Foxtel Management Pty Ltd v Seven Cable Television Pty Ltd

Federal Court of Australia|2000-08-18|Before: Wilcox J, Gyles JJ

THE COURT ORDERS THAT: 1. The appeal and cross-appeal be dismissed. 2. The appellants pay the respondents' costs of the appeal. 3. The first and second respondents pay the appellants' costs of the cross-appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Introduction....................................................................................................... 1

The factual background............................................................................. 2

The statutory framework ........................................................................ 3

The TEA............................................................................................................ 3

The TPA: the access regime in Part XIC.............................................................. 7

The approach of the primary Judge and the submissions

on appeal............................................................................................................... 8

Foxtel submissions......................................................................................... 8

Seven's submissions.......................................................................................... 11

TARBS' submissions........................................................................................ 19 Conclusions on the appeal....................................................................... 23

TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED

Introduction 1 This is an appeal by FOXTEL Management Pty Ltd ("FOXTEL Management") and FOXTEL Cable Television Pty Ltd ("FOXTEL Cable") (unless the context requires otherwise both companies will be referred to as "FOXTEL") against a declaration made by Wilcox J on 8 May 2000 declaring that FOXTEL Management and FOXTEL Cable together constitute a "carriage service provider" within the meaning and for the purposes of the Telecommunications Act 1997 (Cth) ("the TEA"). By doing so Wilcox J was refusing the relief sought by FOXTEL, namely a declaration that neither company was a "carrier" or a "carriage service provider" within the meaning and for the purposes of the TEA. The Australian Competition and Consumer Commission, the third respondent, appeared to submit to any order save for costs.

The factual background 2 The detailed factual background to this appeal has already been described in our reasons for judgment in appeal proceedings N 309 and N 324 of 2000 ([2000] FCA 1159) from Tamberlin J, and N 508, 527, 528 and 529 ([2000] FCA 1160) from Wilcox J ("the ACCC appeal") given today, which we need not repeat. It is sufficient to note that FOXTEL Cable offers to, and does, pursuant to contract, provide to subscribers, by means of residential cable television, a programming package and FOXTEL Management provides, by the same means, retransmitted free-to-air broadcasts of local commercial and non-commercial television stations. Both services are transmitted, inter alia, through the hybrid fibre coaxial ("HFC") network owned by Telstra Multimedia Pty Ltd ("Telstra Multimedia"). The primary Judge described the system in operation in his reasons for judgment published on 8 May 2000, [2000] FCA 589, commencing at para 20: "…there (are) two components to FOXTEL's business that permit it to offer pay television services to subscribers: first, the supply of programs for broadcast and, second, the provision of information and associated facilities which confine subscribers' program access to the channels to which they have subscribed. The first component is called "the program signal". The second, consisting of the subscriber's programming entitlements, is called "conditional access data". Both streams of information are provided by the Foxtel companies and transmitted to subscribers' reception equipment. FOXTEL operates a play out centre at Pyrmont, Sydney. Programs are there assembled as a continuous stream of information. From Pyrmont the programs are broadcast in digital form to headends located in Sydney, Melbourne, Brisbane, Gold Coast, Adelaide and Perth. For this purpose FOXTEL uses the hybrid fibre coaxial ("HFC") network owned by Telstra Multimedia. At each headend the program signal is converted to an analogue signal, encrypted and combined with the conditional access data, which is in digital form. The combined information stream is then broadcast to subscribers over the Telstra HFC network, which currently passes about 2.5 million homes in Sydney, Melbourne, Brisbane, Gold Coast, Adelaide and Perth. If a person wishes to subscribe to FOXTEL, and the network passes the person's home but is not already connected to a wall plate on the person's property, it will be connected by a lead in cable to a wall plate. The lead in cable and wall plate are installed by Telstra Multimedia. Beyond the wall plate, FOXTEL equipment is used to connect the new subscriber to the HFC network: fly cables that connect the wall plate to the set top unit, and the set top unit to these subscriber's television receiver, and the set top unit itself. ….the set top unit (operates) in this way: The set top unit normally sits on or by the subscriber's television receiver. The set top unit receives the combined information stream from the HFC network. In conjunction with the smart card, the set top unit decrypts the program signal component of the combined information stream in accordance with the subscriber's entitlements. The program signal is transmitted by the set top unit to the subscriber's television receiver." 3 Thus, FOXTEL provides the signal to subscribers to its service using cable owned by Telstra Multimedia, but the signal is ultimately received by the subscriber's television receiver as an intelligible image (including sound) because of functions performed by the set top unit ("STU"). 4 Reference should be made to the terms of the agreement between FOXTEL and subscribers. The primary obligation of FOXTEL is found in clause 1.1 of the standard terms and conditions, which reads: "1.1 FOXTEL will provide the Channels and FOXTEL Management will provide the Retransmitted Free-to-Air Broadcasts to you. FOXTEL and FOXTEL Management will use reasonable skill and care in providing the Channels and Retransmitted Free-to-Air Broadcasts (as applicable). FOXTEL may vary Channel content or transmission times, the Channels that make up the Services or stop providing Channels without notice. FOXTEL is not liable for any loss or disappointment you may suffer as a result." 5 "Channels" is defined as meaning "the programming package which you have requested and FOXTEL has agreed to supply" (cl 15.3).

