Foxtel Management Pty Ltd & Anor v Seven Cable Tele

[2001] HCATrans 251

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  Nos S228 of 2000

B e t w e e n -

FOXTEL MANAGEMENT PTY LIMITED

First Applicant

FOXTEL CABLE TELEVISION PTY LIMITED

Second Applicant

and

SEVEN CABLE TELEVISION PTY LIMITED

First Respondent

TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED

Second Respondent

AUSTRALIAN COMPETITION & CONSUMER COMMISSION

Third Respondent

Application for special leave to appeal

GLEESON CJ

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 10 AUGUST 2001, AT 10.40 AM

Copyright in the High Court of Australia

__________________

MR A.C. ARCHIBALD, QC:   May it please the Court, I appear with my learned friend, MR M.J. LEEMING, for the applicants.  (instructed by Allens Arthur Robinson)

MR A. ROBERTSON, SC:   May it please the Court, I appear with my learned friend, MR N.J. WILLIAMS, for the respondent in No 227, for the third respondent in 272 and 273 ‑ ‑ ‑

GLEESON CJ:   I thought we were dealing with matter No 3 in the list, which is a matter in which Mr Jackson and Mr Cotman are opposing. 

MR ROBERTSON:   I beg your Honour’s pardon.  Although I appear for the third respondent in that matter, it is a submitting appearance and I do not seek to be heard. 

GLEESON CJ:   All right.  We will note your appearance then, thank you, Mr Robertson. 

MR D.F. JACKSON, QC:  If the Court pleases, I appear with my learned friend, MR C.A. MOORE, for the first respondent.  (instructed by Freehills)

MR N.A. COTMAN, SC:   If the Court pleases, I appear for the second respondent.  (instructed by Peter Cornelius & Partners)

GLEESON CJ:   This is the case about carriage service provider? 

MR ARCHIBALD:   Yes, it is.  The carriage service case.  And if the Court pleases, the question is whether pay TV providers are to be subjected to the compulsory access regime of Part XIC of the Trade Practices Act.  Pay TV providers are plainly and unarguably content service providers but, in order to be subject to the compulsory access regime, they must perform services which render them carriage service providers.  It is plain that there was a carriage service provided in the present case; that is, the service of carrying the program signal from the headend through the

various arterial and subarterial cables to the edge of the network, which occurs at the wall plate, or the wall socket, the point of entry to the subscriber’s premises. 

The question is:  to whom was that carriage service provided?  The Full Court concluded that the carriage service was provided to the subscribers and, being provided to the subscribers, was provided by the pay TV service provider.  Our contention is that that conclusion is wrong, and that the carriage service is provided not to the subscribers but to Foxtel, the company whose responsibility it is to get the program signal to the wall plate so that it may be received by the subscriber. 

GLEESON CJ:   Provided by Telstra. 

MR ARCHIBALD:   Yes, provided by Telstra, who is the carrier and relevantly, here, the carriage service provider. 

GLEESON CJ:   Just remind us of the arrangements between Telstra and Foxtel. 

MR ARCHIBALD:   By contract between Foxtel and Telstra, Telstra makes available the cable to carry the program signal over it to the various points at the perimeter of the network – by contract between them.  And there are also related contractual arrangements which involve the installation of the receiving equipment, the set top units and the like, in the subscriber’s premises. 

GLEESON CJ:   The cable is that big, black cable that runs along some streets of Sydney like an overhead oil pipeline, is it? 

MR ARCHIBALD:   Yes.  And it passes by a lot of houses, but there are lead-in cables where there are arrangements between the subscribers and the pay TV provider, and they enable the signal to be transmitted to the wall socket.  The position is very like, in our submission, that of an electricity retailer.  The electricity will be provided by the retailer; the retailer will source the energy from a generator; it will be carried along the network by the transmission company for the electrical retailer.  The retailer’s obligation is to provide the electricity at the meter box.  All the carriage activity which occurs to that point is carriage activity provided to the retailer to enable the retailer to fulfil its obligations to the customer, namely, to have the electricity at the meter box to flow when the appliance is turned on.  And in the same way, that is the activity which occurs in the instant case ‑ ‑ ‑

GLEESON CJ:   I noticed there was an analogy with postal services that attracted some comment. 

