SMPTE2017 CONFERENCE, SYDNEY
It is great to be here, with the people who make things work behind the scenes in media and communications, whether to a digital TV, to a smart device, or in a theatre.
From engineers working on the next generation of standards to ensure interoperability, to camera operators and vision switchers capturing the content we see and hear, SMPTE members are at the interface of engineering, technology and economics; at the cutting edge of ensuring that the content we value so greatly both looks and sounds great.
SMPTE members have contributed to the development of “thousands of standards, recommended practices and engineering guidelines, more than 800 of which are currently in force today”.
- You are the reason we ordinary Australians are so familiar with the colour bars test pattern on TV (even though digital broadcasting standards have largely eliminated the need for it)
- You are the reason we can tune in and enjoy sports in High Definition
- You also part of the reason why many of us have some 3D TV glasses lying around in the house… possibly unused!
- And you are the reason there were a few options for enjoying Game of Thrones over Foxtel Now last night, despite the unprecedented demand!
You are no strangers to technological change indeed, for generations, SMPTE members have helped usher it in.
In the 100-plus years that the Society of Motion Picture and Television Engineers has worked to ‘advance moving-imagery education and engineering across the communications, technology, media and entertainment industries’ by ‘providing structure, organisation and interoperability’, it has worked through a range of leaps in technology – ‘from the introduction of “talkies” and colour television to HD and UHD (4K and 8K) TV’.
The Australian Section of SMPTE was founded in 1971 – a great year, by the way. As this conference and exhibition attests, you (like me) are now in a vibrant and mature 46th year, at the ready to continue contributing to the ongoing evolution of technology standards in Australia.
It didn’t seem that long ago that we were watching the TV show, Beyond 2000, to learn about what exciting technological developments we could anticipate once the 21st century arrived and products became available to the mass market.
“The speed at which technology is changing can be daunting, but is also very expensive, especially if you try to keep pace. For example, the screen you’re looking at right now might already be obsolete unless you’ve already gone stereo and digital. Television technology is now going through a revolution”.
That was about 30 years ago. When it was first broadcast, viewers watched that episode over an analog television, on a set made with cathode ray tubes, with 4:3 aspect and interlaced scanning. Mine was encased in a wooden box and was essentially a piece of furniture, on which stood a lamp shaped like a pineapple.
Today, viewers can watch the episode on demand from YouTube over a computer or smartphone. I commend it to you, if only to marvel at the 80s fashion, music and graphics!
While the technology and equipment today is different, the basic point remains much the same: Technology is changing, the speed of evolution can be daunting – particularly if it challenges your business or livelihood – and consumers are cognisant of their hip pocket when it comes to the question of upgrading their equipment and devices.
At the time of that same episode of Beyond 2000, and according to the host, the “ultimate in home entertainment” was a system that incorporated “a television, an FM tuner, a turntable, a compact disc player, a cassette deck, an amplifier, a digital audio processor, a graphic equaliser, a graphic synthesiser and, of course, a hi-fi video recorder with stereo tuner built in”.
Fast forward thirty years and the ultimate in home entertainment today includes features like WiFi, Bluetooth, 3D and HEOS multi-room wireless technology. Television is still a key feature, but as we approach the year 2020, talk has shifted to 4K and 8K technology and anxiety around obsolescence persists.
The article notes that:
“already Japanese broadcaster NHK, along with Sharp, Sony, Samsung, LG and others has shown or announced plans for 8K TV and/or 8K broadcasts. 8K compatible video standards are being rolled out now. And every year at the annual CES where new models are introduced, concept TVs with 8K resolution are on display”.
Of course, the short answer given by the article to the question is No, stating:
“Despite the plethora of 4K TVs on the market, we’ve still barely started the 4K transition. It took years for HD to replace SD, and going from HD to 4K isn’t likely to take less time. Sure, the TVs are available, but the vast majority of content is still HD. There’s no broadcast 4K yet, and even the biggest 4K sources like Netflix, Amazon and Blu-ray disc offer only a small fraction of their catalogs in 4K”.
As you well know, and to continue the quote: “TV technology always outpaces content. It’s a lot easier for a TV manufacturer to add pixels than it is for a TV network to completely change every piece of gear it owns to do a different resolution”.