The TEA 6 In order to understand the legal issue raised in this appeal it is necessary to refer to various provisions of the TEA. That is because whether FOXTEL is a carriage service provider for the purposes of the access regime established by Part XIC of the Trade Practices Act 1974 (Cth) ("TPA") depends upon the defined meaning of carriage service provider in the TEA: see s 152AC of the TPA. The TEA identifies in s 86 two classes of service provider, namely a carriage service provider and a content service provider. Sections 7 and 87(1)(a) provide a basic definition of carriage service provider, and the latter provision reads: "(1) For the purposes of this Act, if a person supplies, or proposes to supply, a listed carriage service to the public using: (a) a network unit owned by one or more carriers; or (b) a network unit in relation to which a nominated carrier declaration is in force; the person is a carriage service provider." 7 "Network unit" is defined in Division 2 of Part 2 of the TEA. It is not in issue that Telstra Multimedia is a carrier and its HFC network is a network unit. 8 Reference should also be made to s 87(5) which reads: "(5) For the purposes of this Act, if: (a) a person (the first person), for reward, arranges, or proposes to arrange, for the supply of a listed carriage service by a carriage service provider to a third person; and (b) the first person would be a carriage service provider under subsection (1) or (2) if the person had supplied that carriage service; and (c) the commercial relationship between the first person and the third person is, or is to be, governed (in whole or in part) by an agreement between the first person and the third person that deals with one or more matters relating to the continuing supply of the service (whether or not that supply is, or is to be, for a readily ascertainable period); and (d) the conditions (if any) specified in a determination under subsection (8) are satisfied; the person is a carriage service provider." 9 Various components of the basic definition are defined elsewhere in the TEA. "Carriage service" is defined in s 7: "carriage service means a service for carrying communications by means of guided and/or unguided electromagnetic energy." 10 "Communications" is defined in that section: "communications includes any communication: (a) whether between persons and persons, things and things or persons and things; and (b) whether in the form of speech, music or other sounds; and (c) whether in the form of data; and (d) whether in the form of text; and (e) whether in the form of visual images (animated or otherwise); and (f) whether in the form of signals; and (g) whether in any other form; and (h) whether in any combination of forms." 11 "Carry" is also defined in that section: "Carry includes transmit, switch and receive." 12 An additional component of the basic definition of carriage service provider is the supply of a listed carriage service to the public. The definitions of the expressions "listed carriage service" and "supply to the public" are found in sections 16 and 88 respectively (in combination with s 7). Section 16(1) reads: "(1) For the purposes of this Act, the following carriage services are listed carriage services: (a) a carriage service between a point in Australia and one or more other points in Australia; (b) a carriage service between a point and one or more other points, where the first-mentioned point is in Australia and at least one of the other points is outside Australia; (c) a carriage service between a point and one or more other points, where the first-mentioned point is outside Australia and at least one of the other points is in Australia." 13 Section 88 sets out the circumstances in which a carriage service is taken, for the purposes of subsections 87(1), (2) and (3), to be supplied to the public and provides, relevantly:… "(1) … (2) … (3) If: (a) a carriage service is used to supply point-to-multipoint services to end-users; and (b) at least one end-user is outside the immediate circle of the supplier of the service; the service is supplied to the public." 14 The definition of "supply to the public" makes reference to "point-to-multipoint services" which is defined in s 7: "point-to-multipoint service means a carriage service which allows a person to transmit a communication to more than one end-user simultaneously." 15 Central to the arguments of FOXTEL in this appeal is the apparent distinction drawn in s 86 between a carriage service provider and a content service provider, and what is meant by content service provider. The expression "content service provider" is defined in s 97 (when read with s 7) as: "97(1) For the purposes of this Act, if a person uses, or proposes to use, a listed carriage service to supply a content service to the public, the person is a content service provider. (2) For the purposes of subsection (1), a content service is supplied to the public if, and only if, at least one end-user of the content service is outside the immediate circle of the supplier of the content service." 16 "Content service" is relevantly defined in s 15: "(1) For the purposes of this Act, a content service is: (a) a broadcasting service …" 17 The expression "broadcasting service" is given, by s 7, the same meaning as in the Broadcasting Services Act 1992 (Cth) ("BSA") which, in s 6, defines the expression in the following way: "broadcasting service means a service that delivers television programs or radio programs to persons having equipment appropriate for receiving that service, whether the delivery uses the radio frequency spectrum, cable, optical fibre, satellite or any other means or a combination of those means, but does not include: (a) a service (including a teletext service) that provides no more than data, or no more than text (with or without associated still images); or (b) a service that makes programs available on demand on a point-to-point basis, including a dial-up service; or (c) a service, or a class of services, that the Minister determines, by notice in the Gazette, not fall within this definition." 18 It can be seen that the definition refers to the delivery of programs to a person having reception equipment.

The TPA: the access regime in Part XIC 19 The terms of the relevant provisions of Part XIC have been set out in our reasons for judgment in the related appeals. However, it is convenient to refer to them in a summary way. Section 152AL confers a power on the Australian Competition and Consumer Commission ("the ACCC") to declare a service to be a declared service. A service that can be the subject of such a declaration is either a listed carriage service or a service that facilitates the supply of a listed carriage service (within the meaning of the TEA): see s 152AL (1) (a) or (b). If a service is a declared service then a carrier or a carriage service provider who provides such a service must, subject to certain conditions and limitations, provide access to the service if requested by a service provider: see s 152AR(2) and (3). Of some importance, for present purposes, is an obligation imposed by s 152AR (8) on an access provider who supplies an active declared service by means of conditional-access customer equipment. Conditional-access customer equipment is defined in s 152AC as: ""Conditional-access customer equipment" means customer equipment that: (a) consists of or incorporates a conditional access system that allows a service provider to determine whether an end-user is able to receive a particular service; and (b) either: (i) is for use in connection with the supply of a content service; or (ii) is of the kind specified in the regulations." 20 It can be seen that conditional-access customer equipment might be subject to standard access obligations because either the equipment constituted part of the listed carriage service, which had been the subject of a declaration, or was a service that facilitated the supply of a listed carriage service and had been the subject of a declaration.

The approach of the primary judge and the submissions on appeal 21 The submissions of the respondents, Seven Cable Television Pty Ltd ("Seven") and Television and Radio Broadcasting Services Australia Pty Ltd ("TARBS"), repeat, in substance, the reasoning of the primary Judge on central issues. The following passage, commencing at para 242, illustrates the reasoning central to the primary Judge's conclusion concerning s 87(1): "I agree that the [TEA] draws a distinction between a carriage service provider and a content service provider. The roles are conceptually distinct. However, if one person may fulfil both roles, as I agree, I do not understand how it can properly be said that the roles "are mutually exclusive". The question whether a particular person has both roles is the question of fact in each case. In the present case, it is apparent that FOXTEL Cable and FOXTEL Management do more than provide content. They contract to deliver content. And they do so. They deliver to the public the listed carriage service known as FOXTEL subscription television. They do so by using the Telstra broadband, which is a network unit owned by a licensed carrier. It is true that FOXTEL Cable and FOXTEL Management also use facilities that are not owned by Telstra, and are not part of a network unit: but that does not matter. Section 87 (1) of the Telecommunications Act does not require that the network unit be the only element in the supply of the listed carriage service: it is sufficient that the network unit be used in that supply." 22 His Honour went on to consider whether FOXTEL Management and FOXTEL Cable were also carriage service providers by operation of s 87 (5) and concluded (para 250) that they were. 23 The submissions of the parties can be sufficiently gleaned from the following extracts from the written submissions.

