The announcement by ABC managing director Mark Scott of a new 24-hour, seven-day-a-week television news channel will harm Australia's media diversity and innovation through the ABC's monopolisation of the market.
Many Australians believe the popular myth that we need ABC television and radio to deliver high-quality news and current affairs because commercial stations will only deliver infomercial-based current affairs and populist news.
The myth is based on the assumption that there is a market failure caused by commercial stations failing to deliver high-quality television news and current affairs programming, and that a taxpayer-funded broadcaster has to fill the gap.
The ABC does currently produce much of Australia's higher-quality Australian news and current affairs programming, but there is no market failure.
A taxpayer-funded ABC doesn't fill a market gap left by commercial networks -- it crowds them out of providing quality news and current affairs.
Commercial stations cannot reasonably compete for the high-quality news and current affairs market because they're playing on an unfair playing field against an ABC that doesn't have to worry about where its next buck is coming from.
The ABC is a tax-financed and tax-exempt organisation occupying the same market space that commercial operators could otherwise occupy if they were able to charge for the services they provide.
The crowding-out potential of the taxpayer-funded ABC is best demonstrated in the one major media market where it is absent -- morning newspapers.
The private sector is completely capable of delivering high-quality state-based and national newspapers at a price the market is prepared to pay.
But if the ABC started giving away high-quality morning newspapers, News Limited, owner of The Australian, and Fairfax would find their newspapers crowded out of the market by a taxpayer-funded alternative.
And by establishing a 24/7 news television station, the ABC is likely to crowd out the current commercial all-news channel, Sky News.
Sky News already provides a high-quality service, so there is no justification for tax dollars to be wasted on a market hole that doesn't need to plugged. In doing so, the ABC will effectively be engaging in government-sponsored predatory pricing.
By entering the 24/7 news channel market, the ABC will be undercutting the viability of Sky News to attract viewers, and with it the rate and volume of advertising revenue it can collect. And the cost of the ABC's efforts is that it is likely to cripple innovation in Australia's media market.
The ABC has a patchy record in media market innovation and has only just identified the opportunity to introduce an Australia-specific 24/7 news channel that has been filled by Sky News for years.
Also, despite originally paying lip service to online opinion commentary to complement general news, the ABC has only recently established a dedicated online opinion commentary website.
This new opinion website has been introduced despite at least four other commercial opinion-specific competitors existing in the market.
Both examples demonstrate that a behemoth ABC already moves slowly. But the most concerning element of Scott's vision is his motivation to establish this new 24/7 news channel.
The ABC's position as a preeminent news provider was threatened following a 2005 decision by Sky News managing director Angelo Frangopoulos to compete against the ABC for the Department of Foreign Affairs and Trade's contract to deliver our soft-power international television network, the Australia Network.
With the looming re-tendering for the $20 million-a-year contract, Sky News has already made it clear it intends to snare the contract from the ABC.
But in November last year, Scott sought to outflank Sky News's capacity to tender, arguing that the Australia Network services should be merged with the ABC's charter-mandated delivery of the Radio Australia international network. If it did so, the ABC would be locking out competition to tender for the Australia Network contract.
By now announcing a 24/7 news channel, the ABC looks like it is using taxpayer dollars to seek revenge to crowd out Sky News on their own turf.
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