MR ARCHIBALD:   Yes.  Well, some analogies, as in all cases, have their advantages and disadvantages.  We would propound, for the purposes of this application, the analogy of the electricity utility.  What is emphasised by the example of electricity is that the only way, and the only point at which, electricity can be provided to the user in the household is at the meter box.  It is insusceptible of being accessed by the user of electricity further up in the main power lines.  And similarly here, in our submission, it is plain that the only point at which provision or, if you like, delivery of the pay TV signal can be effected, is at the wall socket of the subscriber’s premises.  Further up, it is just the common, undiscriminated blend of signals, which is incapable of being accessed by the subscriber.

GLEESON CJ:   Part of the point of the box is, is it not, to ensure that the subscriber cannot access the signals unless the subscriber has paid the ‑ ‑ ‑

MR ARCHIBALD:   Yes.  It is called conditional access, and you need a special thing in the box to unscramble the signal and let it through.  In the same way, if I do not have arrangements with my electricity utility, no electricity will pass through the meter box, no doubt.  The fundamental flaw, in our submission, in the reasoning of the Full Court, was to conclude that what happens, if I can call it, upstream of the wall socket is carriage that is being undertaken for the subscriber, that the subscriber is the user of that carriage service and has it made available to it by the pay TV provider.  We say that is a misconception of what is occurring and a misconception of the arrangements which exist between the subscriber and the provider. 

GLEESON CJ:   From one point of view, what the subscriber is getting is access to what is being, if I can use a neutral word, generated as the signals are produced originally.  That is the program content. 

MR ARCHIBALD:   They need equipment to receive and they receive in the equipment the program.  The only way they can receive it and the only point at which they can receive it is at that equipment. 

GLEESON CJ:   But the program does not come from the wall socket? 

MR ARCHIBALD:   No.  The program, like electricity, is a stream of information through molecules and it flows through when the set is turned on. 

GLEESON CJ:   But what the subscriber is getting is access to the flow? 

MR ARCHIBALD:   Yes, but the only point at which they can get it is at the wall socket.  The function of the pay TV provider is to have the signal at the wall socket, so that when the subscriber desires to utilise the service, it is there and will flow when the switch is turned.  So, when one speaks of “delivery” or “provision” or “supply” of the program signal by the pay TV provider, one can only speak of provisional supply at that point, not at any anterior point.  Delivery is transferring, passing over, and that occurs at the wall socket.  The service that is provided is to hand over the program signal.  It is not to perform the function of carrying the signal over a distance to the point of the wall socket. 

GLEESON CJ:   Mr Archibald, I think we understand the point of construction at issue, but what is the commercial contest behind this? 

MR ARCHIBALD:   The commercial contest is the very profound and very significant one for these applicants and the whole industry.  Can third party access seekers get access to the Foxtel service, which importantly, is effectively an endeavour to get access to the set-top unit – there are 2.5 million connections.  How many set-top units there are I am not sure, but getting access to all those set-top units that are already sitting in houses. 

GLEESON CJ:   Is the alternative they have to provide their own cable? 

MR ARCHIBALD:   Yes.  Well, they may be able to get access to the cable, but they will not get access to the set-top unit.  So the commercial significance lies in accessing not just the cable, which they may be able to access by going to Telstra Media as that carriage service provider, but by going to Foxtel, wrongly characterised, in our submission, as a carriage service provider, and the thing that Foxtel has which Telstra does not is the set-top unit. 

McHUGH J:   Why is this a special leave point, Mr Archibald? 

MR ARCHIBALD:   Because it is a matter of principle; it does not turn on particular contractual arrangements.  The Full Court, at paragraph 29, page 130 of their reasons said that in the sense that they described above, Foxtel provides both the content service and the carriage service.  But the sense described above is a description of what is inevitably the case where any pay TV service provider is seeking to hand over, to deliver, the program signal to the subscriber.  And so it turns on the nature of the pay TV service, not on any particular contractual arrangements. 

