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GREEN PAPER ON BROADCASTING

CHAPTER 1

Role of Broadcasting in the future South Africa

The Policy Process

In August, '97 the Minister for Posts, Telecommunications and Broadcasting announced the commencement of a Policy Process to provide a framework for the organisation, orderly expansion and regulation of the South African broadcasting system.

This policy process has two facets. Firstly it seeks to review the policies, approaches, practices, structures and regulations defining the South African broadcasting system. Secondly, on the basis of this, its purpose is to devise a new policy framework that both serves the needs of the South African people and at the same time is in accord with the best international practice.

It is a continuation of the process to democratise and free the airwaves, underway since the start of the political transformation of South Africa and its broadcasting system.

It is anchored on the provisions of the South African Constitution and the Independent Broadcasting Authority Act of 1993 and its provisions for the regulation of broadcasting in the public interest in South Africa.

The South African Government, through the democratic and legislative process and in line with international trends, is developing a policy framework to meet the broadcasting needs of all the South African people and expand the broadcasting system to offer more choice in services, content and ownership.

The South African Government is in agreement with the principles contained in the guidelines of the International Telecommunications Union on the three-tier broadcasting governance structure. There are three roles in the governance of broadcasting:

National Policy formulation

This is the responsibility of a democratically elected government, Parliament, and democratic institutions, as is the case in other areas of life.

Regulation and licensing

This is the domain of an independent regulator.

Service provision

This is the domain of operators and service providers.

The Policy Process is twofold. First is the Green Paper - a document which poses questions to the public. Answers to these questions help Government to formulate its positions on issues that require policy discussion.

The second is a White Paper Process - Government's position on issues that are under discussion. After the White Paper is issued the public has the right to respond and forward further suggestions to Government.

It is within this context that the Minister called representatives of 26 stakeholder organisations to form a committee to identify the central issues that would need to be raised in a Green Paper. Following public submissions on this Green Paper, a White Paper will be issued for comment. This will provide the basis for the formulation of a Bill that will be placed before Parliament for enactment. The intention is that by the end of this consultative process the Government will have put in place a policy framework to take South Africa into the 21st century.

The Broadcasting Policies of the Past

Until recently, the South African broadcasting system functioned as one of the most politicised broadcasting systems in the world. The apartheid system dictated policies for the benefit of a small minority of the population - the only section entitled to a vote.

Government’s Department dictated policies without consultation. The same Department acted as a Regulatory organ functioning with no regard to public consultation and due processes.

The South African Broadcasting Corporation was created as the state broadcaster with a monopoly on the provision of broadcasting services. These services were devised along racial and ethnic divisions that the political order sought to entrench. Both the content and the unequal spread of resources to the services served to confirm racial notions of superiority and inferiority.

This racial preference found expression in all facets of the broadcasting system from the deployment of the transmission network to its exclusionist employment policies and practices. The commissioning policies spawned an independent production industry, which served the white minority both in terms of its content and in terms of creative and financial opportunities.

The entry into the market of new broadcasters in the eighties did nothing to transform this approach to commissioning independent producers. In fact, the new services that emerged in the eighties were in line with this broadcasting ethos. Without exception, they were introduced to further attend to the special broadcasting needs of the dominant political group.

The history of the broadcasting system, and of the SABC, forms the backdrop to key policy and regulatory considerations that must define the new broadcasting dispensation.

Despite the efforts of the past three years since South Africa's democratisation, the majority of the broadcasting services still favour the needs of the past dominant minority sector of the population.

Broadcasting reform

The Independent Broadcasting Authority

Following lengthy negotiations, the Independent Broadcasting Authority Act was enacted by the Transitional Executive Authority in 1993 as part of the negotiated settlement that led to first democratic elections in South Africa in April 1994. In that year, the Independent Broadcasting Authority came into operation, with the responsibility of regulating broadcasting in the public interest as provided for in the South African Constitution.

The IBA Act ended the near-monopoly state of the broadcasting system and opened the radio and television markets to competition. It provided for the transformation of the state broadcaster into a public broadcaster and made possible the introduction of community broadcasting for the first time.

It also sought to level the broadcasting playing field by prioritising the regulation of the market through cross-media limitation and local content quotas.

The IBA's Triple Inquiry Report of 1995 which resulted from a lengthy public examination of these issues was placed before Parliament in 1996 and set the tone for the development of the South African broadcasting system over the last two years.

Public Broadcasting and the Triple Inquiry Report

Parliament approved the terms of the IBA's Triple Inquiry in 1996. Parliament endorsed the view that the SABC retain three Television channels, 11 radio stations in various languages, four commercial stations and one utility channel. The funding of the public broadcaster was determined as a mix of advertising, sponsorship, licence fee and government grants.

Parliament also endorsed the proposal to sell six of the SABC's regional commercial stations to the private sector.

Parliament endorsed the proposal to integrate the former TVBC broadcasters.

Private broadcasting and the Triple Inquiry Report

Parliament endorsed the proposal that private broadcasting services should bear some public service obligations, depending on their nature and the market in which they operate.

With the sale of 6 SABC stations, private radio as a segment of the broadcasting system expanded. Parliament also endorsed the need to open the radio market further by licensing other private stations in the major centres of the country.

