Public policy making is linked to economic development and national imperatives — fighting poverty, inequality and unemployment.
Ideally, in open economies, such as SA, regulation should define the rules of the game for players to compete in an open and fair system which increases economic opportunities and rights to property. Regulators who intend to regulate for economic development require at least two institutional capacities. First, a forward-looking posture that epitomises a vision for the country and leads (not lags) future trends, and second, a diligent commitment to policy choices on evidence that is relevant and robust.
The bond between policy choices and evidence should be unbreakable. This is articulated in SA’s National Policy Development Framework and the Guidelines for the Conduct of a Socio-Economic Impact Assessment System, both of which require regulators to provide a full and proper motivation for policy decisions.
As the regulator in the ICT and broadcasting space, Icasa’s mandate on behalf of SA consumers and companies is important.
Regrettably, Icasa’s performance has not always been at or above par. For example the spectrum auction which is acknowledged as a necessity for SA to remain attractive for foreign direct investment enabled by high quality ICT infrastructure. While I commend Icasa for the long-awaited spectrum auction and raising much-needed revenue for the fiscus, the auction took place five years later than intended because of Icasa’s avoidable drawn-out squabbles with telecoms players and skirmishes with the department of communications and digital technologies and its predecessors.
In broadcasting, Icasa has been busy with the long-running Pay-TV inquiry launched in 2016 to review the state of competition in Pay-TV. This followed the failure of operators issued with licenses in 2007 and 2015 to launch their services.
In April 2019, Icasa issued a draft findings document which purported to show that the state of competition in the sector was not optimal and proposed that MultiChoice be regulated extensively. When the report was released, over-the-top (OTT) services such as Netflix and Amazon Prime had already launched in SA, with the former experiencing a rapid rise in prominence and uptake due to its large content catalogue.In its draftdocument, Icasa found that streaming services were not competing with traditional Pay-TV broadcasters. Icasa concluded that OTTs complemented Pay-TV, adding that OTTs remained muted due to high internet costs and slow data speeds.
Statista’s 2020 data contradicts Icasa’s views. Already in 2017, there were about 5.1-million Streaming Video on Demand (SVoD) users in SA — this can hardly be considered a muted market. By the time Icasa released its document in 2019 this number had grown to 6.2-million and now sits at 8.3-million users.
Icasa’s arguments on high data costs and slow internet speeds impeding the growth of these services are outdated. Data prices have continued to decline after interventions by the Competition Commission and internet speeds are sufficient for streaming, averaging more than 30mbps. Since 2019, more global streaming services have either entered ( for example Britbox and Fox) or announced their imminent entry into SA ( Disney+ and Paramount set to launch in 2022). It is estimated that by 2025 this market would have about 9-million users.
The growth of the consumption of OTT services in SA is also borne out by recent data from Vox showing that 54.8% of the traffic on its fibre-to-the-home networks is from video streaming services. The figure below shows that the consumption of Netflix is the largest user of bandwidth, accounting for 21.79%, followed by YouTube (14.16%) and Facebook Video (4%). Instagram Video, also owned by Facebook, sits at 2.59%.
The data shows that despite DStv having premium content (live sport and Hollywood movies), which Icasa says is the driver of audiences and subscriptions, the consumption of bandwidth across the entire DStv subscriber base was only 3.10% and Showmax was 1.16%. This raises serious questions about the veracity of Icasa’s draft findings.
It will be interesting to see what Icasa’s final findings document says, but what is clear is that evidence of consumer behaviour points to a regulator who may be out of sync with market reality. Simply put, there are real risks that the entire Pay-TV inquiry and the positions adopted by Icasa in the draft document have been overtaken by events, raising questions about whether they can withstand legal scrutiny.
It is also clear that the regulator and the department are not singing from the same hymn book. In 2021, the department released the Draft White Paper on Audio and Audio-Visual Content Services which categorised streaming services as the biggest competitors to Pay-TV in SA. The paper called for less regulation of Pay-TV broadcasters and regulatory parity with streaming services. Even the Competition Commission, in its Competition in the Digital Economy position paper, accepted the disruption caused by OTT services to traditional broadcasting and argued for regulatory parity.
This raises the questions: for whom does Icasa regulate? To what extent is the regulator knowledgeable about the society and the industry in which it works? Who benefits from clipping the wings of local players that seem to have competently weathered the Covid-19 storm?
In answering these questions honestly, Icasa may find that it is failing to read the room and it may become a threat to the SA economy, with South Africans continuing to pay the price of its failures.
Written by Siseko Maposa _ Published by Sunday Times