COPYRIGHT TRIBUNAL OF AUSTRALIA

Phonographic Performance Company of Australia Limited under s 154(1) of the Copyright Act 1968 (Cth) (No 2) [2017] ACopyT 1

COMMONWEALTH OF AUSTRALIA Copyright Act 1968

THE TRIBUNAL DIRECTS THAT:

1.    The parties are to confer further on the Bundling Issue within 28 days.

2.    If no agreement is reached on that issue each party is to provide the Tribunal with a submission not exceeding five pages on the Tribunal’s suggested methodology at [54] within a further 14 days.

3.    In the event that agreement is reached on the Bundling Issue the parties are to provide the Tribunal with a final form of the scheme within 14 days of reaching agreement.

REASONS FOR DETERMINATION

THE TRIBUNAL:

1.     Introduction

1    The Tribunal determined the direct pricing issues between the parties on 13 May 2016: Reference by Phonographic Performance Company of Australia Limited under s 154(1) of the Copyright Act 1968 (Cth) [2016] ACopyT 3. There remain for resolution the following matters:

(i)    The PPV Issue. This involved a consideration of PPCA’s submission that the revenue Foxtel received from pay-per-view (‘PPV’) sporting events should not be excluded from its subscription revenues (upon which the Tribunal determined in its first decision that PPCA’s fee is to be calculated). This issue was reserved for further submission at paragraphs [139]-[140] of the first decision;

(ii)    The Power Issue. The question here was whether the Tribunal could impose non-price terms by means of a scheme which were inconsistent with the terms under which PPCA was itself licensed by its own members. That licensing took place under an agreement called the input agreement. PPCA’s submission was that the Tribunal could not, by a scheme, license Foxtel to do acts which PPCA was not itself authorised to do under the input agreement;

(iii)    The Streaming and On-demand Issues. Under the scheme proposed by PPCA, Foxtel is to receive, inter alia, a right to use PPCA’s sound recordings as part of the audiovisual content streamed by Foxtel over the internet or other communications networks (i.e. not as part of a ‘broadcasting service’ within the meaning of Part 2 of the Broadcasting Services Act 1992 (Cth)). Under PPCA’s proposed scheme, Foxtel’s subscribers will not, however, be permitted to keep a copy of the program which is streamed, the nature of which remains from the subscriber’s perspective, ephemeral. Foxtel submits that users should be permitted to keep a temporary copy for subsequent replay. A related debate concerns the on-demand right that PPCA proposes. Unlike the streaming right, the on-demand right contemplates that a subscriber will be permitted to receive content and store it for a period of time on their device. However, under PPCA’s proposal this can only occur where the content has itself been broadcast as an actual part of Foxtel’s regular subscription television service (i.e. via HFC cable or satellite) or will be so broadcast within a further 30 days. Foxtel seeks to modify this right so as to delete this requirement. There is also a debate as to how long the subscriber may store such a program. Foxtel resists PPCA’s argument that any such storage should be capped at 12 months;

(iv)    The Bundling Issue. In addition to providing its subscription television service as a standalone retail product, Foxtel also provides the service bundled with other services such as ADSL. The debate between the parties concerned how any discount that Foxtel offered on the subscription television service in a bundle was to be treated;

(v)    The Additional Charges Issue. Foxtel charges its subscribers fees for late payment of an account, the provision of statements, early termination of the subscription agreement and the cost of unrecovered equipment. PPCA argued that these fees should be included in the subscription revenue. Foxtel argued that they were in the nature of cost recovery and should not be; and

(vi)    The Wording Issues. There remained a small band of drafting issues centred around the proposition that the scheme should also extend to cover subscribers who only obtained Foxtel’s services via a communications network and who never availed themselves of its broadcast services using cable or satellite. The parties agreed that this was something the scheme should do but they differed, in minor ways, as to whether the wording of the scheme in fact achieved this.

2    It is useful to deal with this in the above order.

2. The PPV Issue

3    Although neither party had raised it as an issue, the Tribunal concluded at [135] in its first decision that in calculating Foxtel’s subscription revenues, the revenue from PPV sporting events should not be included. It accepted at [139], however, that PPCA had not been heard on this point and gave it a further opportunity to make submissions about it.

