Despite the deluge of criticism against the government decision, the licence fee rebate for the Australia’s free-to-air TV networks is actually well deserved.

Why? Well, the tax was an offset for competition limitations in the past. Pay TV — which is an effective Foxtel monopoly — is still untaxed, despite the public financing most of the $3 billion spent by Telstra to build the Foxtel cable.

Then you have SBS advertising, and prospectively online and other distribution bypasses, which are making this spectrum exclusivity “monopoly profit” for the FTAs non-existent. In addition, the government still taxes the networks with high cost imposts — either directly on revenue generation (the licence fee) or mandated programming.

It would be cheaper for the networks to buy their spectrum completely much as mobile carriers buy their spectrum and eliminate all the restrictions on their programming and the greater  than $140 million or so per annum they will still pay in licence fees.

And given the competitive history of the Australian commercial television industry, I doubt that all the licence fee rebates will fall to the networks’  bottom line. It is unlikely that the networks were able to negotiate this tax reduction without some offsetting — that is, verbal commitments to continue their level of support for local programming.

The proportion that does not go to the bottom line will be largely spent on local programming as, historically, the networks have not had a close correlation between cost movements and profits. In 2009, 12 out of the top 20 drama programs were Australian, and in programs overall for 2009 (regular programming only) only two out of 20 were foreign.

The networks win by spending on Australian programming, and have largely shifted the lower rating foreign programming to their second digital channels (such as Nine’s Go and 7Two).

Furthermore, the FTA industry competes against a large budget in the ABC, which has  no commercial breaks (commercials are a ratings destroyer for FTA networks), and SBS, which takes another 5% or so ratings share with a hybrid revenues model based upon government subsidies with some commercials.

This was a good decision by the Government, even if it was made for wrong — certainly political — reasons in an election year.