TechCentral

Former communications minister Faith Muthambi has won a constitutional court battle against e.tv over encryption in set-top boxes for digital terrestrial television.

TechCentral reported that the minister, who was shifted out of the communications portfolio at the end of March when President Jacob Zuma reshuffled his cabinet, had challenged a supreme court of appeal judgment in favour of e.tv.

In May 2016, e.tv won a significant battle in the long-running war over encryption when the supreme court found that an amendment to the broadcasting digital migration policy by Muthambi, made in 2015, did not follow a process of consultation and was irrational and in breach of the principle of legality. This decision has now been overturned by the constitutional court.

The judgment potentially throws government’s long-delayed digital TV migration plan into further chaos. Last month, newly appointed communications minister Ayanda Dlodlo said in parliament that her department’s policy on the issue will shift to one that favours encryption, in line with ANC policy. It’s not immediately clear what impact Thursday’s constitutional court judgment will have on Dlodlo’s decision.

The following statement issued by the constitutional court outlines the details of the judgment:

Today, the Constitutional Court handed down judgment in three consolidated applications for leave to appeal against a judgment of the supreme court of appeal (SCA), which held that a clause of an amendment to the broadcasting digital migration policy adopted by the minister of communications was invalid and therefore unlawful.

South Africa will undergo a “digital migration process’ to transition broadcast television signals from analogue to digital form. However, millions of households in South Africa do not have television sets that contain a built-in device to convert digital broadcast signals. Those television sets will require set-top boxes (STBs) to convert digital signals. In line with the policy, STBs will be provided to about 5m lower-income households on a subsidised basis.

At the same time, there has been ongoing debate among key stakeholders regarding whether these subsidised STBs should have the capability to decipher encrypted digital broadcast signals. The applicants contended that the subsidised STBs should not have decryption capabilities. The first respondent, e.tv, argued that they should. When it was adopted in 2008, the policy provided for decryption capabilities. However, in March 2015 the minister published the amendment, which inserted a clause in the policy stating that the subsidised STBs shall not have the capability to decipher encrypted broadcast signals.

After the Amendment, e.tv brought an application to the high court to review the Minister’s decision. It argued that the Minister did not have the power to effect that Amendment and that certain consultations as required by the Electronic Communications Act 36 of 2005 (ECA) had not been made. E.tv argued that the minister was required to consult with the Independent Communications Authority of South Africa (Icasa) and the Universal Service and Access Agency of South Africa (Usaasa) before adopting the amendment. The high court held that minister had the power to pass the amendment under the applicable legislation and the constitution. The high court also held that the amendment satisfied the requirements of legality review, including lawfulness and rationality. Accordingly, the high court dismissed e.tv’s application with costs.

E.tv lodged an appeal against the high court ruling to the SCA. The minister and 12 other respondents, including the SABC and M-Net, opposed the appeal. The SCA upheld the appeal with costs.

Aggrieved by the SCA’s judgment, M-Net, the minister and the SABC filed applications for leave to appeal to the constitutional court. These applications were consolidated. The applicants sought the judgment and order of the SCA to be set aside. The applications are opposed by e.tv and others, including SOS Support Public Broadcasting Coalition and Media Monitoring Africa.

In the majority judgment, Mogoeng CJ (Nkabinde ADCJ, Mojapelo AJ, Zondo J, concurring and Jafta J concurring in the order) held that policy-making is fundamentally a power assigned by the constitution exclusively to the executive. Also, the majority held that consultation is markedly different from negotiation, which is essentially about consensus-seeking. Consultation is about the solicitation of such views as key roleplayers and interested persons might have on a policy proposal.

The majority holds that the requirements for consultation had already been met fully through consultative processes embarked on by Muthambi’s predecessors, when she took over. There was no longer any obligation to consult with Usaasa, Icasa or any other interested person. That opportunity had been availed to all, particularly when Carrim published his policy proposals. Muthambi was at large to solicit the views of any other person or entity she thought could be of help to her. Although she went about it in the most unfortunate way, her conduct did not create a right for e.tv which it otherwise did not have.

