MultiChoice accused of hijacking digital TV

Pay-TV operator MultiChoice waged a campaign to overturn a crucial government decision that critics claim crossed the line between acceptable lobbying and capturing state policy.

At issue is the government’s plan to move all television broadcasting to a digital system that, depending on the policy choices, could threaten MultiChoice’s dominance of the pay-television market. This possibility exists because the government plans to subsidise the distribution of millions of set-top boxes (STBs) needed to convert the new digital signal into a form that can still be received by old-fashioned TV sets.

Depending on whether the government policy allows the signal to be encrypted and for the STBs to act as decoders – with a technology known as “conditional access” (See “Battle over limits on access”) – the proliferation of STBs would allow new pay channels and services alongside the existing free channels on the SABC and e.tv.

But without conditional access, new service providers would have no way of using the STBs to offer paid-for services, and MultiChoice’s virtual monopoly would be secured.

When the then communications minister, Yunus Carrim, tabled a final policy decision in the Cabinet in December 2013 allowing conditional access, it represented a major threat to MultiChoice’s profits and opened the door to rivals such as e.tv to offer pay services of their own.

Yunus Carrim (David Harrison)

An amaBhungane investigation has shown how MultiChoice fought back, including by:

  • Signing a controversial deal with the SABC in June 2013 that bought the support of the politically powerful public broadcaster. The SABC chairperson, Obert Maguvhe, recently declared he liked to think of the SABC as being married to MultiChoice;
  • As part of the 2013 contract, the SABC agreed to bar conditional access on its free-to-air channels for five years. The deal is now the subject of a fierce legal battle in the Competition Tribunal. (See “Legal face-offs create static for state and broadcasters”);
  • Apparently securing political access and intelligence, including appearing to know that Carrim was going to be removed long before the minister himself knew it;
  • Backing an empowerment lobby group that appears to have acted as a MultiChoice puppet in launching a public attack on Carrim and his backing for conditional access; and
  • Succeeding in having Carrim’s policy, which was accepted by the Cabinet in 2013, dramatically reversed by Faith Muthambi, the new minister appointed by President Jacob Zuma after last year’s elections. In doing so, Muthambi seemingly also flouted ANC policy, and her about-face is being challenged in court by e-tv. (See “Legal face-offs create static for state and broadcasters”.)

Extraordinary attack
Exhibit A against MultiChoice is an extraordinary attack on Carrim by Koos Bekker, the chairperson of Naspers, MultiChoice’s parent company. It highlights MultiChoice’s deep unhappiness with the 2013 Cabinet decision to include conditional access.

In a memorandum sent to senior management, dated March 2014, which amaBhungane has seen, Bekker describes Carrim as “temperamentally unsuited to high political office” and states that he is “in the power of e.tv”.

He adds that Carrim will not be re-appointed as communications minister after the elections (in May last year).

The source of Bekker’s information is unclear, but well-placed insiders in the broadcasting sector sympathetic to Carrim allege that, months before the memo was circulated, MultiChoice was stating as fact that he would be replaced.

Approached for comment, Naspers spokesperson Meloy Horn said Bekker “is currently abroad. It is not our policy to comment on press speculation.”

Carrim responded to Bekker’s allegations, which amaBhungane brought to his attention, by saying it was “not appropriate” for a former minister to comment on a previous portfolio. But he was not going to allow his integrity to be attacked, he said. “No, no. I was not in the power of e.tv.

“That, however defined, would be a crime. The national fiscus wasn’t my personal money box that I could just use to benefit a particular company I chose.”

Carrim said the December 2013 policy that was decided on on his watch aimed to encourage new African pay-TV players rather than serving e.tv’s narrow interests.

“It was a Cabinet decision, not a personal whim,” he said.

AmaBhungane has also learned that at about the same time MultiChoice’s management was involved in producing an opinion piece, published in April last year, that attacked Carrim.

The article was published under the byline of Keith Thabo, then-president of the National Association of Manufacturers in Electronic Components (Namec).

It is an important lobby group for mainly black small, medium and micro-enterprises in the electronic manufacturing sector.

AmaBhungane has seen email correspondence from April 21 last year between Calvo Mawela, the head of stakeholder and regulatory affairs for MultiChoice South Africa, and Thabo, referring to Mawela’s role in penning an opinion piece published on the technology website TechCentral on the same day.

In the email Mawela writes: “Herewith the final article as requested.”

He then provides Thabo with the email address of the TechCentral editor, Duncan McLeod, saying: “I think try get it to him as soon as possible.”

The article, titled “Minister you are misleading the public”, accuses Carrim of rewriting history and distorting facts.

