State signal distributor Sentech, which was spun out of the SABC in the mid-1990s, is drawing fire from its biggest clients, which have accused it of abusing its monopoly.
The SABC, e.tv parent eMedia Investments, and Primedia, which owns radio stations 702, 947 and CapeTalk, have all gone on the offensive against Sentech in written submissions to communications regulator Icasa, which is investigating the market for signal distribution services in SA.
Icasa, which published a discussion document on the subject in April, is now planning to hold public hearings on August 19. With the SABC, eMedia and Primedia all scheduled to make oral representations, the sparks could soon be flying.
The fight with Sentech has been boiling for some time. The SABC last year wrote to the Competition Commission and Icasa over what it called the signal distributor’s “unfair and uncompetitive pricing”. The year before, it had lodged its objections in parliament.
The public broadcaster’s COO, Ian Plaatjes, wrote to Icasa last July, imploring the regulator to complete a probe into Sentech’s broadcasting signal carriage fees. This was after the SABC told the parliamentary portfolio committee on communications that the broadcaster could not afford to pay Sentech’s “prohibitive” fees, demanding they be cut in half, or by R500m. As Sentech’s sales revenue was R1.3bn in the financial year to March 2021, that would mean lopping almost 40% off the top line. Rationalisation and extensive job cuts would necessarily have to follow.
But Plaatjes warned that the SABC would “not be sustainable” as a business if the fees were not slashed. The SABC has spent more than R3.2bn with Sentech in the past five years (to 2021), he said. Sentech’s charges have continued to escalate annually, despite “technology improvement decreasing the cost of distribution”.
Sentech certainly is a picture of health compared with many other state-owned enterprises (SOEs): it reported 2021 full-year net profit after tax of R313m against total revenue of R1.4bn — but the broadcasters, including the SABC, argue that it has achieved this by ripping them off.
That Sentech has a monopoly over terrestrial signal distribution in SA is not in dispute. The only other signal distributor, MultiChoice Group’s Orbicom, has a far smaller coverage footprint and doesn’t provide signal management services to anyone other than group companies, including M-Net.
The broadcasters argue that they cannot afford to launch their own signal distribution networks of national scope, given the high infrastructure investment costs involved, which gives Sentech a natural monopoly. They are trapped customers, they argue: they have no choice but to use Sentech, and Sentech wields unfair pricing power over them.
Primedia, in its submission, argues that it would like to be able to contract with another supplier of managed transmission services for its radio stations, but none can provide these in the sound broadcasting sector because other players “lack access to the masts, towers and high sites that Sentech enjoys as a result of its previous, decades-long monopoly over that infrastructure”. The company says Icasa should force Sentech to make its “essential facilities” available to other companies wanting to provide these services.
eMedia, meanwhile, criticises Icasa for not acting sooner to rein in Sentech, saying broadcasters’ concerns have been ignored for decades despite pleas that the market needs “urgent regulation”. It also says Sentech is charging high fees for access to digital TV transmission services despite the government (taxpayers) footing the bill for that roll-out.
“Icasa has allowed Sentech to engage in anticompetitive pricing and to exploit this, given the uneven bargaining positions between Sentech [as the only option to provide broadcast signal distribution services] and its customers, being television and radio broadcasters,” eMedia says in its submission.
For its part, the SABC accuses Sentech of failing to assist the public broadcaster in drawing up a chart of accounts meant to determine the fairness or otherwise of Sentech’s tariffs. “Sentech has not been co-operative in this regard for the past two years.”
But Sentech has told Icasa that now is not the appropriate time to be conducting a market inquiry, arguing that upcoming legislative changes in the broadcasting sector should be used to address market concerns. It has also argued that the government’s moves to merge Sentech with Broadband Infraco and portions of state IT agency Sita to create a state digital infrastructure company should be allowed to run their course, even though that might take years.
It is unlikely that Icasa will back off, especially given the growing pressure it’s under from the big broadcasters to do something. As SOEs are involved, a political solution may ultimately be needed.
The pressure on Sentech comes as the company faces a disruptive technological threat as consumers abandon terrestrial TV for satellite alternatives like DStv and eMedia’s free-to-air platform Openview, and, more significantly in the longer term, for streaming services — everything from Netflix to YouTube.
It’s clear that tough times lie ahead for an SOE that many will argue has had an easy ride in the past 25 years.
*McLeod is editor of TechCentral.co.za
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