The recent bobbery over DStv’s — a direct to home satellite television broadcaster — decision earlier this year to raise its subscription rates underscored how poorly the larger number of our people understand the business environment. On reflection, this is not surprising, when you consider that it was not until the mid-1980s — influenced by the outcome of the debate organised by the Ibrahim Babangida administration over whether our then ailing economy should accept the stringent conditions attached by the IMF to the bridging loan we were seeking — that we grudgingly reconciled with the idea of the market as an engine of economic growth. Before then, a strong leftwing mindset — the Union of Soviet Socialist Republic was only just then in its death throes — favoured the nanny state as the provider of choice.
This socialist worldview was in clear evidence in the popular response to DStv’s subscription rate hike. At least in its social media incarnation, opposition to the hike ranged from the quasi-rational (insisting that government promote competition in the domestic market for direct to home broadcast), to the downright communist (an insistence that government put a lid on how much DStv may charge its Nigerian subscribers).
Each of these perspectives is worth looking at in more detail. First, it is not true that there is no alternative to DStv’s offering. Arguably, the most serious such competitor was HiTV a few years back. Such was the strength of this competition that it ensured the separation of Nigeria from DStv’s traditional bid for an African licence to relay matches from the English Premier League (EPL). Having secured the right to relay matches to Nigeria as a separate bid process, HiTV then bid up the cost of this right, high enough, in the second year of its operations to drive DStv out of the broadcast of EPL matches in Nigeria for at least a season.
Now, with its costs sky-high, HiTV still thought it possible to undercut DStv further by underselling — it priced its decoders and subscription at a giveaway. Of course, the leftwing crowd applauded to high heavens. But in less than four years, i.e. between August 1, 2007, when it launched its direct to home satellite technology, and November 2011, and having set cash aflame each year of its operations, HiTV proved that populism does not a business model make.
Today, much of DStv’s elevated cost for broadcasting the EPL matches is the result of HiTV’s competitive activism. Unfortunately, domestic management of the economy has not helped. In naira terms, DStv’s costs in pounds sterling (that is only for the EPL matches, of course) could only have gone up as the naira has lost ground against other major trading currencies. I have had people argue that DStv has not bid for new licencing rights recently and so cannot justify its new subscription levels on this basis. But it would eventually have to and it would need cash to do this. It helps to remember that HiTV was hung on the petard of bank loans, when time came for it to renew its EPL license.
Having learned from the misfortune of HiTV’s attempt to assault the DStv franchise, would-be competitors to the latter have kept their business models focused on low cost and market penetration pricing. The list of these competitors is impressive: Startimes, Consat Cable Network, CTL, Metro Digital, Daarsat, Montage Cable Network, Mytv, and Trendtv. If you remove the argument that DStv is taking Nigerians for granted only because it has no competitors, then what remains of the campaign against the satellite broadcaster is either the requirement to cap its price, or one for its eventual nationalisation. The latter is as dumb as it comes across, and the former only slightly so. The argument for price control is credible where a private provider, DStv in this case, exploits its status as a natural monopoly to charge prices higher than the market would ordinarily have set. HiTV’s brief existence is the most fundamental proof that DStv’s operation in this country is not a natural monopoly. Can we prove the charge that DStv is involved in price gouging? Not when we do not know what its cost structure is. However, we all know that Nigeria, for a variety of reasons, is a high cost economy. This latter is the one reason why comparisons between DStv’s operations in this country and in South Africa may be completely misplaced.
In the end, there is another argument that can be made for government’s intervention in the direct to home television business. This is the one that sees government investing in infrastructure that helps bring down costs in the industry. I concede that given the many infrastructure constraints that we face as a country, this one might be the least important of them. However, this is where the convergence of telecommunications and the internet work best.
All government need do is to make it easier to bring our digital infrastructure up to scratch, either by waiving costs related thereto, by subsidising the laying by private sector entities of fibre-optic cables, or by laying these cables itself. Then, service providers may more readily bundle services such as voice, video, and data in an offering that DStv may not be able to match.