DStv Monopoly: The Facts, The Fallacies

I spent some time following the recent debate in the House of Representatives on the bill to halt what is viewed as a stranglehold on the pay-TV sector of the broadcast industry. The bill, which passed second reading at the House two weeks ago, was sponsored by  Mrs. Aisha Dahiru-Modibbo. It seeks an amendment to the National Broadcasting Commission Act to ensure openness and competition in the industry.

 Specifically, the House expressed its displeasure at the “arbitrary” subscription rates charged by MultiChoice for its digital satellite television services in the country, arguing that high pricing by DStv has denied the majority of Nigerians access to its premium programming. It also alleged that there is a dearth of competition in the pay-TV sector of the broadcast industry, which has given big players like MultiChoice the “undue advantage” of preventing other operators from coming into the market and crashing prices.

Another complaint of the House focused on what it considers a “rigid” subscription policy under which subscribers are billed “whether they are at home viewing programmes or not”.

Dahiru-Modibbo, who led the debate, explained that the House was not opposed to foreign participation in the domestic economy, but was determined to protect the interest of Nigerians. She was of the view that there are Nigerian firms capable of providing premium satellite broadcast programming to Nigerians, but these have been frozen out by “deliberate actions” of by monopolies.
“In every country, measures are taken to protect the people. What is happening to us in Nigeria does not happen elsewhere on the continent. It is high time our regulatory body, the NBC, was positioned to protect Nigerians from this arbitrary actions,” said Dahiru-Modibbo. House Deputy Leader, Leo Ogor, spoke along the same lines, wondering why Nigeria, a country in which DStv has a huge subscriber base, does not get “subscriber-friendly offers” given to citizens of other African countries.

“You have a situation in the telecommunications industry, for example, where you are billed as you go on use your mobile phones. You pay for what you use. We should be having pay as you view or watch as well. Why should Nigerians continue to pay for DStv services whether they are at home using the service or not?” Ogor asked.

Thumbs up for the legislators for rising to protect Nigerians from exploitation. They can count on this writer to queue behind them in every genuine effort to free Nigerians from the grip of monopolists that want or may want to price-gouge them.
My support for the House is partly based on the fact that I am a DStv subscriber, one that is light years away from being affluent and therefore deserving of the kind of protection the House wants to provide. Again, it is part of the human make-up to want bargains. I am certain that the majority of Nigerians want bargains. But are bargains realistic in every situation, including for products of services branded “premium”? I do not think so.  There is a reason a product or service is branded premium. Being premium suggests that it is the highest tier of that product or service. And as we know, services and products have categories marked by class and quality. Access to or enjoyment of such is determined by cost.

MultiChoice have graded their services like the hotels grade their rooms (from executive to standard), like airlines grade their seats (First Class - Business - Economy) and  cars (Custom, Limited Edition, Full Option Regular, Basic Option Regular). Cars come with a variety of  options: Manual or auto? Cassette or CD or Aux or a combination of all? Leather seats or fabric? Four or six cylinders? Alloy rims or wheel cover? Normal dashboard or navigational screen? Houses are also graded. We have detached, semi-detached right down to face-me I face you. The categories, naturally, attract different prices.

The less than subtle charge of monopolising content brought against MultiChoice by the House must have gladdened a more than a few hearts. It is a long-running industry narrative. I believe it deserves a bit more scrutiny. First, MultiChoice is not the only pay-TV service provider in the country. StarTimes, MetroDigital, Daarsat, MyTV and Trend TV, Montage and the new entrant, Consat, provide similar services. HiTv once did, famously wresting the broadcast rights for the Barclays Premier League in Nigeria before its untimely death. Now, I am not happy that HiTv folded up the way it did, but that can hardly be blamed on DStv, which remained in business despite the loss of the rights to broadcast premium sport content before regaining such. Why did HiTv fold up? Simply because it paid too much for the rights to the Barclays Premier League and failed miserably to manage the rights it acquired. HiTv’s case was similar to that of Setanta, the broadcaster that once challenged the power of BSkyB in the UK, but folded up partly because it overextended itself by paying over the odds for content. If HiTv succeeded in one thing, it is in driving up the cost of rights to the Barclays Premier League in Africa-to the eternal disadvantage of the Nigerian subscriber.

In a country that is supposed to espouse democracy and a free market economy, it is  bizarre to seek to punish MultiChoice or any company for succeeding so well at what it does. No doubt,  MultiChoice came in first and did tie up all the great content. Their fault? No. That is business. MultiChoice is doing nothing more than any other company operating in a free market economy. There is no law prohibiting MultiChoice from charging the maximum the market will bear. Can we blame Coca-Cola for outselling other producers globally?

From the look of things, the House wants to force MultiChoice to share its content with its rivals at cut-rate prices. But what the House needs to do is to find out why those granted subscription TV licences over the years have not been able to get things going let alone actually get to the point of being able to compete. HiTv did actually compete for the three years, during which it held the rights for the Barclays Premier League, its cash cow. But in 2010, its inability to obtain bank guarantee for $40million, the content value of the first of the three years for which it sought a renewal, left it gasping before ultimately dying and for DStv to reclaim the rights. It is simply untrue, given the HiTv example, that DStv strangles competition.

