Title: ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS: Interactive Gambling (Moratorium) Bill 2000: Discussion

Date: 25 August 2000 Committee: ENVIRONMENT, COMMUNICATION, INFORMATION TECHNOLOGY AND THE ARTS Reference: Interactive Gambling (Moratorium) Bill 2000 Place: Canberra Questioner: CHAIR; Bishop, Sen Mark; Senator MARK BISHOP; Lundy, Sen Kate Responder: Mr Fletcher; Mr Smeed; Mr Wilson; Mr Freed; known Page: 1 Proof: YES Database: Committees Considering Bills Source: Senate

CHAIR —Welcome. The committee has before it a submission from the ACT TAB. Is there a submission from the New South Wales TAB?

Mr Fletcher —The managing director of TAB will make a speech at the start of this presentation. There is no written submission at this stage, apart from what we have already tendered.

CHAIR —Does the ACT TAB wish to make any alterations or additions to its submission?

Mr Smeed —No, I will just speak to the submission I have already put to the committee, if that is appropriate.

CHAIR —We will invite you to do that now. Then we will invite the New South Wales TAB to make their comments. Would you like to open?

Mr Smeed —Thank you for the opportunity to address what is obviously a very contentious issue in the industry. I should declare up front that ACTTAB is a wholly government owned TAB. It is probably the second smallest TAB in Australia, however it has had some significant growth over the last few years. We are involved in the industry on both sides of this issue that the moratorium affects. Quite clearly we are involved in wagering and have been through a retail network, a telephone betting network and a number of other mechanisms for getting products to our customers for the last 36 years. But on 18 May, we were issued an interactive gaming licence also and we obviously have an interest in that side of the issues that the moratorium covers. I might just make the point though that that application was not granted flippantly by the ACT government. We applied last September for this and the board, although government appointed, has been through a very rigorous probity process, including the police checks, credit checks and hand and fingerprints and all of those sorts of relevant issues. So the ACT government in granting us an interactive licence did not do it lightly.

If I may, I will address separately the two issues that affect our organisation—and probably some of the other people who are appearing here today—that is, I will separate wagering from gaming. I suspect that that has already been done. I came in during the previous submissions, but it is very clear that there is a clear distinction between wagering and gaming. Wagering is definitely not an interactive activity. Using the Internet as a mechanism for wagering is simply using the Internet for what it is—and that is a communications tool. You could have a bet today through the Internet on a dog race that will be run at 10 o'clock tonight and, in fact, that dog could probably eventually be scratched. If anyone says that any sort of wagering activity through the Internet is interactive, they purely and simply do not understand the mechanism by which wagering is transfixed through the Internet.

Wagering is, without a doubt, the strongest supporter of the racing industry in Australia. It certainly has been for the last 36 to 40 years. Any attempt through legislation to restrict the fairly slow growth of wagering and the sport of wagering throughout Australia will only affect the many thousands of people who are involved in the racing industry and the many millions of people who have a bet each week through their TABs. We are all aware that the Internet is a growing mechanism of communication. More and more Australians are accepting and adopting that technology, and it is a natural progression for the large TABs throughout Australia to just use that as a mechanism for allowing people to put on a bet and have a flutter—which is really what they are doing. I would make this point as strongly as I can at this time: in my view, the inclusion of wagering in this legislation has indicated a lack of understanding about the differentiation between wagering and gaming. On the other hand, as Mr Farmer said earlier, the Prime Minister has a very distinct view about what he wants and what he does not want to see on the Internet. There is no denying that wagering is gambling and, if there is an aim to eliminate gambling completely off the Internet, the inclusion of wagering is obvious.

Perhaps I could just address my comments to gaming. Even though we are government owned, we are a very commercial organisation. We identified that wagering through racing was going through a plateau. In looking after our shareholders and, through them, the community, we looked at other areas of expansion for our business and that is why we looked at the interactive area. It is quite clear that there are over 800 gaming sites available on the Internet already. Most of them are based in jurisdictions where there is dubious regulation and questionable licences. For the life of me, I cannot understand why the government would seek to force Internet punters to go offshore to these unregulated environments rather than have them deal with reputable Australian based organisations— organisations that could be strongly regulated and have significant player protections being put in place—and have both those players and the industry as a whole, the Australian public, benefit from that activity rather than—as the government appears to be doing—saying, `Forget Australia, it's an honest jurisdiction but we'd rather you had a bet offshore where we're not really sure that you'll get a fair shake.'

