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The Independent Communications Authority of South Africa (Icasa) is mulling plans to break DStv’s monopoly by halving the number of Hollywood studios it may enter into exclusive deals with and unbundling sports rights.

This comes after Icasa published its draft findings on competition in the pay TV market this week.

But Multichoice urged Icasa to stop any plans of regulating them, warning that if Icasa proceeds with more regulations it will kill DStv’s business and hand the South African market to online streaming giants.

MultiChoice claims it lost over 100000 DStv Premium subscribers in its last financial year from the “unregulated” competition it faces face from “over the top” (OTT) streaming services like Netflix.

“We have consistently submitted throughout our engagement with Icasa that we are not convinced that there is any basis for intervention in the dynamic and rapidly evolving video entertainment sector,” said Joe Heshu, MultiChoice's group executive: corporate affairs.

According to MultiChoice, Netflix and other international streaming companies “do not pay tax” in South Africa and don’t contribute levies to bodies such as the Media Development and Diversity Agency or Universal Service and Access Agency of SA, nor do they pay broadcasting licence fees.

MultiChoice also argued to Icasa that it must not go overboard with regulations, and that whatever it implements should apply to the whole pay TV sector, including services like Netflix.

“Our understanding is that this is an ongoing inquiry which will follow a comprehensive process of consultation with stakeholders, including public hearings,” said Heshu.

“We are reviewing the draft findings and will continue to constructively engage with Icasa in its process to persuade the regulator to ensure that its final findings are evidence-based, balanced, informed and contribute positively to the growth of the video entertainment industry.”

Icasa said that MultiChoice was found to possess significant power in the markets that are “characterised by ineffective competition”.

“Having considered the impact of OTT services, Icasa found that these services are expanding in terms of the number of new entrants and the scale of operations, particularly international video-on-demand service providers.

“However, it was found that the impact of OTTs is muted given the limited access to broadband and/or internet services, the perceived high cost of data and low internet speeds.”

Icasa, in its draft report, said it considered access to Hollywood movies a competitive advantage.

“For new entrants it may be difficult to break into the market without such access. As such, the authority will limit the number of Hollywood studies that a player may enter into exclusive agreements with for purposes of distributing movies.”

Sports rights, too, should be unbundled, it said.

“While the South African market may be different from the European market, the authority believes that it may be useful to consider possible lessons from the European market.

“The unbundling of sport rights involves offering the rights to more than one buyer, usually making the rights available on different platforms such as subscription and mobile TV and OTTs, for instance.

"Jurisdictions that have unbundled sport rights into separate packages include Brazil and the broader European market.”

“It is worth noting that in the South African context the winner of the PSL rights also acquires rights to other distribution channels such as mobile and the internet. There is no reason why this should be the case.” 

On premium movies and series, it said Hollywood movies were released in a specific window of time. “Free-to-air broadcasters and OTT service providers cannot compete with subscription TV broadcasters for such movies because of the terms surrounding their release. 

“Moreover, rights are sold for a particular territory, thus precluding other subscription broadcasters in the same geographical area from acquiring the same rights. 

“The competition for premium movies also increases the cost of acquiring them, especially the first window movies.”

 In addition to the emergence of legitimate OTT providers, piracy is on the rise and posing a huge threat to traditional pay TV services, it said. 

“For example, MultiChoice estimates that more than 2-million people view pirated movies available on DStv in South Africa. “Piracy is a further competitive constraint on pay TV services in South Africa,” Icasa said.