Finnish Communications Regulatory Authority
Kirjaamo
[email protected]
9th April 2014
Selvitys kustannussuuntautuneen hinnan määrittelyyn sovellettavasta menetelmästä Suomen
televisiolähetyspalveluiden markkinoilla
Report on establishing a cost orientation scheme for the Finnish broadcasting market
Dear Sirs,
FOX International Channels (FIC) welcomes the opportunity to comment on the above-mentioned
consultation.
After taking the opportunity to review the report in detail, FIC would like to address the following
issues related to the report. Being solely a TV-broadcasting company, FIC will refrain from addressing
issues related to the technical infrastructure e.g. the availability and accuracy of information related to
net-present-values of technical equipment.
The report is extremely detailed in describing the principle of the cost orientation for the television
broadcasting market in Finland. If the information needed to carry out the cost orientation is in fact
readily available , FIC believes the result could provide the supervising authority with an accurate
evaluation of the costs related to television services.
Nevertheless there are areas FIC would like to be addressed in more detail as follows:
Promoting DTT as a viable platform for the future
- As FIC understands it, the overall goal of the project is to insure that DTT transmission is
priced fairly and in a way that DTT remains a viable broadcast technology in Finland, offering
Finnish consumers a wide range of products at a reasonable cost. We are not technical experts,
but from our experience as a broadcaster across Europe we do see extremely high DTT costs
in Finland which far exceed costs in other markets. Regardless of the methodology, we
believe DTT costs must be reduced for DTT to remain viable. Further, we would advocate for
transparency in pricing – if the pricing scheme is so complex that its fairness and accuracy are
difficult to assess it will not be successful in achieving its main goal.
Fostering competition among broadcasters
- The proposed scheme produces costs per service i.e. estimated cost per one channel carried on
the network. In order to support the Government’s continuous efforts to promote competition
on all levels of the value-chain FIC would propose that costs for network services be weighted
to allow new entrants easier access to the market. Costs for capacity could for example be
weighted according to share of viewing.
Current vs. proposed cost orientation scheme
- The report does not outline how the proposed scheme differs from that of the current process,
which raises questions about the relative merits of the proposed orientation scheme versus the
existing pricing orientation scheme. Additionally, this brings forth the question of whether
implementing the new scheme itself have significant cost implications, which in turn would
increase costs for customers?
Reasonable profit margin
The report proposes the reasonable profit margin for capital would be determined through
calculating the Weighted Average Cost of Capital (WACC). In order to do this the supervising
authority would need to determine the cost for own (CE) and borrowed (CD) capital. Defining
the cost for the capital will have a significant impact on the scheme which is why FIC would
like to stress the importance of this being conducted as accurately as possible. The report
suggests the cost for capital be carried out by benchmarking companies operating in
comparable industries within the Finnish market. As there is an inherent lack of these
companies especially on the Network and Infra I service-levels, how would the WACC
coefficients be determined with the best possible accuracy? In order to increase accuracy, FIC
suggests that the process also include direct cost and price benchmarking against DTT
transmission companies in other countries to assess Digita’s costs and pricing. In FIC’s
experience, DTT transmission prices in Finland are much higher than in other European
countries.
Cost of sales and/or marketing
- Due to the way the broadcasting licences for television operations are handed out, the report
states (on page #20) Digita has very little or no influence over how the available capacity is
used. Therefore FIC does not see the need for the cost orientation scheme to include costs for
sales and/or marketing for television services.
FIC appreciates the opportunity to comment on the Report on establishing a cost orientation scheme for
the Finnish broadcasting market.