Indo: Cable firms furious as RTE pays £6m to Sky

SkepticOne

Amusing story in the Independent.

Cable firms furious as RTE pays £6m to Sky

CABLE group NTL is to contact RTE management to request the state broadcaster pay the company for carrying its Irish channels on the television network, according to industry sources.

I don't think the cable companies have a leg to stand on because:

Under the Broadcasting Act, the cable operators are legally obliged to carry RTE's channels; however, the legislation does not prevent NTL or Chorus receiving a fee.

So why should RTE pay them anything. In any case, it is in the interest of the cablecos to carry the channel. Dropping it would accelerate the migration to Sky who have the upper hand.

Their defence:

The cable companies complain Sky does not invest in Ireland's infrastructure, although NTL and Chorus pour money into their cable systems.

Comment: No, Sky have already invested in the necessary infrastructure. They have a satalite in orbit and ground stations. Now they are reaping the reward. Cable is an obsolete and expensive way of providing non-interactive television. The real benefit of cable is the capability for interactive TV, telephony and cable Internet.

The article goes on:

Sky announced on Friday it had 193,000 digital satellite subscribers in Ireland giving the country the third highest digital TV penetration level in Europe.

Well done Sky!

NTL, why not upgrade to the full two-way system you promised when you got the licence?

Crippled with debt? Then cut your losses and sell to a company who can afford to compete in this modern competitive marketplace.

cableskeptic

Another point quoted in the article:

"The cable companies are angered by the fact Sky is not covered by the telecoms regulator, Etain Doyle, unlike Chorus and NTL. Neither does Sky have to pay a licence in Ireland".

Surely it is a case of unfair competition that ntl and Chorus have to pay a 3.5% levy to the ODTR based on their revenues (not profits).

Also, if it is true that RTE are paying Sky £6 million then why shouldn't they pay the cablecos? We are looking for fair competition here.

SkepticOne

Originally posted by cableskeptic
Another point quoted in the article:

"The cable companies are angered by the fact Sky is not covered by the telecoms regulator, Etain Doyle, unlike Chorus and NTL. Neither does Sky have to pay a licence in Ireland".

Surely it is a case of unfair competition that ntl and Chorus have to pay a 3.5% levy to the ODTR based on their revenues (not profits).

Once full competition enters, I would like to see regulation eased on NTL with the exception of emmission issues and other technical issues.

Also, if it is true that RTE are paying Sky £6 million then why shouldn't they pay the cablecos? We are looking for fair competition here.

I was being a bit unfair on the cablecos here. Again, with competition arriving, there should be less regulation applied to cable companies with regard to the particular channels they carry. Then, whether they carry RTE channels would be down to a private deal with the cable company. I do think, however, that RTE might not pay much for being carried on cable companies here. Firstly, the terrestrial network provides reasonable coverage and secondly, cable companies need RTE as a selling point. But the requirement to carry RTE should be lifted once alternatives are available. This is unfair and I admit to a bit of schadenfreude in this regard.

cableskeptic

Originally posted by SkepticOne
Once full competition enters, I would like to see regulation eased on NTL with the exception of emmission issues and other technical issues.

I don't mind whether ntl regulation is eased or Sky has to pay a levy as long as the same conditions apply to all. Same applies to Chorus as well.

I was being a bit unfair on the cablecos here. Again, with competition arriving, there should be less regulation applied to cable companies with regard to the particular channels they carry. Then, whether they carry RTE channels would be down to a private deal with the cable company. I do think, however, that RTE might not pay much for being carried on cable companies here. Firstly, the terrestrial network provides reasonable coverage and secondly, cable companies need RTE as a selling point. But the requirement to carry RTE should be lifted once alternatives are available. This is unfair and I admit to a bit of schadenfreude in this regard.

Your arguments could be applied to Sky needing RTE as much as RTE needing Sky. In fact it could be argued that this is an incredible deal for Sky and that Sky should be paying RTE for the privilege of carrying their content. I wouldn't be surprised if Sky has as many subs as ntl within a year or two as a result of this (and other) deals.

