SA's first pay-TV operator MultiChoice feels the Independent Communications Authority of SA's (ICASA's) recently initiated inquiry into the state of competition in the ICT sector will consume time and resources, without yielding a meaningful result.
The company - a subsidiary of listed media group Naspers - says in its written submission to ICASA that it feels the regulator has "commenced with a level of inquiry which is so superficial that it will compromise any findings in this process".
Currently holding over 95% of the market, MultiChoice has monopolised pay-TV since it launched DStv in 1995 - an event that was initiated nine years prior with the introduction of SA's first subscription TV station, M-Net.
ICASA in March unveiled plans to conduct a high-level inquiry this year, with an end to evaluating the competitiveness of SA's electronic communications, broadcasting and postal sectors, on the premise that greater competition will lead to reduction in the cost to communicate.
Parallel market?
In its introductory notice, calling on interested parties to lodge written representations in relation to the said inquiry, ICASA draws on a description of the US market by economist Charles Ferguson a decade ago, and asks: "Can parallels be drawn in the South African ICT market?"
In Ferguson's book, The Broadband Problem: Anatomy of a Market Failure and a Policy Dilemma, the economist wrote that incumbent local exchange carriers (*ILEC) had, among other things, "treated their monopoly of local services markets as cash cows, using cash flow for dividends, share repurchases, acquisitions, and lobbying activities rather than for research and development or capital investment in new technology" and "deliberately and systematically avoided competing with each other".
Addressing the broadcasting market specifically, ICASA's notice states: "Attempts to introduce competition in the subscription TV environment are clouded by challenges faced by TopTV (now StarSat) in attempting market entry...resulting in its entering business rescue." It goes on to refer to "allegations of unfair competition between subscription TV and free-to-air TV with regard to access to adspend revenues".
MultiChoice argues, while it appreciates the Electronic Communications Act (ECA) requires ICASA to promote competition in the sector, the authority's four-page notice is "not supported by a single piece of evidence or analysis". The company says this lack of substantiation will prove to be fatal to the entire process.
The company is of the view that ICASA is inquiring into matters of policy that go beyond its legislative mandate. Regulatory experts indicate ICASA has a wide range of general regulatory powers in respect of competition issues, in terms of the ICASA Act, the Broadcasting Act and the ECA.
Remote comparison
ICT veteran Adrian Schofield, who compiled the Institute of IT Professionals SA's written submission to ICASA, says it is possible the inquiry will not yield a meaningful result, unless the regulator can understand the structure of the South African market and the dynamics that drive the pricing model.
There are too many misconceptions about SA's broadcasting and telecoms markets, so it would be a good thing for ICASA to be better informed, he says. "However, to even think of drawing parallels between the US market of 10 years ago and the local market now shows how distant is the thinking of ICASA from the real world. The history, economic status, culture and infrastructure of the two markets is so different as to make comparisons almost worthless."
While he does not believe the inquiry is beyond the regulator's mandate, Schofield says one can hardly expect the operator, which remains the dominant player in the satellite/digital TV space, to welcome successful new entrants. "Other satellite services have so far failed to make a dent in MultiChoice's market share, but it will be interesting to see the impact of Altech's Node in this respect."
Public hearings on ICASA's inquiry took place over the first three days of October, although MultiChoice opted not to participate orally in addition to submitting its written representation.
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