Media companies raise issues over proposed price controls - May 17, 2007 (ST)

BackMay 17, 2007

The Straits Times / The Business Times News On SPH

Media companies raise issues over proposed price controls

Such regulation will reduce the incentive to invest and innovate in the sector, they say.

By Bryan Lee
May 17, 2007
The Straits Times


MEDIA companies have cried foul over proposed price regulation by the Media Development Authority (MDA), saying this will erode the incentive to invest and innovate in the sector.

They say the regulator has not been clear enough on how it wants to control prices - raising significant uncertainty for industry players.

The firms were responding to a draft revision of the media code put up for public consultation by the MDA two months ago.

The revision was the first since the competition rules, collectively called The Code Of Practice For Market Conduct In The Provision Of Mass Media Services, were introduced in 2003.

Many of the proposed changes address the rise of new broadcast services, such as Internet TV, which have emerged through better Internet technology.

Other proposed tweaks include broadening access to television footage of significant national events and ensuring that all media firms are able to advertise their services in newspapers and on TV channels owned by dominant players.

The MDA had received six responses by the end of the review period last Friday from existing players, future entrants and legal experts. These are posted on the regulator's website.

The proposal to give the MDA power to regulate prices drew the most flak, with four respondents commenting on the topic.

The draft code states: 'Where MDA is satisfied that competition is unable to provide adequate protection for consumers, and media service providers are able to impose and sustain excessive fees, MDA may introduce price regulation.'

In such a situation, the regulator would require the media firms in question to seek its approval before charging any fee or varying any existing fee for their services.

The regulator said it will consider commercial factors and the operating environment of the companies when it makes its decision.

It defined 'excessive fees' as pricing that has no 'reasonable relation to the economic value of the product or service supplied'.

Singapore Press Holdings (SPH) and pay TV operator StarHub came out most strongly on the issue.

'Such a development is undesirable and regressive,' said SPH in a 33-page submission. It said that most of Singapore's media markets are already competitive and that any excessive pricing is usually self-correcting.

'Prices have been extremely competitive and such benefits have been passed on to and enjoyed by end-consumers,' it said.

StarHub said price controls will raise business risks for media firms as they effectively give the MDA a unilateral right to determine their business strategies.

'They may therefore seriously reduce the incentives for media companies to invest in their network and to launch new products,' said StarHub.

It said regulators elsewhere - in Britain, Hong Kong, Australia and the United States - have not imposed such price controls.

A partner at law firm Drew & Napier, Mr Cavinder Bull - one of the firm's leaders on competition policy - said in a phone interview that price regulation runs counter to the philosophy of competition law. 'It gives the code a split personality. On the one hand, you are trusting the market to function well, but yet you want to micromanage on this point,' he said.

Competition rules should instead focus on ensuring fair play, leaving business rivalry to keep prices at a reasonable level, he added.

Most respondents argued that the MDA needs to be clearer about how it will determine if prices are too high and how it will intervene.

'The proposed language in the revised code is overly broad and general,' said Hong Kong-based Star Group. 'The criteria is insufficient to make an adequate assessment of market failure.'

Nominated MP and technology lawyer Siew Kum Hong said in a phone interview that the MDA would not be wrong to regulate prices, provided it goes through due process - and gives companies a chance to make their case or exit the market.

Still, the new rule will mean higher compliance costs as firms will have to consider both their competitors and the regulator when setting prices, Mr Bull said.

New rules preventing media firms from capitalising on associated firms that are dominant in non-media sectors drew much attention too.

SPH applauded the move, saying it was timely and appropriate as media and non-media technologies converge. But like the other firms, it called for more clarity on how the rule will be applied.

SingTel, which will launch a pay TV service later this year, said such non-media affiliates may already be regulated in their own field.

Free-to-air TV operator MediaCorp's concerns dealt largely with its position as the national broadcaster. It raised issues over proposed new requirements to give other media companies access to television footage of significant national events such as the National Day Parade.

The rule code review also allowed companies to revisit ongoing regulatory bugbears.

SingTel called again for a moratorium on exclusive content deals.

Rival StarHub argued that it is not a dominant player if free-to-air and pay TV services were considered as one market, just as in the newspaper sector where free paper Today is deemed a competitor of The Straits Times.