The majority holds that the standard of rationality contained in legality review is not some supra-constitutional entity or principle that is uncontrollable and that respects or knows no constitutional bounds. Like all other constitutional principles, it, too, is subject to constitutional constraints and must fit seamlessly into our constitutional order, with due regard to the requirements of the doctrine of separation of powers. It is a good governance-facilitating, arbitrariness- and abuse-of-power-negating weapon in our constitutional armoury to be employed sensitively and cautiously.

The majority also notes that e.tv in effect accepts that foregoing decryption capabilities is a legitimate and effective cost-saving measure or strategy but contends that there is another and possibly more appropriate means of achieving the same purpose. That is the proposal, e.tv says, it would have presented to the department of communications had it been consulted by Muthambi before she finalised the policy. E.tv appealed to this court to endorse its apparently more inclusive and better proposal so that the department could consider adopting it.

In response, the majority holds that the inquiry is always whether there is a rational connection between the means and the purpose. Since the answer is yes, and e.tv together with nine other television licensees were consulted, judicial intrusion is constitutionally impermissible. It is for the executive to modify the means as many times as it wishes to achieve the relevant objective, provided it does so within the bounds of the constitution and the law. The policy-making process was therefore procedurally and substantively rational. The majority concludes that the minister acted well within her powers in amending the policy. Therefore, it upholds the appeal and set the order of the SCA aside.

In a dissenting judgment (second judgment), Cameron J and Froneman J (Khampepe J and Pretorius AJ concurring) find that the minister’s amendment is not immunised from scrutiny. In exercising her power under the ECA, the minister was exercising a statutory power, informed by constitutional values and deriving from high constitutional authority, but not protected by any supposed constitutional policy-making immunity. The minister’s disregard of her constitutional and statutory obligations was patent. Consequently, this court is not only entitled but obliged to intervene.

The second judgment agrees that the minister had to act rationally, as required by the constitutional principle of legality. She sought to save costs for government by foregoing decryption capabilities from STBs. However, e.tv had tendered to cover those very costs. To the extent that e.tv’s tender was unclear, rational pursuit of her objective of cost saving by foregoing decryption capabilities required her to clarify with e.tv what its offer entailed. The minister failed to do so, despite secretly consulting other “stakeholders’ outside of the statutorily mandated process. The means she pursued to attain the end of cost-saving was unrelated rationally to that end. The whole process the minister followed in adopting the amendment was therefore tainted with irrationality. Further, despite being required by the ECA to consult with Icasa and Usaasa on the amendment, the minister failed to show that she had indeed done so. The minister admitted that she consulted various persons and entities, but not e.tv.

However, she failed to explain why she did so. She did not say who she consulted specifically. She also did not seek to explain why this does not open the door to “secret lobbying and influence-peddling’. For these reasons, the second judgment would therefore grant leave to appeal but dismiss the appeal.

In a concurring judgment (third judgment), Jafta J agrees with the outcome proposed in the first judgment, but is unable to support the reasoning furnished for it. According to the third judgment, section 3(5) of the ECA must be read together with subsections (6), (7) and (8) which make it clear that a policy direction referred to in section 3(5) does not constitute an amendment. Subsections (6), (7) and (8) regulate the procedure which must be followed in amending a policy direction. It would be remarkably odd for parliament to use the word “policy’ in an expansive sense that includes amendments and the words “policy direction’ in a restrictive sense that excludes amendments in the same sentence. Furthermore, the scheme of section 3, read in its entirety, suggests that the terms “policy’ and “policy direction’, as used in subsection (5), do not include amendments. According to the third judgment, there appears to be no discernible reason for restricting the procedure in question to policy directions only. The only reasonable explanation that presents itself is that this was an oversight on the part of parliament not to include the amendment of a policy in the provisions of subsections (6), (7) and (8). Accordingly, the third judgment concludes that Muthambi was exempted by subsection (6) from repeating the subsection (5) process, which was followed by former minister Ivy Matsepe-Casaburri, when she issued the original policy.

The third judgment also rejects e.tv’s procedural irrationality challenge and holds that there is a rational connection between the amendment and the stated objective of saving costs.

For the reasons given in the majority judgment, the appeal is upheld and e.tv, Media Monitoring Africa and the SOS Coalition are ordered to pay costs to M-Net, including costs of two counsel.

