Businesses puzzled by CPC’s move to control DStv prices

Business owners are puzzled by a court injunction obtained by the Consumer Protection Council (CPC) seeking to stop a price increase implemented by cable television operator, MultiChoice for its DSTV service in Nigeria.

At the request of the CPC, a Federal High Court sitting in Maitama, Abuja, on August 20 restrained MultiChoice Nigeria Limited from implementing a recent increase in DStv subscription rates that took effect on August 1. Justice Nnamdi Dimgba granted an injunction restraining the video entertainment and Internet Company from implementing the new rates. The court also restrained MultiChoice from any conduct capable of interfering with the regulatory process of CPC.
In a press release stating why it approached the court to stop DSTV from implementing the new rates, the CPC argued that ‘it has a constitutional responsibility to protect the welfare and interest of consumers in Nigeria through the instrumentality of the “the Council.”
However, CPC claims that the court injunction it got did not intend to regulate price, or in any way interfere with the commercial interface between Multichoice and its customers in fixing price. ‘Essentially, the Council recognizes and respects the fidelity in the operation of free market forces in arriving at prices for goods or services.’
‘The Council understands and appreciates that price is an acceptable determination of transparent and undistorted market operations. However, it is the law, that operators can by conduct, distort the market and, or otherwise compromise the integrity or transparency of the market, thereby questioning the reliability of the pricing methodology or mechanism.’
The CPC also admitted that ‘these principles are better articulated in the context of a Competition or Antitrust legislation and regime, which Nigeria does not have’. The CPC however insists that ‘they are consumer protection principles that are generally express or sometimes derived from existing consumer protection legislation.’
The organisation quotes Section 2(i) CPC Act which expressly states that ‘In any inquiry under the CPCA, the question must be whether any entity or individual has engaged in conduct that constitutes an “obnoxious practice”, or “unscrupulous exploitation”.
‘The Council in addressing the entire scope of complaints and House of Representatives resolution, proceeded in the investigation. Multichoice initially adopted a sensible industry approach to regulatory oversight, which was to preserve regulatory and company resources by making admissions of its own in certain areas and welcoming additional regulatory initiatives to improve services and customer experience over a period of time, and supervision.’
According to the Council,”Over a period of time, during which mutual concerns and reservations were addressed, the Council and MultiChoice agreed and adopted a Proposed Mutual Joint Consent Order.”
“The terms and obligations included an unopposed and undisputed requirement and understanding that Multichoice will not change, revise or modify any material term or conditions of service(s) for a period of 24 months. Multichoice never expressed any concerns or dissatisfaction with this clause of the Consent Order that required Multichoice to maintain status quo on its Terms and Conditions (which naturally includes pricing) for the 24-month period during which the company would have been under the Council’s supervision, to ensure that all necessary corrective measures were adequately implemented, and that consumers eventually get expected value for their money.”
Some consumers BusinessDay spoke to seemed to echo the CPC position.
A customer by the name Ola said “why does DSTv keep increasing prices every year, they should be able to explain to their customers the reason why.”
However, analysts disagree with the position by CPC that Multichoice agreed not to raise price for 24 months, noting that price is not something that any company can commit not to increase or reduce for that long considering that different variables go into the fixing of price.
“Inflation has remained at double digits for more than two years. Which company can guaranty fixed prices for that period’ an analyst asked.
Analysts have also noted that DSTV is not an essential commodity for which price should be fixed.
“People have choices when it comes to Cable TV. There is Kwese TV, and TSTV just came back on stream. There are also different online versions. So why is CPC concerned about DSTV when the company is playing in a market that has competition. I thought DSTV should be worried more about the power sector where operators are using estimated billing to kill many Nigerians who genuinely have no options”
Analysts also note that the CPC should have been more concerned if DSTV was reducing prices as that could have squeezed new entrants and constrained competition in the sector.
“DSTV increasing prices is actually good for competition in the cable TV sector, as it means that the new entrants like Kwese TV and TSTV could become attractive for consumers because they are cheaper. Allowing them keep their low prices is actually not in the interest of consumers” said a player in the industry.
Bismarck Rewane, managing director at Financial Derivatives Limited also warns that “Any attempt to control price will always end up in a disaster because the regulator does not know the cost structure involve in providing these technical services.”
“The only way to bring down price is to allow more competition and create an enabling environment for more operators to come in,” Rewane told BusinessDay by phone.
Similarly, Rafiq Raji senior macroeconomist at an Africa focused macro research investment firm Macroafricaintel Investment Limited said although government can raise concern about high price, it is a disservice for government regulators to attempt controlling prices for luxury goods in Nigeria.
“It won’t speak well of the government in the eyes of foreign private investors,” Raji said by phone.
Johnson Chukwu managing director of Crowy assets management limited also believes that the move by the CPC is ill-advised and not a market oriented approach by a government regulator.
“The government should have encouraged a competitive market space by allowing other operators to compete with DSTV. This will make it difficult for DSTV to charge economic rent rather force them to reduce price,” Chukwu told BusinessDay.
But BusinessDay investigations actually show that DSTV and GoTV subscription rate paid by Nigerians, even after the rate hike, is the lowest when compared to other countries in which Multichoice has operations.
When BusinessDay analysed the subscription rate charged by the television and online content producing company, the rate given to Nigerians across its various packages on the platform was the least compared to what its African counterparts also pay for the same products.
In July, MultiChoice raised the subscription rate for the DSTV Premium package from N14,700 to N15,800. This is lower than South Africa’s R809 (N21,228) and Ghana’s GHC368 (N27,360) for the same package.
The Compact Plus package was also increased in Nigeria from N9,900 to N10,650. South Africa and Ghana pays R509 (N13,670) and GH245 (N18,365) for the same product respectively.
The DSTv Compact package in the period under review was increased from N6,300 to N6,800, in Nigeria as against R385 (N10,340), GHc 149 (11,169) paid by both South Africa and Ghana.
The Family packaged which was increased from N3,800 to N4,000 in Nigeria is also lower than what South Africa and Ghana pays for the product at R249 (N6,687) and GHC85 (N6,371) respectively.
The Access package subscription rate in Nigeria which was up from N1,900 to N2,000 is less than South Africa’s R99 (N2,656)
Speaking on the recent DSTV rate hike, Uche Eze, a Nigerian customer said “cost of doing business in Nigeria keeps increasing and you expect DSTV to just absorb the cost. Are they not in business to make profit?”
“DSTV is a business providing service to customers, while operating in a harsh environment, if their operating expenses increase, they have to raise prices. If as a customer you are dissatisfied, cancel your subscription and subscribe to Netflix or Startimes.”
Celestine Okeke,a Lead Partner, Micro, Small and Medium Enterprise Advocacy and Support Initiative(MSME-ASI) believes that the CPC action is capable of discouraging private sector investment in the country.
“I do not think it is right thing the CPC is doing. We are looking for foreign investors and we are now restraining them”

“If you don’t like DSTV you can move over to STAR TIMES and other cable network. What the CPC could have done is to get the Presidency to discuss further with the DSTV and not using the ‘Nail and Hammer’ approach”

Media analysts have also questioned the CPC action. Bolaji Abimbola, the CEO OF Indigo, a PR agency based in Lagos described CPC price intervention in DStv business as an aberration. He asked CPC to concentrate in protecting consumer on quality of service and ensure that promotions are according to the law but not on price.

Bolaji said that there are factors that add up to cost which CPC may not understand. According to him, since there are options in the Pay TV market, he said subscribers have the choice to switch over to another operator if they do not like a particular service. “CPC cannot simply tell an operator not to increase price in a free market system”, he said

Another media analyst asked if “CPC turning itself into a price control board.” He reminded CPC that Nigeria is operating a free market enterprise where consumers are disposed to product if they like the price.

“I can’t understand why CPC is concentrating its efforts on DStv while it has not tried to regulate price of other products and services”, the media expert said.

In 2016, CPC and DStv were also in logger-head over price regulations, consumer complaints and that billing must be contemporaneous with service provision. Some business owners believe that the CPC action could set a dangerous precedent in regulatory inefficient and ineffective price control if not checked.

Endurance Okafor & Harrison Edeh, Abuja