4    Such further submissions were received from PPCA on 22 July 2016 and from Foxtel on 5 August 2016. Subsequently, on 19 September 2016, PPCA applied to put into evidence a confidential document produced by Foxtel. Further evidence was elicited by both parties on this issue; for PPCA by an affidavit of Ms Harrison of 19 September 2016 and for Foxtel by an affidavit of Mr Fairbairn of 26 September 2016.

5    On the question of whether this fresh evidence should be received, the parties then exchanged further written submissions on 30 September 2016.

6    PPCA advanced a number of initial arguments about PPV sporting events which the Tribunal did not find persuasive. First, it was submitted that the revenue for PPV sporting events should be included in Foxtel’s subscription revenues because the Tribunal had concluded at [80]-[81] in its first decision that commercial sound recordings were used in sport, sometimes extensively. However, as Foxtel correctly pointed out, that finding was not about PPV sporting events but rather was about sound recordings across the Foxtel sports channels generally. The use of sound recordings in PPV sporting events may be different to its use in other sports broadcasts.

7    Secondly, PPCA submitted that neither party had raised the issue of PPV sporting events before the Tribunal. This is true. But the point has now been raised and the fact that it was not raised beforehand tells one nothing about how it should be resolved.

8    Thirdly, PPCA developed an argument that the excision of PPV sporting events from subscription revenue might well be revenue neutral. The Tribunal does not accept that this is particularly probative. Depending on the numbers which are selected it is certainly possible to produce the result to which PPCA points. However, the selection of different numbers based on different assumptions about subscriber trends will lead to a different outcome. Ultimately, therefore, this argument does not seem to prove much.

9    Fourthly, the previous submission was developed as part of a more general submission that the administrative difficulties for PPCA associated with separating out PPV sporting event revenue from subscription revenue were not justified in light of the potentially small amounts of money involved. The Tribunal however does not see any inconvenience for PPCA. The difficulties are at Foxtel’s end where the calculations must be done and Foxtel, for its part, was explicit in denying that it was troubled by the suggested inconvenience.

10    PPCA did, however, make two other submissions which had more merit.

11    First, it made the point that Foxtel did not deny that it wanted a blanket licence for PPV sporting events. If it wanted a licence, so the argument ran, why should it not pay for it? In a real sense, the Tribunal’s observation in the first decision that revenue from PPV sporting events should be excluded from subscription revenue depended on the observation that the quantity of commercial sound recordings used in a PPV sporting event, such as a live boxing match, would not be typically great. This does not mean that Foxtel should pay no fee for PPV sporting events but that a lower rate than that applying to other content might be justified.

12    As an alternative submission, Foxtel made just such a submission. It also submitted that PPV sporting events will be marketed and purchased by subscribers on a different basis to other content. Subscribers purchase the opportunity to view a particular sporting event, and the use of sound recordings is unlikely to play any role in their purchasing decision. A flaw in this contention – apart from the danger of generalising – is that it fails to account for the fact that sound recordings may be used in a PPV event and that Foxtel seeks a licence that embraces any such use.

13    Secondly, PPCA pointed out that the licensing formula chosen by the Tribunal in its first decision included Foxtel’s PPV revenue for the financial year ending 30 June 2011. Unless there was significant growth in the proportion of PPV revenue in subsequent years, the change in the licence fee under the Tribunal’s formula would be de minimis. PPCA sought to rely upon additional material about Foxtel’s subscription revenue to support this contention. PPCA submitted that the result did not justify separate treatment for PPV revenue in the licensing formula, given that there were risks in treating it differently to other revenue. One risk was that the concept of a PPV sporting event is ambiguous and opens debate on what should be treated as such an event. Another risk is that Foxtel might have an economic incentive to classify events as PPV sporting events if doing so would excise them from the licensing formula.

14    To resolve these debates it is necessary first to consider whether the additional material tendered by PPCA should be received. There is no doubt about the power of the Tribunal to receive the material. The material itself consists of a single page entitled ‘Attachment 1’, the contents of which the Tribunal accepts are confidential and should not be disclosed in these reasons. What it contains are Foxtel’s revenues for PPV sporting events for the years 2010-2016, figures which PPCA obtained from Foxtel following the Tribunal’s first decision.

15    Foxtel denied that this material could be relevant. The Tribunal rejects that submission. It is relevant to PPCA’s argument that the size of the fee that would be attributable to PPV sporting events under the Tribunal’s proposed licensing formula is not proportionate to the risks that the ambiguity in the concept of PPV sporting events might create. Being relevant, the document will be received into evidence. It is to be designated ‘Highly Confidential’ under the orders made by Emmett P on 31 October 2012.

16    With that material before the Tribunal, it accepts PPCA’s submissions. The amount of revenue involved is small in context. Further, the expression ‘PPV sporting event’ is ambiguous in that it could arguably include the purchase of an entire series of such sporting events. It also leaves up in the air questions such as how the advertising for such events is to be handled. Account needs also to be taken of the fact that the excision of revenue from PPV sporting events would give Foxtel some motive to broadcast more matters as PPV sporting events. For example, it might seek to sell a season of football on a one off basis as a PPV sporting event. The Tribunal accepts that the modest risks which inhere in these factors are not justified by the amount of revenue involved. For a similar reason a price reduction in the licensing formula for PPV sporting events ought not be embraced.

17    Accordingly, having heard PPCA on the excision from subscription revenue of revenues derived from PPV sporting events, the Tribunal accepts, contrary to its initial view, that this excision should not occur.

3. The Power Issue

18    At paragraph 4.2 of its closing submissions of 30 April 2015, PPCA flagged that the then continuing negotiations about non-price terms were ‘subject to agreement from PPCA’s licensors to make amendments to PPCA’s Input Agreements’. At that stage the parties were not asking the Tribunal to resolve an issue about the non-price terms but merely informing it of where those negotiations had proceeded to. Those negotiations having now run their course, PPCA submits that the Tribunal cannot approve a scheme which is inconsistent with the licence agreement it has with its own members. That agreement is called the input agreement.

19    Ms Small gave evidence at the hearing about PPCA’s input agreement. She explained at paragraph 23 of her affidavit sworn 17 September 2012 that each of PPCA’s licensors executes an input agreement which grants to PPCA a non-exclusive licence of the rights relating to exploitation of the relevant sound recordings. It also grants PPCA a right to grant a non-exclusive licence of those rights to others.

20    It appears that the form of agreement used by PPCA for this purpose is generic, that is to say, the same form is used for all of its licensors. Ms Small explained that the input agreement was approved by its copyright committee. That committee comprised representatives of the four major record labels (Sony, Universal, Warner and EMI) together with an independent label, Shock Entertainment. At the time Ms Small swore her affidavit, PPCA was in the process of revising the terms of the input agreement. She was able, nevertheless, to provide a copy of the draft revised input agreement which was then awaiting approval. Subsequent to the hearing, the final version of the agreement was provided.

21    The terms of the input agreement are detailed but, in substance, it operates as Ms Small suggested. For present purposes, it is sufficient to note that its drafting is inconsistent with Foxtel’s contentions about the Streaming Issues (dealt with below at [29]-[33]). For example, the licence which PPCA has been granted by its members does not include a right, in the case of streaming, which would permit a Foxtel subscriber to keep a temporary copy. It also does not include, in the case of an on-demand offering, an entitlement detached from the broadcast of the program via cable or satellite and it prevents a copy being kept for more than 12 months. These are all matters which Foxtel contests.

22    The issue is whether the power of the Tribunal to approve a scheme is limited by what a collecting society may have agreed with its members.

23    PPCA submitted that such a limitation on the power of the Tribunal existed because:

(a)    PPCA did not have the power to grant the licence sought by Foxtel. A scheme providing for such an arrangement would not be a ‘licence’ within the definition of that term in s 136(1) of the Copyright Act 1968 (Cth) (‘the Act’);

(b)    not being such a licence, the power to approve a scheme under s 154(4) of the Act would not be enlivened;

(c)    the principle nemo dat quod non habet was relevant, too. PPCA could not license rights it did not have; and

(d)    in any event, s 154(4) could only be used to approve a scheme which ‘was reasonable in the circumstances’ and a scheme requiring PPCA to grant a licence of rights it did not have would not meet that description.