Source: TechCentral

DStv Media Sales has been fined R180million for price fixing and the fixing of trading conditions in contravention of the Competition Act.

The matter relates to a November 2011 investigation which found that, through the Media Credit Co-Ordinators (MCC), various media companies agreed to offer similar discounts and payment terms to advertising agencies that place advertisements with MCC members. MCC accredited agencies were offered a 16,5 per cent discount for payments made within 45 days of the statement date, while non-members were offered 15 per cent.

The Competition Commission found that the practices restricted competition among the competing companies as they did not independently determine an element of a price in the form of discount or trading terms. “This amounts to price fixing and the fixing of trading conditions in contravention of the Competition Act,’ stated a tribunal statement.

A fine was then imposed by the Competition Tribunal as part of a consent agreement reached between the parties on Thursday.
The tribunal imposed an administrative penalty of R22,3million and the DStv unit will also have to pay an additional R8million to the Economic Development Fund for the next three years.

The money received will be used to assist with start-up capital and to help black students requiring bursaries to study media or advertising, and will be managed by the Media Development and Diversity Agency, who will ensure that the amount is audited annually.

DStv Media Sales has also agreed to provide 25 per cent in bonus airtime for every rand of airtime bought by qualifying small agencies. “This aims to help smaller agencies participate in the market. The bonus airtime will be provided for a period of three years and is subject to a total annual airtime cap of R50million,’ the tribunal statement further read.

DStv Media Sales agreed to cooperate with the Competition Commission in its investigation and has accepted responsibility for being party to this industry practice,’ said MultiChoice.

Source: Tech Central

Naspers is considering the sale of its pay-television business in Africa as sluggish economic expansion in key markets stifles growth and viewers switch to cheaper online alternatives, according to two people familiar with the matter.

A disposal of MultiChoice won’t include the South African division, which is still highly profitable, said the people, who asked not to be identified as the plans haven’t been made public.

A sale is one of a number of options being considered by Africa’s biggest company by market value, and a final decision hasn’t been reached, one of the people said.

Naspers and MTN Group, Africa’s largest wireless operator, have briefly discussed a deal for MultiChoice Africa, but no agreement was reached, according to one of the people.

Both companies confirmed on Thursday that they are still in talks that were disclosed earlier about sharing TV content. MyBroadband reported earlier that MTN was in talks to buy MultiChoice Africa, citing unidentified people.

A sale of MultiChoice Africa would represent a further shift by Cape Town-based Naspers away from its traditional media business, which includes newspapers and MultiChoice’s main product, the DStv satellite-TV service.

Since winning big with a 2001 investment in Chinese technology company Tencent Holdings, a stake that’s now worth about US$107bn, Naspers has become a serial investor in Internet companies around the world, ranging from an online travel agency in India to education software providers in Silicon Valley.

The value of the Tencent stake is worth more than Naspers’s market value of R1,2 trillion, which partly reflects the weak performance of the TV division.

While the company arrested a decline in subscriber numbers over the six months through September, earnings before interest, taxes, depreciation and amortisation at the unit declined 33% to $331m.

As Naspers charges customers in local currencies, “the continued weakness of currencies and economies in many African countries resulted in lower US dollar revenues’, the company said in its November results presentation.

Nigeria’s economy contracted for the first time in 25 years in 2016 and its currency has depreciated by 37% against the dollar over the past 12 months. Sub-Saharan African economies grew by an average of 1,4% last year, compared with 3,4% in 2015, according to the International Monetary Fund. — (c) 2017 NewsCentral Media

By Loni Prinsloo

Source: TechCentral

Government is set to back encryption in digital terrestrial television, a sharp reversal of its position on the contentious subject, following the appointment of a new communications minister last month.

Communications minister Ayanda Dlodlo confirmed in parliament on Tuesday that her department’s policy on the issue will shift to one that favours encryption.

Last week, political journalist Stephen Grootes reported from the World Economic Forum on Africa event in Durban that the Dlodlo had said that government would implement encryption in digital set-top boxes, in line with ANC policy.

This is a reversal from the position held by her predecessor, Faith Muthambi, who was moved to the public service & administration portfolio last month when President Jacob Zuma reshuffled his cabinet.

