approach which the Tribunal has adopted in this report follows that set out in its Policy Statement, as follows: 'Concentration of Media: 4.4 4.5 In administering this criterion the Tribunal will examine the ownership structure of each of the relevant media. The Tribunal will be particularly concerned to identify shareholding or voting interests that exceed 15 per cent, using as a convenient measure the tracing and deemed control provisions contained in Divisions 2 and 3 of Part Iv of the Act. The Tribunal will generally consider an undue concentration of the media may be present in an area where a person has shareholding or voting interests exceeding 15 per cent in more than one of the existing media in that area. For this purpose each printed publication will be regarded as separate medium. Where this is the case the Tribunal will further investigate each applicant's cross-media interests to determine whether an undue concentration of ownership or control would occur in the area if a supplementary licence were granted. In making' this determination the Tribunal will have regard to the nature of the media services available in the area including, in relation to print interests, the circulation, coverage and subject matter of the publications concerned. Where a person does not have shareholding or voting interests exceeding 15 per cent in more than one of the existing media in the area _ the Tribunal will generally not regard an undue concentration of the media as being present in that area or created by the grant of a supplementary Licence.'". qr SE ee ~ 7 Fy Fn ip rer ere ee ny The Tribunal, after examining the facts in relation to media ownership and control in the Mildura area, set out its conclusion as follows:- "6.20 The Tribunal 1s required to consider whether the grant of a supplementary licence to Sunraysia Broadcasters would give rise to or exacerbate an undue concentration of ownership or control of the media in the Mildura area. Accordingly it is appropriate to have regard to the purpose or object of the requirement that the Tribunal consider the matter of undue concentration of ownership or control. 6.21 In the Tribunal's view the Minister's second reading speech, set out above in Paragraph 6.2, makes it clear that the legislature intended the fribunal_ to consider the matter of undue concentration of ownership in this context as a means of ensuring that 'in any area, programming diversity ought to be provided by as wide a range of competitively and independently owned media outlets as possible.' 6.22 If the Tribunal were to grant a supplementary licence to Sunraysia Broadcasters this would lead to a situation where a small group of persons belonging to the same family (namely, C D Lanyon, W R Lanyon and D J _ Lanyon) together with a family trust company (namely Taler Pty Ltd) would control the only two commercial radio services licensed for the Mildura area. The same family trust company (Taler) indirectly owns and controls the company which publishes the Sunraysia Daily, the only daily newspaper published and circulating in the Mildura area. 6.23 In the Tribunal's view the consideration it must give to the issue of potential concentration of ownership or control of the media in the areas to be served has particular significance for media carrying local news and information. As oulined in paragraph 6.18 the major media sources of local news and information for the Mildura area are STV-8, 3MA and the he nenae woe oe cere - sande tabaeihcann tee tealiiinee . . 31 Sunraysia Daily and = as stated in paragraph 6.19, the resources of the Sunraysia Daily are proposed to be used for local news services of both 3MA and the proposed supplementary service. 6.24 If the Tribunal were to recommend to the Minister that he invite applications for an independent licence to serve the Mildura area this would provide an opportunity for a wider range of competitive and independently owned media outlets to operate in the Mildura area than if the Tribunal were to grant a supplementary licence to Sunraysia Broadcasters. Furthermore, given the circumstances outlined relating to news and information, particularly local news and information, such a recommendation would create an opportunity for the development in the Mildura area of a greater diversity in the sources, selection and presentation of local news and information. 