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BLOG: THE ILLUSION OF REGULATION

IN SOUTH Africa, there seems to be an assumption that pay-TV broadcasters can expect to attract huge audiences and make hefty profits. This is, of course, an illusion.

But both the Independent Communications Authority of South Africa (Icasa) and newly licensed broadcasters have eagerly bought into it. The question is: will both reap bitter fruits of their wasted labours?

Icasa creates the expectation that all is well in the pay-TV broadcasting sector by inviting applications for pay-TV licences on the basis that competition best serves viewers and the industry: more broadcasters create greater programming choice, which drives down prices for consumers.

But this is another illusion. While competition is sometimes an engine for greater choice and lower prices, the entry of more pay-TV broadcasters into a market dominated by the colossal DSTV does little to increase choice or reduce prices.

DSTV’s wide range of thematic channels, its exclusivity agreements with channel owners and its acquisition of programmes over a long period gives it a premier broadcasting status among viewers. Pay TV viewers get from DSTV the best international live sport programmes, the newest movies, digital animation, series, documentary, news channels and reality programmes. And since the nineties DSTV has built up a formidable audience.

So what can the competition offer? Very little, if anything.

The important question is why Icasa has awarded licences in a sector of the market where the barrier to entry is now so high that the newly licensed broadcasters are staring at looming financial disaster even before they go on air?

The broadcasters are not blameless because they decided to apply for licences in a bloody market. They had made huge efforts in their applications to show how deeply they believe in Icasa’s myth that Pay TV broadcasting is a market that will reward their labours and investments worth hundreds of millions of rand.

So far, the fall-out in the market has been disastrous. In 2006, Icasa awarded five Pay TV satellite licences. Only DSTV is making a profit. Star Sat (formerly Top TV) is limping under a business rescue in the hope that its new Chinese investor will turn its fortunes. OpenView HD has moved into the satellite free-to-air market but is yet to match DSTV’s premier offerings. Of Walking on Water TV, nothing is known. Sentech runs a small satellite free-to-air service based on a broadcasting licence ostensibly given under the now-repealed Telecommunications Act.

All of these examples should have signalled to Icasa — and to interested investors — that something is not right, and that perhaps an intervention is necessary to lower the barriers or re-examine the need for more licences. But that is expecting too much from a regulator that appears unconcerned or unaware of its earlier mishap.

In May this year, the regulator licensed another five Pay TV broadcasters. Did Icasa study the Pay TV broadcasting market before inviting applications? Such a study would perhaps have averted further ruin for broadcasters or forced them to be more realistic in their expectations when making financial decisions. Failure in the Pay TV broadcasting sector will only continue to erode what’s left of the tattered reputation of the regulator.

New licensees have been granted to Close TV, Kagiso TV, Mindset Media Enterprises, Mobile TV and Siyaya TV. They all say they’ve found gaps in the market and have used them to build their plans for profit. Some say they are bringing programmes from the East and channels the competitor does not have. But what they do not know is whether viewers, wary of the failures in the market, will respond to their marketing.

Expecting viewers to switch to your offering depends on many factors including price, the number of channel offerings and the quality of the programmes.

The second problem is whether there are sufficient numbers of terrestrial free-to-air viewers who can afford the new service. Most of the country’s TV households are still tied to terrestrial free-to-air broadcasting served by the SABC’s three channels and e.tv. The proof is the high audience ratings of these channels and the airtime demand from advertisers.

It is in the terrestrial free-to-air market that Icasa should license new players.

E.tv’s success is an example: it broke the three-channel SABC monopoly and now successfully competes with SABC channels.

Since 1998, e.tv is the only new voice that has been added to the terrestrial free-to-air market, which is greatly in need of new players and owners. Rather than licensing more services to the majority of the country’s viewers, Icasa spends its resources on giving the illusion of greater choice and diversity in a market that services the rich.

It is Icasa’s illusion of regulation, a cheap trick, that disappoints broadcasters and underservices the majority of viewers, and it could be ignoring its statutory remit to regulate in the public interest.

Source: BDLive – Ayesha Dawood
• Dawood is an international corporate communications and digital lawyer from Ayesha Dawood Attorneys