Foxtel submissions 24 The submissions of FOXTEL were as follows: "FOXTEL does not supply a carriage service 14. FOXTEL's argument below was, in essence, that FOXTEL was neither itself supplying a listed carriage service to the public (s 87(1)) nor using Telstra Multimedia to supply a listed carriage service to the public (s 87(5)). It did not supply any carriage service to the public, but was merely a content service provider. 15. In order for there to be a supply of a carriage service, there must be: (a) a facility for carrying communications; (b) someone to whom that facility is supplied; ie, a person who will use the facility to carry communications. It does not follow that a person to whom communications are carried is a person to whom a carriage service is supplied. 16. All that FOXTEL supplies to the public are the images which appear on its subscribers television sets. It does not provide a service whereby its subscribers can send communications to others. FOXTEL does not provide telephony, internet services or banking services (indeed it is expressly forbidden to do so - see clauses 1.7 and 1.8 of the BCA agreement). In short, FOXTEL only supplies "content". In telecommunications jargon, its consumers are "passive". 17. The short point in this appeal is that the trial judge erred by conflating communications services and communications themselves. Section 87(1) 18. In paragraphs [226]-[241], the trial judge accurately described the statutory regime and the submissions of the parties. The entirety of his Honour's reasoning in relation to s 87(1) is found in [242] and [243]. FOXTEL does not dispute [243] (nor did it contend otherwise at trial). 19. Paragraph [242] addresses two points. First, the trial judge dealt with the distinction between carriage service providers and content service providers, saying: "I agree that the Telecommunications Act draws a distinction between a carriage service provider and a content service provider. The roles are conceptually distinct. However, if one person may fulfil both roles, as I agree, I do not understand how it can properly be said that the roles "are mutually exclusive". The question whether a particular person has both roles is a question of fact in each case." 20. As the trial judge accurately recorded at [233], FOXTEL's submission was not that the "roles" of carriage service providers and content service providers were mutually exclusive, but that carriage services and content services are mutually exclusive. That must be so: the difference is between the service of carrying communications and the communications themselves. To take a mundane example, the service of distributing mail is mutually exclusive from the envelopes carried in the mail themselves. 21. FOXTEL accepts that the same person may be both a carriage service provider and a content service provider. However, that person can only be both a carriage service provider and a content service provider by virtue of different activities. This is necessarily so, because content is conceptually distinct from carriage. The mere use of a carriage service to supply a content service cannot make a content service provider a carriage service provider. 22. FOXTEL's contention was and is that since the only activity it undertook was to supply content, and not carriage, it could not be a carriage service provider. This was not addressed by the trial judge. 23. The trial judge proceeded in [242] to say: "In the present case, it is apparent that Foxtel Cable and Foxtel Management do more than provide content. They contract to deliver content. And they do so. They deliver to the public the listed carriage service known as FOXTEL subscription television. They do so by using the Telstra broadband, which is a network unit owned by a licensed carrier." [emphasis in original]. 24. That paragraph, with respect, begs the question. It asserts that the service known as FOXTEL subscription television is a listed carriage service, that being the very question raised in the proceeding. True it is that it was common ground that the service by which the information streams generated by FOXTEL are carried to subscribers' television sets is a "listed carriage service". But the issue in the proceedings was whether the information streams themselves (or for that matter anything else supplied by FOXTEL) were a "listed carriage service". 25. It is unclear what the trial judge intended to signify by emphasising the word "deliver" in the passage quoted above. Seven Cable Television will, presumably, contract to deliver content to subscribers using the broadband network unit owned by Telstra Multimedia. It will not thereby become a carriage service provider. Alternatively, if FOXTEL is a carriage service provider, then so are Seven Cable Television and TARBS. Section 87(5) 26. Paragraphs 2[244]-[247] accurately set out the relevant legislation and parties' submissions. The trial judge's reasoning is found in [248] and [249]. 27. In [248] the trial judge rejected FOXTEL's reliance on the example given in the explanatory memorandum, which dealt with "switchless resellers" and "aggregators" - persons who merely on-supply in a repackaged format a carriage service supplied to them by a carriage service provider. An example is a company like One-Tel which merely resells the local telephony carriage service provided by Telstra. Although it is true that FOXTEL supplies a range of pay television channels obtained from various sources, it is difficult to see that that fact alone was what the author of the explanatory memorandum meant when referring to "aggregators". 28. The critical aspect of the trial judge's reasoning is in [249]. The appellants do not cavil with the first sentence of that paragraph. The trial judge continues as follows: "FOXTEL uses Telstra Multimedia to enable it to supply to subscribers, not only the content aggregated by FOXTEL, but also the carriage service necessary to enable that content to appear on subscribers' television sets. It does this for reward. If FOXTEL did not make that arrangement, but provided the broadband service itself, it would undoubtedly be a "carriage service provider"." 29. In that passage, the trial judge has once again confused the concepts of content and carriage service. It is true that FOXTEL uses Telstra Multimedia to enable it to supply to subscribers its content. It is also true that it is necessary for there to be a carriage service in order for the content to appear on subscribers' television sets. However, it is not true that FOXTEL uses Telstra Multimedia to supply a carriage service to its subscribers. FOXTEL is in fact forbidden to supply a carriage service to its subscribers using the Telstra Multimedia HFC cable. 30. FOXTEL subscribers do not receive a carriage service from FOXTEL. They do not receive a facility to carry communications. They merely receive the communications (content) supplied by FOXTEL. For that reason, FOXTEL is not a carriage service provider either directly under s 87(1) or indirectly under s 87(5). Disposition of the appeal 31. The appeal should be allowed with costs. The orders made by the trial judge in N 217 of 2000 should be set aside, and in lieu thereof there should issue a declaration that neither of the applicants is a carriage service provider within the meaning of the Telecommunications Act 1997."

