CCK clears 168 operators to spur competition in Pay-TV
Competition in the Kenyan pay television market is expected to intensify as the industry regulator prepares to license 168 operators in a sector currently dominated by DStv.
The Communications Commission of Kenya (CCK) on Wednesday said the new providers would be licensed under the digital broadcasting regime, which is replacing the analogue platform.
“We are going to issue the 168 applications on our waiting list with temporary broadcasting permits before the end of this week as we wait for a High Court case to be determined,” Francis Wangusi, the acting CCK director-general, told the Business Daily.
The Media Owners Association last year won court orders barring CCK from migrating them to the new licensing regime because CCK was not an independent industry regulator as envisaged under Section 34 of Constitution. The case is yet to be resolved.
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The new operators will not be required to establish broadcast infrastructure like masts, but will be hosted by the two licensed signal distributors — Signet and Pan African Network — at a fee.
The separation of roles will substantially reduce the importance of capital as a barrier to entry in the sector and instead put greater emphasis on content as a competitive tool.
The high cost of operation has partly contributed to the dominance of DStv and the collapse of new entrants like GTV and Smart TV.
“We expect the new providers to introduce new business models such as video on demand, commonly known as pay- per-view, and niche subscription.”
Video on demand allows subscribers to buy specific programmes instead of packages that have made the pay-TV market expensive and forced consumers to buy content they have no interest in.
Most of the permits will be issued to thematic areas such as sports, culture, environment, religion and industry. This will allow providers to offer content on conditional-access basis, meaning viewers will have to pay for it.
Information and Communications permanent secretary Bitange Ndemo said the viability of the business would henceforth be dictated by content quality.
“Providers will have to sell relevant content. This will bring to an end the era when politicians acquired frequencies for speculation or to drive their partisan agenda,” said Dr Ndemo.
He said the new model would exert competition pressure on pay television providers such as DStv, Zuku, My TV and free-to- air stations.
Already, CCK has offered one operator, StarTimes, a Chinese pay television station that launched its services in Nairobi on Tuesday - one such permit. StarTimes is betting on lower pricing to penetrate the market.
“To meet the needs of varied subscribers who have not been able to access pay television in Kenya and handle competition, we are going to offer low monthly subscription fees for our content,” said Leo Lee, the chief executive officer of StarTimes Media Kenya.
The firm is offering seven bouquets across 60 channels for movies, music, documentaries and sports at subscription rates of between Sh499 and Sh2,499 per month.
To access the channels, subscribers will have to invest on decoders or set top boxes available at Sh2, 999.
DStv — which has dominated the pay television in the country for over 15 years — offers its bouquets for between Sh440 on mobile gadgets and Sh6, 900 for premium content.
Zuku’s products cost between Sh999 and Sh3, 500. The company has applied to CCK to offer services through hand-held devices targeting the low-end market.
DStv has largely been riding on the exclusive rights it holds on key content such as sports, including the English Premiership League, to win a following of about three million subscribers in several African markets.
Wananchi Group, the proprietors of Zuku, has lodged a complaint with CCK and the Competition Authority to compel the South African firm to resell some of the rights.
The Competition Authority said it would establish whether DStv had unwarranted concentration of economic power that made it lock the majority of pay-TV subscribers into its network, meaning new operators cannot break even.
A CCK competition study released three months ago blamed exclusive content rights for stifling competition in the pay-TV market segment.
“If some subscribers choose a Pay-TV provider on the basis of particular sports content, those customers would be harder for competitors to tap into as some sports content is sold on an exclusive basis,” read the CCK report.
The report said competition was growing at the lower end and middle of the Pay TV market.
“There appears to be significant scope for the size of the Pay-TV market to grow, and accordingly, for new entrants to expand their market share,” the report said.
CCK has identified investments in sufficiently attractive content and subsidising Set Top Boxes – the gadgets that convert analogue frequencies to digital as key barriers to entry in the Pay-TV market.
To produce one episode of a local programme costs between Sh300,000 and Sh1 million compared to the cost of airing one episode of a foreign programme, which ranges between Sh24,000 and Sh80,000.
The high cost has forced TV stations to source movies from Nigeria or Mexico, stifling the local industry.
There are 15 free- to- air channels operating in Kenya with the CCK listing Citizen, NTV, KTN and KBC as the largest broadcasters by viewership and revenue share.