Pay TV services are a content service because they are a broadcasting service.  That concept in the Telecommunications Act picks up the definition of “broadcasting service” in the Broadcasting Services Act and that definition, which is in section 6 at page 4 of reprint 3, shows that a “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 radiofrequency spectrum, cable, optical fibre, satellite or any other means –

So the very concept of this broadcasting service embodies in it the delivery function, which is the handing over at the wall socket.  It is plain, in our submission, that the concept upon which the Full Court fastened is a concept which is embedded in the nature of the service, as defined by the legislation. 

If it were otherwise, if delivery were to be some separate function, independent and discrete of the provision function, then it is clear, in our submission, that where one buys or acquires delivered services or goods, the carriage aspect which is involved on the part of the provider is carriage for the account of and on behalf of the carrier, not on behalf of the acquirer.  That is evident, if one needs to go to it, from Castlemaine Tooheys Case (1986) 162 CLR 395, which we notice is on Mr Jackson’s list of authorities, where at page 402 the Court made plain what we think is trite law, that in those circumstances, the carriage service is performed for the supplier, not for the acquirer.

So here, we say there is an insusceptibility of acquisition of this service at any other point than the wall socket, but if we were to be wrong about that, then the nature of the arrangements here – the delivered nature of the services – makes it plain again that the carriage service is provided to Foxtel, not to the subscriber.  If the carriage service is provided to Foxtel, then it is not a carriage service provider; it is the user of the carriage service and remains solely the content service provider.  That conclusion is the answer to the second point which is raised against us, that is, whether by reason of the operation of section 87(5), Foxtel becomes a carriage service provider. 

It is said by the Full Court, adopting the judge at first instance, that it would, but the provisions of that subsection are that a person is a carriage service provider if that person, the first person, arranges the supply of “a carriage service by a carriage service provider to a third person”.  So the first person, Foxtel, would be a carriage service provider if it arranged for the supply of carriage services by Telstra, the carriage service provider, to a third person.  Yes, it would be a carriage service provider if Foxtel arranged the carriage service to be provided to the subscriber, but here the provision of the carriage service is arranged by Foxtel to be provided by Telstra to

itself.  So subsection (5) is not enlivened because the service is provided not to a third person, but to the first person. 

So by neither route, in our contention, could the conclusion be reached, conformably with the statute, that Foxtel is a carriage service provider.  Were it a carriage service provider, section 88(3) of the Telecommunications Act would have no work to do.  Section 88(3) is there, in our submission, to provide for this very case, because that section deems there to be a carriage service provider where there would not otherwise be one.  And the need to deem the existence of the carriage service provider is referable to the very circumstance that obtains here, namely, that Foxtel is not itself a carriage service provider. 

The section deems there to be a carriage service provider because it deems there to be a supply to the public where the carriage service is used to supply point-to-multipoint services to end users, and the point‑to‑multipoint is from the headend to the various – I think they are called “spaghetti”, these days – the pieces of spaghetti, the lines that go out through the network to the subscribers.  That deeming provision is necessary because where there is merely an arrangement between Telstra to provide carriage services to Foxtel, there would not otherwise be a carriage service provider in connection with the supply of that service.  So that our contention gives work to subsection(3) to do.  The conclusion of the Full Court would render it entirely otiose and give it no work to do.  That is a further indicator, in our submission, of the unsoundness of the conclusions of the Full Court. 

The matter is, in our submission, of high importance plainly to the applicants for whom we appear but plainly also to other participants in the pay TV industry, for the point that is found against us, if good, is good not only as against us but in respect of all other pay TV providers, because it turns not upon particular contracts but upon the nature of what is occurring.  So, in our submission, it is a matter apt for special leave.  The decision of the Full Court, we submit, is attended with plain doubt, and the importance of the matter also makes it an apt matter for the grant of special leave.  The issues which arise are issues of principle; they turn on no contested facts.  If the Court pleases. 

