The Independent Communications Authority of South Africa (ICASA) has published the draft findings of its inquiry into South Africa’s subscription television broadcasting services.

“This is the process that started in 2016 when ICASA published a notice of its intention to conduct an inquiry into the state of competition in the subscription broadcasting services sector,” the regulator said.

“The draft findings are published for further comments, subsequent to which ICASA will publish the final findings.”

ICASA said it considered the impact of over-the-top (OTT) services, such as Netflix, and found that while these services are expanding, their impact on the South African market is muted.

This is due to limited access to broadband, the perceived high cost of data, and low Internet speeds in South Africa.

The regulator concluded that OTT services and the upcoming migration to digital terrestrial television do not compete directly with subscription TV broadcasting services.

With these considerations in mind, ICASA identified four retail markets for the distribution of video content in South Africa:

Analogue based free-to-air TV services. Basic-tier subscription TV services and satellite free-to-air TV services. Premium subscription TV services. Video-on-demand services

At the wholesale level, ICASA identified two markets:

Supply and acquisition of premium content for distribution in South Africa. Supply and acquisition of non-premium content for distribution in South Africa.

ICASA said it didn’t feel it was necessary to define a wholesale category for channel acquisition, as it is a function of content acquisition and would not have a significant impact on its analysis.

Of the market categories defined in the draft findings document, ICASA said that competition is ineffective in three of the markets. In all three cases, MultiChoice is the entity which holds significant market power:

Retail distribution of basic-tier subscription TV services and satellite free-to-air TV services.

Retail distribution of premium subscription TV services.

Wholesale supply and acquisition of premium content for distribution in South Africa.

Breaking the MultiChoice monopoly

As a result of MultiChoice’s dominance, ICASA said it is proposing various license conditions to address the market failure.

It said that most stakeholders support the following remedies:

Reducing contract duration

Rights splitting

Unbundling

Wholesale must-offer

Limiting access to the number of Hollywood movie studios

In addition, ICASA added that it has identified set-top box interoperability as a potential license condition to impose on MultiChoice.

1 – Reducing contract duration

ICASA said it will consider reducing long-term contracts and prohibit automatic contract renewal.

Broadcasters undertake long-term content agreements to reduce the effective cost of transacting, but at the cost of competition, it said.

It pointed to the European market, where the European Commission considers that contracts longer than five years raise concerns.

“Whilst the South African market may be different from the European market, the Authority believes that it may be useful to consider possible lessons from the European market.”

2 – Unbundling

ICASA said sports rights should be unbundled, similar to Europe, and rights should be sold under the following conditions:

Open tender.

Allowing more than one buyer.

No excessive exclusivity, with three years being considered the general norm.

No automatic renewal of contracts

“It is worth noting that in the South African context, the winner of the PSL rights also acquires the rights to other distribution channels such as mobile and the Internet. There is no reason why this should be the case.”

3 – Rights splitting

ICASA said rights-owners must split their content rights and sell them to more than one broadcaster.

Consumers may find it difficult to subscribe to several service providers to get access, but it has the advantage of allowing smaller entrants who do not have deep pockets to bid for rights.

4 – Wholesale must-offer

Wholesale must-offer regulations, which UK regulator Ofcom imposed on BSkyB’s Sky Sports channels, is another option. This allowed other channels to acquire key sports rights.

Ofcom launched a review of the regulations in 2014 and found that the availability of sports and Internet TV services made the regulations unnecessary, however, and scrapped them.

ICASA believes such regulations may still be a feasible remedy in SA, though.

5 – Limiting access to the number of Hollywood studios

ICASA said that it will limit the number of Hollywood studios that a broadcaster may enter into exclusive agreements with for the purposes of distributing movies.

“The Authority considers access to Hollywood movies as constituting a competitive advantage. For new entrants it may be difficult to break into the market without such access.”

6 – Set-top box interoperability

ICASA also proposed set-top box interoperability, where viewers can use one decoder for all direct-to-home satellite services.

ICASA said it would undertake further work before proposing it as a licence condition for MultiChoice, however, due to the technical complexities.

MultiChoice “generally disagrees”

“Most stakeholders agree with the Authority’s analysis and preliminary views contained in the Discussion Document. MultiChoice, on the other hand, generally disagrees,” ICASA said.

“Where the Authority arrives at a finding that differs from views expressed by stakeholders, reasons are provided.”

ICASA said that depending on the outcome of the final version of its finding document, it may consider developing regulations in terms of Section 67(4) of the Electronic Communications Act.

“A separate public consultation process would be followed in that case.”

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