Seven's submissions 25 The submissions of Seven were as follows: "1. Foxtel misconceives what is involved in supplying carriage services under the Telecommunications Act 1997 ("the Telco Act"). The error appeared in Foxtel's submissions made at trial (see the passage quoted in paragraph 234 of the Judgment, and in particular the reference to the postal communications service) and it has been repeated on appeal. 2. A "carriage service" is relevantly defined in s 7 of the Telco Act as a service for carrying communications. Foxtel asserts in paragraphs 15, 16 and 30 of its submissions that a person who merely receives communications and does not receive a service whereby it can send communications is not a person to whom a carriage service is supplied. 3. Seven submits that a person who provides a service of delivering communications to the customer is a carriage service provider, whether or not that person also provides to the customer a service of carrying that customer's communications to others. 4. There is a second, derivative, error in Foxtel's submissions, which is the assertion that if Seven's submissions are accepted, every content service provider would be a carriage service provider. 5. These errors will be dealt with in turn. Supply of one-way communications service Ordinary meaning of "supply a … service to the public" 6. The issue may be illustrated by the example used by counsel for Foxtel at trial, which is reproduced in paragraph 234 of the Judgment (AB386). The example is as follows: "A person who receives a letter in the post does not receive a postal communications service. The person receives what has been conveyed by the postal communications service." 7. To similar effect is paragraphs 15 and 16 of Foxtel's submissions, which relevantly state: "In order for there to be a supply of a carriage service, there must be: (a) a facility for carrying communications; (b) someone to whom that facility is supplied; ie a person who will use the facility to carry communications. It does not follow that a person to whom communications are carried is a person to whom a carriage service is supplied. All that FOXTEL supplies to the public are the images which appear in its subscribers television sets. It does not provide a service whereby its subscribers can send communications to others." 8. It is clear that a person who receives letters by postal delivery is receiving a postal communications service, whether or not that person ever uses the postal service to deliver a letter to another person. The person is receiving both the letter and the service of delivery. The delivery service is also being supplied to the sender of the letter. Likewise, in the present case the subscribers who receive the Foxtel service are being supplied with both the communications (being television programs) and the service of carrying those communications to the television set (the carriage service). If the subscribers did not receive the carriage service, then all the subscribers would see would be a blank screen. That conclusion is apparent as a matter of ordinary language and logic. Effect of s 88(3) of the Telecommunications Act 1997 9. In the present case, it is also a conclusion that is required by s 88 of the Telco Act. The relevant question under s 87(1) is whether a person is supplying a carriage service to the public. Section 88 relevantly provides: (1) This section sets out the circumstances in which a carriage service is taken for the purposes of subsection 87(1), (2) and (3), to be supplied to the public. (2) … (3) If: (a) a carriage service is used to supply point-to-multipoint services to end-users; and (b) at least one end-user is outside the immediate circle of the supplier of the service the service is supplied to the public. The term "immediate circle" is defined in s 23. In relation to a corporation, it is relevantly a related body corporate within the meaning of the Corporations Law. The term "end-user" is not defined. However, it is clear from the definition of "point-to-multipoint services" that it cannot be Foxtel. The term "point-to-multipoint service" is defined in s 7 as: "a carriage service which allows a person to transmit a communication to more than one end-user simultaneously". The "end-users" must be the (multiple) customers to whom communications are supplied. 10. In the present case, Foxtel concedes that the service by which the information streams generated by Foxtel are carried to subscribers' television sets is a listed carriage service: paragraph 24 of Foxtel's submissions. Foxtel is transmitting communications (being television programs) to more than one end-user simultaneously, and is therefore supplying a point-to-multipoint service. In these circumstances, the relevant carriage service is taken to be supplied to the public, notwithstanding Foxtel's argument that no carriage service is supplied to the public. General scheme of the Telco Act 11. Foxtel's submissions are also inconsistent with the general scheme of the Telco Act. 12. If Foxtel's argument was correct, then in all cases involving merely the supply of television programs to the public, no person would be a carriage service provider because no carriage service would be supplied to the public, only content. On Foxtel's argument, a carriage service is involved in the supply (this is conceded in paragraph 29 of its submissions) but: (a) in a case such as the present, the carriage service is supplied only to the provider of the television programs (ie to Foxtel); and (b) in the case of an integrated pay television provider (being one which both supplies the television programs and operates the equipment for transmitting the programs to the viewer), no carriage service would be supplied to any person. Under this argument, the only telecommunications activity which would be regulated under the provisions of the Telco Act dealing with "carriers" and "carriage service providers" is a two-way communications service such as telephony, internet services or on-line banking services, being the services referred to in paragraph 16 of Foxtel's submissions. The argument would also have the consequence that no carrier licence would need to be held in relation to infrastructure used solely to provide pay television or other broadcasting services. 13. This consequence is inconsistent with the scheme of the Telco Act. The Telco Act regulates "carriers", "carriage service providers" and "content service providers" (see the simplified outline in s 5 although, as set out below, there is in effect no regulation of content service providers). A "carrier" is defined, in s 7, as the holder of a carrier licence. The circumstances in which a person is required to hold a carrier licence are set out in Part 3 (ss 41-51). 