That is to say, technology and standards evolution does not occur in a vacuum, but rather within a complex ecosystem comprising connected international, national and industry standards-setting activities. The needs of industry, both domestic and worldwide, help drive the evolution of standards which, in turn, shape activities and behaviours along the value chain of broadcasters, manufacturers, importers and retailers and consumers.
Of course, within such a complex ecosystem, you find a multiplicity of approaches to, and opinions on, the various technologies in play as their implications – their potential and limitations – are explored.
Last year, the then Chief Product Officer of Netflix, Neil Hunt, who had been with Netflix since ‘Before 2000’, back when it was a DVD rental-by-mail service, was quoted as saying that: “The future of TV is in better pixels, not just more of them” and that “HDR [High Dynamic Range] will be the true future of TV evolution; a more important innovation for consumers than 4K”. Of Virtual Reality, the same company has said they, “don’t see an opportunity right now in the near-term for Netflix and VR,” but do think “there’s a great opportunity for Virtual Reality in gaming”.
While that may be true, it does not stop other companies from actively exploring ways of telling stories in VR.
The PricewaterhouseCoopers’ Australian Entertainment & Media Outlook 2017-2021, launched last month, canvasses developments in virtual reality films. It mentions the IMAX announcement that it is developing, with Google, a VR camera for film-makers, meaning VR is becoming part of expanding consumer choices, whether it’s in a theatre or for in-home entertainment. It also profiles an Australian VR company called Lens Immersive who have developed a platform to connect film-makers with audiences. The report notes: “Their compression technology is an important part of their technology mix which enables high resolution (such as 4K) video streaming”. The Outlook goes on to consider eSports and interactive gaming.
All of these developments are exciting and promise an array of new experiences in the entertainment sector and beyond, with implications for all aspects of the digital economy – health, education and jobs – as well as the manufacturing and retail sectors around device supply.
Of course, consumers needn’t worry too much about their television becoming obsolete if Mark Zuckerberg is right because, as he was quoted in an interview with USA Today a couple of months ago, in the lead up to Facebook’s F8 annual developers’ conference in April 2017:
“We don’t need a physical TV. We can buy a $1 US app “TV” and put it on the wall and watch it. It’s actually pretty amazing when you think about how much of the physical stuff we have doesn’t need to by physical”.
This brings me to the key questions I wish to pose today: In the global communications ecosystem what, if anything, should policy makers be pursuing to promote and balance the interests of Australian businesses and Australian citizens and consumers through the evolution of technology?
What outcomes are we trying to achieve, when it comes to technology and standards evolution, and what, if anything, should Government do to support those outcomes?
Meeting the challenge of ever-improving standards requires us to take a long view, as well as consider the short and medium terms, and it demands that we understand Government action (or inaction as the case may be) in the context of a connected ecosystem.
- What should Government be doing to support the future evolution of digital terrestrial television to enable it to compete with over-the-top providers in the broadband-enabled environment?
- What should Government be doing to support the film and television industries, including content producers?
- What should Government be doing to foster the growth of new technologies and applications for use across the digital economy, in health and education, for example?
For the answers to those questions, I have my eyes and ears open. Part of the reason why I am here today is to engage with SMPTE and invite its members to contact me, to speak with my representatives, and share your ideas on the way forward.
But I am also here today to share my perspectives.
It is my view that a best-practice approach to the formation of policy, regulation and other government support mechanisms should be adopted in the Communications Portfolio. Such an approach embarks on action only with a clear sense of the outcomes or benefits to be achieved, or problem to be solved. It adopts an evidence-based approach to the identification of issues and options in a holistic manner.
The option of ‘do nothing’ should always be considered and where deregulation is appropriate, it should be effected swiftly. However, where the market alone will not deliver a solution, and there is a need for the government to step in and intervene or support, government should respond in a timely manner to the extent necessary to address market failure.
In a number of areas in the media and communications space, the market alone will not deliver the outcome we are looking for. The NBN and the digital switchover program are cases in point, as is the fact that audio description of television continues to elude blind and vision-impaired Australians, for example.
In the complex ecosystem of which SMPTE is a part, we need calm, coherent and evidence-based policy, as well as a roadmap for the transition from here to the future, not just panicked, piecemeal and short-sighted reactions that serve only as Band-Aids to salve the concerns of a few dominant media interests.
It is unacceptable that a Government can be in office for almost four years and to have produced only piecemeal proposals for adapting our media laws to 21st century conditions.