Community broadcasting and the Triple Inquiry Report

Parliament endorsed the proposal to develop this sector of broadcasting through the granting of four-year licenses. An earlier amendment to the IBA Act had permitted the IBA to grant temporary licenses to community broadcasters.

Signal distributors and the Triple Inquiry Report

Parliament endorsed the proposal that Sentech, until then a signal division within the SABC, be separated from the SABC and converted to a public company.

This policy process, in line with international trends, seeks to develop the broadcasting sector to meet the needs of all its citizens. It is also confronted with the dire need for policy to position the country in the global information society. The rapidity with which convergence is occurring demands that governments the world over, review the efficiency and appropriateness of the processes and structures created for the delivery of information services.

Insufficient Parliamentary time and attention were given to the identification of a policy framework within which the IBA could operate. The IBA was established as a Statutory Body to regulate broadcasting activities in the public interest. In practice, it was expected to develop national policy on broadcasting and thereafter regulate its own creation.

In addition, its relationship to the Government and to certain sectors of the broadcasting system were not clearly defined

The statutory definition of the three sectors of the broadcasting system presents many problems. The definition lacks guidelines as to the mandates and objectives of the three sectors. In addition, it defines the three sectors from the point of view of ownership rather than the nature of broadcasting services.

In other countries around the world, independent regulators are given a more prescriptive directive by Parliaments, and by responsible Ministers, than that which has been given to the IBA. They have also been given access to the government policies of the day and have been subject to ministerial direction regarding certain issues, without loss of independence. In this policy process, it is vital to define, in clear terms, the nature of the relationship between Government, Parliament, the IBA, and Broadcasting organisations.

Governance of the broadcasting system operates at three levels. There is a Policy level, a Regulatory level and an Operational level. The role of the various stakeholders in the various levels must be clarified.

The IBA Act contains a number of primary objects, which require the IBA to achieve some crucial objectives without providing the support or the power to achieve them. Reform of the IBA's statutory charter appears to be an urgent priority.

The SABC's charter is in similar need of an overhaul if it is to be given a Parliamentary mandate to remain a public broadcaster.

The future of these two statutory organisations - the IBA and the SABC - is key to the future shape and direction of broadcasting in South Africa. There is no question that they will both continue to exist, but their ultimate responsibility will lie in the nature of their mandates from Parliament.

Both organisations are accountable to Parliament and are bound to meet the mandates given by Parliament and the representatives of the people.

The Private Sector

This is a sector, which has expanded since the liberalisation of the broadcasting system. Six SABC stations were privatised in 1996, 8 green fields licenses were awarded in 1997. A free-to-air Television Service will be licensed in 1998. This sector of the broadcasting system is increasingly playing an important role in the broadcasting system.

Economically, the commercial private sector has enjoyed the benefits of favourable trading conditions in South Africa. The SABC does not differ fundamentally from this sector because of its commercial activities and structure.

In many countries around the world, the privilege of being given access to a radio frequency is often accompanied by responsibility, a number of obligations and impositions, many designed to achieve desirable social values.

These obligations take the form of:

• Local content quotas
• Specific programme genres (e.g. documentaries, drama, children's programmes)
• The payment of annual fees based on proportions of revenue
• Advertising restrictions (e.g. tobacco products)
• Programme standards or codes (e.g. unbiased news coverage and current affairs programmes)
• Advertising restrictions
• Ownership, control and cross media rules
• Emergency rules
• The provision of a comprehensive range of services
• Universal obligations

The identification and formulation of many of these obligations have been left to the IBA. The IBA has had to come up, on its own initiative, with certain systems due to the lack of directives.

The question arises whether the private broadcasting sector has been required to make a sufficient contribution to reflect the diversity of South Africa and provide services for its entire people. The role and structure of this broadcasting sector in meeting the needs of the South African population deserves attention in view of global trends towards the opening of broadcasting markets.

This is an issue that, on its own, deserves considerable discussion and debate.

The Community Sector

The community sector of broadcasting started in 1993. More than 100 temporary community stations have been licensed. There are two major issues needing resolution with respect to the community sector of broadcasting. The first relates to the expansion of this sector to all the communities in South Africa. This requires an appropriate policy framework and strategies to achieve a signal distribution infrastructure roll out, Human Resources Development and a secure financial base.

The second issue relates to the mandate of the community sector including the relevance, structure and participation of the communities.

In summary, the past has served to create a number of structural difficulties in South African broadcasting which now need to be addressed.

Socio-economic context

The quest to construct a vibrant and democratic dispensation fostering a national identity, equality and a respect for the fundamental rights of all South Africans as entrenched in the new constitution is far from realisation.

South Africa in many ways is still shackled by its past - a society deeply divided along ethnic, racial, class, gender and cultural lines. These divisions continue to define the essence of the social, political, economic and cultural transformation necessary for the creation of a democratic and completely inclusive society.

Despite the gains of the last few years in opening up the broadcasting system and making it more reflective of all South Africans, the legacy of apartheid is very evident in the broadcasting system.

At one level the system displays levels of sophistication that favourably compare with any developing country in the world. The variety of radio and television services owned by the private, public and community sectors offers a range of programmes from news and current affairs to a selection of drama, music and talk shows.

At another level South Africa shares the problems of many developing countries. Large sectors of the population have no choice of services, and sometimes receive no services at all. The majority of South Africans rely on a single service, usually radio, to meet their vast broadcasting needs.

This dichotomy is reflected in the unequal pattern of deployment of broadcasting infrastructure throughout the country - in terms of transmission networks, studios and facilities - which underpins this lack of services. In and around urban areas, services abound. In rural areas, a single radio station and a single television service define the choice of services.

This inequitable allocation of resources undermines the equality of the eleven official languages of the country. Many people who speak these languages are clearly not adequately served by the broadcasting system. The situation is compounded by the fact that while services in English increase with the introduction of new services, a major part of South African society does not use English as a language of communication and interaction in daily life.

In the areas of ownership, management and production, despite the recent inroads, the broadcasting system still displays racial and gender inequalities. These two worlds within one nation provide the socio-economic and socio-political context, which is the point of departure for this Policy Process.

This Process must address the legacy of the past, extend services to all South Africans on one hand and help develop broadcasting system in line with the South African Constitutional Principles.

The South African Constitution enshrines equality and equal opportunities of all South Africans. The Constitution guarantees Fundamental Rights including the right to Freedom of Expression. It also guarantees equality of all official languages and calls for their development.

These constitutional provisions have a bearing on the nature, type and organisation of the South African broadcasting dispensation embracing the future.

The IBA Act of 1993 was a product of a negotiated settlement and passed by the Transitional Executive Council. The Constitution provides for the establishment through national legislation of an independent regulatory authority to regulate broadcasting in the public interest.

The Vision

Broadcasting policy discussions must, on the one hand, focus on facilitating a move away from the legacy of the past, and attempt to forge a broadcasting system that treats all South African citizens equitably, responding to their needs.

On the other hand, broadcasting policy discussions must recognise global trends in the broadcasting industry, advances in technology and the different and diverse requirements for advanced services.

Policy discussions must contribute to integrating broadcasting into the broad strategic repositioning of the communications sector as a fundamental pillar of the South African economy.

Broadcasting policy must help the broadcasting system contribute its fair share to the national economy, and economic contribution must be reflective of the gender and racial demographics of the South African population.

Broadcasting is the most pervasive communications platform. As part of the communications industry, it helps South Africans communicate with each other and provides news and information, which enable South African citizens to participate in the democratic political system. The role played by broadcasting in providing a platform for a democratic political discourse has been important and will still be important in the future. Policy must enhance the role broadcasting plays in enabling South Africans to be informed on all important developments that have a bearing on their future.

Broadcasting policy must ensure services, which offer an opportunity for the representation of the diverse views inherent in society and the access to these diverse services.

Technology is converging at a rapid pace. The convergence process opens up opportunities to provide varied types of services to different segments of the South African population over the existing and new transmission networks. Technology already offers an opportunity to meet the different needs of society and most importantly in new and cost effective ways. A policy framework must integrate and promote the introduction of technologies that will make the South African broadcasting system relevant, accessible, diverse and responsive to the communications needs of the country.

The first phase of broadcasting reform in South Africa took place prior to the first democratic elections, and that reform was focused almost exclusively on the need to ensure that those elections were conducted fairly.

Quite understandably, the major broadcasting policy issues simply could not be dealt with at the time because of the pressing demands to address the political order to define a democratic South Africa.

The time has come now for South African policy-makers to come to grips with these major structural issues.

Any future broadcasting policy for South Africa must seek to resolve industry tensions built on past philosophies and seek to unshackle broadcasting from this legacy. It is at the level of Policy that such contradictions and tensions should be resolved.

Broadcasting and Nation Building

The inauguration of a new democratic government following the 1994 general election has brought about certain changes. Established democratic institutions and sectors of business and civil society, have been industriously mapping out ways of addressing the past and of reconstructing and restructuring various facets of public life in an attempt to put both the country and its people on the path to development and general wellbeing. Public and private institutions are also undergoing changes to reflect this attempt. One of the guiding concepts to these efforts is Nation Building.

Nation building seeks to forge a new South African identity, a common understanding and acceptance of the various cultural backgrounds, which are South Africa’s heritage. It seeks to redefine the South African national identity in line with the democratic ethos underpinned by the Constitution. The democratic ethos is based on the principles of respect for the fundamental rights, equality of all South Africans, participatory political and social processes, empowerment of the previously disadvantaged South Africans, respect for the rule of law and the democratic institutions.

Government measures directed at nation building include campaigns such as the restoration of the culture of learning, policies to address gender discrimination, the development of youth, black economic empowerment, job creation and the promotion of small and medium entrepreneurship among the historically disadvantaged and society in general.

Nation Building embraces multi-culturalism, cultural diversity, national reconciliation, national identity and economic empowerment.

The new broad philosophical outlook guiding South African public life is that, despite the various and distinct cultures that make up its society, the South African nation is united in its diversity. This cultural diversity permeates South African society and, when properly acknowledged by the social, cultural and political institutions of the State, unifies it.

The following principles guide this vision:

• the democratisation of society
• the promotion of an inclusive South African identity
• the acknowledgement of cultural diversity and multiculturalism
• the promotion of all official languages and their development
• the promotion of tolerance and understanding among and between South Africans, and
• the achievement of national reconciliation.

The role of broadcasting services in realising the new national vision requires close examination.

A Non-partisan Broadcasting System

Many countries around the world, particularly developing countries, see a legitimate role in nation building for their broadcasting services, including private broadcasting services.

Several countries in South East Asia, for example, readily acknowledge the power of broadcasting. Broadcasting systems lay stress on their educational and cultural roles.

Broadcasting is utilised by those countries as a tool for nation building. Broadcasting policy is fully integrated into general government policies with the same objective.

Some of these countries are not, of course, full democracies, as South Africa is now, and it is obviously vital that democratic principles be observed when considering the nature of any obligation relating to nation building that might be imposed upon, or required of, the broadcasting sector.

Any obligation of this kind must not be allowed to impinge upon democratic principles or promote partisan politics.

But even highly developed countries, with very mature broadcasting sectors, acknowledge that broadcasting has a legitimate role to play in the achievement of all inclusive policies, and that unregulated economic forces alone will not produce desirable social outcomes in broadcasting.

Global Context

Broadcasting is nowhere completely unregulated. And broadcasting regulation has traditionally acknowledged that Parliaments, particularly democratically elected Parliaments, can legitimately identify both the nature and extent of the social obligations it feels are desirable goals, in addition to the role that the broadcasting sectors should be required to play in the achievement of those goals.

Even in the most commercially mature broadcasting market in the world - that of the United States of America - regulation has been increased in certain areas in recent years. Obligations to screen a certain minimum quota of children's television programmes, and obligations to classify television programmes for their levels of violence, nudity and language, have recently been imposed on the private sector.

In the United Kingdom, the Independent Television Commission has been empowered by Parliament to determine what the programme line-ups of private television operators should contain. For example, ITC even has the power to determine the actual time-slot when news programmes might be screened.

In Australia, the Parliament has determined that levels of local Australian content can be imposed on commercial operators, as well as obligations to provide a comprehensive range of services in particular areas, or, at least, to contribute to such a range of services by all those operating in particular areas.

Also, of course, the United Kingdom (BBC), Australia (ABC and SBS), and Canada (CBC) all have mature public broadcasters which are, in general terms, obliged to complement, rather than compete with, private broadcasters, insofar as their programming is concerned.

Comprehensive reach, i.e. the role of providing a variety of services to as many citizens as possible, is one of the usual hallmarks of a public broadcasting service.

1.1. What should be the vision of the broadcasting system in South Africa?

1.2. How should this vision be achieved?

• Government?
• Parliament?
• Provincial legislatures?
• The Independent Broadcasting Authority?
• The broadcasting industry/sectors?

1.4. What should be the role of the broadcasting system in Nation Building?

1.9 If so, how can it do so in practical ways?

1.11 How can these objectives be sensibly and practically achieved?

CHAPTER 2

Broadcasting, the National Economy and Economic Issues

Broadcasting is part of a growing global information economy. Communications industry global revenues are growing at a rate of 6,1 percent - nearly twice the rate of the world economy. Global broadcasting revenues are estimated at R815 billion.

The total media advertising revenue in South Africa is estimated at R5 billion per annum. The annual broadcasting revenue is estimated at R2 billion. Advertising constitutes the bulk of total broadcast revenue.

Since the establishment of the IBA and moves to open the market, the following investments have been made in South Africa:

• About R600 million to acquire the 6 SABC radio stations that were privatised.
• An estimated sum of R140 million to launch the 8 green fields radio licences.
• An estimated sum of R700 million to start and maintain the first free-to-air private television channel that will be awarded in the first half of 1998.
• R350 million in Ku band and C band DTH services for Southern Africa and Africa respectively.

The contribution of broadcasting to the national economy extends to other related fields:

• South Africa accounts for at least 4 million television sets out of the 12 million sets in the African continent. Projections indicate that the number of TV sets is likely to double by the turn of the century. This represents a vast economic opportunity for manufacturers, suppliers and retailers. This economic opportunity is likely to triple as more and more households in the continent acquire television sets. The ratio of television sets to the population in the continent of Africa is 12:700. Clearly there is great scope for higher levels of household penetration in television.
• The video cassette recorder (VCR), introduced less than 20 years ago, has achieved a sizeable penetration of homes. The role of the VCR in programme reception is likely to grow as more and more services are introduced generating a greater need for time-shifting. Of the 2 million video cassette recorders found throughout Africa, 50% are in South Africa. But by world standards, the South African penetration of VCRs is still very low. Only a quarter of South African households which own a television set also possess a VCR.
• More than a million analogue Pay TV decoders were manufactured over the last ten years in South Africa. These decoders were exported to African countries and some parts of Europe. Pay TV decoders have achieved almost the same penetration of homes as the VCR.
• A new South African industry has evolved in recent years, focused on the hiring of video cassettes for home viewing. The analogue decoder has achieved penetration of households to the same level as the VCR.
• The broadcasting industry is currently employing about ten thousand people in production, programming, management, advertising, sales and marketing, research, and regulation.

Clearly, broadcasting is capable of making a significant, and growing, contribution to the nation's GDP.

Advertising Growth

Advertising and sponsorship, in a broadcasting context, work in the following ways.

The broadcaster markets programmes to audiences. Viewers watch programmes and patronise services. In turn, the broadcaster sells these audiences to advertisers who are willing to buy advertising time in order to access this market for their products.

South Africa's national advertising revenue pool is currently 0.9% of GDP, compared to 1.6% in European markets, and 2.8% for the United States of America.

This means that South African companies still spend less on advertising their products and services than companies do in other parts of the world. Potentially, there is room for growth in advertising revenue as a percentage of GDP.

Not all services that allow for advertising manage to attract advertising revenue. Advertising revenues depend directly on audiences and the value attached to those audiences by advertisers. Advertisers attach value to audiences consistent with their disposable income or living standards in general.

This reality means that a large section of the population of South Africa cannot be attractive to advertisers who seek people with high incomes and the economic capacity to pay for discretionary goods and services.

Broadcasting services targeting this large, but poor, section of the population therefore stand economically disadvantaged in relation to those that target the upper income groups.

Most South African broadcasting services depend significantly on advertising revenue for their operations.

Private free-to-air broadcasters depend almost exclusively on advertising revenue for their survival.

The SABC depends on a mix of advertising revenues, receiver license fees, sponsorships and other minor sources.

Community broadcasters derive their resources from donors and grants but still see advertising as offering an important source of revenue. Many community broadcasters appear to rely only on advertising revenues, and some have achieved considerable revenues.

The relatively high dependence of South African broadcasters on advertising revenues poses a difficulty for the achievement of the community's social goals.

The provision of programming to niche audiences, like minority language or dispersed groups, and children, does not deliver mass audiences, or wealthy audiences, to advertisers. Even where they do, social norms prevent the development of active markets.

Part of what could inhibit South African companies from advertising is the price they must pay to advertise through broadcasting. The amount advertisers must pay to advertise is in turn influenced by the number and nature of channels and regulations limiting advertising.

Advertisers have complained of what they term excessive rates charged by the broadcasters. Some have suggested that regulations covering advertising rates should be relaxed so as to prevent operators from fixing the rates in an un-competitive way.

The Green Paper poses the following questions: -

2.2. What policies should be put in place to facilitate this growth?

High standards of truth and honesty?

Societal norms?

Fair competition?

2.9.1 Is self-regulation an effective way of regulating societal issues?

2.11 What impact will new services have on advertising?

2.12 How should policy address such an impact?

The Manufacturing Sector

The broadcasting industry has significant potential to contribute to South Africa's manufacturing sector.

It has already established a manufacturing base for some electronic broadcasting equipment.

Given its leadership role in Africa, particularly sub-Saharan Africa, the potential to provide manufactured goods to Africa for use in broadcasting is worth close assessment.

The special needs of Africa for cheap, simple reception equipment, e.g. radio and television receivers, VCRs, aerials, dishes and set-top boxes, might help define new manufacturing objectives.

Accordingly, manufacturers might be encouraged to invest in South Africa through a variety of mechanisms. The government might be prepared to consider incentives that would assist in the establishment of manufacturing bases within the country.

The promotion of local content in broadcasting and receiver equipment should be considered in the light of government's expressed desire to see the growth of South African industries. In this context care must be taken to ensure that the manufacture of broadcast and receiver equipment goes beyond the assembly of imported component parts.

The establishment of local production facilities within South Africa would appear to be a high priority, in both television and radio.

The more South African broadcasting programmes can be produced locally, the greater the flow-on effects will be in establishing a pool of local skilled personnel able to "connect" with South Africa's diverse peoples.

Programme export potential within Africa and the rest of the world for South African productions should be encouraged wherever possible.

South Africa already compares favourably to other African countries in its production capacity. Many of the continent's countries do not have a sophisticated production base to produce locally, let alone compete internationally. Yet talent abounds in these countries to produce and record, for example, the oral tradition of story-telling handed down generation after generation in Africa.

2.13.2 Should the broadcasting manufacturing industry be regulated? If so how?

2.17 Should import tariffs be lowered to facilitate the lowering of prices?

Broadcasting to the African continent

Technological developments make it possible to supply broadcasting services throughout the African continent and the world.

South Africa shares common problems with greater Africa, such as illiteracy, poverty, and lack of basic infrastructure. On the other hand, it also shares common ground like language and culture with other African countries.

These circumstances should make it worthwhile for South Africans to consider policies designed to encourage the production of programmes that could address the entertainment and developmental needs of audiences outside of South Africa.

In turn, South Africans could receive programmes from other African countries as a form of cultural interchange.

Ownership and Investment

Cross Ownership

Cross Ownership provisions seek to prevent the concentration of ownership and the creation of monopolies in both the print and electronic media. The IBA Act provides for the regulation of cross media control. The cross media control of broadcasting services is subject to such limitations as from time to time are determined by the National Assembly acting on recommendations of the IBA and in accordance with the provisions of the constitution.

Cross media limitations were designed to affect the newspapers. In the world of convergence, new forms of media are emerging and likely to proliferate. Consideration should apply as to which other forms of media warrant to be covered by the limitations on cross media ownership.

On the other hand, convergence, technological innovation makes it possible for entities to distribute information in many formats. Once information is acquired, it can be stored, changed and distributed in any other form. The entry of the Internet into the broadcasting domain will mean an ability by newspapers to offer narrow cast services over the Internet. In turn broadcasters can offer and distribute news and information in the electronic and print forms.