14. Section 42(1) relevantly provides that the owner of a network unit must not use the unit, either alone or jointly with one or more other persons, to supply a carriage service to the public unless the owner holds a carrier licence. Section 42(2) relevantly provides that the owner of a network unit must not allow or permit another person to use the unit to supply a carriage service to the public unless the owner of the unit holds a carrier licence. 15. It is common ground that Telstra Multimedia Pty Limited ("Telstra Multimedia") is the owner of a network unit used for the supply of the Foxtel television service, and holds a carrier licence. 16. Foxtel submits that in the case of the supply of television programs, there is no supply of a carriage service to the public. If Telstra Multimedia's broadband network was only used to supply television programs, it would follow that there would be no need for Telstra Multimedia to hold a carrier licence. 17. However, this clearly is not what is intended by the Telco Act. Section 44 sets out the circumstances in which a network unit will be taken to be used to supply a carriage service to the public. It is in terms similar to s 88, referred to above. It relevantly provides (sub-section (2)(c)(ii)) that if the network unit is used to supply point-to-multipoint services to end-users, where at least one end-user is outside the immediate circle of the owner of the unit, the network unit is taken to be used to supply a carriage service to the public. 18. The definition of point-to-multipoint services has been set out above. A cable broadcast of television programs is a paradigm case of a point-to-multipoint service. 19. Section 48 provides for exemptions from the obligation to hold a carrier licence in the case of certain broadcasting services. The term "broadcasting service" is defined in s 7 as a broadcasting service within the meaning of the Broadcasting Services Act 1992 ("the BSA"). The term is defined in s 6 of the BSA in wide terms, and clearly includes the service provided by Foxtel. Section 48 contains a number of double negatives. Section 48(1) relevantly provides that if the sole use of a network unit is use to carry communications that are necessary or desirable for the supply of broadcasting services to the public and the unit does not consist of, or include, a facility used to carry communications between: (i) the head end of a cable transmission service; and (ii) the equipment used by an end-user to receive a broadcasting service, and the unit does not consist of a broadcasting transmitter transmitting a signal of a broadcasting service to its intended audience, then s 42 does not apply to the unit. 20. The exemption is not satisfied in the present case, because the relevant network unit does consist of a facility used to carry communications between the head end of a cable transmission service and the equipment used by an end-user to receive a broadcasting service, and therefore s 48 is not relevant. 21. However, the terms of s 48 indicate that parliament intended that network units used for the supply of cable broadcasting services to the public would, if not exempted by s 48, otherwise fall within the terms of s 42. Otherwise, s 48 would be meaningless. 22. The same arguments apply in relation to Part IV, Division 3, which defines "carriage service providers". Section 88(3), analysed above, provides that a "point-to-multipoint service" (such as a broadcast service) may constitute a supply of a carriage service to the public. Section 93 contains an exemption for certain broadcasting services in terms similar to s 48. Again, the Foxtel service does not fall within the exemption because the Foxtel service involves communications carried between the head end of a cable system and the equipment used by an end-user to receive a broadcasting service. Again, it is clear that Parliament intended the supply of certain broadcasting services to be a supply of a carriage service to the public. 23. See also the definition of "Communications" in section 7 of the Telco Act, which relevantly provides that Communications include any communications: (a) whether between persons and persons, things and things or persons and things; (b) … (c) whether in the form of visual images … indicating that "communications" would include television programs. 24. These sections indicate that it was the intention of Parliament that the broadcasting of television services over cable would not merely be regulated under the provisions dealing with "content services". Indeed, the Telco Act in effect contains no regulation of content services, for the reasons set out in the Explanatory Memorandum, page 3, 2nd last paragraph. (The relevant passage is set out below in paragraph 37). 25. In further support of this conclusion, reference may be made to the terms of Part XIC of the Trade Practices Act 1974 ("the TPA"). The Explanatory Memorandum for the Telco Act indicates that the Telco Act and the relevant amendments to the TPA were part of a package of legislation: see Explanatory Memorandum page 1 (paragraph 2 and last paragraph), page 2 (last paragraph) and page 3 (2nd last paragraph). Section 152AR of the TPA, which contains the access obligations, applies (sub-section (2)) where "a carrier or carriage service provider" supplies declared services. Section 152AR(8) is in the following terms: "If an access provider [ie a carrier or carriage service provider] supplies an active declared service by means of conditional-access customer equipment, the access provider must, if requested to do so by a service provider who has made a request referred to in subsection (3), supply to the service provider any service that is necessary to enable the service provider to supply carriage services and/or content services by means of the active declared services and using the equipment". "Conditional-access customer equipment" is relevantly defined in s 152AC as customer equipment that consists of or incorporates a conditional access system that allows a service provider to determine whether an end-user is able to receive a particular service, and which is for use in connection with the supply of a content service. 26. It is apparent from these sections that Parliament intended that the s 152AR obligations would extend to carriers and carriage service providers who were providing pay television services. Who supplies the service 27. Having determined that a carriage service is being supplied to the subscribers, the next question is: who is supplying the carriage service? This question is not to be answered by consideration of who is operating the equipment by which supply is effected. A company supplying an interstate courier service does not cease to supply that service because it uses a third party (such as an airline) to carry the relevant parcel between two capital cities. The question is to be answered by consideration of who undertakes to provide the service. 