Why MultiChoice is challenging e.tv’s TV box victory

Johannesburg - Encrypted digital TV set-top boxes risk being expensive for government and burdening poorer South Africans with defunct technology, says pay-TV provider MultiChoice.

Set-top boxes are key to South Africa’s digital migration which will shift public broadcaster the SABC from analogue to digital signals and open up frequencies for faster broadband. The boxes will decode digital signals for older analogue television sets.

Subsequently, government plans to roll out subsidised set-top boxes to 5 million poorer households to help with the digital migration process.

But the issue of encryption of these set-top boxes has become a battleground between broadcaster e.tv and other players like Naspers-owned MultiChoice and the department of communications.

Last month, upon a legal challenge from e.tv, the SCA overturned Communications Minister Faith Muthambi’s decision not to encrypt the subsidised set-top boxes.

READ: e.tv wins key digital broadcast court battle

The court ruled that Muthambi failed to properly consult parties on her decision to amend policy on encryption, and that her decision could cost e.tv R3bn to manufacture extra boxes.

Broadcaster e.tv has also argued that a lack of encryption would hinder high definition broadcasts and risk non-compliant STBs receiving digital broadcasts.

But MultiChoice owned M-Net, together with Minister Muthambi, have lodged an application with the Constitutional Court for leave to appeal the SCA’s decision.

READ: MultiChoice, minister take TV encryption fight to ConCourt

“The SCA erred in accepting e.tv’s argument that encryption is needed to allow free-to-air broadcasters to obtain high-definition content,” said MultiChoice in a document sent to Fin24.

MultiChoice, in the document, said broadcasters ranging from the BBC and Channel 5 in the UK to CBS in the US do not encrypt signals but are able to obtain high definition content.

In a separate ‘fact sheet’ provided to Fin24, MultiChoice further outlined its position on the matter.

In the document, MultiChoice said government’s subsidy of the 5 million STBs will come at a cost to the fiscus of approximately R2.5bn.

But MultiChoice argues that in future, newer television sets - which are becoming cheaper - will be capable of receiving digital signal, making STBs obsolete.

“If it is decided to put encryption technology, also known as conditional access, in this converter it will mean that when the household decides to upgrade to a digital television set there will still be a need to keep this converter to unencrypt the free-to-air signal, which does not need to be encrypted in the first place because it is precisely that – a free-to-air signal,” said MultiChoice.  

“In our experience, an STB lasts 5-7 years on average before it breaks.

“If we encrypt the signal and the digital televisions will forever be dependent on the boxes, who will fund the second (and third and fourth) round of subsidy, a lot more than R2,5bn each time?” added MultiChoice.

Cost to the taxpayer

MultiChoice’s other arguments against encryption include the premise that unencrypted boxes are cheaper to make, which could mean that government could subsidise more poorer TV households.

Meanwhile, MultiChoice further said that encryption software requires annual maintenance and has ongoing costs for royalties.

“Encrypting the free signals (which do not require encryption because they are meant to be free) will require massive back-end systems and investments in support structures like call centres,” said MultiChoice in its document.

“The cost of maintaining a call centre of 1 000 people to service these requirements is R300m per year,” the pay-TV provider added.

In contrast, MultiChoice has alleged that overseas software makers will “reap tens of millions per year”.

MultiChoice has also argued that TV makers will have less incentive to sell digital televisions in South Africa and “dump old analogue televisions into the South African market”.

'Myths' over HD, local manufacturers

In its final arguments, MultiChoice said that encryption is not required for the broadcast of HD content by free-to-air broadcasters as specifications already exist to protect this type of content.

MultiChoice added that encryption is also not required to protect local manufacturers.

“The department of trade and industry has imposed an import duty of 15% on all imported STBs,” said MultiChoice.

“Government controls the purse strings. They issue the tender and decide who gets the contracts for the manufacture of the 5 million boxes and can direct those orders to local manufacturers,” MultiChoice added.

Fin24 asked e.tv to comment on M-Net’s bid to challenge the SCA ruling and on MultiChoice’s arguments regarding encryption of STBs.

However, the broadcaster has opted not to comment at this stage.

“e.tv’s legal team has commenced preparing their legal papers and will not be commenting at this stage,” Vasili Vass, group head for e.tv’s corporate affairs said in a brief email statement to Fin24.

In the meantime, MultiChoice is standing firm on its stance that encryption is unnecessary.

“It is patently clear that encryption is not necessary, is expensive, is not policy in any major countries in the world, will be harmful to the poor and is not required for a quick and smooth migration process,” said the company.

“On the contrary, adding encryption technology will lock South Africa into an old world forever and a day, will benefit only a few with vested commercial interests and is anti-poor,” added MultiChoice.

*Fin24 is part of Media24 which is owned by Naspers.

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