MultiChoice described the allegation that it was involved in authoring opinion pieces for Namec “insulting”.

“Through its office bearers, Namec asked for Mr Mawela’s input as a broadcasting engineer, and he shared his thoughts based on his expert knowledge of the broadcasting sector,” said MultiChoice’s spokesperson, Jackie Rakitla.

The Mail & Guardian reported in August last year that Namec had split into two factions.

The article reported on allegations made against Thabo and Vijay Panday, another Namec leader. They were accused by one of the factions of being “empowerment raiders” for hijacking an empowerment deal for their own benefit.

At the heart of the dispute was the relationship Namec had entered into with MultiChoice and the Chinese manufacturer Skyworth Digital, to potentially supply 15-million decoder boxes over three years.

Responding this week, Thabo said: “We formulate academic opinions and write articles on our own, as we have a research and development team that has done research on DTT [digital terrestrial television] and visited Europe, Asia and South America.”

Quid pro quo?
Some Namec members said the only reason MultiChoice was interested in doing a deal was Namec could help in the fight against conditional access.

This appears to be backed up by correspondence between Panday and Thabo, dated June 16 last year.

The email from Panday, titled “MCA”, an abbreviation for Multi­Choice Africa, reads: “You have to tell BRU [presumably a MultiChoice staffer whose identity is unknown] we want some protection. Between you and me, they [are] under pressure from the top to relook at UEC [Altech UEC, a rival set-top box manufacturer]. 

Before that happens, we put a lot of time, effort, lost face with govt and DTI [department of trade and industry], fighting the [conditional access] battle. A year from now, when all is over, they can allocate the forecast to anyone.”

The email appears to show that Panday saw the fight against conditional access as a quid pro quo for the set-top box orders Namec was getting from MultiChoice.

But Rakitla said the pay-TV operator had no knowledge of the email.

“We concluded a purely commercial agreement … It had absolutely nothing to do with who took what position on digital migration.”

In a further email from Panday, dated May 25 last year, the day Zuma announced his new Cabinet following the elections, he wrote: “A big thank you to all from Keith and I for all the support with the recent fight with DOC Carrim. He is officially out. We will have an easier run. She is a nice person and supports Namec.”

The she in the email appears to be a reference to Muthambi, the new communications minister.

Rakitla said MultiChoice could not comment on Panday’s email, as it was unaware of it.

“However, it’s important to note that when Minister Muthambi was appointed, we had no knowledge of her position on [set-top box] control,” Rakitla said.

Panday did not respond to questions from ama­Bhungane.

Namec’s secretary general, Adil Nchabaleng, a leader of the faction opposed to Thabo and Panday, said, in his view, “a predatory approach was used by MultiChoice to get them [Thabo and Panday] on side for conditional access”.

Thabo said Nchabeleng was relieved of the secretary general’s position in 2010.

“This is a desperate man who has been used by the white electronic industry to frustrate the aspirations of the black players in transforming the industry and creation of black industrialists,” he said.

“A big thank you to all from Keith and I for all the support with the recent fight with DOC Carrim. He is officially out”.


Legal face-offs create static for state and broadcasters

Two ongoing legal challenges are set to spotlight government’s stunning about-turn on the inclusion of conditional access in five million state-subsidised set-top boxes (STBs).

The STBs will underpin the migration of South African television from analogue to digital (See “Battle over limits on access”). 

It is unclear what led Minister of Communications Faith Muthambi, in March this year, to change the broadcast digital migration policy approved by Cabinet under previous communications minister Yunus Carrim in December 2013. 

Faith Muthambi (Mail & Guardian)

Her decision to remove conditional access from the policy reverses a previous Cabinet decision and flies in the face of ANC policy, which favours conditional access. Both the South African Communist Party and labour federation Cosatu have called for the implementation of the 2013 Cabinet decision. 

Muthambi’s decision also contradicts a position the Competition Commission took in February in a submission to a policy review process run by the telecommunications department. 

 The commission argued that excluding conditional access from the STBs would be anti-competitive and that it “must be incorporated”. 

This week the Pretoria high court began hearing a legal challenge by e.tv to Muthambi’s policy reversal. At the same time, publisher Caxton and nongovernmental organisations Media Monitoring Africa and the SOS: Support Public Broadcasting Coalition have taken the SABC and MultiChoice to the Competition Tribunal. 

The matter involves the R550-million contract between the two that stipulates the terms under which the SABC supplies a 24-hour news channel and an entertainment channel to MultiChoice. 