24    PPCA’s submission is to be rejected. The legal effect of the Tribunal’s power to approve a scheme does not derive from the existence of a licence which a collecting society may hold from its members. Indeed, the Act does not require that such a licence exists. In practical terms, collecting societies may find such licences useful for achieving consensual arrangements with possible licensees. But in the Tribunal, the machinery of the legislation does not operate by reference to any such licence.

The critical provisions are subsections 154(4) and 159(1) of the Act. The former authorises the Tribunal to confirm or alter a scheme referred to it by a collecting society. The latter gives a defence to an action for infringement to a person operating under a scheme. The provisions are as follows:

‘154 Reference of proposed licence schemes to Tribunal

….

(4)     The Tribunal shall consider a scheme referred under this section and, after giving to the parties to the reference an opportunity of presenting their cases, shall make such order, confirming or varying the scheme or substituting for the scheme another scheme proposed by one of the parties, as the Tribunal considers reasonable in the circumstances.

…’

‘159 Effect of order of Tribunal in relation to licences

Order under section 154. 155 or 156

(1)     Where an order made on a reference under this Part with respect to a licence scheme is for the time being in force and a person, in a case to which the scheme reflecting the order applies, does anything that, apart from this subsection, would be an infringement of copyright but would not be such an infringement if he or she were the holder of a licence granted in accordance with that scheme, in so far as the scheme relates to cases to which the order applies, that person shall, if he or she has complied with the relevant requirements, be in the like position, in any proceedings for infringement of that copyright, as if he or she had at the material time been the holder of such a licence.

…’

25    Neither provision is consistent with the ability of a licence between a collecting society and its members to constrain what the Tribunal may, or may not, determine by way of a scheme under s 154(4). Section 154(4) in terms contemplates variation of, or indeed wholesale replacement of, the scheme put forward by the collecting society. It would be a lacuna in the scheme contained in Part VI Division 3 of the Act if a collecting society could prevent the Tribunal exercising this power of amendment or replacement by the device of entry into an input agreement with its members only authorising the scheme the society itself had put forward.

26    So too s 159(1) does not depend for its efficacy upon the existence of a licence from a collecting society’s members. It operates directly by reference only to the scheme approved by the Tribunal, which scheme the Tribunal is fully at liberty to amend as it sees fit.

27    As for PPCA’s individual arguments (a)-(d) at [23] above (which eschew any reference to s 159(1)) the following should be observed. As to (a) and (b), the power of the Tribunal in s 154(1) does not refer to a ‘licence’ so there is no textual foundation for the idea that its power is somehow constrained by the existence of a licence to a collecting society from its members. As to (c), the maxim nemo dat quod non-habet is little to the point in the face of s 159(1). The point of the scheme of Part VI is to create the ability to license rights against their owners’ will, just as it is in the case of any decision-maker which, as here, regulates monopoly asset pricing. As to (d), the Tribunal would accept that the existence of an input agreement is a matter which it can take into account in assessing what is reasonable in the circumstances under s 154(4). However, it is not a controlling matter for the reasons already given.

28    Accordingly, the Tribunal does not accept PPCA’s submission that the form of its input agreement can prevent the Tribunal from acceding to Foxtel’s submissions.

4. The Streaming and On-demand Issues

29    The parties agree that the scheme should include the grant to Foxtel of an audiovisual streaming right. They also agree that Foxtel itself should be entitled to make a temporary copy which the Tribunal assumes relates to the technical aspects of transmission. In relation to what subscription users can do, Foxtel seeks to have the scheme crafted in such a way that a user can make a temporary copy on their own device (i.e. a phone, tablet, personal computer, smart TV, internet enabled set-top box etc). The idea appears to be that a user might stream a program to their device for subsequent replay. Foxtel did not say this in terms but the Tribunal assumes that what is intended is that the program could be watched only once.

