/ 15 January 2021

Pay-TV inquiry probes the Multichoice monopoly

Multichoice Fined R40 000 For Negligence
Africa’s largest subscription television operator says it is under threat amid the emerging popularity of global platforms like Netflix and Amazon Prime

The Independent Communications Authority of South Africa (Icasa) held public hearings as part of its investigation into competition in the pay-TV sector this week. 

The authority’s inquiry, which began in 2016, will determine whether there are competition issues in the subscription-television broadcasting sector, which has seen slow growth since 2007. The inquiry will likely lead to regulations aimed at breaking MultiChoice’s monopoly in the pay-TV market.

Proposed remedies to competition issues in the sector include reducing long-term contracts with content providers, unbundling sports rights and limiting access to Hollywood movies.

In a 2017 discussion document, the authority described the pay-TV market as highly concentrated, with little contestability. This results from high barriers to entry, brand loyalty and increased customer switching costs, the authority said.

Two years later, after engagements with various stakeholders, the authority published its preliminary findings on the matter. Icasa found that MultiChoice, Africa’s largest pay-TV operator, held significant market power, which the authority considers a harm to competition.

In its response to Icasa’s findings, MultiChoice said the authority’s conclusions “do not reflect a balanced, fair and robust analysis of the evidence provided to it in the course of the inquiry” and that it seriously failed to meet constitutional standards.

MultiChoice said: “Since providing the 2017 submissions, MultiChoice has continued to face increased competition and threats to its business, leading to further competitive responses.”

The emergence of over-the-top (OTT) media services that offer content directly to viewers over the internet — like Netflix, Hulu and Amazon Prime — have led to cost-cutting and retrenchments, MultiChoice added.

In its preliminary findings, Icasa concluded that the impact of OTTs is still muted, given the relatively limited level of internet access, the high cost of data and low average internet speeds. 

“The lack of access to local content and sports content also limits the rapid growth of OTTs in South Africa,” the findings add. “As a result, OTTs are seen as an out-of-market constraint on subscription television services.”

But MultiChoice said the growing dominance of these platforms has caused “a seismic shift” in the sector.

“The major Hollywood studios are now less important. Other studios and production houses have muscled in, including Netflix,” the MultiChoice submission reads. “There has been a proliferation of highly valued series, documentary, movie and reality TV content developed by and for OTT services, and local content is recognised as important for building audiences.”

MultiChoice calls Icasa’s exclusion of the effect of OTTs on pay-TV in its inquiry “inexplicable”. On this matter, the authority “made material findings based on flimsy, anecdotal and unsubstantiated information, and, in many instances, on supposition”, it adds.

In its submission, eMedia Investments, which owns eTV, said that although it agrees that OTTs currently have little effect on the market, Icasa needs to take a long-term view on the matter. 

“OTTs will, as the cost of data reduces, access to internet increases and digital content is made available en mass, impact on the subscription and broadcasting industry as a whole.”

During Icasa’s public hearings on Wednesday, Media Monitoring Africa director William Bird said that though MultiChoice may have a monopoly within the local market, increasingly powerful global players, like Netflix, present “a genuine threat”. Pitting MultiChoice against OTTs “is not even a fair fight”, he said.

In a prior submission, MMA said that the threat of new platforms does not detract from Icasa’s mandate to ensure fair competition in the subscription television market.

“We are of the view that Icasa must ensure that this inquiry continues to focus on the subscription television market in which MultiChoice clearly and unambiguously enjoys a monopoly.”

Bird said on Wednesday that the outcome of the inquiry should not serve the interests of those in power but the public’s interests. Without a sustainable local content sector, the public will likely lose out, he said.

SABC head of policy Philly Moilwa said Icasa’s inquiry is taking too long, adding that the public broadcaster requires regulatory certainty as it grapples with a rapidly changing market. If the process continues to drag on, influential players will be allowed to entrench their monopoly further, he said.

In its submission, the SABC says that the effect of OTTs should not be undermined.
“OTTs may not be a direct competitor to broadcasters, but as soon as the cost of data is lowered, OTTs will make serious inroads in the sector and may overtake regulation development for this sector.”