28. In the present case, the trial Judge held that Foxtel Cable Television and Foxtel Management contract to deliver content and do so, and thus deliver to the public a listed carriage service: paragraph 242. 29. As the trial Judge analyses in paragraphs 15, 16 and 238, Foxtel Cable Television Pty Limited ("Foxtel Cable") contracts to provide the "Channels" (the programming package selected by the subscriber) and Foxtel Management Pty Limited ("Foxtel Management") contracts to provide the "retransmitted free-to-air broadcasts": clause 1.1 of the customer contract (AB 35). The customer contract does not contemplate that any third party will deliver the Channels and re-transmitted broadcasts. Rather, Foxtel undertakes to provide these. Foxtel, in fact, outsources the carriage or "delivery" function to Telstra Multimedia, but that does not affect Foxtel's position vis-ŕ-vis the customer. 30. Indeed, in the case of Foxtel Management it is apparent from the customer contract that Foxtel Management does not undertake to provide any content of its own, but rather merely provides a function of re-transmission, being re-transmission of free-to-air broadcasts: clauses 13.1 and 13.2 of the customer contract (AB 37). It is even clearer that Foxtel Management is a carriage service provider. Section 87(5) of the Telco Act 31. If, contrary to the above submissions in relation to the person supplying the service, Foxtel Management and Foxtel Cable do not themselves supply a carriage service to their customers (and therefore do not satisfy s 87(1) of the Telco Act), then both companies are carriage service providers by virtue of s 87(5). 32. If these Foxtel companies do not themselves supply a carriage service, then Telstra Multimedia is a carriage service provider. Foxtel (for reward, being the subscription fees) arranges for Telstra Multimedia to supply the relevant listed carriage service to a third person, being the subscriber: s 87(5)(a). Foxtel would be a carriage service provider under s 87(1) if Foxtel had supplied that carriage service: s 87(5)(b). The commercial relationship between Foxtel and the subscriber is governed by the customer contract, which deals with one or more matters relating to the continuing supply of the Foxtel service: s 87(5)(c). It is an agreed fact that there is no determination under subsection (8): s 87(5)(d). In relation to the third element, the customer contract is an agreement for the continuing supply of the Foxtel service, unless the customer contract is terminated pursuant to the mechanisms in that contract: clauses 1.1 and 9 (AB 35, 36). Whether all content service providers are carriage service providers 33. Foxtel submits (paragraph 25) that if Foxtel is a carriage service provider, then all other content service providers (such as Seven Cable Television and TARBS) will also necessarily be content service providers. That conclusion is not correct. 34. Whether a content service provider will also be a carriage service provider depends upon whether the content service provider also supplies or delivers the content to the end user. If so, then the content service provider will also be a carriage service provider. If not, then somebody else will fulfil the role of the carriage service provider. 35. The distinction may be illustrated by considering an example of a dial-up information service providing recorded information, such as the time, a weather forecast or sports results. Such information may only be obtained by people who have a contract with a telephone company to provide carriage services, including a service of carrying the recorded information to the caller's premises. The provider of the recorded information service is a content service provider, and uses the telephone company to supply the content service to the caller. The caller in turn uses the telephone company to, in effect, collect the recorded information from the content service provider and carry it to the caller's premises. The telephone company is a carriage service provider in this example (and may or may not also be a carrier, depending upon whether it owns the relevant network unit or units). 36. Likewise, in relation to the postal example referred to above, by analogy the person who sends the letter is a content service provider, and Australia Post is the carriage service provider. 37. In the case of a cable television service, there may be cases where the cable delivery service may be undertaken by one person, and the content supplied by another person. Whether Seven or TARBS will be carriage service providers will depend upon the arrangements they make with Foxtel or Telstra Multimedia and with the end users, and the conduct of their service. If Seven and TARBS simply provide channels to Foxtel to carry, and have no direct relationship with any customer, then they will not be carriage service providers. They will be content service providers. The class of content service providers is potentially very wide. As noted in the Explanatory Memorandum (page 3, 2nd last para): "The incorporation of a new concept of 'content service providers' is not intended to be used to impose substantial regulation on these persons. The Bill will primarily enable those persons to benefit from access rights under the proposed amendments to the Trade Practices Act (see proposed Part XIC in Schedule 1 to the Trade Practices Amendment (Telecommunications) Bill 1996). The regulation of content remains a matter for the Broadcasting Services Act 1992." 38. If Seven and TARBS have an arrangement with their customers to supply them with content, but provide that the customers must obtain their cable delivery services from Foxtel, then Seven and TARBS arguably will not be carriage service providers, and Foxtel will be a carriage service provider. 39. In the present case, each of Foxtel Cable and Foxtel Management provide both the services of content and delivery. Each of them are carriage service providers. Note: The word "Foxtel" has been used throughout the submissions and in the Judgment of Wilcox J as a convenient shortcut or abbreviation for the two Foxtel companies. As analysed by the trial Judge, the activities of the two companies are distinct. The declaration made by Wilcox J should be amended for the reasons set out in Seven's submissions on its cross-appeal."

