By Solee Park
The decision granted to the state broadcaster, the Ghana Broadcasting Corporation (GBC), to resume the collection of TV licence fees from the public will lead to market distortions and anti-competitive practices. With the recent court ruling, the GBC’s nationwide collection of the TV licence fees has been effective since August 11, 2015.
The reintroduction of the TV licence fees generated a lot of anger among Ghanaians, but more importantly, it raised the critical issue of ineffective competition in the TV broadcasting industry.
Background
The Television Licensing Decree NLCD 89 of 1966 was passed in a bid to finance the only operating TV station in Ghana – the state broadcaster, the GBC. This decree allowed GBC to collect TV licence fees from owners of TV sets across the nation.
The licence fees had remained GH¢ 0.30 for domestic TV users with one TV set since 1991, mainly to lessen the public’s financial burden in the face of rising inflation and depreciation of the Cedi. However, the reintroduction of TV licence fees on August 11, 2015 results in significant increase in the fees to reflect economic factors and to ensure the revenue outweighs the cost of collection, raising the fee from GH¢ 30 to 36 for domestic users with one TV set.
According to the Director-General of GBC, Major Albert Don Chebe, TV licence fees “will finally make GBC independent, accountable and completely transparent to all Ghanaians, especially Ghanaians who are suspicious of the financial ties between GBC and sitting governments and consequently, GBC’s neutrality, particularly during the political season would be guaranteed both in words and in action.”
In short, the intended purpose of the licence fees, therefore, includes maintaining the quality of media content; and minimising the government’s control over GBC to increase its transparency.
Impact on the broadcasting industry
In every competitive environment, firms are pushed to become more innovative and efficient to increase their competitiveness and market share. Unfortunately, GBC has failed to demonstrate its competitiveness in the broadcasting industry, despite its first-mover advantage.
In the past, it remained a monopoly when it was the only TV station in the country; however, with the liberalisation of the airwaves, other private broadcasters have gradually entered the industry, increasing their market share through competition. As a result, GBC lost its dominance in the industry and failed to attract consumers in response to private broadcasters’ improvement in the quality of media.
The legal mandate of GBC to collect TV licence fees will discourage the growth of the broadcasting industry as a result of unhealthy and ineffective competition. The GBC is expected to raise revenue of GHC 250 million annually from the collection, which could be used to compete against private dominant players in the broadcasting industry. The TV licence fees take away incentives for GBC to improve quality of media content in order to remain competitive, but rather threaten the economic survival of private broadcasters.
The preferential treatment given to GBC distorts healthy competition in the industry and may drive private broadcasters out of the broadcasting industry. With the GBC law enacted in 1968 which allows the public broadcaster to make profits from commercials, it could adopt a predatory pricing strategy by temporarily lowering its rates for advertising in order to drive its competitors out of the broadcasting industry.
This type of price war, especially, threatens small yet growing private broadcasters which do not have sufficient fund to cover their losses made from lower price bids. Moreover, GBC could take advantage of the revenue from TV licence fees to offer higher bid to acquire broadcast rights, increasing its viewing public as well as its market share.
TV licence fees, therefore, distort effective competition in the broadcasting industry, stifling the growth of the industry. From consumers’ perspective, TV licence fees are very alarming to their welfare. The payment of the fees solely depends on whether they own TV sets or not. In an effective and fair competition, consumers decide which broadcasters to watch based on their quality of content (efficiency of a firm), and therefore their decision shapes the market share of the industry and also eliminates inefficient competitors.
However, with the licensing system, consumers’ decision is not the main key to drive inefficient broadcasters out of the industry, minimising voices of consumers in the market.
TV licence fees abroad
The often-compared British Broadcasting Corporation (BBC), however, is very different from the GBC. The BBC collects TV licence fees for its operation, as it is banned from raising revenues from commercial activities. It is prohibited from carrying advertising so that it will remain independent of commercial or political interests.
The GBC, on the other hand, is allowed to make profits from commercials, which questions its assertion that the collection of the fee is to insulate the public broadcaster from government influence. The state broadcaster has failed to demonstrate in the past that the collection of TV licence fees prevented promotion of political propaganda or agenda in its broadcasting.
This challenges GBC’s justification to use the fees to remain transparent and to provide high-quality media content to serve the general public interest. Unlike Ghana which has recently reintroduced the TV licence fees, a lot of countries have abolished the licence. For instance, Singapore collected the licence fees from 1963 to 2010. It is not until January 1, 2011 when Singapore had abolished the licensing system, that the Finance Minister, Tharman Shanmugaratnam, declared the fees were losing relevance.
Moreover, Indian state broadcasters AIR and Doordarshan terminated the TV licence fees and have been funded instead by the Government of India and by advertising.
Conclusion
The major rationale behind the collection of TV licence fees is to insulate the state broadcaster from the government’s control. However, GBC raises its revenues from commercial activities, which could result in conflicts of interests and compromise on quality of media content.
Moreover, the licence fees encourage unfair competition in the broadcasting industry, potentially stifling the growth of the industry and jeopardising financial sustainability of small private broadcasters. Consumer welfare is also in question due to economic survival of private broadcasters.
Consequently, GBC’s collection of TV licence fees is viewed inappropriate and an inefficient decision. It is, therefore, recommended that to promote efficient competition among GBC and other private broadcasters, the TV licensing system must be abolished.
This article can also be viewed at: http://graphic.com.gh/