Pay-TV licences were granted to five applicants (e.sat, MultiChoice, On Digital Media, Telkom Media, and Walking on Water) in September 2007. When are they expected to be issued?
It should not take more than a year from granting to issuing the licences. We are awaiting a ministerial policy directive which will inform regulations pertaining to licence fees before the licences can be issued.
Did the Independent Communications Authority of South Africa (ICASA) consider the viability of the applicants’ proposed services before granting the licences?
We did not consider this process as a competitive bid. We simply looked at what the applicant was proposing. For instance, if the applicant said: Ã¢Â€Â˜We are going to provide 40 channels’, our duty was to say: Ã¢Â€Â˜Let’s first interrogate whether the applicant’s market research supported the 40 channels proposition’.
Then we considered the business case and whether there was funding for the venture. It was not a beauty contest. All the applicants identified a gap in the market based on the LSMs MultiChoice served.
We had to give them some benefit of the doubt, given that at that stage we had 7-million TV households. Everybody looked at the LSM 4-8 bracket. Not all of them were, however, saying they were going to get content from the seven majors (America’s seven big studios).
If the applicants were planning to target the same LSMs, why did the regulator not consider whether the market could sustain the number of licences granted?
The pay-TV market is driven by how the operator packages content. From that perspective, you cannot say whether operator A or B is going to succeed. That’s why we, for instance, asked the applicants to show us with which content providers they were in discussion. We did not want to say: Ã¢Â€Â˜You only have seven majors and that is where most people go.
Ã¢Â€Â˜Therefore, if you go to Denmark, that content is not going to work in South Africa’.
We also had the promulgation of the Electronic Communications Act (ECA), which at its policy fundamental opens up the market. There was therefore no justification in limiting the number of applicants entering the market. We had to ensure that the applicants had done their homework in terms of market research, funding and content.
This was critical because we needed to ensure that South African consumers were not going to be left high and dry because operator A or B went under.
Clare O’Neil (see “Related links” below) argues the new operators will struggle to acquire content that would drive subscription. What is your view?
With respect to sports rights, the authority will be issuing draft regulations for comment. We do, however, not have jurisdiction in the international arena and that is where I would agree with that (O’Neil’s) observation.
The authority could only look at whether the applicants had enough money to bid for content. The operators could look at countries outside the US for content. The applicants had to give a convincing proposition in this respect.
Why did ICASA choose to issue pay-TV licences and not more free-to-air licences?
The problem was the availability of broadcast frequency spectrum (before digitisation). We would also have needed more time to craft a regulatory framework for free-to-air licences because of public interest considerations. Because of the scarcity of spectrum, free-to-air licensing would have had to happen by way of a Ã¢Â€Â˜beauty contest’. The business model for free-to-air is totally different (from pay-TV); it is mainly driven by advertising.
Masiza’s term as councillor of ICASA ended on 30 June.
This Q&A first appeared in !_LT_EMThe Media!_LT_/EM magazine (July 2008).