Media organisations from other parts of the world have demonstrated an interest in the evolution of the South African broadcasting system. The overseas organisations have been for some time operating in policy environments which allow for less stringent regulations. In this way they obtain economies of scale which might disadvantage South African companies prevented by limitations on cross media control as presently constituted.

Ownership by historically disadvantaged South Africans

The IBA Act mandates the IBA to encourage ownership and control of broadcasting services by persons from historically disadvantaged groups. Some strides have been made in the licensing of private and community sectors of broadcasting.

On the other hand different companies composed of people from the disadvantaged backgrounds have complained of practical problems they experience in accessing the financial markets. Because of the background of the people involved in these companies, they have no financial resources, at times, to develop credible business plans. This prevents a significant part of the disadvantaged section from making the proper use of this economic opportunity.

Foreign Investment

Foreign investment in broadcasting enterprises can undoubtedly help make South African broadcasting more professional and competitive, and is undoubtedly welcome.

Foreign skills in distribution, production and the like can only assist in the growth of the industry, thereby making more room for local skills to grow and prosper.

At the present time there is a cap of 20% on foreign ownership, and this is justified by social and political factors. This policy seeks to ensure that South Africa's broadcasting system continues to be owned and operated by South Africans. This arrangement serves to guarantee South Africa's sovereignty in political and cultural fields.

But the globalisation of the information, broadcasting and communications industries brings together companies that traditionally did not co-operate across industries and borders. The economies of scale at times dictate co-operation of companies and entities.

Any potential to further encourage foreign investment should be seriously considered.

The Green Paper poses the following questions: -

CHAPTER 3

Market Structure

Broadcasting exists in a framework of identified national goals of democracy, development and nation building. It is vital that a market structure exists wherein broadcasters are able to further these national goals within the context of a healthy, balanced and vibrant industry. The challenge then, is to formulate a policy framework that will create an environment which will allow the national broadcasting system to advance public interest objectives and values, and one which will ensure the growth of the South African economy and efficiency in the delivery of services.

Principles

The principles upon which such a broadcasting policy framework may be anchored are already enshrined in the Constitution for a democratic South Africa and they include the following:

• Access;
• Diversity;
• Fair competition
• Choice; and
• Equality.

Implicit in these principles is the need to make broadcasting accessible to all citizens and to ensure diversity of media services. These principles also aim to ensure the diversity of ownership including cultural and linguistic diversity in content material and representation of groups of people in society. It also means opening up the market to competitive forces, whilst promoting fairness and equality of opportunity to citizens in a manner which will ensure the availability of real choices for all sectors of society. This would mean the availability of a broad spectrum of choices in programming content and choice in the delivery of services.

Historic market structure

A closer look of the South African broadcasting sector will reveal that it is characterised by a market structure that has, to a great extent ‘been dominated by monopolies and an oligopoly. Only until recently, with the advent of some degree of liberalisation has there been a release of the pent up competitive spirit in some sectors.

It is an industry in which the evolution of the delivery of content services in Radio and Television has been the defining factor of the market structure.

On the supply-side, the level of growth and maturity of the Radio and Television content delivery services has determined the pace of evolution and liberalisation of the broadcasting system from monopoly to a competitive environment. From the demand-side this has also meant that various sectors of the society were denied of choice, diversity and virtually all the principles outlined above by monopoly suppliers who determined the levels of quality and nature of services delivered.

A new policy framework must aim at breaking this stranglehold of the broadcasting market structure by monopolies. It must seek to depart from a premise that acknowledges that the development of broadcasting needs to take place within a policy framework, which supports dynamic competition in the market. It must be one which seeks to encourage private investment, support a flexible regulatory environment and allows South African citizens open access to a variety of choices in services, networks and other essential facilities on a fair and equitable basis.

Liberalisation of Radio

Twenty-five Radio services were under the control of the SABC until the establishment of the IBA, three years ago. One Radio service in the country was under the control of a private company. The birth of the new regulatory authority, however, brought about a radical transformation.

Within three years of the existence of a regulatory environment the country has witnessed the unbundling of monopoly control in radio.

The sale of the six SABC stations was the initial step. The granting of new broadcast licenses saw the sudden expansion of the private commercial sector of the Radio market.

Nearly a hundred community licenses have so far been awarded on temporary basis by the IBA. The result is that the Radio Market has grown from a few stations to more than a hundred stations.

Liberalisation of the Television market

The Television market has been characterised by a much slower pace of liberalisation compared to radio.

Television services were introduced by the SABC in 1976. The first and only form of competition was allowed to enter the market after ten years and even then under the tight constraints of delivering services through the limitations of being an encrypted subscription based outlet. This method of delivery ensured that services were only accessible to a limited sector of society, who were (a) able to acquire the additional technology to receive the encrypted signals, and (b) could afford the monthly subscription fee. The broad spectrum of society was still denied of choice and access through the barriers of language, limited reach of signals and prohibitive tariffs.

The lowering of barriers of entry to the new single player, albeit on a limited scale, only created a television market structure that has been dominated by this duopoly until now.

This structure has seen one player dominating the terrestrial free-to-air market, and the other player becoming the sole provider of a terrestrial pay television service.

Free-to-Air Television Market

Until recently with the advent of a variety of new technologies, the predominant means of delivering television signals to a majority of homes in most countries including South Africa has been through wireless transmission over the terrestrial frequency spectrum which is commonly known as free-to-air television. In this country thus far, only the three channels of the SABC have been transmitted over this medium and are easily received over-the air using a simple reception antenna. These channels are licensed as free-to-air terrestrial broadcasters and have maintained a monopoly of supply in this free-to-air market.

Free-to-air transmission of services may be used for the delivery of services on a national or regional basis.

A new terrestrial free-to-air license service will be issued by the IBA to allow for the entry of a new player into the TV market in general, and the terrestrial free to air market in particular. It will become the fourth free-to-air service, which will be funded primarily through advertising revenue and thus will not be encrypted.

The entry of this new player in the Television market will undoubtedly provide choice, and programming diversity to audiences. It will offer more opportunities to local producers to market themselves and their productions. It will create an environment in which the system can be made to operate in the public interest to the extent that license conditions may outline public interest objectives that it must meet.

The new entrant will also have an impact on the revenue base of the other players in the Television market because of its predominant reliance on advertising income for its survival. As such it could affect the financial viability and sustainability of the other players. With additional competition and its ability to capture increased market share, it can be expected to generate new advertising revenues beyond current levels.

In turn the established players could attempt to prevent the successful entry of the new channel. In other parts of the world, dominant players have used a variety of means to deny entry into the market by the new players. These could take the form of:

• obtaining exclusive rights to programme materials and warehousing programming
• the new entrant can afford lowering of advertising rates to below levels that
• the lowering of subscriptions to make pay services compete with the new free-to-air.
• airing of programming in the same target programming categories of the new competitor;

The playing field must therefore be levelled and all players allowed competition on a fair, equitable basis to better meet public interest. This requires regulation and the monitoring of the established TV players. The new entrant must also be monitored to ensure compliance with license conditions to meet public interest objectives.

The entry of a new player throws up a question as to what pace the TV market is further liberalised and what could be the role of the new and established services.

3.14.1 Should the acquisition of programming materials be on a non-exclusive basis?

3.14.2 Should subscription rates be monitored and regulated?

Pay-TV Market

A single player from inception to the present has dominated the Pay-TV market. There are many factors, which are responsible for this situation. Some of these could be:

• Policy and political considerations at the time of licensing including the protection of the Public Broadcaster
• Economies of scale to launch and sustain pay-TV
• Development of the subscriber base
• Penetration and acceptance of the new technologies
• Economics and affordability of the pay-TV
• Absence of pro-active government policy toward the licensing of new entrants in pay-TV services

Technological innovation has produced countless ways in which Pay-TV can be delivered to subscribers. Technology in the form of MMDS, satellite and cable make it possible to deliver multi-channel services at far more cost efficient ways. New markets have opened up. A whole new range of speciality services offering exclusive news, sports and children's programmes to different audience segments are a reality in other Television markets.

New technologies make it imperative that due consideration be given to this expanding sector of the TV market.

Before policy options can be developed for the Pay-TV markets, it is important to analyse possible problems which could prevent the entry of new players, and frustrate the introduction of competitive conditions. International precedence has shown that opening up the Pay-TV market to competitive forces frequently leads to the emergence of a new set of dynamics that may require regulatory and policy intervention.

Technology as A Barrier of Entry

As a subscription based form of television, the growth and success of Pay-TV is very dependent on the use of technology for ensuring conditional access and for managing the subscription system.

Pay television operators use a variety of methods to prevent unauthorised access to the service(s) by the broad public who normally view through free-to-air transmission. Access to such services is conditional on the payment of a premium to the operator on a periodic subscription basis. The viewer is then provided with a viewing mechanism that may be a physical piece of technology and/or software switching device to enable the operator to control access.

A choice of a particular technology has implications to the development of the market and costs to the consumers. If different service providers choose different technologies, (that are not compatible) consumers have to acquire different receiver equipment for different services.

Established Pay-TV operators can use technology to deny entry to new services. One way for regulation to counter this manoeuvre is to deny the right of the multi-channel signal distributor to offer channels on an exclusive basis. This would mean that the consumer would be able to receive the full slate of services from one supplier or another. It would also ensure that new South African channels reached the widest possible audience and revenue base.

Subscriber base Management System

A number of key functions are required on the part of the operator to manage the subscriber base. These functions include: a subscriber management system (SMS), which manages the decoder population through over-the-air addressing of embedded chip-sets in the decoder; a subscriber authorisation system, which is used to switch off decoders upon default of payment or to enable them and an encryption system which scrambles the signal to ensure conditional access. A number of other technical systems are also in place to ensure conditional access by the consumer through the use of hardware and software technology.

The size of subscriber base and its roll-out determines the levels of investments required in starting Pay-TV in case there are barriers to accessing the established subscriber management system. A possible measure would be to ensure that the SMS operator is treated according to common carrier regulation, requiring access to alternative subscription based service offerings.

Content creation/ rights holders and broadcasters

The increase in channels leads to an increase in demand for television programmes in properly regulated Television Markets. A major bottleneck relates to the ownership of programming broadcast rights. Rights holders are aware of their market power and consider Pay-TV as an important source of additional revenue, which can only grow in a multi-channel environment. Lobbying and paying high prices for exclusivity to these rights already underline the importance of such rights in a competitive environment.