The change in direction comes ahead of a constitutional court judgment, expected to be handed down soon, that will deal with the issue. Muthambi — supported in her application by MultiChoice — challenged a supreme court of appeal judgment that found in favour of free-to-air broadcaster e.tv on the issue.

In May 2016, e.tv won a significant battle in the long-running war over encryption when the supreme court found that an amendment to the broadcasting digital migration policy by Muthambi, made in 2015, did not follow a process of consultation and was irrational and in breach of the principle of legality.

The court found, too, that the amendment did not achieve its purpose and was thus irrational and invalid. Muthambi purported to bind regulatory authorities and broadcasters and thus acted ultra vires (beyond her authority), the court said.

MultiChoice, which owns M-Net and DStv, and e.tv have been at each other’s throats for years over encryption of the signals. The pay-TV broadcaster has argued, among things, that putting encryption in government-provided free set-top boxes would amount to unfair competition. E.tv, on the other hand, argued that if this didn’t happen, the free-to-air broadcasting sector in South Africa risked being “ghettoised’.

MultiChoice said on Tuesday that it is not aware of any official position from government on the subject, and declined to comment further.

Democratic Alliance MP Marian Shinn described Dlodlo’s reversal of the policy “a great step forward’. (Also see the opinion piece, written by Shinn, Set-top box move is “good news’.)

The South African Communist Party welcomed the news of government’s policy reversal, saying Muthambi’s 2015 amendment was done “simply to benefit parasites and Naspers’, which owns MultiChoice.

“The SACP agrees with the basic principles underlying the policy, specifically the strategic aim to strengthen free-to-air, public and community television broadcasting,’ the party, which is an ANC alliance partner, said in a statement.

“Naspers was established during colonial rule in South Africa and served as the mouthpiece of the Broederbond, the ideological vanguard of apartheid. The action to strengthen its monopoly and parasites could only be the function of false radical economic transformation at the expense of true radical economic transformation,’ the SACP added.

“In sharp contrast, true radical economic transformation must de-monopolise our economy. It must decisively elbow the stranglehold of private monopoly capital, concentration, oligopolies, oligarchs and parasites from the neck of our economy, including in the media and communications sector.

“The digital terrestrial television broadcasting space must therefore be democratised by means of bringing an end to the monopoly of Naspers’s MultiChoice.

“The government must use the [broadcasting digital migration] process to expand access to new entrants. Encryption significantly lowers the financial barriers to entry for new entrants in the pay television sector, while allowing for state revenue generation to recover, over a few years, the cost of the initial … subsidisation of [set-top boxes].’

The SACP said, too, that the inclusion of encryption would give South Africans, including the poor, access to a variety of digital platforms including e-government services. “E-government services can only be delivered in home language and geographically specific form, with [set-top boxes] that have functional conditional access/encryption chips.’

The party called on Dlodlo to withdraw the appeal application before the constitutional court. — © 2017 NewsCentral Media

Source: TechCentral

MTN South Africa has pulled the plug on VU, its video-on-demand platform, just days before its partner that provides the service, Discover Digital, launches a new VOD offering. The service will be terminated on 3 May, MTN said.

As a “gesture of goodwill’, the mobile operator will provide affected customers with a three-month subscription to Naspers-owned Showmax, MTN South Africa chief digital officer Maxwell Nonge told TechCentral.

The company launched MTN VU in December 2015. VU was a rebranding of FrontRow, launched a year earlier.

Following a review of its digital strategy, MTN has taken a decision to “decommission’ its VOD service, the company said.

“In line with the ongoing review of its operations, MTN is also reviewing its streaming and content strategy as the costs associated with offering these services have become prohibitive,’ it said.

As with FrontRow before it, MTN subscribers’ data was zero-rated (provided free, without eating into their data allowances) when they streamed content from VU using an MTN Sim card.

“The decision to discontinue VU does not signal a departure from this space [for MTN],’ Nonge said. “We are still committed to becoming a significant player in this field. To this end, we will announce new services to the market at an appropriate time.’

MTN’s decision comes just days before Discover Digital, which provided the VU service for MTN, launches a new VOD service widely rumoured to be called DEOD, or Digital Entertainment on Demand. Discover Digital will hold a media conference in Johannesburg on Thursday to announce its plans.