Of the Government’s broadcasting reforms, the repeal of the 75 per cent reach rule is a bit of rudimentary deregulation that industry should already be enjoying. It could have passed Parliament last year, yet it continues to be held up, despite Labor’s support for its repeal.
The proposed repeal of the 2 out of 3 rule, on the other hand, is a failure of best practice regulation. The proposed repeal fails to properly consider the public interest outcome of diversity, fails to adapt our laws to 21st century conditions and fails to address the evidence.
The fact is that Australia already has one of the most concentrated media markets in the world. The fact is that the majority of Australians continue to source their news from traditional platforms, particularly in regional areas. The fact is that the diversity-enhancing potential of the internet is yet to be realised in Australia, particularly where broadband connectivity is substandard.
The grant of interim financial relief for commercial broadcasters, announced late in June, exemplifies the piecemeal approach being adopted by this Government. Meanwhile, there is no relief for the independent production sector or the subscription television industry, for example.
I’d like to touch on Content Reform.
While connectivity and delivery is fundamental, and platforms may be Queen, Content is King. How do we ensure we have the quality content we need to fulfil our national identify, to support our democracy?
I’ve got a five year old. She enjoys watching programs on the big screen, and will watch everything from Netflix to Foxtel to ABC Kids, on the TV, or iPad, and she loves YouTube and it bothers me when I hear her playing with her toys in an American accent.
Labor understands that content production forms an important part of the media and communications ecosystem and laments the fact that the health of our content industries is suffering as a result of Government inaction on so many fronts.
When I was Chair of Screen NSW, I experienced first-hand just how broad that ecosystem is, traversing engineers, technicians, creatives, writers, directors and producers. A lot of the ancillary jobs are held by my constituents in the Western Sydney seat of Greenway, who are in logistics, driving trucks, security, catering, make-up and hair, for example. I came to understand that production incentives were actually job creation incentives for the residents and small businesses that I represent.
It is unacceptable that a Government can be in office for almost four years before it even commences a Content Review, when the evidence shows clear decline in the production sector.
It is unacceptable that the Government is yet to provide a response to the Senate Standing Committee Report Game On when, as Labor understands, the Australian video games industry is key to culture, innovation and productivity in our nation, key to fostering the skills of artists, musicians, writers, performers and software developers and is part of the new frontier that sees the blurring of the film and television industries with the broader digital economy.
The evidence keeps piling up there in that this Government has no agenda for the Communications Portfolio; No roadmap – whether on broadcasting, public interest journalism, gaming or content – there is no agenda.
Clearly frustrated, Screen Producers Australia released the Screen Production Industry Policy Ledger, earlier this month. They say “What the ledger demonstrates is the Government’s policy approach to the local production industry looks a lot like trickle-down economics. The Government’s agenda to date has been regrettably incomplete and has left out the small businesses that drive the industry”.
“The ledger also makes clear the other Government decisions that have had an asymmetrical impact on the industry. The Government decided to benefit certain businesses at one end of the value chain, such as the broadcasters with a series of broadcast licence fee refunds. These windfalls may boost broadcasters’ share prices, but not their commitment to local content, which has declined 20 per cent for drama and documentaries over the past four years”.
“The Government has also moved to benefit certain elements of the local industry, such as services sector and crew with nearly $70 million in funding for foreign films Thor, Alien and Aquaman. This is welcome but the approach has not been certain or consistent or taken into account the entire production ecosystem and it ongoing sustainability”.
Labor believes that the Australian screen production industry should be supported and funded, to encourage increased private investment, train further talent and assist market development through Australian local content requirements on free to air and pay television as well as diverse new technologies.
I now wish to turn to the National Broadband Network.
At the core of Labor’s communications policy is one unifying principle that feeds into all others: Australia must entrench universal access to broadband and communications services as a right – and that includes how speed, quality and affordability are defined.
This in turn drives how all other elements of the digital economy join up.
This was the starting point from which Labor embarked on bold action to deliver a ubiquitous broadband network that would connect 93 per cent of Australian premises with optical fibre.
The policy question Labor faced was two-fold:
- Firstly, how do we achieve investment to deliver twenty-first century digital infrastructure in order to create social and economic opportunity in an increasingly competitive world?
- Secondly, what technologies would best enable these opportunities given the economic and regulatory realities before us?
