After years of South Africa's broadcasting regulator failing to ensure proper competition within South Africa's pay-TV market, the regulator has now come up with 6 ideas as part of a new inquiry to try and break up MultiChoice's dominance - each of which will have an impact on ordinary pay-TV consumers.
The Independent Communications Authority of South Africa (Icasa) has released a new discussion document as part of a new inquiry into dismantling MultiChoice's pay-TV market dominance in South Africa.
South Africa currently has Naspers' MultiChoice running DStv; StarTimes South Africa and On Digital Media (ODM) running StarSat that launched in 2010 as TopTV; and Deukom that launched in 2012 as pay-TV services.
With 6.36 million DStv households, MultiChoice is by far the biggest under the 16 million households in South Africa in 2016 of which 80% have access to television.
MultiChoice has a 98% share of subscription television broadcasting homes, while StarSat has dropped from 200 000 subscribers to 60 000 and Deukom has around 4 000 South African subscribers.
While any of the pay-TV operators as well as free-to-air and public broadcasters can bid for, pay and sign any content - including exclusive content agreements like sports rights - only MultiChoice and subsidiaries like M-Net and SuperSport are predominantly willing to sign long-term and expensive content agreements.
Telkom however notes that "the monopoly position that was enjoyed by MultiChoice for a long time has ensured that it forges long-term, exclusive relationships with content suppliers, making it difficult for new entrants to make substantive inroads into the market".
South Africa has no digital terrestrial television (DTT) subscription services yet since the South African government and the department of communications has been dragging its feet for over a decade with the country's botched digital migration process.
In the discussion document entitled "Inquiry into Subscription Television Broadcasting Services", Icasa is asking South Africa to comment on the proposals, with people and institutions having until 31 October 2017 to do so.
Written responses should be emailed to subscriptioninquiry@icasa.org.za and people can call Refilwe Ramatlo at 011 566 3251/3125.
Icasa says the inquiry is to determine "whether there are competition issues in the sector", saying it "has not yet reached a conclusion on the existence of any competition problems in the context of the subscription television broadcasting sector in South Africa".
Icasa says South Africa's pay-TV industry "remains highly concentrated" and that "contestability in the market appears to be limited by high barriers to entry, brand loyalty and high customer switching costs".
From page 87 in the discussion document, Icasa lists 6 possible "pro-competitive licence conditions" that the regulator could impose.
Each of these however - and not spelled out in the discussion document - comes with a big impact to existing pay-TV subscribers and ordinary South African consumers paying for television.
Each of the following 6 proposals, if enforced, will have a huge impact for DStv subscribers for instance.
1.Shortening exclusive contract periods
Icasa notes that pay-TV operators enter into long-term contracts for buying premium content because of the transaction costs involved in going to market on a regular basis.
Long-term contracts reduce transaction costs, negotiation costs. Icasa notes that the European Commission considers that contracts of longer than five years raise concerns. "While the South African market may be different from the European market, it may be useful to consider possible lessons from Europe."
Impact: Shortening exclusive contract periods could make rights more widely available. But if a pay-TV operator has to pay more due to shortened content contracts, the cost of the higher contracts will be passed on to the end-consumer: the pay-TV subscriber and ordinary pay-TV viewer.
2.Introducing unbundling
The so-called "unbundling" of content rights, like sport rights involves offering the rights to more than one buyer, usually making them available on different platforms.
The European Commission has adopted an approach that sport rights must be sold on open tender; the rights must be "unbundled" allowing more than a single buyer; there must be no excessive exclusivity (a term of 3 years being regarded as a general norm); and that there must be no automatic renewal of contracts.
Impact: It's not clear that even if rights are offered on resale, that 2nd tier takers would take it, or be able to afford it.
It's also bad for the end-consumer, the ordinary pay-TV viewer who will have to subscribe to many different services, buying different decoders and paying multiple monthly subscription fees to get access to different blocks of content.
3.Imposing rights splitting
Right splitting requires an owner to split content rights and sell them to more than one broadcaster.
Icasa says the advantage of rights splitting, with splitting rights into many packages is that it facilitates access by new smaller entrants who may not have deep pockets to bid for the full package of rights.
Icasa says that on the downside consumers may find it difficult to subscribe to various different service providers in order to get access to specific sport matches for instance.
Impact: A big consumer cost obligation is placed squarely on the ordinary pay-TV subscribers - especially ardent fans - who will have to subscribe to multiple different pay-TV services to literally "get a whole picture" and see everything of one type of content. Imagine some soccer you really want to see being available only on Operator A, and some soccer you really want to see only being available on Operator B because nobody is allowed to buy everything of one type of thing.
4.Imposing wholesale must-offer
According to Icasa the British broadcasting regulator Ofcom in 2010 imposed wholesale must-offer rules on BskyB’s Sky Sports.
Sky Sports was forced to make rights available to other distributors at "regulated" prices. Ofcom dumped this obligation in 2014.
Icasa says "wholesale must-offer" might still be a possible and feasible remedy" for South Africa.
Impact: Practically it seems impossible to introduce this within South Africa's context.
Why anyone would work hard to acquire something exclusively, just to be forced to resell it at a regulated wholesale price, doesn't make any sense.
Instead of working to secure exclusive content, every broadcaster would sit back and wait for someone else to do the work and be forced to resell the acquired content at a cheap, regulated price. Why expend the energy to swim yourself if you can cruise along in someone else's wake?
5.Opening up MultiChoice’s network
After MultiChoice did the capital expenditure over many years to build its own pay-TV autobahn, Icasa proposes everyone getting access to using the roads.
"One way of fostering entry would involve placing an obligation on a dominant provider to open their distribution infrastructure to other subscription television broadcasting providers," says Icasa.
"In this way, competition may be enhanced by creating the circumstances for a new entrant to utilise existing infrastructure, thereby lowering barriers to entry".
Impact: It's unlikely that McDonalds would ever be required to suddenly set aside a part of its ordering counters in its own restaurants, that it built itself, to KFC or Burger King. But that is what this proposal expects MultiChoice do with DStv.
How exactly other operators are to get access to the distribution access of MultiChoice, a complex network of satellite transponder leases, conditional access systems and DStv decoders isn't clear, if not almost practically impossible.
Walk into any Edgars and ask for the dedicated in-store till where you can pay PEP. The sales lady might smile, but she will be laughing at you on the inside.
6.Introducing set top box inter-operability
Pay-TV subscribers wanting to switch service providers must buy a new set top box (STB) or decoder and satellite dish due to a lack of inter-operability.
But that's the same as when people want to switch between Samsung and iPhone smartphones, Volkswagen and Nissan cars and even Absa and FNB bank accounts.
Icasa says "inter-operability" - meaning forcing pay-TV operators to make their decoder be used by all - "can help to stimulate competition by lowering switching costs".
"However, due to the technical complexities surrounding set top box inter-operability, Icasa would have to undertake further work and separate consultations on the issue before proposing it".
Impact: What a huge benefit would this not be to the ordinary pay-TV consumer - only it wouldn't be.
No pay-TV operator would have any incentive to invest in research and development (R&D) of decoders, all opting to wait for someone else to do the huge capital investment and then manufacturing and then piggy back once it's in the market.
Furthermore no pay-TV operator would bother to brand their own decoder if others get to use it, no one will invest in improving and adding features.
If inter-operability worked, people would wear each other's underwear.
Ask your dad if you can use his wallet for your money because the inter-operability means you don't have to buy and carry one too, and note his reaction.
Here is the Icasa document in its entirety:
