Icasa and Competition Commission have collusion confusion

The Competition Commission and the Independent Communications Authority of SA (Icasa) have tripped over each other trying to regulate the same thing: MultiChoice-DStv, its content providers and its customers. Their competing conceptions of competition led to sneaky calls and collusive meetings in smoke-free rooms.

Icasa’s draft sports broadcasting regulations propose a ban on freedom of contract between DStv, sports bodies and viewers. The pretext for the regulatory overreach is an alleged need to “open” pay-TV to “ensure that sporting events of national importance are easily accessible”. Without a hint of shame, they  announced that they had agreed to “a formal relationship … to collusively handle … co-jurisdiction”.

The original quote euphemistically had “collaboratively”, which I have replaced with the more accurate and honest “collusively”. When private firms collaborate legitimately, they are accused of “collusion”. So, for the two regulators to collaborate illegitimately is doubly reprehensible collusion. Massive fines and stifling controls — and potential criminal charges — imposed by the commission on private firms should, in fact, be imposed on itself.

In the “national interest” — that meaningless weasel term; the terrifying two regulators want to deprive DStv, sports bodies and other content providers of income from high-demand sports and premium entertainment TV rights.

Not surprisingly, being colluders, neither understands competition. They think, for instance, that a single supplier is a “monopoly”; that competitive collaboration is anti-competitive; and that consumer preferences do not matter. Most seriously, they lack understanding, or even awareness, of the role of contestability in competition.

If contestable markets — ones without regulatory barriers — result in a single supplier, or none, or a few, the outcome is pro-consumer because it reflects consumer preference. Eminent SA economist William Hutt observed that “consumer sovereignty” prevails in contestable markets. When markets are free and contestable, consumers “vote” in a perpetual dollar democracy for preferred products and suppliers.

That is the DStv story. All broadcasters are free to offer sports bodies and consumers alternatives. That DStv dominates suggests that it is the better consumer champion. The regulators’ contrasting philosophy is “compete, but don’t win”.

DStv pay-TV faces direct competition from rival broadcasters, and indirect competition from a ballooning range of local and foreign media, including electronic and print, radio, and internet streaming services (‘over the top’ (OTT), YouTube, Netflix, Amazon, Showmax, and the like). 

Counter-intuitively, competition does not need competitors. A sole supplier is mistakenly called a “monopoly”. Consider a small town such as Wakkerstroom. There was one bank, called a “monopoly”. When it closed, the market remained competitive, without any banks, because it was contestable. When an ATM opened, the bank concerned had to behave competitively because freedom from regulatory barriers of the kind proposed created a threat to entry.

What matters is that markets are contestable, rather than contested. When there were no doctors, people wanted one. They now have a doctor and she must behave competitively to keep others out.

If all consumers decide to buy one brand from one supplier, competition policy that forces additional suppliers, and restricts what suppliers may provide, as is proposed, violates consumer freedom of choice.

Regarding the poor, all they proposed is vacuous rhetoric. They have no idea how many people watch sport in sports bars, shebeens, township halls, with friends or in restaurants (as I have done for the Rugby World Cup). Nor how many listen to live on radio broadcasts, attend live matches, or watch free-to-air (FTA) extended highlights.

Saying TV should be “free” is as irrational as saying that food, taxis, furniture or shoes should be free.

Our colluding regulators have an erroneous conception of competition. In their myopic world, there is only one kind: direct competition. In the real world, all suppliers of everything compete with one another. They compete for your money.

Examples of types of competition include:

  1. Null competition — no suppliers, like no doctors in small towns.
  2. Direct competition — street vendors selling identical products side-by-side.
  3. Indirect competition — car dealers selling different brands.
  4. Substitute competition — wood, plastic or steel for buildings.
  5. Money competition — all suppliers competing with all suppliers for all money.

Few people realise that even without regulators there is so much competition that experts fear “choice overload”. A Kellogg School of Management study found, for instance, that “Amazon’s cellphones and accessories category alone contains more than 82-million products.” The total number of consumer and business choices probably exceeds billions.

Given the facts, and the nature of competition, the commission and Icasa’s obsession with unquantified increases in pay-TV “accessibility” is a nonsensical fruit salad of competition, collaboration, collusion and confusion.

• Louw is executive director of the Free Market Foundation.

This article was first published on Businesslive on 9 November 2019

Help FMF promote the rule of law, personal liberty, and economic freedom become an individual member / donor HERE ... become a corporate member / donor HERE