30    PPCA resisted this only on the basis of the input agreement arguments rejected above. The Tribunal was not taken to any argument as to why, in principle, Foxtel should not be able to permit its users when streaming to store a program to be watched later. It is not difficult to discern reasons why such a right would increase the amenity of streaming services for the public. For example, it would allow users to stream a program to their device over a home Wi-Fi network and then to watch it on public transport. Nor does a consideration of the input agreement as a discretionary matter (rather than as an argument about power) lead to a different result.

31    The Tribunal concludes therefore that the scheme should include a right for Foxtel which would permit its users to store a streamed program for later one-off watching. In reaching that conclusion, the Tribunal rejects PPCA’s submission that some succour for it might be found in s 111 of the Act. That provision is concerned with broadcasting under the Broadcasting Services Act 1992 (Cth) and not with streaming of content over communications networks.

32    The definition of ‘audio-visual streaming rights’ in the scheme should be as follows:

‘1.1(f)    Audiovisual Streaming Rights means the rights to Communicate Cleared PPCA Sound Recordings reproduced in Audiovisual Content and Enhanced Content (excluding for the avoidance of doubt Music Videos and radio programs) to the public over the Internet, a mobile telecommunications network or any other communications network now known or developed in the future, including by means of an interactive on demand service or linear channels where there is no copy made by the Subscription Television Service of the Audiovisual Content other than a temporary copy for technical reasons but where the user can, instead of viewing the Audio-visual Content, store it instead for later viewing on a one-off basis.’

33    The Tribunal does not think it appropriate to include the proposed cl 1.5 which notes the non-impact of s 111 on those rights. It appears to have no legal consequences.

34    The proposed scheme would also grant to Foxtel an on-demand offering right. This is the right to make content available over communications networks by streaming or through use of a ‘time-out podcast’ (i.e. a podcast which expires after a fixed period). On its face, this is a similar right to that granted by the audiovisual streaming right.

35    However, they are not the same. There are two differences. The first is that the on-demand offering right does contain a copying entitlement for the user. The second is a requirement of the on-demand right that the programs to which it applies have ‘previously been Broadcast or will in the next 30 days be Broadcast by the Subscription Television Provider.’ What this means is that on-demand offerings will only be available where the program has been, or will shortly be, broadcast by means of cable or satellite.

36    PPCA submitted that this was required by its input agreement but did not advance any argument of a substantive nature why such a curious restriction should exist. The Tribunal has been unable to conceive of a reason why users should be able temporarily to store a copy for later viewing of an on-demand program but only where that program is also broadcast by Foxtel using its cable or satellite broadcast capacities. The Tribunal is also unpersuaded for similar reasons by the input agreement viewed as a discretionary matter.

37    Accordingly, the Tribunal accepts Foxtel’s submission about this.

38    Foxtel also proposed that the storage right should be coterminous with the program to which the sound recording related. PPCA agreed with this but sought to add a rider that the storage time should not exceed 12 months in any event. PPCA submitted that beyond that period the right began to resemble a right to copy. So long as the replay right can only be exercised once, it is difficult to see any validity in this contention. The Tribunal can discern no compelling practical or legal reason why a subscriber should be compelled to watch the program they have paid to download within any particular timeframe so long as they can only watch it once. This would suggest that there should be no limit at all placed on the time within which the program should be watched. However, given that Foxtel itself accepts that the storage right for the sound recording should be coterminous with the storage rights which inhere in the actual content, the Tribunal will accept that view given that PPCA has not been heard on the broader proposition.

39    The parties also joined issue on the form of the definition of the word ‘Program’ in clause 1.1(uu) of the scheme. The form proposed by PPCA was:

‘‘Program’ means a clearly separate identifiable television program (including episodes of a series) or a clearly identifiable part thereof that has been Broadcast’.

40    The term ‘Broadcast’ is defined in clause 1.1(g) in a way which includes Foxtel’s broadcasting of material via its satellite and HFC cable infrastructure but which does not include either conventional free to air broadcasting or, more importantly, datacasting, on-demand transmission or provision over the internet or by means of some other telecommunications network. The effect of the definition of ‘Program’ is, therefore, that it does not include programming which has not been broadcast by Foxtel already using its satellite or HFC services.

