HONG KONG: A report from Media Partners Asia (MPA) and Charles River Associates (CRA) has identified "potential flaws" in the new cross-carriage rules for Singapore's pay-TV sector.

The new rules, announced in March, require that pay-TV players SingTel and StarHub make available to each other channels and content acquired on an exclusive basis after March 12, 2010. (Exclusive deals signed before the cut-off date are exempt from the legislation.) At the time, Lui Tuck Yew, the acting Minister for Information, Communications and the Arts (MICA), noted that the proliferation of exclusive content deals (such as SingTel's mioTV outbidding incumbent StarHub for rights to EPL action) in Singapore had resulted in a "high degree of content fragmentation, as well as higher content acquisition costs." With cross-carriage rules, consumers would no longer require multiple set-top boxes or have to switch platforms to access exclusive content.

The policy report from MPA and CRA notes that this state of fragmentation in Singapore's $290 million pay-TV market is likely to be transitory."Exclusivity is a relatively common feature of markets in a rapid state of flux," the report notes. In addition, "exclusivity can be a legitimate and pro-competitive mechanism which encourages the growth of new players and market innovation. ... Over time, as competition develops and the market matures, exclusivity has been seen to wane."

The analysis goes on to take issue with cross-carriage itself as a remedy, citing customer confusion and rising costs as potential consequences of the new rules. Other concerns include reduced investment in pay-TV content and limited product innovation and differentiation, the report continues. MPA and CRA also list the temptation for deeper intervention in order to remove the hurdles to full implementation of the cross-carriage rules—bundling and existing exclusivity deals.

Calling cross-carriage a "risky public policy proposition," the MPA and CRA suggest an alternative course of action. "A less risky alternative policy course would be to formalize an annual regulatory review of the marketplace to gauge whether the predicted course of market evolution takes hold. During this time, it is reasonable to expect that competition and consumer choice will continue to increase in all major dimensions, while exclusivity will wane. If at the first or second annual review, exclusivity is not substantially less than today, then some degree of intervention may then be implemented."

According to MPA, the pay-TV penetration rate in Singapore is 65 percent currently and forecast to reach 70 percent by year-end—46 percent through StarHub and 23 percent through mioTV. There are more than 192 pay-TV channels on offer in the island nation. The average monthly consumer spend on pay TV is $34.