MEDIA STATEMENT

DIGITAL TELEVISION: ON SET TOP BOX ISSUES 20 December 2013

Broadcasters free to decide whether to use control system in decoders or not

On 4 December Cabinet decided that the USE of a control system in Set Top Boxes (STBs), or decoders, for digital television would not be mandatory, as was the case in the previous Broadcasting Digital Migration policy. However, it was decided that the STBs would have a control system to protect Governments investment in the subsidized STB market and the local electronics industry and, with rapid technological changes, for future use by broadcasters who might not want to use it now. To avoid subscription broadcasters unfairly benefitting from the STB control system, Governments investment in the STB Control System will be recovered from those subscription broadcasters that choose to make use of the STB Control system. Criteria for Cabinet decision In deciding on government policy, we took the following criteria into account: i. The need to begin implementing the migration as soon as possible, given that South Africa is five years behind schedule, the ITU June 2015 deadline looms and there is an urgent need to release radio frequency spectrum. ii. iii. iv. Ensure that the Government subsidy is used productively. Stimulate the local electronics industry and create jobs. Benefit emerging entrepreneurs.

v. Reduce prospects of the South African market being flooded by cheap STBs that are not fully functional. vi. vii. Best serve the viewers needs. Protect the interests of the SABC against commercial broadcasters.

viii. Be sensitive to rapid changes in the broadcasting and ICT sector as a whole.

ix. Recognise the increasing use of mobile phones, rather than televisions, for Internet and other services. x. Reduce the extent of monopolisation and encourage competition by creating space for new players in the pay television market without them unfairly benefitting from the Government subsidy. xi. Recognise the majority of the broadcasters are opposed to a control system. xii. Reduce the prospects of the possibility of more challenging legal action from broadcasters and entrepreneurs that would hold-up the migration process. These criteria need to be looked at as a whole without undue emphasis on any particular one as against others. Importantly, the STB control matter relates to broader issues of industrial policy, particularly the need to stimulate the local electronics industry, encourage emerging entrepreneurs, and create jobs. It cannot be seen simply as a broadcasting issue. We worked closely with the Department of Trade and Industry in developing governments approach.
Drop Control altogether

We considered dropping control altogether, but the main obstacles were: i. The SABS (South African Bureau of Standards) standard SANS 862 would have to be changed and this takes an average of 6 months. ii. Concerns that the South African market will be flooded by cheap low quality STB imports that will not be fully functional and undermine the local manufacturing industry and the prospects of jobs. Just note this, from the Chairperson of the Information and Communication Technologies Authority of Mauritius as an example: the single most important lesson one can learn from the Mauritian experience is the one concerning the STB chaosYou cannot allow the importation of set top boxes on the basis of price alone because then everybody runs to [] and you land up with asynchronous (start/stop) audio and video problems, impulsive noise, frozen pictures iii. The Free-To-Air broadcasters do not all agree to drop control, so any broadcaster wanting to use control could legally challenge the government. iv. There could be a legal challenge to government by manufacturers who invested in control system certification and STB designs including control and

applied for the Government tender on subsidized DTT STBs based on the fact that a control system was specified as requirement in the last amendment to the Broadband Digital Migration Policy (of 13 February 2012), SANS 862:2012 (Edition 2) and the tender on Government subsidized DTT STBs of 2012.

e.tv Court Judgment and Possible Court Action Now In respect of the e.tv court judgment, lawyers we consulted are clear that government has the right to make policy on STB control but it cannot prescribe the supplier, the operator of the control system, the type of control system to be used or how it should be managed. We were threatened with legal action from several parties to the dispute, and we had to thread a careful path. The policy we shaped sought to address the key concerns of all the parties to reduce the prospects of this. We have not made a decision about the management of a control system. Nor do we refer at all to conditional access or encryption as methods of implementing STB control. We are saying that broadcasters are free to decide whether they want to use control or not. There is no compulsion. So we cant see how we are going against the court order. Furthermore, we have proposed generic control, which refers to any system which can be used to control the functions of a STB. We are not proposing a particular or specific system. For a long while, the broadcasters have been feuding about whether to have a control system or not. Both former Minister Pule and I encouraged the broadcasters to arrive at consensus, but to no avail. In September the Ministry began a new facilitation process led by a team chosen by the broadcasters to foster a measure of consensus, but, with the parties refusing to make any compromises at all, the facilitators reached an impasse. Our original aim was to reduce the differences among the broadcasters and then engage with the entrepreneurs in ways that are legally tenable to set up a representative committee to work with government to amend the broadcasting digital migration policy so that we could move quickly ahead. We very much wanted the parties to come to an agreement. But the facilitators were unable to secure even the most minimal consensus. Government then shaped its policy taking into account what all the parties had to say. What else could we do? The country could not be endlessly held to ransom by the feuding of the broadcasters.

There has been concerted consultation with the parties. It is a matter of considerable regret that parties are now threatening to go to court because they could not get everything they want and are seeking to delay further the already long overdue digital migration process. We are still committed to engaging with them and request them to cooperate.

It is regrettable that the SABC as a public broadcaster is siding with commercial entities and taking this approach instead of engaging with the representatives of its shareholder.

SABC-MultiChoice Agreement
The SABC does not want to use a control system. So the agreement with MultiChoice will not be affected. Our advice is that the commercial agreement only deals with the encryption of SABC channels and not with whether the STBs that are used for viewing SABC services have a control system or not. So the SABC is free not to use the control system in the transmission and management of its channels, and its agreement with MultiChoice will not be affected. Financial Implications i. ii. The cost to the government of control will be about R20 per subsidized box. Broadcasters wanting to use the control system will have to pay the government. They will pay the other costs related to the control system.

iii. The goverments cost for the STB control has to be related to the benefits to the local electronics industry and emerging entrepreneurs and in terms of jobs. The South African government, like most governments, has invested in a variety of ways for industrial returns. Government deploys a wide range of incentives - tax incentives and rebates; trade measures such as standards and specifications; and strategic tariff policies in support of industrial development. These measures are designed to support the achievement of a range of policy objectives and secure co-commitments from the private sector inclusive of broad based black economic empowerment (BBBEE); support for enterprise development and competition in the domestic economy; competitiveness upgrading; localisation and supplier development. The procurement policies of government enshrined in the amended regulations of the PPPFA, the Competitive Supplier Development Programme and the National Industrial Participation Programme are designed to support these policy objectives. It is estimated that in its various forms, direct and indirect incentives and tax foregone, this amounts to R7 billion a year. On Space for Emerging Entrepreneurs We are acutely aware of the need to deracialise and transform the economy. Our approach certainly caters for emerging entrepreneurs in ways that are consistent with governments BBBEE policies, legislation and regulations. On Engagement with Parties not in Agreement with the Cabinet decision On 5 December we briefed all the broadcasters on the Cabinets decision and requested them to make submissions on the 6 December gazetted version of amendments to the broadcasting digital migration policy. We also suggested a joint technical committee be set up to clarify matters and settle any outstanding differences. They have not responded favourably to this. We remain committed to engaging with them.

Yunus Carrim Minister of Communications