By Michalis Zaouras on August 03, 2010

Cyprus TV digital platform

Unfortunately we are witnessing another failure of the Cypriot authorities to control for the failures of the market. The market for television is far from competitive; I think the most robust argument to prove this statement is the subscription fees charged by the private channels (see mi-vision, nova, LTV). The main reason for the upnormal fees is the right to broadcast football matches which turns these companies to a monopoly against the fans of a particular team. However recently we have been experiencing another example of anti-competitive behavior. To be more specific I am referring towards the parties that are bidding to buy the rights for the new digital platform.

Three main parties have been trying to capture this new tool: Cyta, Cyprus telecommunication authorities, LGR and a consolidation of eight private channels. As for the last player, it seems to me obvious that there is a collusion going on. Additionally I would really like to know why the anti-trust authority has allowed for such a “consolidation” to be created and bid in order to acquire the new platform.

2 comments:

  1. Costas Apostolides6 August 2010 at 11:49

    I believe that the opposite is the case from that argued. There will be two digital platforms only, at least at this stage. One will be given to the Cyprus broadcasting Corporation which is a state controlled institution, and the Government is fighting to give the other to The Cyprus Telecommunications Authority (CYTA) which is also a state controlled body. The government will therefore be able to use its monopoly on the digital platforms to influence the freedom of expression of the media. I believe that the correct policy should be to have 2 or if possible 3 platforms. Give 1 to a combined CyBC and CYTA consortium, which would also allow this one to be financed from non-state funds given that CyBC is essentially bankrupt, and CYTA has funds.

    Give the second one to the highest bidder as long as no other state organizations are bidders (ie the Electricty authority which has links with Cablenet and primetel). There would therefore be two networks at least in competition. The fact that 8 media firms are together reduces the chances of any one media firm or private station having control (we would need to see the shre structure of the consortium).
    What is clear is that the Government has made a mess of things in view of its keeness to ensure a state monopoly, and it is trying to ignore the views of parliament.
    Costas Apostolides

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  2. Dear Costas thanks for your comment.

    I do agree that we need to avoid a state monopoly. However this does not mean that we shall allow a duopoly also. Creating a consortium of such a nature will create at least information diffusion on pricing and other strategist aspects of the industry (see JCC a consortium on the Banking industry). I do believe that an independent organization should acquire the second platform. On the other hand this will cause a double marginalization problem on the second platform resulting into a competitive advantage in favor of the state owned platform. As a result of that I believe that the government should create a third party on this industry that will either do not allow the state owned companies to take advantage of its competitive advantage or charge it with the difference of their costs (canceling out their competitive advantage), given that the first platform will be provided to the state owned companies. To conclude the new platform will most probably create a welfare loss, however this might be either insignificant or will be canceled out by the increased quality that will be offered to consumers.

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