tarbs' submissions 26 The submissions of TARBS were as follows: "6. The reasoning that supports His Honour's conclusion is as follows: 1. The issue whether Foxtel is a Carriage Service Provider (CSP) is the issue whether Foxtel: · (or a partnership of which Foxtel is a member (see the s 7, Telco Act definition of "person")), · supplies · a listed carriage service · to the public · using a network unit · owned by one or more carriers · or · for reward · arranges · the supply of such a service, where · had it done it itself, it would have been a CSP. … Listed Carriage Service 2. A carriage service is a service for carrying communications by means of guided or unguided electromagnetic energy. 3. By Sec 7, "Communications" includes any communication: "(a) whether between persons and persons, things and things or persons and things; and (b) whether in the form of speech, music or other sounds; and (a) whether in the form of data; and (b) whether in the form of text; and (c) whether in the form of visual images (animated or otherwise); and (d) whether in the form of signals; and (e) whether in any other form; and (f) whether in any combination of forms." 4. A listed carriage service is such a service between a point in Australia and one or more other points in Australia: sec 7 Telco Act. 5. There is no doubt that the Telstra broadband cable system is an aggregation of physical and logical structures designed to and capable of carrying communications by (as to parts) both guided electromagnetic energy and unguided electromagnetic energy, both point to multi-point and point to point, with two or more such points being in Australia. That was the purpose for which it was built. Network Unit 6. The Telstra broadband system is a network unit. … Carrier 7. Telstra Multimedia is a Carrier. It is licensed as such. Conclusion 1 8. Therefore, there is a network unit owned by a carrier, used for a listed carriage service, being the Telstra broadband network. Issue: Is Foxtel a Supplier of the Listed Carriage Service? 9. Therefore, the issue is whether Foxtel proposes to or does supply the service of communication by or on the Telstra network, with or without additional equipment or facilities. Users of the Listed Carriage Service 10. Because of the Foxtel roles as both manager of the Telstra broadband cable system under the April 1997 BCA (whether exclusive or not) and as the vendor of Pay TV services to the consumer, there are at least two groups of users of that service. They are: · Actual or potential content suppliers to consumers of Pay TV (input-end access) who require access to the cable network to have their message communicated or sent; and · Subscribers (output-end access) being the public comprising consumers of Pay TV, (whether or not there is one or more than one supplier of content), who require access to the cable network to receive communications of programming Supply to the Public 11. A "supply to the public" of a listed carriage service is defined to exist when a carriage service is used for point to multi-point services to end-users and at least one end user is outside the immediate circle of the supplier, or point to point and both end-users are outside that circle. … 12. There appears to be no reason why in the point to multi-point instance the "end-user" needs to be a consumer of Pay TV services (one of the multi-points) and not a supplier of Pay TV services (content) who wants access to the "point" to distribute to the multi-points. At this time there are apparently no content suppliers who have been given access, other than Foxtel companies, on the Telstra broadband system. 13. Given that the use in fact of the Telstra broadband cable is point to multi-point communications, and at least one end-user (ie the consumer or subscriber class) is outside the circle of Foxtel, it does not appear to matter that only Foxtel itself or Foxtel Cable Television (entities within the circle) have access as content suppliers. There is undoubtedly a supply to the public of the broadband service within the meaning of the section, as His Honour so found: AB 385 14. Therefore, the ONLY issue(s) is/are: · whether it is Foxtel that is doing the supplying or, if it is not, · whether it is arranging the supply, for reward, in circumstances where it would be a CSP if it did the things that it is arranging to be done. Foxtel as Supplier: 15. Under the BCA Foxtel is apparently granted the exclusive entitlement to provide or manage the provision of "services" to subscribers on the Telstra broadband service. Services are defined as, in short, residential Pay TV. Conversely, Foxtel is prohibited from using any other system to deliver those services. Under the BCA Telstra Multimedia agrees with Foxtel not to allow anyone else to perform that function. 16. Therefore, Foxtel is apparently the party capable of lawfully supplying the communications mechanism necessary for cable Pay TV on the Telstra broadband service or system. 17. In selling Foxtel Pay TV subscriptions to members of the public, it is content delivered by the Telstra broadband service that Foxtel offers to supply, as His Honour so found: AB 388. 18. Foxtel is a carriage service provider because it offers to prospective end-users and supplies to existing end-users, because of its arrangements with others, the prospect of point to multi-point communications being the service of Pay TV by marrying: · The content supplied by itself and Foxtel Cable Television, · The broadband facility owned by Telstra Multimedia and managed by Foxtel Management, and · The information streams to and from Customer Services Pty Limited to drive the operation of CAS/SMS to provide the aggregate service of communication of selected images to the end-user via the broadband system. Foxtel as an Arranger of Supply 19. In the alternative, Foxtel is an arranger within the meaning of s 87(5). … 20. There was no evidence of any direct dealing between Foxtel Cable Television and a prospective subscriber, by way of solicitation of them to acquire their respective services. There is evidence that Foxtel Management does solicit such people (actual and potential subscribers) for the purposes of its business to become subscribers to Foxtel Pay TV, see AB 388. 21. There is no evidence of any direct dealing between Telstra Multimedia (as to either access to its network or the use of Customer Services Pty Limited) and a prospective subscriber by way of solicitation of them to acquire their respective services. There is evidence that Foxtel Management does solicit such people (actual and potential subscribers) for the purposes of its business to connect to the cable and use the services of Customer Services Pty Limited by becoming subscribers to Foxtel Pay TV. 22. That solicitation results in subscribers being signed up and ultimately receiving the Foxtel Pay TV programming of their choice via the Telstra broadband cable. 23. It is manifest that Foxtel Management at least arranges any relationship that does materialize between those companies that own any content rights and Telstra Multimedia and the end-user, or itself is the, or a, party to those dealings. There is no point to a consumer having a relationship with one only of those entities in connection with Pay TV. Both are needed to get Pay TV. 24. Foxtel is able to do arranging because it is the manager of the business of Foxtel Cable Television and the manager of access to the Telstra broadband cable: see BCA. 25. The BCA recites that Telstra Multimedia is supplying the cable service to Foxtel Management it to use it for the purpose of the conduct of a Pay TV business. 26. Foxtel could not sell its, or anyone else's content rights without also the supply of cable access to achieve communication to the subscriber. 27. Therefore it is either a supplier or it is an arranger of supply of distribution and supply of content. Arranging for Reward 28. Foxtel is not doing this arranging gratis. It must do it for reward. His Honour so found: AB 388.5. Contract with Third Party 29. Foxtel signs up its subscribers for extended periods of time and those terms govern (inter alia) continuing supply of subscription TV. Foxtel a CSP if did it itself: 30. There being no issue that Telstra Multimedia is itself a CSP, it follows that if Foxtel Management performed the functions of Foxtel Cable and Telstra Multimedia, it would be a carriage service provider. Conclusion 31. Therefore, Foxtel is a deemed CSP by sec 87(5). Therefore Foxtel is within either, or both, sec 87(2) or (5) and therefore a CSP."