41    The use of the term ‘Program’ in the proposed scheme is not entirely consistent. For example, the definition of ‘On-demand Offering Rights’ at clause 1.1(jj)(a) of the scheme, and referred to above, explicitly refers to ‘Programs’ which have not yet been ‘Broadcast’ but will be ‘Broadcast’ in the next 30 days. Obviously enough, this makes no sense since ‘Program’ is defined to mean something which has been ‘Broadcast’. This is a minor point but it may suggest that the schema of the definition has not been entirely well thought through.

42    The debate between the parties was not concerned with this kind of nit-picking, however. Although the parties’ submissions were densely expressed (at the request of the Tribunal), the real debate seemed to lie in the way in which the definition of the ‘On-demand Offering Rights’ operated. It was defined to mean a right for a subscription television provider ‘to make available a Program…by Streaming or Timed-Out Podcast via the internet, mobile networks or any other communications network’. The difficulty was that the definition of ‘Program’ had the consequence that only programs which had already been broadcast by Foxtel via satellite or HFC could be a ‘Program’ to which this right applied. Consequently, the on-demand offering right would not be available for programming which had not already been broadcast in that way.

43    Foxtel submitted that there was no reason for the definition of ‘Program’ to be limited to programs which had been ‘Broadcast’. It identified the reasons for this as essentially the same as those which it advanced (and which the Tribunal has accepted) in relation to the issue of ‘On-demand Offering Rights’. PPCA submitted that this was not appropriate and that its definition of ‘Program’ was an internationally used definition in sound recording licensing and formed part of its input agreement.

44    Again, the Tribunal fails to see the rationality of PPCA’s requirement. It is unpersuaded by the argument which rests upon the existence of a similar requirement in PPCA’s input agreement for the reasons it has already given. In relation to the suggestion that the definition of ‘Program’ reflects some international practice, the Tribunal is unclear as to whose practice that might be or why it matters – at least without a good deal more explanation. The Tribunal accepts Foxtel’s submissions on this point.

5. The Bundling Issue

45    Foxtel offers its customers bundles consisting of different elements in addition to its subscription television service. Not all of the elements in a bundle necessarily require PPCA’s blanket licence, e.g., ADSL services. There arises, therefore, a need to determine how much of the overall bundle charge is to be attributed to the subscription television service.

46    The parties agree that if it is not possible to determine what the charge which relates to the subscription television service element is, then it is to be taken to be the retail rate for the subscription television services.

47    They are in disagreement, however, as to the approach to be taken where a discount is applied to individual bundle components. PPCA was concerned to ensure that in any bundling arrangement ‘the allocation of the total price to the subscription television component is fair and reasonable within the context of the overall bundled price’. As developed, its concern was that unless some restraint was placed upon Foxtel, it might put most of the overall discount on a bundle onto the subscription television component. In practice, this would reduce the revenue flowing from that component and hence the size of PPCA’s fee.

48    Foxtel submitted this was not so and that the revenue to be attributed to the subscription television component should be the actual revenues it generated. In effect, it submitted that if it offers the subscription television service at a discount that is its business decision. If PPCA wishes to have a percentage of its subscription revenue, it has to accommodate itself to the reality of what that revenue actually is rather than what it wishes it might be.

49    Both parties’ submissions are persuasive. The difficulty is that Foxtel’s undoubted ability to fix whatever discount it wishes directly impacts on PPCA’s revenues. There can be no objection to this where Foxtel makes this decision for reasons other than a desire to decrease the amount to be paid to PPCA. However, it is not acceptable that Foxtel might be able to fix the discount on the subscription television component for purposes which include a desire to reduce PPCA’s fee.

50    It may be that Foxtel’s ability to do so is attenuated by private law concepts. However, this was not submitted to the Tribunal and, in any event, it would be better to provide certainty on the matter.

51    PPCA’s solution was to use Foxtel’s full retail rate in the licensing formula if the discount rate applied to the subscription television component was the largest discount rate applied to any of the bundle components. The Tribunal notes that this calls for a comparison between rates and not absolute discounts.

52    This certainly achieves the outcome for which PPCA contends. However, it also has the effect of curtailing what might otherwise be legitimate discounting decisions by Foxtel. By the same token, Foxtel’s proposal leaves PPCA exposed to the possibility that it might seek to use its ability to discount for the purpose of reducing the amount to be paid to PPCA.