MTN rebranded FrontRow as VU on 1 December 2015, and cut its prices to match new competitors in the market. The rebranded platform offered content from all six big Hollywood studios, along with programming from BBC Worldwide, Endemol and Freemantle. — (c) 2017 NewsCentral Media

Source: TechCentral

The SABC is in talks with national treasury to secure a guarantee to help it claw its way out of a financial crisis after it failed to pay some of its content suppliers in March and April.

We are “currently in talks with the treasury and the department of communications on how we can possibly secure a guarantee from government,’ spokesman Kaizer Kganyago said by phone on Wednesday, 26 April.

The SABC is one of the key state companies that have been marred with allegations of poor management. The broadcaster’s entire board quit last year after parliament instituted an inquiry into its conduct following a series of scandals, administration blunders and legal disputes. An internal report shows SABC risks running out of cash.

“The financial difficulties that we have already come out and said we are having are due to the economic crunch that all companies are currently operating in and the fact that advertising revenue has decreased,’ Kganyago said.

The state broadcaster hasn’t had a permanent CEO since 2015 and the nation’s graft ombudsman found that the former chief operating officer, Hlaudi Motsoeneng, lied about his qualifications and the high court barred him from working at the broadcaster. Motsoeneng introduced a controversial policy to ensure 90 per cent of music on its 22 radio stations was by local artists.

Government guarantees to state companies totals R477.7bn, or 11.5 per cent of GDP, according to the February budget review.

The SABC’s interim board is seeking at least R1bn, according to a report by Johannesburg-based Eyewitness News citing Khanyisile Kweyama, who was appointed chairwoman at the end of March.

“There’s no figure that has been put out by the SABC in terms of how much money we need,’ Kganyago said. “The talks are ongoing.’

SABC’s management met with suppliers two weeks ago to explain the broadcaster’s financial difficulties and to inform them some payments might be delayed, Kganyago said.

The broadcaster failed to pay some production companies in March according to a statement issued by the Independent Producers Organisation, which represents 100 producers in South Africa. Some producers have also not been paid for April.

“The failure of the SABC to pay not only places the industry in crisis but also puts thousands of livelihoods, bond and loan repayments, school fees and living expenses at risk,’ Naomi Mokhele, a spokeswoman for the IPO, said in a statement on 31 March. — (c) 2017 Bloomberg LP

Source: TechCentral

Amazon.com has agreed to buy Dubai-based online retailer Souq.com, whose shareholders include Naspers and Tiger Global Management, betting that e-commerce in the Middle East is poised to take off.

The US e-commerce giant beat out Emaar Malls, which runs the world’s biggest shopping centre and had bid US$800m for Souq.com. Amazon and Souq.com didn’t disclose deal terms and declined to comment.

Amazon has been stepping up its overseas expansion. Having largely ceded China to Alibaba Group, the Seattle company is waging a war of attrition with Flipkart Online Services in India, where it has pledged to spend $5bn in the next few years. The Middle East has lagged behind the rest of the world in e-commerce, but online shopping is picking up in such countries as Bahrain, Qatar and the United Arab Emirates, where most people own mobile phones.

“As growth in core markets mature, Amazon is looking for new avenues of growth,’ Edward Yruma, MD of KeyBanc Capital Markets, said in an interview. “You have very entrepreneurial e-commerce start-ups that need help getting to the next degree of scale so this makes sense from a lot of perspectives.’ In an earlier note, Yruma said acquiring is a bit of a departure for Amazon, which typically builds businesses from the ground up.

In Souq.com, Amazon is getting a well-established player with a claimed 23m online visits a month. The retailer, which employs over 3 000 people, sells more than 400 000 products, from televisions to perfumes — and calls itself the “Amazon of the Middle East’.

Founded in 2005 as part of Arab online services provider Maktoob, it was spun out following Yahoo’s $164m acquisition of Maktoob in 2009.
Souq.com was valued at $1bn in its last funding round, people with knowledge of the matter said at the time. The retailer secured $275m in February 2016 from investors including Standard Chartered Private Equity, International Finance Corp and Baillie Gifford. Souq.com’s investors also include hedge-fund firm Tiger Global Management and South African media company Naspers.