GLEESON CJ:   Thank you, Mr Archibald.  Yes, Mr Jackson. 

MR JACKSON:   Thank you, your Honours.  Your Honours, our submission is that special leave should be refused for two reasons.  The first is that the issue is not sufficiently attended by doubt.  What we would seek to say there is that the particular facts fell directly within the terms of the statute, either 87(1) or 87(5).  The statute provides its own limiting mechanisms for the ambit of the provision.  The second thing is that, in reality, the case does not involve any issue of principle but does turn simply on whether the provisions of the Act apply to the circumstances of the types of contract that are entered into by Foxtel. 

GLEESON CJ:   On that first point, what do you say about Mr Archibald’s last argument concerning section 88? 

MR JACKSON:   Concerning section 88(3), your Honour.  The significance of section 88(3) is that it is seeking to describe a circumstance where one has at least one end user being outside the immediate circle.  It is seeking to describe a particular class of case, and your Honours will see the definition of “immediate circle” in, I think, section 23.  It covers a very large class of cases where there may be persons who are related, and where there may be these types of networks.  Your Honours, it is fair to say in relation to the first of those points, if one goes to what section 87(1) does, your Honours will see that it applies: 

if a person supplies, or proposes to supply, a listed carriage service to the public using: 

(a) a network unit owned by ‑ ‑ ‑

GLEESON CJ:   Just a moment.  You are referring at the moment to what?

MR JACKSON:   I am sorry.  I am referring to the Telecommunications Act. 

GLEESON CJ:   Yes.  Which section? 

MR JACKSON:   Section 87(1).  It is at page 83. 

GLEESON CJ:   Thank you. 

MR JACKSON:   Your Honours will see that a person is a carriage service provider: 

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 -

Now, your Honours will see that a “carriage service”, which is defined by section 7, is simply: 

a service for carrying communications by means of guided and/or unguided electromagnetic energy. 

And “communications” includes any communication between persons or things, whether in the form of visual images or a combination of forms.  No hint, your Honours, of a need for reciprocity, a matter adverted to in the written submissions but not in the oral submissions.

Foxtel provides a service for carrying to its customers communications as defined.  It is immaterial, in our submission, that it chooses to do so by having an arrangement with Telstra whereby it in fact uses facilities which belong to Telstra, no different in a sense from the type of courier case the Court was dealing with in the case you gave judgment in yesterday, Hollis v Vabu Couriers.  The courier undertakes to do the job; the precise nature of the relationship between it and the people who do the job for it does not really matter. 

Now, your Honours will see that there was an agreement between Foxtel and its customers.  The agreement is summarised by Justice Wilcox at page 16 in volume 1 of the application book in paragraphs 15 and following.  Your Honours will see in paragraphs 15, 16, 17 and 18 that it is set out what Foxtel is to do.  Foxtel provides, in effect, the whole service.  Your Honours will see that then that, in our submission, the Full Court was right in the view which it came to in paragraph 29, to which my learned friend took your Honours earlier, at page 130, where their Honours said “the contractual obligations of FOXTEL to the subscriber” included not only the provision of content but also its delivery. 

They involved delivery in two respects, the first being that equipment was installed and maintained by Foxtel, though in fact it was Telstra doing the work on behalf of Foxtel at the place of reception.  The second was that the obligation to provide channels or programs assumed that the content found its way to the subscriber.  They said it may be assumed that happens in fact by Telstra but Telstra does not have any contractual obligation to do so; it is Foxtel that does.  They said in that sense Foxtel provides both the content and the carriage service. 

Your Honours, that, we would submit, was the position that arose because of the particular arrangements between Telstra, Foxtel and the customers and, in our submission, Justice Wilcox was right in identifying the issue as one turning on the particular facts.  Your Honours will see that passage extracted by the Full Court a few pages earlier from the last reference, at page 114.  And your Honours will see in the quotation in paragraph 21, his Honour referred to the fact in the second line in the passage quoted:

The roles are conceptually distinct.  However, if one person may fulfil both roles, as I agree, I do not understand how it can properly said that the roles “are mutually exclusive”.  The question whether a particular person has both roles is a question of fact in each case. 