The rest is stated in my submission. I think the point that I would make in the summing up is: separate wagering and gaming. Secondly, I would say: look at gaming in an environment which is fully regulated, fully controlled, there is a taxation benefit and there is also a player benefit from the ability to enforce controls.

CHAIR —Thank you, Mr Smeed. Mr Fletcher or Mr Wilson?

Mr Wilson —Thank you for the opportunity to be able to attend and speak on this issue. As you may well be aware, TAB Ltd has participated to date via a submission dated 30 July 1999 to the Senate Select Committee Inquiry into Online Gambling, an appearance at that committee's public hearings on 15 October 1999 and, more recently, a submission to the NOIE study dated 4 August 2000.

A very brief overview of TAB Ltd's history as a major wagering and gaming operation shows that we were established as a statutory off-course betting agency in 1969, privatised mid-1998 and are now one of the largest wagering businesses in the world with an annual turnover exceeding $4 billion—which converts to revenues of about $670 million. The company currently conducts wagering, under New South Wales government licence, on racing and sports events. We own Sky Channel, the satellite broadcaster, the satellite narrow-caster service that telecasts race meetings throughout Australia. We are also developing new gaming businesses, including the monitoring and jackpot linking of electronic gaming machines in New South Wales. These licences to move into that gaming environment were issued by the New South Wales government prior to privatisation and were sold to the shareholders as part of our business.

The company has a record of the highest probity and integrity standards stretching back almost 40 years. It directly employs over 2,000 people on a full- or part-time basis, and many more thousands of persons are associated with it throughout the distribution network of our 1,500 agencies, pub TABs and club TABs across New South Wales. In the 1999-2000 financial year the company contributed approximately $189 million to the New South Wales government in wagering taxes and, importantly, we returned $173 million to the New South Wales racing industry. That now constitutes about 80 per cent of their livelihood. Our entry into online wagering can be traced back to the commencement of telephone betting in 1965. In 1991 we developed a PC based system to provide direct betting access to high volume customers without the need for operator intervention.

In June 1997, TAB Ltd launched its NetTAB betting service, which potentially allowed any registered account customer—and I want to stress 'account customer'—to place bets and access information via the Internet. Significantly, the New South Wales government viewed this new service as no more than an alternative form of communication. For account customers, given that no new bet types or events were being introduced via this medium, the government did not require any additional licensing or approval processes, because they were already in place.

NetTAB, as the service is known, has recently passed its third year of operation and accounts for 15,000 individual subscribers. In the most recent financial year, it only constituted, though, one per cent of our total wagering sales. Again, to reiterate what Roger said, in the wagering business in the last five years, single digit growth of less than five per cent has been experienced by nearly every TAB across Australia. This percentage is growing.

Senator MARK BISHOP —Sorry, what was that last point again, Mr Wilson?

Mr Wilson —The point is that Sky Channel commenced a home racing service on 5 September 1998 and now, through all of the pay TV operators, the home racing channel is available in about 1.3 million homes—nearly one in four homes throughout the country, and yet it is still only single digit growth that is probably below or around inflationary growth in the country. So the point is that, even with these new technologies or new distribution mechanisms, we have not seen any outrageous or unwieldy sort of growth in the business. My point is that the technology will not—as some of the doomsayers suggest—create rampant growth in wagering. It just will not happen.

Senator MARK BISHOP —You instituted that new system in September 1998?

Mr Wilson —No; it was the home racing channel in September 1998. The new Net betting site started in June 1997.

Senator MARK BISHOP —Did the low growth rate—you said less than five per cent per annum—conform with your plans at the time, or your objectives?

Mr Wilson —Yes.

Senator MARK BISHOP —So you anticipated low growth.

Mr Wilson —Yes. All we are doing in all of this technology is not gaining rapid turnover growth. All we are doing is basically lowering our costs of distribution of a product. In the high street, to run an agency, it costs about four per cent to take a bet. Over the telephone it costs probably about 1½c to take a bet. Over the Internet it gets down to nearly nothing to take a bet. So what you are actually doing is achieving cost reductions and getting benefits back to the racing industry and to the shareholders. You are not seeing rampant growth in wagering. It is not a thing that is going to create any double digit growth or crazy, runaway wagering habits of customers. The reason Sky Channel has registered as a narrowcaster is that it only appeals to 12 per cent of the population. It is truly a narrowcast service.