The deal is one of Amazon’s largest acquisitions in recent years. In 2014, it bought game streaming site Twitch for $970m. The US retail giant began weighing a bid for Souq.com late last year. Having walked away from a deal earlier in the year, Amazon restarted negotiations to buy the company for as much as $650m, people familiar with the situation said on 9 March.

“Amazon and Souq.com share the same DNA — we’re both driven by customers, invention and long-term thinking,’ Amazon senior vice president Russ Grandinetti said in a statement.
The deal is expected to close this year.

(c) 2017 Bloomberg LP

Source: Tech Central

Efforts to license competition to DStv parent MultiChoice have proven “futile’ and a new strategy is needed to open the market to competition, the ANC has said in a discussion document published ahead of its national policy conference.

One of the ANC discussion documents, published at the weekend ahead of the party’s national policy conference to be held from 30 June to 5 July 2017, has warned that efforts to license competition to DStv parent MultiChoice have proven “futile’ and that a new strategy is needed to open the market to competition.

In a document dealing with ICT, entitled “Towards the Fourth Industrial Revolution’, the ruling party says that “it seems there are limited or no prospects under current conditions of any new player successfully entering and competing against the existing monopoly due to its dominance.’

The document says a “multipronged strategy’ is needed to address the problems in the subscription broadcasting market, including a review of the licensing conditions for pay-television companies.

“Facilitating growth in the subscription market requires the review of the licensing conditions of the subscription services,’ the discussion document says. “The current regulatory regime imposed at the time when the subscription market was small and had a relatively insignificant share of the total audience must be changed to reflect the size and therefore the obligations to ensure fairness across the whole television market.’

The document says, without elaborating about what it means, that the “technology platform’ must be opened “for use by new entrants’ and that “diverse suppliers’ must be allowed to “provide services across the different elements of the subscription value chain.’

Elsewhere, it says: “South Africa must open the subscription television market, which is currently dominated by one player, Naspers, through MultiChoice and DStv.’
It says there is “a need to review the legislative limitations on advertising revenues, considering the prevailing conditions in South Africa.’

“[These] limitations were intended to protect the [free-to-air broadcasting] sector (which therefore has greater obligations in relation to, for example, South African content quotas). Advertising revenue collected by a pay-TV operator must always, according to law, be lower that of subscription revenue. However, subscription revenue now exceeds total advertising revenue and the limitations are therefore meaningless. This must be addressed to ensure the viability of [free-to-air] services both during and after digital migration.’

The document warns that, in recent years, the broadcasting regulatory system “has not been effective and has resulted in operators not fulfilling their licence conditions’. It doesn’t elaborate on this, but says: “The establishment of two regulators as per the [national integrated ICT policy] white paper, one for content and the other for competition and networks, will help address this issue.
“These two regulators must be established without delay so that they provide the necessary capacity for flexible and proactive regulation…’

Elsewhere in the document, the ANC says the move to digital terrestrial television must be used to strengthen free-to-air broadcasters, benefitting public, community and commercial services.

Moreover, digital migration should be used to break up “monopolies and concentration across the television and audiovisual content value chains and, for example, address [the] decoder monopoly, promote interoperability of decoders and position South Africa to be a preferred producer of all-in-one decoders (decoders enabled with digital terrestrial television, Internet connectivity, the Internet of things and pay-TV, etc.’

The discussion document also touches on the entry of “over-the-top’ (OTT) services in broadcasting in South Africa. Such services include the likes of Netflix, YouTube and Amazon Prime Video. The ANC warns their entry could lead to “unfair competition to existing licensees who have public interest obligations attached to their licences.’

“The regulatory framework must be fine-tuned to create a level playing field,’ it says. “The review of broadcasting policy, for example, must expand the definition of broadcasting to take into consideration broadcast-like services that have been enabled by technology changes.

“Policy must also encourage the emergence of South African OTTs so that they can meet the needs of local content and societal needs while competing with the foreign OTTs. The regulation of OTTs will be graduated to reflect their market power and ability to provide services that replace the current regulated services.’

© 2017 NewsCentral Media

Source: Tech Central