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04 February 2015

Attention: Hon. Ebrahim Patel

Minister of Economic Development

Dear Minister,
RE: On Why South Africa Needs Conditional Access
We write to you concerning the implementation of Cabinets decision of 4
December 2013 concerning conditional access/set-top box encryption.
Of particular relevance to your Ministry are the implications of the exclusion of
conditional access/set-top box encryption from the government manufactured
STB on competition in the broadcasting market economy, and the consequent
impact on both the national public broadcaster and the people of South Africa.
Minister, the delay in the commercial launch of the broadcasting digital migration
project for over seven years has enabled a subscription broadcasting service
licensee with significant market power to double its penetration into the South
African market to 5 million subscribers out of the 11 million TV-owning
households in the country. Our view is that in its opposition to the inclusion of a
conditional access system in the government manufactured set-top boxes, this
same licensee is campaigning to limit the ability of existing and, especially,
entrant broadcasting service licensees to compete fairly.
There is extensive evidence that new entrants in the South African Pay-TV
market will struggle to survive given the market dynamics precipitated by
the significant market share held by this subscription broadcasting service
licensee. The failure of On Digital Medias short-lived Top-TV subscription

broadcasting service is a trite but singularly notable example of what little

prospects entrant licensees have under the prevailing conditions in the
broadcasting landscape.
We have previously outlined, to some detail, the benefits that the inclusion of a
conditional access system in the government manufactured set-top box can bring
for both the broadcasting market economy and, most importantly, the people of
South Africa. These include, but are not limited to:
Real access to the subscription broadcasting service markets for entrant
broadcasting service licensees.
o Licensees would not be required to risk prohibitive sunk costs in
order to gain entry to a hostile and anti-competitive broadcasting
environment characterised by the de facto monopoly held by one
licensee, thus progressively leveling the playing field.
A platform that enables interoperability, thereby stimulating competition.
o The inclusion of a conditional access system in the government
manufactured set-top box allows for a single technological
platform (the set-top box) to receive multiple free-to-air and
subscription broadcasting services. Consumers are, therefore, no
longer locked into a single service as a result of investing in a
particular kind of technological platform, and broadcasting service
licensees have to compete more robustly for audiences and
The ability for existing and entrant broadcasters to compete for
premium content on equal terms.
o In the broadcasting industry, a licensees ability to acquire
current, high quality, premium content (which include new release
international films, popular series and sporting content) is
significantly determined by the broadcasting licensees ability to
encrypt its signals. Technologies like conditional access open the
door for existing and entrant licensees to competitively bid for such
content and begin neutralising the market distortions created by the
prevailing de facto monopoly we see today.
Minister, it is for these reasons that the inclusion of a conditional access system
in the government manufactured set-top boxes is of significant relevance to your
portfolio. We believe that government, and your Ministry in particular, must take
economy, especially now when we establish the terms of engagement in the new
digital broadcasting market space.
Specific interventions we believe you can take to do this include, but are not
limited to:

Recommitting to the Cabinet decision of 4 December 2013 which provides

for the inclusion of conditional access in the government manufactured
set-top boxes, and encouraging the implementation of the decision in
policy; and
Draw the Competition Commissions attention to the desperate need for
an inquiry into the market dynamics of the broadcasting market economy
with particular emphasis on issues pertaining to:
o the implications of the inclusion of conditional access to
government manufactured set-top boxes on the broadcasting
market economy, including impact on consumers.
o access to premium content and the sale of distribution rights.
o defining significant market power in the broadcasting market
o other limitations on access to content.
Minister, we urge you to take serious consideration of our letter to you in realising
our shared vision for a broadcasting environment that works for the people of
South Africa.

Yours Sincerely,

Sekoetlane Phamodi
Coordinator: SOS: Support Public

Loren Braithwaite-Kabosha
CEO: South African Communications