Wagering only appeals to about 12 per cent of the population. It is a narrowcast business. We have already demonstrated we have put the picture into the home and we have not seen any rampant or crazy situations at all. All it has done is made it more convenient for those who are currently participating to participate in a more enjoyable or alternative methodology: instead of having to go to a local agency or down to a pub TAB or a club TAB they can view in the home and they can pick up the telephone. All the Internet will be doing is replacing the telephone. It is just a communication mechanism, as Roger already pointed out, and as other speakers I am sure have pointed out before me or certainly will after me—because that is all it is.

A further point is that it only constitutes one per cent of our total sales. As I said, our total sales are over $4 billion. The Internet only constitutes one per cent of that. All it is doing is transferring existing telephone based sales. To actually have a bet, you have to have a pre-established account and it has to be a debit account. You cannot credit bet. We have all of those rules and regulations in. It is no different to all of the other TABs across Australia, and no different to Roger's operation. They are all pre-established debits; they are not pre-established credits.

The account establishment procedures are similar for both Internet and telephone customers: you require proof of identification and you also are required to go through the 100-point check that everyone is familiar with from banking situations. TAB Ltd has experienced no particular problems or issues with its Internet wagering site. There has been no known breach of security mechanisms, and the system has been well received by our customers. As conveyed in our submission, TAB Ltd wishes to be able to continue to offer this service into the future. In our submissions, we have also attempted to clearly distinguish between the issues of interactive wagering and interactive gaming. It is our understanding that the primary concerns of the government surrounded the growth of what I call `cyber' gaming operators, particularly from unregulated offshore sites.

We note that the legislation now before parliament has failed to recognise that distinction, and that any significance extensions of our existing Internet wagering service would be prevented during the moratorium period. This is not considered to be an acceptable position, given that it prevents TAB Ltd, on a small subset of our business, from offering the same services to all of our customers across the network. As conveyed in our recent correspondence to all federal members of parliament, such a position ultimately harms both the company and its major stakeholders—and, as I pointed out previously, the major stakeholders are the New South Wales government and the New South Wales racing industry. Given the limited time available to me this morning, I might now move to summarise our point of view and appropriate government policy in the interactive gambling area. As regards the racing and sports betting or wagering environment, TAB Ltd agrees that it is sensible for the federal government to freeze the allocation of further licences whilst a proper study is undertaken. We do not however believe that pre-existing licence holders should be prevented from extensions of wagering services and products during this period.

Longer term, following the conclusion of the moratorium, we believe that there should be a role and appropriate regulatory powers for the federal government to both limit the issue of further licences and protect licence holders and consumers from unlicensed operators, including those offshore. To that end we would support the direct prohibition of access by Australian residents to unlicensed offshore betting sites. Similar legislation already exists in New South Wales to protect New South Wales consumers and racing industry revenues. Other than in respect of the licensing issues, to ensure consistently applied standards of integrity and customer safety we do believe there is a need for substantial new regulation in the interactive wagering environment. Such activities are adequately handled now by the state government authorities. Taxation and revenue sharing issues are, however, vital as evidenced by a weakness in the current state based arrangements.

In respect of other interactive gaming, TAB Ltd, unlike many other companies before you today, has no existing licences or particular interests in this area. We would, however, submit that the attempted outright prohibition of this activity may not provide the best public policy outcomes. We would therefore suggest that consistently applied Australian jurisdiction licensing and regulation of high integrity operators will provide a better outcome for consumers. In this respect we believe that the federal government must possess overriding powers to ensure that non-compliant operations and jurisdictions are controlled. That concludes our submission this morning. However, we have with us today a company whom we have been working closely with, ITV, and we would be pleased to demonstrate for about five minutes what actual interactive wagering would or could look like if it were to proceed.