6.25 In these circumstances the Tribunal is of the opinion that if a supplementary licence were granted there would be an undue concentration of the ownership and control, direct and andirect, of the media in the area". The Tribunal (in para 6.21) said that the Minister's second reading speech "makes it clear that the legislature intended the Tribunal to consider the matter of undue concentration as a means of ensuring that "in any area, programming diversity ought to be provided by as wide a range of competitively and independently owned media outlets as possible". This view of the sub-paragraph comes close to construing it as prescribing at least a prima facie policy of preference to applicants with no existing media interests in the area. In para 6.24 the Tribunal expressed a similar view when it said that if it were to recommend to the Minister that he invite a x ' 32 applications for an additional licence "this would provide an opportunity for a wider range of competitive and independently owned media outlets to operate in the Mildura area than if the Tribunal were to grant a supplementary licence to Sunraysia Broadcasters". In my opinion, the Tribunal misconstrued sub-paragraph (e)(i2)(B), which required it to consider "whether, in its opinion there is or would, if the supplementary licence were granted, be an undue concentration" of ownership or control. The phrase "undue concentration" recognises the fact that there may be a concentration, which is not, in the opinion of the Tribunal, "undue". By definition, an applicant for a supplementary licence must be the holder of an existing licence, and the mere grant of a supplementary licence might result in some concentration of ownership. The Tribunal was called upon by the sub-paragraph to say whether in its opinion, in all the prevailing circumstances, there is or would be a concentration characterised by it as "undue". Its failure to do so resulted from an error of law in construing the Act. There is another possible aspect of the case, which was not argued before me, namely, that the Tribunal considered the question of public interest before, and not after, it had determined and considered the matters referred to in sub-paragraph {e)(ii)(A) and (B). Some five chapters before turning to consider those matters, the Tribunal stated its conclusion on public nm ne en 7 " + Ve Tg oe we en eer ee Dg nee te et ptr ee ee toy age TT TSN interest in para 2.72, saying "On balance therefore the Tribunal concludes that an independent FM station together with the continuation of 3MA albeit an modified form, would provide a commercial broadcasting service to the Mildura area which is more likely to accord with the public interest than a supplementary service provided by Sunraysia Broadcasters in tandem with 3MA". After it had dealt with the matters set out in sub-paragraph (e)(ii)(A) and (B), the Tribunal, in para 7.4 merely said "Further, the Tribunal concludes that an independent FM Station together with the continuation of 3MA, albeit in modified form, would provide a commercial broadcasting service to the Mildura area which is more likely to accord with the public interest than a supplementary service provided by Sunraysia Broadcasters". One would have expected the Tribunal — i. to determine the question posed in sub-paragraph (e)(i); 2. to consider "the need for an adequate and comprehensive service to be provided pursuant to the licence for such an additional station" (sub-paragraph (e)(ii)(A)); 3. form its opinion on the question of undue concentration of ownership or control (sub-paragraph (e)(ii)(B)); and 4. then proceed to take these matters into account as factors to be weighed in determining whether "it is in the public interest that applications for such a licence should be invited". This aspect of the Tribunal's method of dealing with the question of public interest may have involved an error of law, or a failure to observe procedures required by law to be observed, arose sors wrock oo re ee a npn ene . . 34 but, as the question was not argued before me, I make no finding upon it and do not take it into account. I mention it only in case it may be of any assistance to the Tribunal and to the parties when the matter is further considered. The Court's order is that the decision and recommendation of the Tribunal dated 27 October 1987 be set aside, and that the application be remitted to the Tribunal to be dealt with according to law. It is not appropriate to give the other directions to the Tribunal which the applicant sought. The Court does not know how the Tribunal may be constituted to deal with the application. I will hear counsel on the question of costs. I certify that this and the preceding thirtythree (33) pages are a true copy of the Reasons for Judgment herein of the .Honourable Mr. Justice Sweeney Dated: 20 August, 1987 LO — ar Aen Rome catiliond Associate TE SI ie ere te re er nee eee a VG 400 of 1986 Counsel for the applicant: Solicitors for the applicant: Counsel for the first respondent: Solicitors for the first respondent: Counsel for the third respondent: Solicitors for the third respondent: Mr P.M. Guest Q.C. Mr R.Mc K. Robson Corrs Pavey Whiting & Byrne Mr J. Mazurkiewicz Australian Government Solicitor Mr D.K. Catterns Scott & Williams Dates of hearing: 6, 7, 8, 9 July, 1987