The Convergence Review has unveiled the most dramatic proposals to regulate the internet seen in Australia for years. If implemented, the proposals would represent a dramatic increase in protectionism.

Online media face a massive increase in regulation and compulsory content levies under the Convergence Review’s interim proposals for a more converged, less technology-specific content régime.

If implemented, the proposals would represent a dramatic increase in protectionism and would be a huge win for the commercial free-to-air television networks in their battle to offload their current content responsibilities, under the guise of “regulatory parity”.

The interim report, after months of consultations by the review team of Glen Boreham, Malcolm Long and Louise McElvogue, proposes an entirely new framework for content and spectrum regulation, abandoning the current technology-specific Broadcasting Services Act and Radiocommunications Act-based framework.

Central to it is a technology-neutral régime to support Australian content, by phasing out content obligations on broadcasters and slapping regulation and content levies on online content providers that operate above a certain size, regardless of whether they are based in Australia or not. Companies such as Google or Apple, provided they generated sufficient revenue or had sufficient reach within Australia, would be notionally subject to levies to fund the production of Australian content or be required to produce their own Australian content. What would count as a “content service enterprise” under the new framework isn’t clear — Twitter and Facebook could potentially be included as well.

The report acknowledges “there may be challenges in attempting to regulate overseas enterprises” but “… there are legal and financial avenues as well as strong brand and market incentives to encourage these enterprises to comply with relevant Australian regulations”. As the Productivity Commission showed in relation to attempts to ban online gambling, previous Australian efforts to impose its own quaint regulation on overseas sites have been a dead letter.

However, the review also foreshadows that any online provider, including individual bloggers, could be subject to content restrictions. Large online media companies would also be roped into media diversity laws.

It represents the most far-reaching proposals for internet regulation since the Howard government banned online gambling and goes well beyond the internet filter proposal that notionally remains government policy.

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The report also proposes the abandonment of most aspects of the current geographical and numerical-based media diversity protections in favour of a public interest test. Rules such as the 75% reach rule, the “two out of three” rule limiting cross-media ownership and limits on the number of radio and television licences that can be owned in a single market would be dumped, with a new regulator enforcing a public interest test that covered not merely the traditional regulated media of print, radio and television but online media and subscription television as well.

As Crikey has repeatedly argued, a public interest test sounds like a solution to concerns about diversity, but provides only uncertainty and subjectivity in place of the current clear, quantifiable — if inadequate rules.

However, to the review’s credit, it identifies that a key issue in a public interest test must be considering media transactions at a national level — something for which there is no basis for consideration under the current rules.

The report also proposes a range of other changes, several of which have rather more merit than its bizarre calls for internet regulation.

It proposes dumping the current, timid and legalistic broadcasting regulator, ACMA, in favour of a new content and communications regulator that appears to be closely modelled on the UK’s Ofcom. The new body would have its own secure source of funding, full independence from government, cost recovery arrangements, much greater freedom in enforcement of legislation, cover all forms of media and generate its own advice and reports to government and the market. Such a model is unlikely to appeal to either the media industry or politicians, who are used to ACMA’s light-touch co-regulation based model. The new regulator would also specifically handle content competition issues (such as sports rights) that might go beyond the ACCC’s remit.

The interim report also proposes a more market-based approach to spectrum allocation, with greater clarity about public interest requirements, and licence fees better reflecting the actual value of spectrum to licensees. Under digital transition arrangements, free-to-air television broadcasters were gifted vast amounts of spectrum in the late 1990s to keep out competitors. It also suggests the ABC and SBS charters be brought up to date and that the ABC be required to comply with a 55% Australian content quota on its main channel.

While a new regulator, a fully market-based spectrum allocation process and, most likely, an Australian content requirement on the ABC won’t appeal to politicians (the ABC would have to receive additional funding to meet the 55% content and maintain quality year-in and year-out), it may well be that the option to regulate the internet may prove appealing to some politicians, particularly when it comes with the corollary of making life easier for the influential free-to-air TV networks. However, it is unclear whether slapping local content obligations on the likes of Google and Apple would be consistent with the Australia-United States Free Trade Agreement, which the report notes needs to be considered in the context of any changes to content obligations.

The media diversity changes are problematic politically: in effect, the changes would hand the final say on major media transactions to an independent regulator, taking away the control currently exercised by governments via changes to the media ownership laws, and thereby removing from politicians a key political tool.

Those changes will at least see powerful players representing their interests in any debate. And while Google and Apple might also express their views about the draconian proposals in the report, advocates for an unfettered internet will find their voices count for much less when politicians come to consider the review’s final report, due next year. Submissions on the interim report are due by February 10.