And then he went on to deal with the particular case. 

That factual issue is one in relation to which it may be noted, in our submission, is one on which the applicants have failed twice in the courts below and it is a factual issue which does happen to be dependent on the particular arrangements in each case.  Your Honours, we refer in our written submissions in volume 2 at page 345, in paragraph 21, to the fact that if the commercial arrangements that were entered into by Foxtel had taken a different form, quite a different result might well follow.

GLEESON CJ:   Your point seems to be that what this case turned on was not so much a construction of the legislation as a characterisation of the facts. 

MR JACKSON:   Exactly, your Honour.  We would also add, following upon that, that the Act itself, in our submission, does really make it clear that the two points raised by my learned friends are, with respect, without substance.  Could I say – and I will just mention it, your Honours – in relation to the need for the recipient of communications to be able to send back or on‑send, one has the terms of section 93.  Section 93(1)(a)(i) of the Telecommunications Act contemplates that “the supply of broadcasting services” may be a carriage service. 

“Broadcasting services” is defined to have the meaning given to that term in section 6 of the Broadcasting Services Act - I will not take your Honours to it.  It is set out in my written submissions.  It plainly includes one-way television service, as you might expect.  The second thing, your Honours, is that if one goes back to section 88, one sees the contrast between 88(2)(a) and 88(3)(a), where 88(2)(a) is referring to communications between end users.  88(3)(a) is not; it is referring to point‑to-multipoint services to end users. 

Your Honours, we would also note in relation to that two-way point that if our learned friends are right, then no one would be a carriage service provider for the purposes of the Act because there would be no reciprocal communication and the system required by section 42 would not be complied with.  That is the first thing.  The second thing is this.  If one goes to section 87(5) and looks at the words of it, what one sees is that it says in paragraph (a) that if: 

(a) a person (the first person), for reward, arranges, or proposes to arrange, for the supply of a listed carriage service by –

someone else –

a carriage service provider to a third person –

and we would submit it is simply talking about the fact of supply.  And secondly: 

(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 and the third that deals with one or more matters relating to the continuity of supply –

in effect.  Paragraph (d) does not matter because it was satisfied.  Then: 

the person is a carriage service provider. 

It takes, with respect, considerable parsing, analysing, reading down and avoiding to have section 87(5) not fit this case, with respect. 

The last thing, your Honours, I would seek to say about the Act itself is that the provisions relating to the access regime themselves allow exemptions from the regime in certain circumstances.  I will take your Honours to those in just a moment, but the point I would seek to make about it is that if it is said that this is an Act which has a potentially wide operation, so be it, your Honours; one treats the words as they stand.  But the Act allows the Minister, if he thinks it appropriate, to make a declaration under either section 95 or section 96 of the Telecommunications Act, which has the effect that section 87(1) or section 87(5), as appropriate, would not apply. 

Could I take your Honours to section 95.  If one looks at section 95(1) on page 89, your Honours will see that it enables the Minister to: 

determine that a specified eligible definition provision does not apply in relation to:

(a) a specified carriage service; or
(b) a specified person. 

If one goes then to subsection(2), it may be conditional or unconditional.  And then subsection(5), your Honours will see the provisions which are eligible definition provisions, including 87(1) and (5).  Again in section 96,

your Honours will see subsection(1) referring to a “specified regulatory provision”.  That is defined in subsection(5).  It is: 

a provision of:

(a) this Act; or
(b) any other law of the Commonwealth;

that contains a reference to a carriage service provider –

The Minister can, by the operation of section 96(1) – if I could use the jargon expression – disapply the provision in relation to the person.  So that the Act contains provisions allowing limitation of its operations. 