I like the use of schadenfreude in your post. Good to see a bit of culture creeping into the debate.

SkepticOne

Originally posted by cableskeptic
Your arguments could be applied to Sky needing RTE as much as RTE needing Sky. In fact it could be argued that this is an incredible deal for Sky and that Sky should be paying RTE for the privilege of carrying their content. I wouldn't be surprised if Sky has as many subs as ntl within a year or two as a result of this (and other) deals.

Now that RTE are getting out of the transmission business, they may want an alternative platform which will give them bargaining power over this new transmission company. Sky, of course, will take advantage of this. It is also a selling point from Sky's point but the big selling point for Sky here will be the UK core terrestrial channels. It's nice, though, to be able to get all the channels with the one remote.

With the Eircom deal, it looks like Sky are serious about competing here.

For the moment, RTE can take advantage of the cable companies' obligation to provide the RTE channels to not pay them anything. Ultimately, I don't think the ODTR should be getting involved in this sort of thing.

cableskeptic

Originally posted by SkepticOne
Now that RTE are getting out of the transmission business, they may want an alternative platform which will give them bargaining power over this new transmission company.

RTE's move has massively devalued the worth of their transmission assets and they now might find it difficult to sell the assets off at all.

The following email on this subject was sent to my website:

---

RTE’s satellite deal with BSkyB
…it’s NOT in the national interest


RTE’s digital satellite service agreement with Sky could spell disaster for the three television service operators. Some if not all could cease to exist within a short number of years.

RTE’s action is helping an external TV operator – which doesn’t pay Irish VAT or spectrum licensing fees – gain a monopolistic position. At present, there are three television service operators, Sky (satellite), ntl (cable) and Chorus (cable). During 2002, a new Irish entrant operating a nationwide digital terrestrial service will join these operators. Over the next three years the Irish-based operators will pay in excess of £40m to Government agencies; whereas Sky will pay nothing…and their achieving a near monopolistic market share would mean annual exchequer losses of close to £100m.

In April2002, RTE will act on their agreement with Sky to commence the broadcasting of RTE1, Network2 and TG4 on Sky’s digital satellite service.

This decision by the national broadcaster is anti-competitive and anti-consumer, and goes against the national interest. With such assistance by RTE, it is possible that Sky will become the dominant pay-TV operator in Ireland with up to one million subscribers in less than 10 years. The economic ramifications for Ireland are significant with over £80m per annum in lost VAT, £14m lost in annual spectrum licensing fees and a loss of hundreds of Irish jobs.

Irish Digital Terrestrial Service on the way


The pay-TV market in Ireland is entering a new phase. Should RTE’s intended agreement with Sky proceed it is probable that some if not all the current operators will cease to exist within a short number of years. At present, there are three operators, Sky (satellite), ntl (cable) and Chorus (cable). During 2002, a new Irish entrant operating a nationwide digital terrestrial service will join these operators.

Sky currently has upwards of 190,000 subscribers with ntl and Chorus having in the region of 375,000 and 220,000 respectively. Sky is the only operator whose customer base is increasing significantly, mainly at the expense of Chorus. However the impact of Sky creating a stranglehold on the Irish market would be disastrous –and RTE’s intended actions will greatly assist Sky in achieving near monopolistic market share with annual exchequer losses of close to £100m.

Our national spectrum plundered

Currently ntl and Chorus generate in the region of £15m per annum in VAT receipts for the Irish exchequer with a further £3m in spectrum license fees to the Office of the Director of Telecommunications Regulation (ODTR). As Sky is not providing its service from a base in Ireland is does not pay Irish VATon income from their Irish subscribers. In addition, as Sky has no licence from the ODTR to operate in Ireland, it does not pay spectrum licence fees and is in effect plundering our national spectrum.

This is not just over-spill reception, Irish Sky subscribers are being targeted directly. As part of Sky’s concerted recruitment effort it has recently launched an Irish version of the Sky Magazine. Ironically this publication now has a greater Irish circulation than that enjoyed by RTE’s own RTE Guide.

