TV consumers should not be locked in, but neither should broadcasters

What you need to know:

  • Consumers may, of course, argue that they watch their television channels for free, but they forget that advertisers do pay for the cost of the service.
  • Whereas having two national distributors is economically a good thing for the country, it does come with serious risks, depending on exactly who these two distributor are.
  • The self-initiated attempt to import digital set-top decoders that are allegedly exclusive to their stations is in breach of regulatory rules for importing the devices and borders on uncompetitive behaviour.

The digital migration, with respect to broadcasting, has been covered several times on this blog. In the most recent coverage, we thought the Supreme Court directive requiring NTV, KTN, Citizen TV and the Communications Authority of Kenya (CA) to settle out of court was the last time we would have to cover this endless saga.

Indeed, following the Supreme Court's directives, the regulator had given the private broadcasters a provisional license and frequencies to roll out their digital broadcast networks in anticipation of a formal competitive process to award the same to a third Broadcast Signal Distributor (BSD).

The two existing BSD licensees are PANG, which is Chinese-owned, and SIGNET, which is owned by KBC, the public broadcaster. Their role in the restructured broadcast market was to distribute digital broadcast content from the content developers to the consumers or viewers.

The technical details and market structure of how this works was covered earlier so we shall go straight into the non-technical issues that seem to be opening new battlegrounds with regards to digital migration.

In an ideal situation, where frequency spectrum is to be managed both efficiently and cost-effectively, a country of Kenya's economic magnitude would be sufficiently served by one and not more than two national broadcast signal distributors.

THE COST OF 'FREE'

That way, we consolidate the cost of building national broadcast signal distribution networks into one enterprise in order to avoid the need for individual broadcasters to duplicate the distribution infrastructure, and ultimately pass this cost to consumers.

Consumers may, of course, argue that they watch their television channels for free, but they forget that advertisers do pay for the cost of the service. If I owned a bakery and was advertising my brand of bread on one of the TV stations, the advertising cost charged to me must be sufficiently high enough to include the cost of operating that TV station.

The advertising costs must ultimately cover the cost of installing, maintaining and operating the transmission networks. As a bakery, I will ensure that the price of my bread ultimately borne by the consumer does include the cost of advertising on the TV station.

In short, the consumer indirectly incurs the cost of marketing (advertising) on the so-called “free” TV channels. The TV stations offer “free” services in order to attract a wider audience that the bakery and other enterprises need for selling their products.

Clearly, if the cost of maintaining the distribution network was removed from the equation, one would expect that the broadcasters would have a smaller total cost of operation, and perhaps charge lower for advertisements. In a free and competitive bread market, this would subsequently translate to lower costs of bread to the consumers.

WILLING TO BLOCK CONTENT

This illustration shows the economic benefit of having fewer broadcast signal distributors in an ideal broadcasting environment. However, we very well know and agree that Kenya still has some way to go before reaching this ideal state perhaps in the year 2030, if we are to believe our national Vision. Before then, it is clear that some of the issues that private broadcasters are raising do have weight and require serious considerations.

Media freedom, for example, becomes pertinent when you realise that the government, through CA, has designated KBC, through SIGNET, and the Chinese investors, through PANG, as the only national distributors for digital TV signals in the country.

Indeed, by June 2015, all broadcasters are expected to pass their content through these two distributors, failure to which they would be violating the law and are liable for prosecution. Whereas having two national distributors is economically a good thing for the country, it does come with serious risks, depending on exactly who these two distributor are.

It is not too far-fetched to imagine that SIGNET and PANG would be more than willing to block content that may be deemed uncomfortable by powers outside the internal editorial regimes that traditionally made the call on what content to broadcast when.

Essentially, one could argue that the principle of self-regulation for broadcast content is potentially at risk, and shifting from the broadcasting stations to the distribution network operator.

That said, we also have to accept that the private broadcasting stations are not entirely without fault. Indeed, their self-initiated attempt to import digital set-top decoders that are allegedly exclusive to their stations is in breach of regulatory rules for importing such devices and borders on uncompetitive behaviour.

THE NEW REALITY

Similar actions were witnessed in the early days of mobile communications when telecommunications companies “locked” phones into specific networks. In the fullness of time, the operators realised that this was really not a sustainable competitive strategy.

It simply created an industry for young hackers to “unlock” the phones at a fee, without necessarily retaining customers. The best way to lock in customers is by way of providing “value added services” as opposed to providing “locked-in” access or physical devices. The broadcasters must therefore wake up to the new reality and craft their strategies accordingly.

Furthermore, the high cost of launching a TV station has just gone down drastically, knocking down one entry barrier to the broadcast market. Any Wanjiku, Wafula or Onyango can create digital content, lease affordable transmission space from SIGNET or PANG and begin transmission, reaching a sizeable audience within a very short time.

In other words, Wanjiku.TV, Wafula.TV and Onyango.TV can potentially reach a national audience without building and deploying expensive transmission networks. 

This is a reality that the broadcasters, the regulator or the Supreme court cannot change. It is a reality that should be accepted and subsequently inform this digital conversation going forward.

Mr Walubengo is a lecturer at the Multimedia University of Kenya, Faculty of Computing and IT. Twitter:@jwalu Email: [email protected]