Television content is expensive, added to which TV channels will not be able to sustain covering these costs with traditional advertising revenue. One does not need a PhD to do the math. BSkyB acquired the rights to broadcast the Barclays Premier League between 2013 and 2016 at a less than measly cost of 2.28billion pounds. Early this month, a nine-year extension to the contract for the broadcast rights of NBA games between the NBA and its broadcast partners, ESPN and TNT, was signed. The new contract, which kicks in at the end of 2015-2016 season, will see the cost of the contract go up from $930million per year to $1.4billion yearly.

  Sport, today, is a business and not a charity. Legislators need to understand that access to pay-television programming, particularly sport, is not a human right issue, just like owning a car is not. The government needs to concentrate on fixing power (this will allow people to watch television a lot more) and other critical infrastructure.

A friend with whom I shared the view that access to subscription television is no human right issue rejoined that consumer protection is the motivation of the House. But consumer protection is not about price, but about a defective product or dire service. If you renew your DStv subscription and you are not reconnected when due or you are sold a defective decoder or overcharged for a service, your rights-as a consumer-have been violated and you are entitled to redress. When the price fixed for subscription is not agreeable to you, it is your right to look elsewhere for one that suits your purse.

What our legislators also need to understand is that the pay-as-you-go model in telecommunications does not fit the pay-TV industry. How exactly is DStv supposed to detect whether you are watching or not at any point, given that the signal is one way (downlink)? What DStv is able to do is to block the smart card from accessing the signal. There is no way to transmit back to base/MultiChoice whether you are watching or not and what you are watching. Pay-per-view (PPV), which many have suggested, uses your telephone line or internet connection to execute the transaction. PPV is also not yet adequately understood. A usage-based system that is PPV is cripplingly expensive and is usually for one-off events. For example, the Floyd Mayweather vs Saul Alvarez boxing bout cost as much as $75 to watch in the United States. The sum is more than the cost of full DStv premium package on which Nigerians watched the fight. In addition, pay-TV providers are more or less agents. They do not always own the content they broadcast. If the content owners do not sell to them on pay-per-view basis, how can they resell on such basis?

Another leg of the narrative is the long and loud claim that Nigerians pay the highest DStv subscription rates. This, however, is untrue. For the DStv premium package, Zimbabwean subscribers pay the equivalent of$72, Zambians, $81, Tanzanians $81.18, Kenyans $82, Mozambicans $81 and Ghanaians $78.75. Nigerians pay $72.46. There are countries where lower rates are paid, but Nigerians do not pay the highest rates for the premium bouquet. For the Compact Plus package, Ghanaians pay the equivalent of $50, Tanzanians $51.49, Kenyans $52.48 and Zambians $52. Nigerians subscribers pay the equivalent of $48.3. The Compact package attracts the equivalent of $31.10 in Nigeria. In Zambia, it is $31.19; $32 in Zimbabwe; $32.30 in Kenya; $30 in Namibia; $31.67 in Ghana and $31.80 in Tanzania.

Competition is desirable. But it is by no means the only thing that drives prices down, as many are wont to claim, citing the telecoms sector as the example.
At the beginning, there were three telecoms companies in Nigeria: MTN, ECONET and NITEL. Before MTN and ECONET, only the affluent could afford the cost of getting a CDMA mobile phone on the NITEL Intercellular or Multilinks networks. When ECONET and MTN joined the party, the game changed. But it was not by legislating that NITEL should bring down its prices. The new companies offered better services than NITEL. And even at N35 thousand for a SIM card, it was still cheaper and better than NITEL’s. Naturally, NITEL subscribers migrated to MTN, whose SIM card was still costlier than ECONET’s. While ECONET was still in Lagos, MTN had reached Port Harcourt, Warri and other places.

In those days, calling across networks was expensive, a development that made more people to drift towards MTN. A major factor in driving down the prices was the reduction in the cost of doing business, as the new companies built their own exchanges and no longer relied on NITEL’s expensive and outmoded facilities. That was when MTN built the Yellow Band project.
Even now that there is competition and all of what we want, there are options in the telecoms marketplace. For example, you have MTN Trutalk, MTN SmoothTalk MTN, Smoothtalk Plus and MTN Zone. They carry different content and the higher the content, the higher the cost. It is the same with other providers.

The bill before the House, with due respect, carries a whiff of crying wolf where there is none. Monopoly, which the bill alleges, simply does not exist because of the options available to the pay-TV subscriber. Also non-existent is a design to kill competition. In a free market economy, there is no illegality in charging prices that the market is capable-as has been demonstrated-of bearing. Premium television content is not sold to broadcasters on the cheap and broadcasting, being a business, has to turn a profit else go under, taking with it direct and indirect employees as well as those with whom it must have built partnerships. As much as I would love a reduction in subscription rates, it should not come by legislation. If nobody has thought of legislating that Coscharis should slash the prices of its BMWs, why should it be MultiChoice for which such should be recommended? It is not right to punish innovation, top-notch content, efficient marketing capabilities and quality-all of which MultiChoice possesses.
The bill before the House, to me, is akin to an opportunistic stick-up rather than a desire to push for more openness and competition in the pay-TV sector.

source: vanguardngr