Better prices? Better service? More competition! (But not too much)

Competition in both the broadband and broadcasting industries is key to reducing prices and encouraging innovation, but too many competitors may cause problems of its own.

So said Alan Knott-Craig Junior, former MD of iBurst and CEO of World of Avatar, to a group of delegates at the inaugural TV Show Africa held in Sandton on 31 May 2011.

Knott-Craig said that of the approximately 1 billion people in Africa, around 500 million have cellular phones, while it is reported that there are only 37 million TVs in Africa.

Even though TVs have been around a lot longer, there are far more cellular phones in the market, Knott-Craig remarked. “What exactly has happened there?” he asked.

Answering his own question, Knott-Craig said that broadcasters and cellular operators face similar challenges:

  1. They need to get devices into people’s hands.
  2. They need to get paid for the services and/or content they deliver.
  3. Infrastructure. For broadcasters satellite is an option, but terrestrial broadcasting is cheaper.

Knott-Craig said that the difference between broadcasting and mobile network operators is the level of competition.

Alan Knott-Craig Junior
Alan Knott-Craig Junior

“TV is one of the great opportunities in Africa, especially in terms of broadband, as it’s one of the least contested spaces,” Knott-Craig said.

To target segments of the market that either couldn’t enter into contracts or preferred not to, South African cellular providers invented prepaid, Knott Craig said. This is a concept that originated from SA and now 90% of the world uses prepaid, added Knott Craig.

Infrastructure also didn’t come easy, Knott-Craig said. Mobile network operators had to build their own roads, laid electrical cabling, built their own transmission network and then posted guards to protect it all.

According to Knott-Craig, the infrastructure put in place is mostly self-protecting now as communities look after it because they want the services dependant on it.

Broadcasters are not driven to look for such solutions because the level of competition is not as high as in the mobile network operator space, Knott-Craig said.

Knott-Craig said that he believes the “magic number” of competitors needed to foster a vibrant marketplace is three. However, too many competitors is a disaster for infrastructure, he added.

If the margins become too thin due to too much competition that means there won’t be enough money to reinvest into the infrastructure, Knott-Craig explained.

“You need three competitors and a strong regulator,” Knott-Craig concluded.

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Better prices? Better service? More competition! (But not too much)