Mr Fletcher —We stress that this is a very brief situation which will only take a few minutes. It is not a service currently offered by TAB in New South Wales. However, it is offered in some overseas jurisdictions. We have demonstrated previously our Internet betting service and our capability for people to watch wagering at home and bet at home via the Internet or telephone. What you are about to see is the next step or the leading edge in wagering technology as it is globally available now, and it is something that TAB would like to move to. I think it might be valuable for the committee members to see what the ultimate step in interactive wagering technology could bring.

CHAIR —The committee is happy for you to do that, if you would like to proceed.

Senator MARK BISHOP —Is this a product that you wish to offer in the future?

Mr Wilson —I think it is a logical extension for all of the industry. I think it is fair to point out that we will not be bringing this in independently. We would be working with every other TAB in Australia to actually bring this in—for the simple reason that all of the rules and regulations in relation to wagering are state based. Through Sky Channel we have a national approach in terms of broadcast and we would take a national approach in terms of being able to bring this in. However, we would be the holder of the IP in the system and, of course, we would want to be rewarded by places like Roger's for that exercise.

Senator MARK BISHOP —So, if this bill were passed in its current form, it prohibits new services being offered?

Mr Wilson —That is correct; this would not be able to go ahead.

CHAIR —Please proceed.

A video was then shown—

Mr Freed —This is an additional set-up box that you would have in your home to watch TV, which is basically a very small computer. It allows me to interact with the TV, so I can play along with my handset. You will have to excuse us, because they will be using UK racing as they are a UK-based company. Using this system, I can go in and place a bet on any particular horse, choose the type of bet that I want and place an amount. The transaction is processed: it would look at my TAB account, find out whether I had the credit and place the bet for me. I can then go in and make another bet.

Mr Wilson —Every piece of information that is being displayed in this demonstration is already available in the newspapers, or by way of telephone result services, forms, fields, prices: all of this information is freely available to the world at large already. All it is doing is basically putting it together in one package.

Mr Freed —I have now placed two bets and, when the race starts, I can watch how my horses do. Technology-wise, this uses exactly the same technology as the Internet betting. It is really just the interface into the home that is different, in that it is via TV and handset rather than my PC and keyboard.

Mr Wilson —As you can see, it uses pictures that already exist. It provides the ability to actually place a bet and that ability already exists, whether it be a telephony based bet or an Internet bet. It shows form, fields, what the track looks like, where the track is in relation to the country—every piece of information up here is already freely available. All this is really doing is extending a different type of communication mechanism. It is merely replacing the telephone with an interactive bet. The person still has to wait for the actual event to be real—and that is the difference between the gaming cyber world and the wagering world: it is real even in real time with real controls through all of the mechanisms at the race track, the stewards, et cetera, and all of our controls which have been in place for many years in terms of our account betting.

Senator MARK BISHOP —Would you propose to offer this on pay TV or to get a datacasting licence to broadcast it?

Mr Wilson —The immediate positioning of it would be through the pay TV operators and, longer term, of course, with digital free-to-air television. As I said earlier, the pay TV operators are only in one in four homes today. If you truly wanted to distribute it widely, you would go in conjunction with a free-to-air digital cast service, but that is probably in 2005 or 2006 before that becomes a reality. All of us, of course, have to go out and buy digital TVs.

Senator MARK BISHOP —Yeah!

Mr Wilson —But in the first instance, we would make it available through the pay TV operators. As was pointed out earlier, it is just a piece of software that resides in the actual digital box in the home. It is fair to say that out of the 1.3 million homes that subscribe to pay TV operators today, less that half their boxes are digital capable. If you have been reading the press of late, Foxtel in particular now have major issues as to who is and who is not going to fund that conversion from their current boxes to digital boxes. So you cannot offer the service. You would only get to about one in nine homes with this service—if it started tomorrow.

Mr Fletcher —A key point we need to make is that this type of service is not likely to enlarge the pool of people that will bet on racing. Fundamentally, you still need to be interested in the racing product to have an interest in accessing this type of technology. That is certainly what we have already found in our existing Internet wagering business. It is not introducing new people to betting; it is merely converting existing wagering customers from venue betting and from telephone betting to a more convenient method of placing their bets via the Internet. This technology is absolutely similar.

Senator MARK BISHOP —I understand the argument that there is a significant cost reduction in transferring from phone betting to Internet betting—and that goes, presumably, straight to the bottom line. What is the convenience from the punter's perspective of Internet betting as opposed to phone betting? With phone betting, you just ring up, give your account number, lay the bet and it is done.