The ODTR is responsible for the policing of the national spectrum. Chorus and ntl each pay 3.5% of gross revenues to the ODTR. The new Irish digital terrestrial service provider due to launch in Ireland in 2002 will do so also.

Sky will pay nothing

Over the next three years these Irish based operators will pay in excess of £40m to Government agencies. Sky will pay nothing.

RTE’s action in helping an external TV operator gain a monopolistic position, which doesn’t pay Irish VAT or spectrum licensing fees, and has no interest in regional content or the Governments Information Society objectives could possibly bring the destruction of ntl, Chorus and digital terrestrial. RTE is providing the straw to Sky that they will use to suck jobs, exchequer income and national identity out of Ireland and back to their UK base.

RTE’s deal with BSkyB is self-serving and in the medium term will destroy Irish broadcasting, as Rupert Murdock will treat the Irish market as another UK province. It appears RTE have agreed to pay Sky £6m over a three year period –and this figure does not include operational costs to be borne by RTE in the provision of television signals, for example staffing, satellite uplink equipment, satellite transponder time, etc. RTE believe they will recoup this annual investment through the growth of advertising revenue –a revenue stream that is in decline for all broadcasters. Gaining an additional £6m net in advertising revenue is highly unlikely in the current market. Maybe RTE have a hidden agenda? Are they attempting to embarrass the Government by going onto a broadcast platform which is totally outside Irish regulation because they did not receive a licence fee increase which they believe though couldn’t prove was warranted? Maybe it is time the RTE Authority and senior management were asked some tough questions.

The lack of strategic planning and awareness within RTE is also worrying. If Sky gains significant market share due to RTE’s availability on the platform, RTE will lose all identity and their channels will become just one of many hundreds available on the platform. Viewer’s allegiance to RTE will disappear and the public will select channels on the basis of programme content –an area that is not one of RTE’s strengths.

And what will RTE do when it eventually develops its digital channels? RTE will be forced through their lack of foresight to pay Sky many more millions of pounds for carriage on the satellite platform. It goes from bad to worse for RTE.

RTE’s actions are against the national interest

Senior RTE management and the RTE Authority have a responsibility to Ireland and yet their actions are directly against the national and consumer interest.

So what should be done? At a minimum, RTE should be prevented from acting on their agreement with BSkyB unless they can justify their decision. And the ODTR should find a mechanism to level the playing field and stop the free ride Sky currently enjoys. A simple annual levy on the smart cards supplied by Sky to subscribers could provide the solution

If you have any comments to add - just email me at karlpeters@mail.com.

SkepticOne

Originally posted by cableskeptic
RTE's move has massively devalued the worth of their transmission assets and they now might find it difficult to sell the assets off at all.

Who knows what's going through the heads of RTE. It would make a lot more sense to sell the assets first and then do the deal with Sky. Maybe they do have a hidden agenda like the email suggests. I'm not complaining though because, for the moment, it adds to consumer choice.

If Sky do become a monopoly, some blame must be attributed to the cable companies who should have upgraded years ago to modern standards.

Tom Dunne

Originally posted by SkepticOne

If Sky do become a monopoly, some blame must be attributed to the cable companies who should have upgraded years ago to modern standards.

I couldn't agree more. While I have no experiences with NTL, I have had several major run-ins with Chorus when I subscribed to their alleged MMDS TV service. I experienced nothing but sheer frustration over the two years I had the service from the unbelievable arrogance of the telephone staff to picture reception which could be at best described as moody.

When Sky became available in Ireland, I jumped at it. Within two weeks I had dumped Chorus. Both Chorus and NTL knew Sky would become available in Ireland. What did they do? - ran a load of ads promising digital TV with no promise of when it would become availabe. Here we are a year after Sky have entered the market and they appear to be decimating Chorus' customer base. Yes, I hate to see a monopoly forming, yes, I hate to see Irish jobs going, but unfortunately, as appears to be the case with a lot of Irish companies, they get comfortable in their little corner of the market (look at Eircell and Digifone). Chorus and NTL could have done a hell of a lot more, they didn't, they are now suffering. This is the sad economic reality of two very badly run companies.

TD.
:mad: