CUTS Ghana’s Position: TV License Will Lead To Market Distortions And Rent Seeking

The decision granted to the state broadcaster, the Ghana Broadcasting Corporation (GBC) to resume the collection of TV license fees from the public, and the subsequent establishment of special court to trial “defaulters” will lead to market distortions and anti-competitive practices in the TV broadcasting industry.

Impact on the Broadcasting Industry
In competitive environment, firms are pushed to be innovative and find better and more efficient ways to produce and distribute goods and services and by so doing firms are able to win the heart of customers. Unfortunately, GBC has never won the heart of the viewing public. In the past, it remained monopoly when it was the only TV station in the country; however, with the liberalization 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. GBC is expected to raise revenue of GHC 250 million annually from TV licence fees, which could be used to compete against private dominant players in the broadcasting industry.

The collection of TV licence fees takes away incentives for GBC to improve quality of media content in order to remain competitive, but rather threatens the economic survival of private broadcasters. When private broadcasters are crowded out from operations, it will bring us to the days of pre-liberalization era.

The preferential treatment given to GBC distorts healthy competition in the industry and may drive private broadcasters out of the broadcasting industry. With 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.

At the time that the NRC decree was passed, it was the right thing to do since GBC was the only broadcaster in the country. Now with more than 60 TV stations in the country, where each one is competing on the merits of its content and quality of service delivery, it would be unfair to allow the state broadcaster to collect license fee to support their operations and at the same time compete with them on commercials. This will allow the GBC to grow needlessly powerful not on the strength of its content delivery, but on its balance sheet.

TV License Fees Abroad
Although it is true that TV licence fees in Ghana are lower than some other countries, it is also important to note that state broadcasters are barred from commercial activities.

The BBC collects TV license 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. 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.

Australia, Belgium, Cyprus, Finland, Gibraltar, Hungary, India, Malaysia, Malta, Netherlands, Portugal and Singapore have all abolished the licensing system as the fees were losing its relevance

Conclusion
GBC can either follow the path of BBC where it collects TV license and it is barred from running commercials and competing with other TV companies, or be like the Australian state broadcasters which does not collect TV license fees and it is able to compete on its merit.

What the state broadcaster needs is not TV license but rather the freedom to allow the state broadcaster to be run like other successful state owned enterprise like the Graphic Communications Group. Again, the state broadcaster should be innovative in their programs to attract viewers.

Signed by
Appiah Kusi Adomako
Country Coordinator
CUTS Ghana
30 Asafoatse Oman Street
Accra North
[email protected]
+233.24.392.0926
*About CUTS
CUTS is a public policy research and advocacy think tank working in the areas of consumer welfare, competition policy and law, economic regulation, trade and development, good governance and agricultural and public-private partnerships. CUTS’ vision among other is to Increase people’s participation at various levels of governance and implementation of polices, laws and regulations, development of well-functioning markets and effective competition policy and law regime, welfare maximising sector regulations, and an enabling investment regime. ( www.cuts-international.org/arc/accra )