Labor decided to back fibre – not because of an ideological conviction to preference one technology over another. Rather, the vision to build a fibre NBN was grounded in two disciplines: engineering and economics.
The engineering judgment was straightforward – fibre has the technical flexibility to scale bandwidth to meet present and future demand — and it can do this at very little cost. It is also a more reliable technology, with lower fault rates and greater resilience against environmental conditions.
Copper on the other hand was constrained by physics in terms of the download and upload speeds it could deliver. The experts also explained that Fibre to the Node (FTTN) does not have an economical upgrade path – because it in fact requires an overbuild to push fibre deeper into the network. This is capital intensive, duplicative and wasteful.
Now we turn to the economics.
The question of what is the most economical approach to deploy an NBN is intertwined with the time-horizon over which you want to measure the costs and the benefits of different options.
Labor has always believed that if you are going to invest over $40 billion in national infrastructure, then the public interest requires that Government take a long term view. Of course, the short-term politics will often get messy, but successful and innovative nations must think and act for the long-term.
This can be seen in the social and education initiatives of Gough Whitlam in the 1970s, to the micro-economic reforms of Hawke and Keating in the 80s and 90s, to the National Broadband Network as originally conceived by Labor.
However if we take a 10, 20 or 30 year view of the current NBN it is clear the multi-technology-mix does not pass the economics test – it costs more to maintain, it generates less revenue, it will waste billions in upgrade costs that could be avoided, it is more exposed to mobile competition, and it infuses an enormous amount of systems and migration complexity into the NBN project.
This is why the current NBN deployment has a 3.4 per cent rate of return, compared to the 7.1 per cent return under Labor’s fibre-dominated business case.
The reason I am explaining this is because both the engineering and economics of the NBN have important linkages to how content might be carried and priced over the network into the future.
Pricing on the NBN is composed of two charges: one is called an Access Virtual Circuit (AVC) charge which means you pay for a chosen speed link to a customer’s premises. For example, a 25 Mbps speed link costs $27 per month (according to NBNCo WBA product catalogue price list at December 2016).
The second is called the Connectivity Virtual Circuit — otherwise known as the CVC charge. CVC can be considered the bandwidth purchased from NBN to carry traffic from customers in the access network to the NBN Point of Interconnect (POI). 1 Mbps of CVC bandwidth costs around $15.25 per month, and on average, providers currently dimension around 1.1 Mbps per customer.
In a perfect world, retail providers would purchase enough CVC capacity to support the speeds and traffic demands of their customers during peak hour. But in a competitive market place that proposition becomes more complicated, and retailers will of course act in what they judge to be their commercial and strategic interest.
As I have said in speeches previously, the biggest challenge with the Connectivity Virtual Circuit (CVC) charge is that it doesn’t relate to the cost of the bandwidth itself. Rather, its purpose is to allow NBN to generate revenue as usage over the network increases.
This is a legitimate business model to recover the capital invested in a newly built network – but the problem is that current CVC price signals are at odds with the inflated cost base and deflated capabilities of the multi-technology-mix.
The effect of current CVC design is to discourage usage because it signals to RSPs that they should under-use the capability of the network, and market slower speeds to their customers.
It is therefore no surprise that 90 per cent of fibre households in New Zealand sign up to 100 mbps or more speed plans, compared to only 15 per cent on the NBN here in Australia.
Also no surprise that on the front page of today’s Australian newspaper there are reports NBNCo has finally confirmed CVC pricing is a key factor behind ongoing slow speed issues faced by consumers.
The demand for video content and data will continue to grow and Cisco has forecast that by 2021 over 80 per cent of all internet traffic will be video compared to 67 per cent in 2016. And by 2021 it is forecast a connected 4K TV in Australia will consume 9 GB of data per month. To put this in context that exceeds the total average download per month of Australians a decade ago, which was around 7.7 GB per month.
Beyond headline growth figures, the demand for data in Australia has also become much more ‘peaky’ than what traffic engineers have observed in the past.
This trend is a product of higher levels of concurrent usage driven by on-demand video content. And if we see a greater shift towards live content broadcast over the internet, this gap between busy and non-busy hour traffic could increase further.
When the pricing design for fixed-line infrastructure includes not only access to the local network but also the traffic carried over it, these trends have potential to compound existing challenges.
This could also have implications for the relative economic efficiency of the NBN as a high-definition broadcast medium for real-time content.