Mr Fletcher —Identical.

Mr Wilson —Basically identical services. With the Internet, though, you can go to page 2 and page 3 and page 4, and you can see further information. You cannot do that over the phone. So, for instance, you can go to page 2 and see the form and on page 3 you can see what the track looks like—those sorts of things. Mr Smeed —You can also hear the signal of the races being run currently while you are looking at your selections for the next few races. There is a live link to racing radio on most of the Internet sites, and you can listen to how your bet on race 2 is going while you are having a think about race 3 and race 4.

Senator MARK BISHOP —But I can get all that information from the Saturday paper—the form. I can listen to the radio.

Mr Wilson —Yes.

Senator MARK BISHOP —The information that you are talking about that is up there is currently available and being used by punters for betting?

Mr Wilson —Absolutely. That is correct.

Mr Fletcher —One of the main benefits is the updated betting odds that you can see for all the different pools. All that information is readily available to you. You are not relying on listening to a radio announcer telling you odds over the radio or watching a pay TV odds display, which may not give you as good a result. Certainly, you cannot get odds information on the telephone from our telephone operators. The other benefit is, of course, that there is no queuing to telephone operator centres. On our major race days—on Saturdays, and particularly on carnival days—we cannot provide enough operators to cater for the demand in terms of your being answered the absolute minute that you get through on the phone.

Mr Wilson —Yes, one of the major things for the consumer is that they get through. We have between 10 and 15 per cent non-connect problems with our system because of overload on the telephone. We probably get half those back, because they ring back, but with the Internet we do not have those load problems, and it is an easier methodology of, simply, connection.

Mr Smeed —It also offers a service to our customers who cannot readily get to a retail outlet—disabled people, elderly people and so forth who like to have a gamble. Certainly, for people connected to the Internet, it offers easy access and a full information service. It is a mini-TAB outlet in the range and the type of information that is offered, and it is much more convenient to them.

CHAIR —I suppose you could argue that, because of the fuller range of information available—as you have said, you can go to page 2, 3 and 4 and get additional information—you might give the punter a more informed basis upon which to make a choice.

Mr Wilson —That is a true statement and that was brought out by one of the earlier speakers who said that bookmakers no longer thrive because the consumer is so much more informed now. The consumer has a vast amount of information now readily available to them that they did not have before. This will be another step to assist them to make a more informed choice and hopefully win.

Mr Smeed —Your statement, Chair, has clearly outlined the difference between wagering and gaming and the interactivity of it. In wagering, the punter has a go based on the information and their own skill base, whereas in the other areas of gaming in a lot of cases interactivity is with a random number generator. CHAIR —Thank you.

Senator LUNDY —I want to return to ACTTAB. For my benefit, would you again go through the details of the issuing of the interactive licence that you have under the ACT jurisdiction?

Mr Smeed —We have a full licence to conduct interactive gaming. That licence was applied for in September last year and granted in May this year.

Senator LUNDY —What date in May?

Mr Smeed —The 18th; I suspect that the announcement of its awarding may have precipitated the reason for everyone sitting in this room. Tattersall's and we were granted a licence on the same day. Senator LUNDY —And prior to that you were licensed to operate under the bookmakers act?

Mr Smeed —No, we have a licence to conduct wagering under the totalisator betting act, and there was no need for us to be licensed under the bookmakers licensing act in that case.

Senator LUNDY —In terms of any online service, has ACT TAB got anything online?

Mr Smeed —We have had an Internet site up for 3½ years, which has been offering information—approximate odds and all of the details and results that are available either in an agency or over the telephone. We do have the ability to bet across the Net but we have not activated that. In fact, we were ready to activate it when the announcement of the moratorium came in place.

Senator LUNDY —Was it possible for people to place a bet over the Internet using an email facility prior to the 18th?

Mr Smeed —We had a pilot program going of betting across the Internet through our site. There are some questions as to whether they comply or do not with the current terms of the legislation. Certainly, with our site there was an ability to bet across the site at that time but it was not available to the general population; it was in a pilot program.

Senator LUNDY —So you are getting legal advice, I presume, on those issues at the moment?