The parties argue that clauses seen as giving MultiChoice control over the SABC archives and dictating that SABC channels cannot be encrypted using conditional access constitute a merger between the two broadcasters.

e.tv versus Faith Muthambi
In its legal challenge, e.tv argues that Muthambi’s about-turn on conditional access is both “irrational” and “unreasonable” and calls for the relevant clauses of the policy to be “reviewed and set aside”. e.tv argues that the amendments are “unlawful” and exceed the minister’s powers. 

Referring to a 2012 judgment of the Pretoria high court in e.tv’s dispute with former communications minister Dina Pule over conditional access, it says the court found it unlawful for the minister to decide on certain key technical issues affecting free-to-air broadcasters, and that he or she had to leave these to the broadcasters themselves.

 “The effect of the encryption amendment is to unlawfully breach these principles,” reads the e.tv affidavit in the current case. “The amendment means that the minister has done precisely what the high court held she could not do.” 

Speaking last week before her budget vote in Parliament, Muthambi said she was not concerned about e.tv’s legal challenge and that digital terrestrial television (DTT) would go ahead. 

Caxton’s case
In the case set to go before the Competition Tribunal, Caxton and the two NGOs argue that the SABC/MultiChoice contract constitutes a mandatory notifiable merger. 

According to their reading, the Competition Commission should have been notified when the deal was signed so that it could give regulatory approval. In affidavits, Caxton chief executive Terry Moolman argues that, through the agreement, MultiChoice has “acquired control” over the SABC’s TV broadcasting policy as well as its programme archives. 

“Until it concluded the agreement with MultiChoice, the SABC supported the delivery of DTT signals to South African viewers on the basis that these signals would be encrypted,” Moolman states. “The SABC has, as a result of concluding the agreement with MultiChoice, aligned itself with MultiChoice by departing from that position.” 

This gave MultiChoice a “powerful tool to lobby government”, he claims. Elsewhere, Moolman argues that MultiChoice “does not want the prospect of increased competition that would be facilitated by a policy that provides for encryption as a standard in STBs”. 

MultiChoice and the SABC respond MultiChoice and the SABC deny that the deal constitutes a merger or gives MultiChoice control over the SABC archives.

 The SABC’s responding affidavit says the argument that MultiChoice secured control of the SABC’s stance on the encryption of DTT signals in the DTT broadcasting environment, through the contract is “incorrect”. 

The SABC argues that, if the regulations change and encryption is required, it will comply and that the contract “provides for such eventualities”.

 MultiChoice chairperson Nolo Letele told amaBhungane that the company’s contract with the SABC is a standard, “run of the mill” channel supply agreement. Letele denied that the contract constitutes a merger, gives MultiChoice control over the SABC’s archive or hands MultiChoice the right to dictate policy on conditional access.

 M-Net’s director of regulatory and legal affairs, Karen Willenberg, told amaBhungane that it is “factually incorrect” that MultiChoice offered the SABC a contract in order to get it to change its position on conditional access. 

“The SABC opposed encryption before the MultiChoice contract was signed,” she said. Letele said Encore, the entertainment channel that the SABC is supplying to MultiChoice, will revive old SABC television shows from the 1980s and 1990s, amounting to 1% of the SABC archive. 

A ‘marriage proposal’
 Despite the protestations, the apparent love affair between the SABC and MultiChoice seems to have strengthened. At the launch of the SABC rerun channel Encore two weeks ago, SABC chairperson Obert Maguvhe proposed a marriage between the public broadcaster and MultiChoice. 

“Actually, for me, I wouldn’t have preferred it to just be a partnership,” said Maguvhe. “Actually it should be a marriage. You can be our bride and we will be the bridegroom.” “We love you so much, MultiChoice,” continued Maguvhe. “We want to enter into a marriage.”


Battle over limits on access

Since 2012 there has been a highly contested battle over whether or not to include conditional access in the set-top boxes that will be used for the migration of South Africa’s television services from analogue to digital. 

This process is known as the digital terrestrial television (DTT) migration process.Digital television allows for more television channels to be broadcast on spectrum bands than on analogue television. 

Because spectrum is a finite resource, this migration process is important as it will free up spectrum to be used to deliver many more television channels and other services such as broadband wi-fi.

 Conditional access is a security system that can be included in a set-top box and used by broadcasters to control access to certain channels through encryption. 

For example, if a person does not pay their DStv bill, MultiChoice can use the conditional access system in its set-top box to deny them access to their television services until they have paid up. 

MultiChoice is opposed to the inclusion of conditional access in the DTT set-top boxes. Many critics have argued that this is because it wants to prevent rival broadcasters from beginning to offer new subscription services through the boxes. MultiChoice argues that its objections are based on the cost of the conditional access to taxpayers and are in the public interest.


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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.

 
Lloyd Gedye

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