Hearings began today on the Ministry of Communications Broadcasting Administration's proposals for settling the three sided dispute involving the ministry, the cable television companies, and the DBS companies, over the conditions for the introduction of satellite television in Israel.
The Broadcasting Administration proposed, as a transitional arrangement, that here should be "tiering window" lasting eighteen months, or until 15% of the cable companies’ customers transferred to DBS. Tiering means offering customers differently priced packages of channels, rather than making them pay a standard amount that includes channels they never watch. Up to now, the Ministry of Communications has not allowed the cable companies to offer tiering.
"’Give me’, yells the Cossack whose goods have been looted. ‘It is inconceivable that a million consumers should be held hostage’, say those who, for many a long year, bore direct responsibility for holding those consumers positively prisoners of the monopoly. ‘This is an infringement of property rights’, say the representatives of entities which trampled roughly over third party copyrights for years.
"And all for what? Because the competition’s hour has come. Because that is competition’s strong point. Because competition is like a beacon that lightens the darkness, whose beam catches the monopoly in its nakedness - and all its ugliness - lumbering, powerful, sated. Because competition may, even slightly, reduce its over-inflated profits". This is how DBS Satellite Services general manager Eitan Rov begins the company’s response to the Broadcasting Administration’s policy paper.
To the cable television companies’ assertion that they have been selling a good product at a reasonable price, Rov retorts: "In the USA, the price per cables subscriber for a basic package, a package including eighteen channels (all in English, the subscriber’s mother tongue), is just ten dollars, compared to the $40 paid by the Israeli consumer for forty channels, 60% of which are in languages foreign to the subscriber. Thus, for example, a typical US cable TV company invests some 40% of the price it collects from the subscriber in acquiring content, while the typical Israeli cable company invests only 15%".
Tevel cable TV company general manager Yossi Douer, maintains, by contrast:
"For a variety of reasons, the government has decided to bring about legislation which will void (our) exclusivity before it is due to expire pursuant to the original undertaking. And now that the basic commitment has been infringed, the board is presented with a list of recommendations, which will result in the cable companies forfeiting 15% of their subscribers without compensation.
"This procedure is without parallel in any nation of the world which regulates its television broadcasts market, and certainly where such expropriation is added to the breach of an undertaking which formed the basis for the contractual engagement between the parties and a basis for the entry of the cable companies into tremendous investments.
"There is nothing wrong", Doar maintains, "in tiering services that are beneficial to customers, and the board can therefore hardly not approve them. There remain the considerations of competition, which are, in fact, the main reason for the Administration’s recommendation.
"The primary requirement of the laws of competition is that the consumer be protected by affording protection for competition and not by protecting the competitors. The laws of competition do not permit restriction on competition in order to aid a competitor. The recommendation set forth in the recommendations paper consists entirely of restriction on competition, in order to assist a competitor".
Golden Channels: Bezeq’s entry into DBS may be aimed to damage cable as competition in telephony nears
Golden Channels was the only one of the three cable television companies to refer bluntly to the significance of Bezeq’s entry into DBS (Bezeq has a stake in DBS Satellite Communications): "Awarding the satellite broadcasting license (and the first license, what is more) to a corporation controlled by Bezeq arouses suspicions, and even concrete difficulties. This is especially so because of Bezeq's subordination in law to the Minister of Communications, and the State’s interest - as the main shareholder in Bezeq - in promoting Bezeq’s interests, especially when an issue is in the offing."
Golden Channels said, "There is a real fear that Bezeq’s entry into the satellite market was due to improper, monopolistic considerations, that is, to reduce the cable market in order to prevent future competition in the local telephony market, in which Bezeq is a monopoly."
Abitbul calls for a tiering window until 23% of cable customers switch to satellite
"We support most of the recommendations and conclusions of the learned report, even though we believe that the future market analysis is deficient, since it does not take into account the fact that we are not planning merely television broadcasts but also Infotainment, a notion which bespeaks a revolution the like of which we have never known.
"We reiterate our position, that cables should be prohibited from offering clusters until 23% of their subscribers leave them". So writes DBC general manager Prosper Abitbul, whose company obtained permission to take out a DBS licence.
Matav seeks permission to complete tiering services using digital technology within four years
"Matav is of the opinion that it should be permitted to offer clusters service on the currently accessible and available analog technology. At the same time, Matav seeks to implement the clusters service gradually, using digital technology too, and undertakes to complete the transition to full digitalisation within four years", writes Matav general manager Amit Levin.
The position taken by Matav is based on its level of digital readiness, which is lower than that of Golden Channels, but higher than that of Tevel. Matav, however, also offers a technological explanation: the development has not yet been completed of the cable TV two-way channel using digital technology, that will facilitate interactive services, and in the existing position, the return channel is by telephone. Matav expects that within a year, the development of this function will be completed, make it more worthwhile to distribute digital converters.
Matav, smallest of the three cable television companies with 270,000 subscribers, fears that, at the end of the tiering window period, it will suffer damage due to the absence of a critical mass of subscribers enabling it to implement futuristic services. Levin writes that this absence of critical mass, together with the limited regional structure characteristic of the cable companies, will translate, for Matav, into a material deficiency in the content field.
Economist and former Budgets Commissioner David Boaz claims, in a written opinion he prepared for the cable television companies, that the Broadcast Administration’s determination of the economic inferiority of the satellite operators, is doubtful. It was on the basis of that determination of economic inferiority that the recommendation was made to establish an eighteen-month tiering window.
Published by Israel's Business Arena May 2, 1999