It appears that Multichoice will go to any lengths to protect its stronghold over the subscription-broadcasting market. The Mail & Guardian has established that Multichoice attempted to take Telkom out of the picture just months before the regulator\u2019s hearings to award new licenses began. Since then the broadcaster has taken new licensee e.Sat out of the market with a deal that will see the launch of the e.News 24-hour news channel on the DStv bouquet in June.<\/p>\n
The M&G has viewed a proposal put to Telkom by Multichoice in February 2007 that outlines the case for a joint venture that would deliver an internet television service (IPTV) to consumers.<\/p>\n
An IPTV service is a television service that is delivered via your broadband connection, as opposed to YouTube, which is closer to the video on demand (VOD) model.<\/p>\n
The proposal stipulates that the joint venture would prevent Telkom \u2013 whose subsidiary Telkom Media, which was also awarded a subscription broadcasting licence in September 2007 \u2013 from providing any satellite subscription, VOD or direct to home (DTH) outside of Multichoice\u2019s content.<\/p>\n
The proposal states that the offer is subject to: \u201cTelkom\u2019s agreement not to offer pay-TV or VOD services on the Telkom IPTV platform other than by means of the content supplied in terms of the MCA [Multi-Choice Africa] \u2013 Telkom IPTV joint venture.\u201d<\/p>\n
The proposal states that \u201cMCA would also reserve the right to exit the MCA-Telkom IPTV joint venture at any time should Telkom offer a DTH service in South Africa.\u201d<\/p>\n
Responding to questions posed by the M&G this week, Multichoice denied that it had tried to restrict Telkom from offering these services.<\/p>\n
Multichoice\u2019s head of corporate affairs, Jackie Rakitla, says: \u201cThe proposal was never made conditional on Telkom not applying for a subscription broadcast license. It was aimed at IPTV services and would not have prevented Telkom from launching any satellite subscription, VOD or DTH service.<\/p>\n
\u201cBut in relation to VOD on the IPTV platform only \u2013 for which you do not require a broadcast licence \u2013 the terms of the proposal were governed by a non-disclosure agreement,\u201d he says.<\/p>\n
The Independent Communications Authority of South Africa\u2019s (Icasa) move to icence new entrants was aimed at introducing competition into the market that Multi-Choice has dominated for more than 20 years.<\/p>\n
In September 2007 Icasa licensed four new subscription broadcasters that included Telkom Media, e.Sat, On Digital Media and Walking on Water.<\/p>\n
The announcement by Icasa was lauded by the government, market analysts and stakeholders, who saw the introduction of new entrants into the market as a great step to stimulate competition and provide consumers with more choice.<\/p>\n
But it appears that MultiChoice was keen to scupper these plans by using its power to remove entrants from the market.<\/p>\n
MultiChoice also states in the proposal that if Telkom were not receptive to setting up the joint venture, an option could be \u201cenforcing access to the Telkom network by means of local loop unbundling\u201d.<\/p>\n
\u201cThe proposal did not push for local loop unbundling,\u201d says Rakitla. \u201cIt simply indicated the options available to broadcasting licensees and MultiChoice\u2019s preference for reaching an agreement with Telkom instead.\u201d<\/p>\n
The local loop or last mile, as it is often referred to is the copper wire system that delivers fixed-line telephony and ADSL services to consumers\u2019 homes.<\/p>\n
Local loop unbundling is a key regulatory measure being pursued by Icasa and the department of communications, but the process is highly complex and last year the Minister of Communications Ivy Matsepe-Casaburri set a deadline of November 2011 for it to be completed.<\/p>\n
This joint venture proposal was made to Telkom following the launch of a trial cooperative IPTV service to a closed user subscriber base group in 2006, as stated in the document.<\/p>\n
However, contrary to the proposal, Rakitla insists that this IPTV service was launched in 2004.<\/p>\n
\u201cGiven that the trial was commenced in 2004, both parties were looking at IPTV services,\u201d says Rakitla. \u201cThis was long before Icasa issued an invitation to apply for a subscription broadcast licence.\u201d<\/p>\n
The proposal makes a case for why Telkom\u2019s stand-alone package has \u201cvery little chance of survival\u201d and then goes on to list the benefits of the joint venture. These include the aversion of bidding wars for content which drive prices up; lower costs and reduced risk for Telkom; and an immediate return on investment for Telkom.<\/p>\n
\u201cTelkom\u2019s alternative stand-alone option would be subject to uncertainty and risk would also be many times more expensive and less efficient,\u201d says the proposal.<\/p>\n
In addition, the proposal says the emerging black middle class which would be the key market for all new entrants, has been overstated and that putting together a package for this market and offering it at a low subscription rate would be difficult.<\/p>\n
\u201cTo obtain the quality content demanded by the \u2018mid-market\u2019 and then offer it at the low prices that the research indicates the market it willing or able to pay could be commercially unsustainable for a new entrant,\u201d states the proposal.<\/p>\n
\u201cMCA has already secured such suitable content and already offers a R199 Compact bouquet [to which it will shortly add a significant number of new channels],\u201d says the proposal.<\/p>\n
\u201cMCA also plans to offer smaller bouquets [\u2018sub-Compact\u2019 bouquets at less than R199].\u201d<\/p>\n
Telkom\u2019s spokesperson Nabintu Petsana, says Telkom is not in a position to comment due to the confidential nature of the information involved.<\/p>\n
Telkom Media spokesperson Chris van Zyl says he cannot comment as it is a matter concerning Telkom South Africa and suggested the M&G contact its parent company.<\/p>\n