Tiering Troubles Grip Israeli Pay TV

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Tel Aviv, Israel -- The country's pay televisionindustry and its suppliers are anxiously awaiting a decision by the CommunicationsMinistry on when cable operators may offer tiered programming packages.

The ministry has proposed that cable companies be barredfrom tiering their services until 18 months after the debut of the country's firstdirect-to-home platform, DBS Satellite Services, or until at least 15 percent of Israelicable subscribers, or 150,000, defect to DTH -- whichever happens first.

DBS Satellite said it plans to launch in the first quarterof next year, although government officials forecast a launch as early as this summer.

The ministry's proposal has infuriated both the cableand DTH camps. What's more, the government is demanding that cable companies digitizebefore they introduce tiering.

The ministry is expected to decide on the issue at ameeting May 2. However, the cable industry said that if it isn't happy with thedecision, it's prepared to go to court in mid-May.

Reverberations from the plan could be felt all the way toFrance. At this month's MIP-TV program market in Cannes, France, U.S. cable networksreported discussions with wanna-be Israeli pay TV program networks that are awaiting wordof the ministry's decision as they try to line up backers. "We were approachedby maybe 20 different entities," said Kristen Jordan, vice president of internationaldevelopment at Scripps Networks, which distributes Home & Garden Television and FoodNetwork internationally.

At home, the tiering issue is creating some very blackclouds. DBS Satellite managing director Eitan Robb has launched a publicity campaignagainst the ministry's proposal, and he threatened to scrap any rollout plans, eventhough his consortium has already paid a nonrefundable $7.5 million license fee to thegovernment.

Robb said the ministry's recommendations "callinto question the economic feasibility of the satellite project." DBS Satellitespokesman Gilad Hayman added, "We want to enter the market, but not at any price. Wemust be given the basic conditions to recoup our $200 million investment."

Robb is calling for cable companies to be barred fromoffering tiering for at least three years after DBS Satellite's launch date, or untilthey lose 20 percent of their customers to DTH.Cable operator Tevel Israel InternationalCommunications Ltd.'s vice president of programming and marketing, Pnina Shanhav,commented, "Nowhere in the world does a government forbid cable companies to offertiering. We hope that tiering will be parallel [with DTH's launch] and analog.We're ready."

One cable company claimed to have a letter from theministry suggesting that it might be allowed to offer tiering on the very day when DTHlaunches. The cable companies are demanding a window of no more than one year, and theyrejected the requirement to digitize.

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