In many fields of activity there is only one rights holder who is the controlling body thus complicating matters. In South Africa there is only one association controlling Rugby, Soccer, Tennis etc.

The exclusive relationship between content providers/rights holders and Pay-TV providers can prevent the emergence of competitive conditions in the Pay-TV market. On the other hand, it is likely that new pay-TV services will obtain an effective franchise for that category of programming (sports, news, youth, movies, etc.), which means that there will not be rights competition among the pay channels.

The rights issue for subscription services spills over to free to air broadcasting. Exclusivity acquired by the subscription service may deny access to programming of national importance (e.g. rugby finals) for those who do not subscribe to the pay-TV services. There may be need for regulation to ensure that the over-the-air services are not denied such access.

The entry of new pay-TV channels affords the opportunity of South Africa to build its own slate of domestically owned and programmed services - rather than simply importing the foreign channel of a similar category. At present, notwithstanding a few locally packaged programmes on some of its channels, DSTV primarily offers a diet of foreign services (e.g. MTV, TNT, Cartoon Network, BET on Jazz, Discovery, etc.). In this arrangement there is a missed opportunity to insert South African originated content (e.g. movies, nature and travel programs, South African music videos, etc).

It might be possible to regain this opportunity through the licensing process for new multi-channel technologies (e.g. MMDS). Indeed, action could be taken to bring the existing DTH services into the broadcasting regulatory framework (not merely the telecommunications framework). And, the right could be reserved to have these services converted to South African services. In this way, the ownership and content would be restructured to be more reflective of the South African reality. It would mean that the best of foreign would be programmed along side of the best of South African.

3.21 Should the objective be to establish a range of South African pay-TV services? In what priority categories?

• education - formal and life long
• music television
• all-news
• all-sports
• history/geography
• nature/wildlife/travel
• single language, non-English
• children's/youth
• parliamentary/public affairs
• religious

3.22.4 Should license conditions specify local content requirements and how?

Convergence and New technologies

The impact of convergence on market structure is considered in chapter 7.

CHAPTER 4

Public, Private and Community Broadcasting in South Africa

The broadcasting system in South Africa has undergone a process of fundamental change in the past three years.

The SABC, once the custodian of a monopoly in both free-to-air television and radio, has shed a number of its commercial radio stations. These were sold to private broadcasters to further the Government's fundamental commitment to open up and free the airwaves. A new commercial free-to-air television license is about to be allocated. A large number of community radio licenses have already been allocated by the IBA.

In the mid-1980s, a subscription television service called M-Net commenced operation in South Africa. Its service is transmitted via a mix of satellite and terrestrial networks.

A regional television service, known as BOP TV, also provides a free-to-air service in and around the North West Province and Johannesburg areas.

Trinity Television broadcasts as a terrestrial religious community station in the Eastern Cape province.

The South African free-to-air broadcasting market is no longer completely dominated by the monopoly of the SABC. Progress has been made in this direction, to introduce new broadcasting licenses that fall within the three categories identified in the Independent Broadcasting Authority Act of 1993, viz., public, private and community broadcasting services (radio and television).

This three-tier structure saw legislative policy encouraging a diverse set of services designed to meet the broadcasting needs of South Africans.

The IBA Act, though restructuring the broadcasting system into three categories of license, did not spell out the role of each sector.

Definitions of each of the different categories of service are to be found in the IBA Act, defining license category, and an assessment of the criteria for the license allocation process.

Taking the present state of the community license sector into account, there does seem to have been a blurring of the lines when Parliament originally set out to categorise the sectors.

The continued uneasy status of the SABC contributes significantly to the confusion about these divisions.

Public Broadcasting

A public service broadcaster refers to a broadcasting service which seeks to cater for all audiences, and all tastes in society irrespective of geographic location, class and cultural background.

The guiding beacon of a public broadcaster is, first and foremost, the provision of both a diverse and multiple range of programming to meet the broadcasting requirements, norms and disposition of the population.

This covers the entire spectrum of popular programmes like sitcoms and game shows to niche minority programmes like the opera, documentaries on specific topics, etc.

A feature distinguishing the public broadcaster is also the question of its ownership. The public broadcaster is owned by the public. Therefore, in its functions, it is accountable to its owners - the public - through Parliament. In theory, the public as owners should therefore have a right to define the public broadcaster, and this is normally done through the elected community's representatives who pass appropriate laws to that effect.

In many countries broadcasting services are licensed to carry out certain obligations in their programming to satisfy their unique public needs.

These obligations are commonly referred to as the Public Mandate.

The Public Mandate for broadcasting services has to do with addressing the needs of the community in a given country, and these requirements differ from one country to another. What constitutes the Public Mandate for one country, may not be so for another.

South Africa is unique in that it reflects the characteristics of both a developing and a developed country. South Africa's geographical composition is made up of nine provinces, each displaying different social strata in terms of race, religion, culture, class and gender cleavages.

In addition, there are also what may be referred to as 'marginalised' social groups which find themselves on the periphery of South African public life, e.g., the poor and the unemployed, members of minority language groups, the geographically isolated, the disabled and women.

Because of the cleavages which separatist policies of many years imposed upon South African society, the country has inherited a background in which access to public amenities of education, health and welfare are skewed to the benefit of a few at the expense of the majority, on racial grounds.

With the inauguration of a democratic order three years ago,