Tuesday, August 16, 2016

WARNING. How Telkom's shocking new call tariff increase shows exactly how you will pay much more if MultiChoice lets you choose your own channels.

The shocking move of Telkom to massively hike the tariff price of over 100 international call types is a stark warning and a perfect example of what will happen, why it will be bad, and exactly how bad it will be, if MultiChoice should ever let DStv subscribers "choose and pay only for the channels they want".

Besides griping over "too many repeats" - although study after study shows that in 2015 there was an avalanche of more original hours of TV content than ever before and with 2016 that will again surpass 2015 - the second pet peeve of DStv subscribers in South Africa and across the African continent is a clamouring for wanting an "a la carte" model.

DStv subscribers' argument is that, surely just like Kellogg's Fruit Loops on the store shelf, if I want and demand a box of just orange, or just blue, or just orange and blue fruit loops instead of the multi-coloured box, I'm entitled to it.

Erroneously calling it "pay per view", DStv subscribers say they're tired of being forced to watch TV channels they don't watch and don't want. They can't understand why they're forced and "locked in" to pay for TV channels as part of bloated packages they don't want.

DStv subscribers argue that it would be cheaper, and that they will save money monthly by picking and choosing only the separate TV channels each one of them actually cares for and wants to watch.

They want to build their own customized bouquet, ringing up a monthly charge like a restaurant or hospital bill, consisting of only the individually-priced TV channel "items" they want to pay for - none of that Pawn Stars on History, or the trashy Kardashian stuff if E! Entertainment isn't something that you're personally interested in.

Pay-TV subscribers want to break gym access, the hotel breakfast buffet, vegetable soup and the water colour paint set - all in essence one intrinsically linked service or product with a combined value proposition - into individually monetised parts.

Unhappy pay-TV subscribers who wants to pay for "only the channels I want", want gym membership priced for just the use of the dumb bells (the gym has to pay its operational costs and overheads whether you use one piece of equipment, or 6, or all), and the ability to buy a water colour paint set with just dollops of blue and red and the rest of the plastic pack empty.

Surely that's not too much to ask?  

It's not so straight-forward - and Telkom's shocking shift to give people calling international numbers exactly that, is indicative of exactly how much worse off the average pay-TV DStv subscriber will be if MultiChoice starts to do the same.

What Telkom secretly just did by massively hiking over 100 international call tariffs is an excellent explainer and predictor of what will happen if MultiChoice gives foolish DStv subscribers exactly what they want: the ability to only pay for the channels they select.

Telkom just hiked over 100 individual international call rates by massive amounts. A call to Australia for instance that used to cost R0.72 per minute jumped to a whopping R20.11 - basically 2 700% more.

Now you have to call the Netherlands from Telkom for R57 per minute - or dail a Swedish number through Sweden's Fix Paging at an astronomical R298.40.

Where calls to the UK Freephone was 53c per minute, it's now shot up to an eye-watering R31,85 per minute.

But why?

It's because Telkom now charges much more for several "premium-rated, low-volume lines" in accordance to what those individual lines actually cost.

Telkom says it has been undercharging for international calls to certain destinations and had to change to recover its costs. Telkom says that in the past it charged all callers a single rate, despite operators charging it different wholesale rates.

Telkom says "while operators charged different wholesale rates, Telkom effectively absorbed the risk by charging a single rate to its own customer".

"Telkom has had to apply the actual international call cost, along with Telkom's own wholesale and retail costs".

Telkom is now charging individual callers, making specific international calls, the specific price of the cost of that specific call. 

There is no longer a "cross-subsidy" happening where the benefits of the overall bundling of the mere existence of the service that Telkom provided, is used to in a sense benefit everybody who wants to make use of it.

Previously, Telkom grouped multiple operators in a single country together for one price (a single rate) to callers. Now, Telkom broke that up, making individual callers pay the individual cost of that call according to a specific operator's price, plus what Telkom adds to make a profit. 

These few cursive sentences are incredibly important, because it's exactly what MultiChoice will say is the reason, and will do, if it's forced to, or decides to offer DStv subscribers the ability to each pick and choose their own TV channels.

How the existing pay-TV model works (and what a lot of people who complain, don't understand or care to learn) is that MultiChoice's DStv is a bundled service - like the R5 access to your local municipal swimming pool.

For R5 you get access to the diving board (whether you want it or not, or only go to use that), the shallow and the deep end (irrespective of where you prefer to splash), and the little always-lukewarm (and we know why) baby pool (irrespective of whether you use it or not) to everyone's benefit for as long as you want to.

When I go to the Ratanga Junction theme park, the entry fee I pay for entertainment (although high), is for all rides - whether I use all rides or only use one, or just a few.

The income from the thousands of visitors make it possible to "spread" the cost of providing the encapsulated rides and experiences. If I just went on the Cobra rollercoaster, a premium ride, I'd max out after maybe just 4 rides equal to the price of admission, if the Cobra was priced as an individual ride, on a pay-per ride basis.

Yet everybody - with one of the few broadly applied admission fees - can enjoy the park to a greater degree, and cheaper, than what it would have been if every single visitor was forced to pay per differently priced, individual ride. 

Now let's look at what will happen - just like Telkom now did - if you start paying a more "just" parity price for your pay-TV service, just for what you want to use, because, as critics argue, it would be "more fair".

If premium channel A costs MultiChoice R5000 (let say SuperSport), but it has less interest, meaning it's a premium-rated but low-volume channel that only 100 DStv subscribers want and subscribe to, MultiChoice must recover the entire channel cost from only those people (because it can't run and provide it at a loss).

It means R5000 divided by 100 = R500.

If a non-premium, yet high-volume channel B also costs R5000 (lets say Mzansi Bioskop) but 1000 people want it, the cost is only R5.

"Wonderful," say the charge-me-for-my-separate channels pay-TV subscribers. "I will choose and subscribe to 20, maybe 100, of the R5 channels".

Well, that is possible. 

And yes, some pay-TV subscribers will get a lesser monthly bill. But their type of TV - the quality and scope - will be greatly reduced. By far, the larger majority of pay-TV subscribers will end up paying more than what the case is currently for exactly the same, or less, content.

Why? Because you've lost the power of bulk buying, the guaranteed number of subscribers taking and getting a certain channel, that helps to offset the cost of carrying that channel.

Did you know that some TV channels on DStv - lets take for instance BBC Earth and BBC First - are already not available in some countries like Kenya?

Why you ask? Because already - even in the existing packaged, bundled buy that lumps thousands of Kenyan subscribers together - there's not enough subscribers to make it financially feasible.

Imagine if channels are not made available in must-take collections and Kenyan subscribers can individually choose. The irony is that their "more choice" will become a smaller choice, since the number of available TV channels out of which to pick from, will shrink even more.

Pay-TV is called pay-TV for a reason. It's not charity in the form of the Salvation Army. By picking only the individual TV channels you want, you will quickly end up paying more. A lot more.

The premium channels - those ones you want with the live sports, the hottest new seasons of can't miss shows, the 24-hour TV news and the latest movies - they will cost the most.

And as more and more people opt out of taking them because they're too expensive (or any unpopular channel for that matter), those people still choosing that channel, will end up collectively paying even more. 

Keep in mind that the price of a channel will be dependent on dividing up the price that it costs to provide that channel.

Also keep in mind that if not enough people watch (and pay) for that individual channel - it will die or disappear, and much, much quicker that what it took for Animax to come and go on DStv.

It's exactly the same way that Telkom now allows you to call Equatorial Guinea or Lithuania if you want, but at an even more exorbitant cost to just you, now directly linked to what that call actually costs them.

Be grateful that you can subscribe to something like a DStv Compact for instance, where the same package, of the same curated channels, is sold to literally millions of customers, making the bigger range of channels possible in the first place.

It is the power of that collective scale that makes it possible for the number of subscribers to be leveraged to include a level and quality and quantity of content that would cost the individual subscriber a lot, lot more if extracted and payed for as itemised billing.

Below is a joke "what if" example if a restaurant "a la carte" bill looked like a hospital bill where you're being charged for every smallest imaginable thing and a litany of service charges.

Ask yourself" is this really how you would rather your pay-TV account look when you get the greater consumer freedom and power and joy of picking only your TV channels?