53    The Tribunal does not embrace either proposal. A fairer mechanism could be to determine the proportion the retail rate for the subscription service bears to the retail rates for the other components and apply that proportion to the total bundle price. That is to say, the retail rates of each of the bundle components would be totalled and the proportion that the retail rate for the subscription service bears to that total would then be applied to the bundle price. Neither party has been heard on that proposal and the Tribunal does not conclude at this stage that such an arrangement should apply. What the Tribunal will do is direct the parties further to confer on this issue in light of the Tribunal’s reasons.

6. The Additional Charges Issue

54    In PPCA’s proposed scheme the expression ‘subscription revenue’ is defined to include charges paid to Foxtel by its subscribers which are ‘directly or indirectly in connection’ with Foxtel’s subscription television services. This form of words has the effect of including other charges levied by Foxtel such as late payment fees, statement fees, early termination fees and fees for unreturned equipment.

55    PPCA submitted that this issue had been determined by the Tribunal in its the first decision. The Tribunal rejects this submission.

56    PPCA then submitted that these charges were revenues made by Foxtel as a result of the use of its sound recordings. Foxtel submitted that they were instead cost recovery measures.

57    The Tribunal accepts Foxtel’s submission. There is a cost to it by subscribers paying late and in the issue of statements. There is also a cost attendant upon early termination by subscribers of their contracts and the failure of customers to return equipment. To the extent that the charges do reflect cost recovery the Tribunal sees no reason for them to be included in Foxtel’s subscription revenue. To the extent that a charge exceeds cost recovery – and assuming that it is not otherwise unlawful for Foxtel to levy that charge – the Tribunal does not think that the administrative difficulties in identifying the profit component on a cost recovery element would justify its imposition.

58    For those reasons, the Tribunal does not accept PPCA’s proposition that the phrase ‘directly or indirectly in connection’ should be part of the definition of ‘subscription revenue’.

7. The Wording Issues

59    The apparent issue here was whether the terms of the scheme allowed Foxtel to provide its services to customers who did not utilise its cable or satellite offerings (i.e. ‘non-broadcast’ subscribers). It was an apparent disagreement rather than an actual one because both parties agreed that it should so provide. Both parties also agreed on the drafting changes which should be made to the definitions of ‘Subscription Television Service’ and ‘Subscription Television Provider’ to achieve this outcome.

60    They were nevertheless at loggerheads as to whether those drafting changes required further changes to other definitions. Foxtel’s concerns related to its ability to sublicense its rights. Subclause 2.2 of the proposed scheme permits Foxtel to sublicense the Broadcast Rights and the New Media Rights subject to presently immaterial conditions. This would appear to be a right to sublicense. Foxtel submitted that the current drafting of the definitions of ‘On-Demand Offering Rights’ and ‘Digital Content Rental Rights’ included a reference to a ‘Subscription Television Provider’; that if this was to mean (as was now agreed it did) an entity with a subscription television licence both broadcasting and also providing its services over communications networks then this would limit the entities to which Foxtel could theoretically sublicense only to entities doing both. This would prevent it sublicensing to entities, for example, only using communication networks. In light of subclause 2.2 such a reading of these provisions is not tenable. No change as submitted by Foxtel is required.

61    Lastly, Foxtel submitted that the definition of ‘commercial subscriber’ should be amended to clarify that such a subscriber had to be authorised to receive the subscription television service. This is unnecessary, however. Such an outcome already occurs as a result of the definition of ‘subscriber’. This could be clarified by replacing ‘subscriber’ where it first appears in the definition of ‘Commercial Subscriber’ with ‘Subscriber’.

8. The Scheme

62    The Tribunal makes the following orders:

(1)    The parties are to confer further on the Bundling Issue within 28 days.

(2)    If no agreement is reached on that issue each party is to provide the Tribunal with a submission not exceeding five pages on the Tribunal’s suggested methodology at [54] within a further 14 days.

(3)    In the event that agreement is reached on the Bundling Issue the parties are to provide the Tribunal with a final form of the scheme within 14 days of reaching agreement.

Associate:

Dated:     21 July 2017