The last thing I would seek to say, your Honours, is this.  We would submit that the reality of the present case is, as we have submitted in our written submissions in volume 2, at page 344 – and may I take your Honours to that for just a moment.  If I could take your Honours to page 344, paragraphs 18 to 20.  As appears from paragraph 18, we submit there is clearly a listed carriage service - who supplies it.  What we would seek to say is set out in the remainder of that paragraph and paragraphs 19 and 20.  May I refer also to paragraph 26 on page 346.  Your Honours, those are our submissions. 

GLEESON CJ:   Thank you, Mr Jackson.  Yes, Mr Cotman. 

MR COTMAN:   Your Honours have our written submissions.  At page 353, we subscribe to the proposition that essentially the matter determined is a matter of fact on the construction of the relevant provisions.  Can I draw to your Honours’ attention in relation to the proposition that in some respects this issue simply opens a gate to access to the Foxtel equipment without more to the provisions of section 152AR of the Trade Practices Act, which will be the matter diverting your Honours later this morning, which are the operation of the various conditions that stand between a person seeking access to a facility, such as the Telstra cable and the set-top boxes, and actually getting that access. 

There are five such conditions, including the issue of protected contractual rights, the issues of capacity, the issue of existing commitments and matters of that sort.  So this is not a situation, in my respectful submission, where one leaps directly from third parties being off the cable and off the set-top boxes to, on the determination of this issue, being on in all respects.  But in essence we say in relation to the primary issue it is a question of fact that on the particular arrangements as found by his Honour Mr Justice Wilcox and confirmed by the Full Court, the issue is disposed in our favour.  If the Court pleases. 

GLEESON CJ:   Thank you.  Yes, Mr Archibald. 

MR ARCHIBALD:   My learned friend Mr Jackson mentioned the equipment.  Equipment is provided but the provision of equipment has nothing to do with the carriage of the program signal.  The equipment is installed at the subscriber’s premises.  The equipment is not a network unit and is not owned by a carrier and is incapable, therefore, of falling within the carriage provider provisions of the definition.  In any event, all that the equipment is doing is providing a facility for reception, not carrying the signal which is then received. 

Reference was made to Justice Wilcox’s findings, as set out at page 114 of the application book.  His Honour did express his finding in terms that Foxtel does “more than provide content.  They contract to deliver content.”  And that, I think, is the source of the phraseology in the Full Court’s reasons in paragraph 29.  The provision of the contract is set out at page 109, lines 35 to 44, and it is solely in terms of provision of the program signal.  There is nothing in the contract that speaks about delivery as a separate function. 

His Honour is correct to say that Foxtel delivers the content, and for the reasons that we addressed in our submissions in-chief, that is inevitably so because you cannot provide without delivering, and delivery must inevitably be at the point at which the cable enters the subject premises.  So, although it is expressed in terms of what they contract to do, it is what they inevitably contract to do and does not depend upon any eccentric provision of the contract between Foxtel and the subscriber. 

Mention was made also by my friend Mr Jackson of the courier service example.  Of course, the courier service is exclusively a carriage service, and you do not cease to be a provider of a carriage service by outsourcing part of that function.  Here, the service is the content service, the supply of the content constituted by the program signal.  Any carriage activity which occurs is used by the pay TV service provider, not by the subscriber.  So Justice Wilcox was correct, in our submission, in saying at page 114, line 26, that “they” – Foxtel – “do so”, ie, deliver the listed carriage service, “by using the Telstra broadband”.  The point to which his Honour does not advert is that the use of the broadband is by Foxtel for itself, not by Foxtel to enable it to supply the service to a subscriber.  If the Court pleases. 

GLEESON CJ:   Thank you, Mr Archibald.

The decisions in the Federal Court turned upon the application to the particular facts and the particular commercial arrangements in the present case of the relevant statutory provisions.  Such difficulty as the case presented turned upon the characterisation of the facts rather than upon any ambiguity in the statute.  There are concurrent findings in the Federal Court.

The case does not raise an issue suitable for a grant of special leave to appeal and the application will be refused with costs.

MR ARCHIBALD:   If the Court pleases.

AT 11.18 AM THE MATTER WAS CONCLUDED