Mr Smeed —We are. If the issue of wagering is separated, though, of course that will not come into effect.

Senator LUNDY —I beg your pardon? Mr Smeed —If the legislation is either passed, amended or not passed at all, but passed or amended to separate wagering and gaming, then that would not have an impact on us.

Senator LUNDY —So it was a wagering offering? Mr Smeed —It is a wagering offering, yes.

Senator LUNDY —That is what you sought that licence for, even though now you are technically licensed to do interactive gaming as well?

Mr Smeed —That is correct.

Senator LUNDY —But you were not going to expand into interactive gaming?

Mr Smeed —In fairness, we saw that as an opportunity for future growth for our company and applied for—and received—the licence with a view to assessing what future direction the company would take to the benefit of the shareholders.

Senator LUNDY —In terms of the back end of your business, to what degree had the Internet enabled your business operations anyway?

Mr Smeed —As I have said to you before, we had the Internet site up for nearly four years. It was extremely well supported and still is. The wagering business is as much about information as it is about the sexy look of the screen and so forth. In fact, punters tend to resist change somewhat when they are getting the type of service and information they want. We still get 10,000 hits on a Saturday, and considering that we are the second smallest TAB in Australia, I think that is a remarkable achievement and shows that there is a high level of need and usage of that type of information.

Senator LUNDY —That was coming to that site regardless of whether or not you were offering a betting service online?

Mr Smeed —Absolutely. We have communication when there are issues and things that they want improved on the site, and the ability to bet across the Net is something that our customers have in fact asked for. Our activity towards that direction has been in response to their demand.

Senator LUNDY —Thank you. I am just going now to New South Wales or TAB Ltd. What are the implications for your shareholders? I am presuming your prospectus was issued with those licences not only in place but also in anticipation of development in that area?

Mr Wilson —Our activity in the wagering side of the business is, and has been, already conducting Internet betting and we will continue to service those customers on a go forward basis. The implications, of course, are that anything new could not be added to it and that would put us in a holding pattern for the 12 months. And during that 12 months we would have to consider our various options available to us on a go forward basis. In terms of our gaming, it does not affect us at all—they are totally separate. We do not have any interactive gaming at all and will not be offering interactive gaming.

Senator LUNDY —In your submission earlier you mentioned that you supported the concept of controlling Australians' access to gaming sites that were unlicensed and unregulated. One of the issues that has been widely discussed with this bill is the capability to actually enforce those types of regulations if they were in place, and we have an exercise in the online services bill to attempt to do that. Are you familiar with that legislation?

Mr Fletcher —Senator, our position clearly is that sensible, high integrity regulated gambling within the borders of Australia and conducted under Australian jurisdiction licence is ultimately the best way to adequately protect Australian consumers. You cannot envisage that protection being effective unless you then exclude access to offshore and therefore unregulated unlicensed sites elsewhere in the world—and that should apply both in the wagering and gaming interactive environment.

Senator LUNDY —And what are you thoughts on how that would be achieved?

Mr Fletcher —Our view and our understanding is that technically it will be very difficult to achieve via singular measures that target the technology only. We believe that where the federal government needs to intervene and can change the shift of emphasis here is with its powers in banking and other federal powers which, in addition to every effort in terms of communication and technology, we believe will have a 99 per cent effectiveness rating in terms of excluding access to those operations. In summary, why would any person within Australia presented with legal, safe competitive options therefore go to a lot of trouble, expense and risk in trying to do business with anyone offshore?

Senator LUNDY —Yes. That message has come through loud and clear.

Mr Wilson —Senator, just from a technology point of view, at the present time I do not believe that you could actually do it. It may well be like the motor vehicle. Every state has, of course, limits on speed, et cetera, and most of us do the right things. Every now and then you get fined and, aside from the government coming down and telling the Ford Motor Company they can only build cars that go 60 kilometres an hour and no more, then that maybe where we are at with this. Everything that Peter said is quite correct. That is the way it would have to be done: basically regulated as opposed to totally controlled. From what I know—not being in at the techno end of the world—no-one has come to me and told me that you could shut it down, or that there is a system available to you to actually shut it down. The www does say exactly what it means—worldwide web.