This of course adds to existing questions about the sustainability of CVC price points going forward.
The broader pricing challenge underscores the importance of innovating in how we leverage content distribution technology and network intelligence to distribute content more efficiently over NBN infrastructure over time.
This would not be the first time engineering has helped alleviate a problem with network economics. And I am confident it will not be the last.
Digital terrestrial television
Turning next to digital terrestrial television, I note that for a range of factors, including its ubiquity, stability, quality content and preference by the Australian population, this medium continues to be a dominant one in the Australian media and communications landscape.
Engineering and economics were at the forefront as Australia moved through the switchover from analog to digital television broadcasting.
After winning government in late 2007, Labor moved swiftly to institute a ‘firm’ digital switchover date and to address a number of issues. These included finding a solution for digital reception in areas unable to receive terrestrial signals and assistance for those unable to afford digital equipment. It began a comprehensive switchover campaign and was rewarded with strong statistics on the conversion of households to digital television in the years that followed.
Such is the value of a clear vision.
As part of the switchover process, the Australian Communications and Media Authority had to address the engineering and policy challenge posed by the requirement that all viewers able to receive analog terrestrial television also be able to receive digital television – the ‘same coverage’ requirement.
This was because of evidence that, as noted by the ACMA: “The Australian television market is unusual for its high reliance on terrestrial reception of free-to-air television. The majority of Australian viewers rely solely on free-to-air terrestrial transmission to receive television services”.
The switchover process was completed at the end of 2013.
As the ACMA approached the finish-line for analog switch-off, it looked ahead and released a discussion paper in early 2012 called Beyond Switchover – the future technical evolution of digital terrestrial television in Australia.
With the release of this paper, the ACMA kicked off a discussion with industry and the community, believing it was ‘timely to look to the future and consider whether there is a role for the ACMA in promoting the progression to new digital television technologies over the next decade and beyond’.
The ACMA sought input on the drivers for change, the paths for implementing change and any steps it could take in the short to medium term that would assist change to new technologies for digital television in the longer term.
I applaud this approach and regard it as consistent with the Final Report of the ACMA Review, released in May 2017, which outlines high-level intervention principles that guide decisions about when and how governments should intervene in the market, one of which is that: “government intervention should be considered from a system-wide view of the interdependence, interconnectivity and feedback relationships between different parts of the communications sector and other sectors in the economy”.
The Beyond Switchover paper was released over five years ago now, and it may again be timely to recommence such a dialogue, particularly as commercial and national broadcasters have adopted MPEG-4 in order to deliver their primary HD channels and the Final Report of the ACMA Review has been released.
That report recommends that the ACMA’s remit cover all the layers of the communications market, including infrastructure, transport, devices, content and applications. I note that the applications/content layer includes the content delivered on subscription and free-to-air digital television or delivered over applications such as iView, Netflix and Stan. This layer also includes software applications or platforms that support additional functionality, including the ability to make voice and video calls.
The broadcasting industry continues to innovate and look for ways to be more efficient with its technology and business operations.
What can policy makers and regulators do to support the evolution of digital terrestrial television to ensure it remains competitive with IPTV, mobile and WebTV and other innovations in the broadband-enabled environment?
Since the conclusion of the Digital Dividend Program, there has been no sign of a roadmap for the future. What preparatory work could policymakers be doing on this front, particularly around the future use of vacant spectrum?
On Spectrum Reform, I acknowledge the lengthy timeframe it has taken to get to consultation on the current exposure draft of legislation, as well as the importance of getting spectrum reform right. Proposed legislative change of this scale only occurs once about every 25 years and will have a big impact on industry.
The change is of vital importance to the economy and, while the flexibility of the regulatory framework is useful, it is not an end in itself. This process needs to be shaped by a clear vision of the benefits we wish to achieve.
As I said before, SMPTE members are no strangers to transition, and SMPTE members are accustomed to working within an ecosystem to forge a way forward.
Government action, and inaction, has impacts right across the media and communications ecosystem – all along the value chain.
I invite your engagement on what principles and evidence should guide us as we approach 2020 and beyond, and what practical steps we should take in the short to medium term to help achieve our long term goals.
I am confident that SMPTE has the skills with which to approach the questions I have posed today, and I genuinely look forward to addressing them with you.
Thank you, and best wishes for a productive conference.