Plan to protect pay-TV customers 'may backfire'

Analysts warn of higher prices if there is no penalty for breaking contracts

A proposed new rule to better protect consumers by allowing them to break pay-TV contracts without penalty in the event of unfair practices may lead to higher prices instead, warn analysts.

It was announced in Parliament last week that a new rule was being considered to address complaints about pay-TV operators unilaterally removing channels or programmes and imposing higher fees. While some said the change would make for a more competitive market and benefit consumers, others say it might backfire if applied bluntly.

"Getting rid of termination charges wholesale is too blunt a stick," said Maybank Kim Eng analyst Gregory Yap.

"The conditions of business would become too unpredictable and the natural reaction of the sellers would be to raise prices to cover this contingent cost," he said.

Telecommunications consultancy Delta Partners' principal James Ong agreed, saying that programming changes are potentially out of a telco's control.

"If the content rights are not renewed by the telco, this cannot be further provided," Mr Ong said.

A good balance would be for the sector regulator Media Development Authority to oversee only pricing changes as telcos have control over these, both men said.

For instance, consumers should be allowed to exit pay-TV contracts without penalty when telcos add content and force them to pay more. The same should apply when telcos remove content that continues to be available but force customers to pay more.

Pay-TV providers changing the terms of activated contracts has long drawn the ire of consumers, who have to pay a penalty to exit their contracts.

In 2012, when SingTel removed Champions League football from its Ultimate Sports Package, customers complained that they were asked to pay more to watch the games. Last year, consumers were unhappy when StarHub added the ESPN Star Sports network to its sports package and raised fees.

Some consumers say pay-TV operators should put up the expiration date of their content on their websites. But lawyer Bryan Tan, a partner of Pinsent Masons MPillay, said this is not a solution as such dates are trade secrets and competitive information.

Many believe the proposed rule will make the market more competitive. Ms Elle Todd, a partner at technology, telecoms and media law firm Olswang Asia, said: "If contracts are shorter and more readily breakable, companies may look at offering incentives or freebies to reward loyal customers."

Consumers Association of Singapore executive director Seah Seng Choon agreed, saying: "This new rule will enhance the quality of service to retain customers."

The public will be consulted on the proposed rule next month.

itham@sph.com.sg