Senator LUNDY —No, I was just curious because you make quite a strong statement to that effect in your submission and I wanted to explore your level of understanding about the relative difficulties in actually banning that.

Mr Wilson —We understand it fully.

Senator LUNDY —The issue, of course, is the positive incentive you have to offer consumers of your product in the Australian jurisdiction as opposed to disincentives for them going anywhere else.

Mr Wilson —Absolutely. Roger mentioned it earlier. Some of the probity issues that a company like ours goes through are quite substantial—full fingerprinting, full five-year histories, transactional base tests on all bank accounts of myself and my family. All of those things really put us up on a bit of a pedestal in terms of integrity. Those are the sorts of positives that we do need to bring forward.

Senator LUNDY —Do you believe that, if a moratorium is put in place, after the 12-month period it will be lifted and it will be business as usual?

Mr Wilson —That crystal ball—it is in your hands, not mine.

Senator LUNDY —I am asking what your expectation is in terms of your developing business plans for the next five or ten years.

Mr Wilson —Our expectation is that you would have to go down a regulatory path as opposed to a prohibition path, and that our plans would incorporate those things. However, given that all good business plans look at the absolute worst case, we would have those thought about as well.

Mr Fletcher —On the same issue, the statement was made by one of the earlier speakers that interactive wagering is already tightly controlled at state government level. Yes, we bet on sports and racing, but the 24 sports are we are licensed to bet on are scheduled and controlled by the government and, indeed, the events and contingencies within those sports are again prescribed. We could not bet on every kick of the football, even if we wanted to. We would have to go through a very rigorous assessment of any extension of our product service with government.

Senator LUNDY —One final question. With respect to the preferred regulatory model, you also expressed in your earlier statement that you were happy for federal government to have an active role in limiting and controlling interactive gambling—particularly gaming, I think your comments were; but I think it was a more general statement. What is your preferred model of regulation for interactive gaming in terms of what you see, with your experience, to be the best application of laws in this country?

Mr Fletcher —We suggest that a co-regulatory approach between states and federal government might offer the best solutions. There is already longstanding and useful regulation in place at state government level. We see the federal government role as being to provide consistency across Australian jurisdictions in terms of harm minimisation consumer protection measures—providing a safety net, if you like—and then having a big stick to be able to intervene if renegade jurisdictions try to fall out of line with the agreed level of standards.

Senator LUNDY —So that sort of co-regulatory model you envisage would require legislation.

Mr Fletcher —We believe so. We have done a lot of detailed work on that to this point.

Senator LUNDY —A final point; in terms of discussions to date—whether it is the gambling ministers working party, ministerial council or discussions within industry—what do you think has prevented the states finding a consistent position with respect to the licensing of interactive gambling around the country?

Mr Fletcher —Certainly there has been some breaking of ranks in terms of consistency on a number of regulatory issues. Some of the smaller states and territories have taken the view that they should offer very laisse faire arrangements whereby their licensees can fully target the more populous states without any recourse to loss of revenues, particularly to the racing industry in those larger states. Those types of arrangements and competition between the states have led to the situation that you allude to.

Senator LUNDY —So it is an issue of who gets market share in a new environment—that type of thing?

Mr Wilson —Yes. I think that the aggressive states have been those that have the least to lose—states/territories. That is, they do not have a tax base, they do not have a population base and, therefore, they have little to lose by getting out on the front foot and going forward with these things. I think it is already on the public record that one particular territory said that they wished to be the Nevada of Australia. I think that says it all.

Senator LUNDY —One other issue I would like a comment on is the fact that the various states offer different taxation treatments of the revenue from the gambling and gaming. Is that an issue as well? Mr Fletcher —Yes, we believe it is. We understand the draft interactive gaming model that has been on the table for some time talks about a situation of returning taxation to the jurisdiction of player location. That is certainly not the case in the wagering environment at the moment. We have net leakages from the racing industries and from governments in the more popular states flowing to very low tax jurisdictions.

Senator LUNDY —Is it a fair comment to say that one of the major sticking points in establishing some consistency across the states is the issue of revenues and taxation in the jurisdiction and the difference between the different state jurisdictions? Mr Fletcher —Yes, but we do not believe it is insurmountable.

CHAIR —I thank the witnesses for appearing. Thank you for that demonstration; it was very interesting. We will now have a short tea break.