OPTA on the cable sector: Put an end to cross-subsidies

Cable television companies may not pass on any shortfall, which they sustain on their own range of programmes, to competing programme providers. The cross-subsidisation of the operations of cable companies as suppliers of infrastructure and as providers of services and programmes using the same infrastructure must end. If certain programmes can no longer be viewed in the living room as a result, or the price of cable television packages rises excessively, in the view of the government, the latter will simply have to search for alternative subsidy sources.

OPTA states this in a discussion document published today. In this discussion document OPTA sets out the implications of applying so-called ONP principles in the cable sector. In December last year the Lower House of the Dutch Parliament passed an amendment stipulating that OPTA has the power to use these principles as the basis for ruling on disputes and performing its regulatory duties. Amongst other things, these ONP principles entail the following:

• the separation of roles (now cable companies are wholesalers of infrastructure, retailers of any programmes they provide, and transmitters of mandatory programme packages);
• unbundling (operators are required to charge all providers and themselves the same tariffs for each channel);
• non-discrimination (all programme providers will have access to the cable networks subject to identical conditions);
• transparency (the method used to allocate channels and the tariffs charged must be clearly set out and verifiable and, for example, cable companies are required to determine supplier and consumer requirements each year).

Irreconcilable demands

According to OPTA, the government is making irreconcilable demands on cable companies at present. They are required to operate in a competitive market, are bound by predetermined subscription tariffs (pricing policies) and programme packages, and they have to transmit a ‘must-carry package’ (media policies).

It is impossible to meet all these demands simultaneously. If market forces are to operate and innovation is to occur, a cable company acting in its capacity as a provider of infrastructure must grant access to the latter to itself and others subject to identical conditions. In its role as a service provider, a cable company may include programmes in its standard and extended packages, which do not overlap their own transmission entirely. However, cable companies may not charge competing programme suppliers which use its cable infrastructure, to cover any shortfall involved.

Implications

What changes OPTA’s views will lead to with regard to price and the composition of cable packages, will depend on the following, amongst other things:

• the parties to whom the cable companies may pass on the large sums which they paid, when the cable networks were privatised;
• the parties that pay for the transmission of the mandatory channels.

The OPTA Commission calls on all interested parties to respond to the vision which it has outlined in the discussion document. OPTA will organise a seminar for this purpose on 17 May 1999.

Cable television companies may not pass on any shortfalls in its own range of programmes to competing programme providers.