The Office of the Regulator (“OOTR”) would like to clear the air and provide an explanation on article published by some media outlets with headings “Broadcasting Tariffs for Digital TV Platform a Curse” and “Digital TV tariff could ‘kill’ local stations, P.M tells Minister”, news on local radio station and the broadcasters complaint letter to the PM dated 1 October 2019.
The Digital TV Transition is a very unique venture in Samoa, there is a need for change from analogue to digital as claimed by nationwide consultation since 2013.
Technically the transition should have been driven by those in the industry mainly the broadcasters, but because no one was willing to step up and the fact that the broadcasters were incapable of working together, the Office of the Regulator undertook the role of coordinating the initiation of the Project.
The model adopted was based on what was recommended by the broadcasters themselves. This was done in the understanding that it would reduce the costs for broadcasters and for broadcasters to work together as a consortium to build, operate and maintain the digital platform or multiplex. However due to the broadcasters unwillingness to form a consortium and failing to carry out their plans for the digital platform, the OOTR had to initiate an alternative plan and business model for the project. If they had agreed to a consortium they would not pay tariff.
Despite the failure of the broadcasters, OOTR still took to Cabinet the broadcasters’ recommendation for set up of digital platform. The Cabinet approved the recommendation and it was from there OOTR worked on the documentations for the project. By 2015, all documents needed and related to the project were in place and ready to be used but the broadcasters refused to build, operate and maintain the platform despite OOTR’s requests.
Procurement of Services
OOTR sought for almost two years for bidders to invest in the setup of the Digital platform; and after frequent advertisements no one else but Samoa Digital Communications Limited established by the Ah Liki Investment Group, took up OOTR’s invitation to treat for the establishment and operation of the platform, in return for a licence.
SDCL’s interest in building, operating and maintaining the platform was treated the same as other applications evaluated and determined by the OOTR.
In OOTR’s effort to avoid complaint about the TV coverage, which up to now no TV Broadcaster has met 100% coverage, the Digital Platform was built to attain and deliver better services and better coverage to the public, a solution to a current problem.
The 7 Broadcasters (TV) were informed and consulted from day one and in not only one occasion, regarding the coming changes and more than often the old licensing regime was relaxed (such as broadcasting coverage obligations) to allow them to prepare for the transition.
In terms of the tariff, the Broadcasting Regulator review proposed tariff and determine it before making a final decision. In determining the tariffs for Digital platform the Office of the Regulator developed a Cost model for establishing a revenue requirement for SDCL.
The tariff of $35,759.00 was premised on the following factors:
Capital Investment of $6 million(whereas the actual cost incurred was $9 million),
Weighted Average Cost of Capital (considering Samoa inflation, Equity market risk premium,
country risk premium, company specific risk premium, cost of equity, corporate tax etc),
Depreciation of assets,
Operating Expenses (incurred actual costs and forecasted business plan) and Demand (7 TV
the TV Broadcasters ability to pay
OOTR determined a tariff using best practise cost models considering all Regulatory instructions and approval forming part of the License issued to SDCL to setup the platform and sustain the platform operations. The tariff determined was also premised on the clear intention of the OOTR to review the tariff annually or earlier when the new players enter the TV broadcasting market. There is value to the broadcasters to have DTT service price stability in the initial period of the DTT service being offered so that they can better plan their own business, advertising rates, and others.
The broadcasters do not have knowledge of Regulatory aspects for tariff calculations as they were not privileged to Regulatory capacity building on calculating tariffs in the Broadcasting market. Hence, the unwise formula used by broadcasters does not have true reflection of Regulatory tariffs on best practise based on professional standards not what suited them.
TV Broadcaster in a manner of scepticism sought professional advice on the tariff. They self-confessed and confirmed in our consultation on the tariff that the professional advice they sought calculated a very similar amount to the $35,759 determined by the OOTR.
The OOTR is in consultation for the Digital Radio Project to be on board the Digital Platform and would further render the calculated tariff.
￼Office of the Regulator 2
The $35,759 is a single expense to connect to the readymade Digital platform that TV Broadcaster did not coordinate to build and reap the income themselves. While this is being said, the tariff is also an obligational cost to the broadcasters for not meeting the 100% coverage requirements under their licenses.
The broadcasters will no longer be burdened with the cost they used to endure with the analogue system but rather pocket some of these costs saved as income. The Cost Model that we currently use was based on what was consulted and agreed by all broadcasters and was then approved by Cabinet.
The Office of the Regulator wishes to advise the broadcasters of the need to hire economists to recommend the real market analysis and how finances and expenses are collected and also the standards the OOTR is using to calculate tariffs.
For the broadcasters to insist on lowering the tariff that OOTR sets as mandated by Law is disrespectful. We are only doing the work that is required of us by implementing it based on the right interpretation of the law passed in Parliament.
The PM’s remark ‘mala paga’ is considered a sympathy statement for those who present grievances to him, it is his prerogative as a leader to show compassion and therefore these jargons are taken to be motivational statements to find solutions that would appease parties; but in some circumstances when process and proper consideration has been done there is nothing else to offer but clarification. So for the record irrespective of the Talamua reporter’s translation of ‘curse’, if one is to consider and truly reflect on the hard work people put into this Project, the journey taken to get this far, it would show that this project is too blessed beyond the curse.
OOTR has made its final determination on Digital Platform Broadcasting Tariff and issued Order No.2019/T83.
For more information, please contact the Office of the Regulator on telephone 30282