New licence for South African Free-To-Air satellite television station coming

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South Africa is set to get another free-to-air television station. This was announced by the Independent Communications Authority of SA (Icasa) last Friday in a move to remedy the failed attempt to introduce competition in the pay TV market dominated by MultiChoice.

The regulator said it would issue an invitation for applications for a licence for free-to-air broadcasting over the satellite platform. Satellite is a viable option because the government and the industry are busy with the migration for terrestrial broadcasting from an analogue system to digital. The only independent free-to-air broadcaster is e.tv, but it uses a terrestrial platform.

Icasa spokesman Sekgoela Sekgoela said the timing of the invitation had not been finalised. The decision comes amid comments that Icasa's big bang approach of issuing four new pay TV licences has failed.

Last week saw the demise of Telkom Media, which was the country's best hope for meaningful competition to MultiChoice in the pay TV market. Telkom, which was the only Telkom Media shareholder to contribute money to the failed entity, has written off R450 million in costs on the venture.

The fixed-line operator said last week that Telkom Media would close down after it failed to secure new shareholders. The company had planned to sell a significant stake to strategic shareholders.

Sei Mukoma, an ex-Icasa employee and independent broadcasting and competition commentator, said one reason for the failed strategy was that Icasa and the applicants for pay TV licences had not done a detailed economic and market analysis to determine the chances of survival of a new entrant. This would have shed light on the barriers to entry and whether the local pay TV market was ready to support more than one player.

e.tv's sister company, e.sat, which won a license, warned during the selection process in 2006 that issuing more than two licences would be a costly move. e.sat chose to provide channels to MultiChoice rather than running its own satellite station.

Mukoma said the blame could not be placed squarely on Icasa's shoulders. The applicants themselves did not do detailed and adequate research. When the licensing process was under way, interest rates were going up and most consumers and funders already faced financial difficulties. "In this situation, a big bang approach was not going to work. The economic risk was not considered," he said.

Icasa has said that it did not fail in its licensing mandate, as the regulator's role was to license companies to create competition. Beyond that it was up to the companies to make a success of the opportunity. Sekgoela said Icasa's primary role was to regulate the market and not to get involved in the internal operations, including investment strategies, of the companies it regulated.

"Therefore, Icasa has not in any way failed in its attempt to bring about competition in the pay TV market and believes it was in the interest of the industry and South Africa at large for it to have embarked on the subscription broadcasting licensing process," he said.

On Digital Media, which won a licence, is expected to launch in the fourth quarter, but has already said there might be a slight delay. It aims to provide up to 60 channels and customers can expect to pay for channels they want to see. It had raised sufficient funds to kick-start its operations. MultiChoice has more than 1.6 million customers and revenues of over R5 billion a year.

Business Report