Government must reveal true cost of digital migration

Government must urgently rethink its Digital Terrestrial Television (DTT) rollout strategy, and particularly its misguided decision to opt for locally manufactured set-top boxes (STBs).

Cabinet announced last week that it had approved the STB manufacturing sector development strategy and that it would now also pick up the costs of digital TV aerials for five million poor households. The aerials will add at least another R750 million to the R2.45 billion government has already allocated to subsidise STBs for these households.

The belated inclusion of the aerials in the plan indicates that the Department of Communications (DoC), which has been working on this issue for the past five years, has persistently failed to fully comprehend the complexities and scope of digital migration and produce an all-encompassing vision, cost, financing plan and roll-out strategy for the project. 

The SABC and signal distributor Sentech have told government that they have insufficient budgeted funds to deliver DTT on time so it is unlikely poor households will have any digital signals to receive via their subsidised aerials and STBS by the end of next year.

The department must re-focus its energies and funding priorities on putting in place the essential standards, regulations and comprehensive roll-out strategy to meet the DTT switchover deadline of December 2013. 

The focus on local manufacture of STBs is misplaced for a number of reasons. 

Firstly, STBs can be bought for about R350 from off-shore manufacturers and are readily available. Government has set aside R2.45 billion to subsidise 70% of the R700 each locally manufactured STB will cost. This subsidy could be slashed by R1 billion if STBs were imported. This money could be better invested in ensuring that digital television is delivered to standard and on time throughout South Africa. 

Secondly, local manufacture of more expensive STBs can only start once standards are finalised. Consultation between the departments of communications, trade and industry and economic development on the details of the local manufacturing strategy must still take place. If the government remains committed to local manufacturing of STBs it is unlikely that the December 2013 deadline for digital switchover will be met. 

Thirdly, the demand for STBs has a limited lifespan. Within a few years most South Africans will likely have bought digital televisions, and sales of analogue sets for which STBs are necessary will cease. There seems to be little point in establishing a local manufacturing capability for the short-term demand of STBs as any possible job opportunities resulting from local assembly or manufacture will be unsustainable.

There will also be limited export opportunity for locally made STBs to the rest of Africa or elsewhere. Our neighbours are likely to opt for the cheaper, technologically proven off-the-shelf option that is readily available from other countries. The locally manufactured STBs will not be able to compete in this market unless government's plan is to use public funds to subsidise offshore sales as part of a government-led local industry job creation programme.

Government should thus abandon its idea of locally developing and manufacturing STBs for poor households unless there is a clear strategy to ensure sustainable benefits to all South Africans. 

I will write to Communications Minister Dina Pule asking her to make public:

·         The strategy for the set-top box manufacturing sector development industry;

·         the regulatory and implementation plan, as well as associated costs to government, of the establishment of this industry; and

·         a final business plan, and associated costs, of digital migration, with details of each DoC entity's requested - and allocated - budgetary requirements to deliver DTT on time.

The DoC's current newspaper campaign creates an expectation among poor households that they will start receiving digital content on their analogue TV sets through their subsidised STBs within the next 18 months. Government's lack of cohesion in planning for DTT and its determination to stick to a local manufacturing plan with few, if any, tangible benefits is, however, likely to continue delaying the digital migration programme. 

The department should shelve its extensive advertising campaign until it is ready to deliver DTT to viewers at an affordable price. 

Statement issued by Marian Shinn MP, DA Shadow Minister of Communications, March 25 2012

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