Rugby World Cup is the latest No Free Lunch example

By Doug Mattushek - 25 September 2019Views : 454


“You might forget the rugby, but never forget TANSTAAFL,” Leon Louw, Executive Director of the Free Market Foundation (FMF), reminded South Africans. “There Ain’t No Such Thing As A Free Lunch!”

The start of the 2019 Rugby World Cup (RWC) on Friday 20 September is a timely reminder of this iron law of economics. Lunches, or, in this case, free-to-air (FTA) games, or, for that matter, other goods and services, are never free. FTA is a misnomer. Someone pays. The question is who?

“Someone always pays for all goods and services,” said Louw. “If the government subsidises SABC FTA broadcasts or provides bailouts, it is actually the poor who pay – a government subsidy is always money diverted primarily from healthcare, housing, policing, education and essential services,” said Louw commenting on the sports rights debate regarding the Premier Soccer League (PSL), Cricket World Cup (CWC), and now RWC.

Louw lamented that, “The broadcast regulator, ICASA, wants to force people who pay and don’t watch, to subsidise people who watch and don’t pay.” He added that, “to the extent that broadcasters may be forced to use advertising revenue for FTA sport, consumers, most of whom are poor, will be forced to subsidise whatever minority happens to watch a specified game. And we should never forget that, at best, only marginal viewers - those who do not yet watch and would start watching - could benefit. The majority of viewers either have Pay TV or watch in homes, clubs and sports bars that have it.”

After reviewing the market, current regulations, proposed amendments, and international practice, with a view to preventing heavy-handed regulation with perverse unintended consequences, it became clear that mandatory “free” viewing would serve the interests of neither viewers nor sport.

Regulator ICASA wants extreme control derived from faulty presumptions: that there is monopoly power (market dominance and insufficient competition), and that it deprives fans of FTA viewing. In 2016, ICASA launched a “market inquiry” and, in 2018, proposed stifling law and policy changes to sports rights.

During public hearings in May, most submissions, especially better-informed and researched submissions, vehemently opposed ICASA’s misdirected proposals. While an anxious market awaits ICASA’s response, Multichoice and SABC deals enabled FTA broadcasts of PSL soccer and World Cup cricket.

Who paid? ICASA neither knows nor cares.

“Because ICASA wallows in TANSTAAFL denialism, it wants to force broadcasters to provide ‘free’ premium content,” said Louw. “In other words, ICASA wants to impose FTA costs on innocent victims.”

Previously, SABC acquired rights for major events from Multichoice, which, in turn, bought rights from sports bodies. Now that the SABC is broke, having squandered licence fees and bailouts on corrupt mismanagement, it wants Multichoice subscribers to provide “free” or “commercially viable” content.

ICASA’s draft – or should we say daft – proposals are misinformed and naïve. They would, in any event, according to Senior Council evidence, be beyond ICASA’s powers, unconstitutional, and violate the Rule of Law. “They are,” according to Louw ,“like King Canute trying to turn back the tide. They presume ICASA authority in foreign sports federations, ignore international practice, and violate accepted commercial practice.”

ICASA’s proposals go beyond sport. It wants to control the sale of Hollywood movies.

“Far from ICASA having solutions, it’s a major cause of real and imagined problems. Its failure to release superfluous spectrum – airwaves used for broadcasting – needlessly inflates data and TV prices.”

“What the government can and should do to lower Pay TV prices for the poor,” concludes Louw, “is the same way that makes groceries affordable - the opposite of what ICASA proposes. It is to remove ICASA’s licencing barriers to entry and competition, release spectrum, and discontinue TANSTAAFL denialism.”

The FMF is an independent, non-profit, public benefit organisation, created in 1975 by pro-free market business and civil society national bodies to work for a non-racial, free and prosperous South Africa. As a policy organisation it promotes sound economic policies and the principles of good law. As a think tank it seeks and puts forward solutions to some of the country’s most pressing problems: unemployment, poverty, growth, education, health care, electricity supply, and more. The FMF was instrumental in the post-apartheid negotiations and directly influenced the Constitutional Commission to include the property rights clause: a critical cornerstone of economic freedom.