Conclusions on the appeal 27 We agree in substance with the submissions of Seven and TARBS, and with the judgment below. Therefore, we do not need to elaborate our views in detail, but will outline some points which we believe are of particular cogency. 28 Much of what was submitted by FOXTEL is incontrovertible. Both FOXTEL Management and FOXTEL Cable are plainly content service providers. So much is apparent from the definition of "content service provider" in s 87 and the definition of "content service" in s 15 (when read with the definition of "broadcasting service" in s 6 of the BSA). However, while the reference in the definition of "broadcasting service" to "persons having equipment appropriate for receiving that service" may, in an appropriate factual and legal context, serve to limit what is the relevant "content service", and thus the circumstance in which a person is a "content service provider", it is unlikely that this aspect of the definition was also intended to signify a limit on who may be a "carriage service provider". The characteristics of a "carriage service provider" are elsewhere identified (in s 87) and it is not in issue that a person may be both a "carriage service provider" and a "content service provider". Thus, a person may be a "content service provider" in relation to content provided to the reception equipment of an end user (consistent with the definition of "broadcasting service") but also be the "carriage service provider". That could be so even if the "carriage service" included all or part of the reception equipment used by the end user . The existence of a provision that can create an obligation on a carriage service provider (s 152AR(8)) to provide access to conditional-access customer equipment indicates that the access regime is intended, in relation to a "carriage service provider", to extend to equipment that is either reception equipment or equipment that is an adjunct to reception equipment. 29 In the present case, the contractual obligations of FOXTEL to the subscriber include not only the provision of content but also the delivery of content. They involve delivery in two respects. The first is that, as far as the customer is concerned, equipment is installed and maintained by FOXTEL (though, in fact, installed and maintained by Telstra Multimedia on behalf of FOXTEL) at the place of reception by the subscriber. The second is that the obligation to provide channels (or programmes) assumes that the content finds its way to the subscriber. It may be accepted that the content finds its way to the subscribers' headend by means of the Telstra Multimedia HFC network. However, Telstra Multimedia has no contractual obligation to the subscriber to deliver or transmit the content, and its obligations arise incidentally through its contractual arrangements with FOXTEL. In this sense, FOXTEL provides both the content service and carriage service. 30 "Carriage service" is defined as a service for carrying communications by the means specified in the definition. The definition of "communications" is at a high level of abstraction and is not directed to the content of the communication. Rather, it concerns who the parties are to the communication and the form in which the content is transmitted to the recipient. The definition of "carriage service" focuses on the service which provides communication in a particular form apart from both the content of the communication and the underlying equipment or infrastructure by which the communication occurs. The only aspect of the definition of "carriage service" that bears upon the type of equipment or infrastructure involved is that it must be capable of carrying guided and/or unguided electromagnetic energy. 31 It is provided by s 87 that a person is a "carriage service provider"(inter alia) if the person supplies a listed carriage service to the public using a network unit owned by one or more carriers. Network units are dealt with in Pt 2 of the TEA which makes clear that the network unit relates to the facility or infrastructure which carries the communication. This confirms the fact that a carriage service is something separate from, but which uses, the facility or infrastructure. A "carriage service" means a service for carrying communications by means of guided and/or unguided electromagnetic energy which is distinct from the network unit which is utilised for the purpose. Reference has been made in the ACCC appeal to the dictionary definition of "service", to the conceptual difference between a service and facilities utilised to provide or deliver that service for statutory access purposes, and to the authorities concerning that difference: see Rail Access Corporation v NSW Minerals Council Ltd (1998) 87 FCR 517,524C; Hamersley Iron Pty Ltd v National Competition Council (1999) 164 ALR 203, 214; in re Sydney International Airport (2000) A Compt T 1 par 14-17. As to the meaning of "service" in a constitutional context (concerning a radio and television service) see Jones v The Commonwealth (No 2) (1965) 112 CLR 206 and in the context of the Copyright Act 1968 (Cth) see Telstra Corporation Ltd v Australasian Performing Right Association Ltd (1997) 191 CLR 140. 32 In our opinion, it follows that service in the relevant sense includes the commercial arrangements by which the service provider can use the network unit and the commercial arrangements by which the service is provided to and received by the customer. The access, which is the end point of the legislative chain, needs to be to a "service" which reaches the customer. The three functions of carrier, carriage service provider and content service provider are different, but in any one case the one party may carry on one or more of these three functions. This is to be judged by the commercial arrangements which in fact exist at any one time. This is the way in which the trial Judge approached the issue, and we think he was correct in finding, or characterising, the facts as he did. 33 We also think that it is legitimate, in considering this question, to have in mind that the main object of the TEA is to provide a regulatory framework that promotes, inter alia, the long-term interests of the end-users of carriage services. This will not be assisted by a construction of the TEA which, when applied to the facts, does not accord with commercial reality. That reality is that Foxtel, with the full knowledge and approval of the licensed carrier, Telstra, held itself out to the world as the provider of the relevant service. 34 If, contrary to our opinion, Foxtel is not a service provider within the meaning of s 87(1), then, as submitted by Seven and TARBS, we agree with the conclusion of the primary Judge that it would be a service provider within the meaning of s 87(5) and, generally, with his reasoning to that conclusion. 35 The issue to which we must return is the cross-appeal by Seven seeking to vary the terms of Order 1 of the orders made by his Honour in proceeding N 217 of 2000. 36 Order 1 provides: "It be declared that the applicants, Foxtel Management Pty Limited and Foxtel Cable Television Pty Limited, the suppliers of the service known as "FOXTEL subscription television service", together constitute a "carriage service provider" within the meaning and for the purposes of the Telecommunications Act 1997." (Emphasis added) 37 Seven contends that his Honour should have made the following declaration: "It be declared that each of the applicants, Foxtel Management Pty Limited and Foxtel Cable Television Pty Limited, the suppliers of the service known as "FOXTEL subscription television service", is a "carriage service provider" within the meaning and for the purposes of the Telecommunications Act 1997." (Emphasis added) It is contended for Seven that his Honour's reasoning (in particular par 238) supports the conclusion that each company is a carriage service provider in its own right. 38 As we are of the view that carriage service is best seen in this case as the bundled commercial service which carries the communication to the receiver, the form of order which was made is appropriate on the facts here. We should make clear, however, that if either party offered its service to the public separately from the other, then each would be a carriage service provider. 39 We dismiss both the appeal and cross-appeal. We order that the appellants pay the respondents' costs of the appeal. We order that the first and second respondents pay the appellants' costs of the cross-appeal. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Beaumont, Moore and Gyles.

Associate: Dated: 18 August 2000 Counsel for Foxtel Management Pty Limited and Foxtel Cable Television Pty Limited: Mr A J Meagher SC and Mr MJ Leeming

Solicitors for Foxtel Management Pty Limited and Foxtel Cable Television Pty Limited: Allen Allen & Hemsley

Counsel for Seven Cable Television Pty Ltd: Mr CA Moore

Solicitors for Seven Cable Television Pty Ltd: Freehill Hollingdale & Page Counsel for Television & Radio Broadcasting Services Australia Pty: Mr N A Cotman SC

Solicitors for Television & Radio Broadcasting Services Australia Pty Limited: Peter Cornelius & Partners

Counsel for Australian Competition and Consumer Commission: Mr N J Williams

Solicitors for Australian Competition and Consumer Commission: Australian Government Solicitor

Date of Hearing: 6 June 2000 Date of Judgment: 18 August 2000

Part XIC of Trade Practices Act 1974(Cth)

Trade Practices Act 1974(Cth)

At a glance

Court

Decision date

Before

Source

Judgment (29 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (7)