In 1993 the promulgation of the "Cable Television Law" legalized cable television in Taiwan. The "4th station," as it was widely known had, until this time, operated "underground." Since then the cable television business has flourished. However, the rapid growth has brought serious side-effects. At the end of last year, a dispute between the two leading players in the business, the Koo's Group and Rebar, almost resulted in the severing of services and brought to the fore a crisis in the cable television market that had been brewing for a long while .
As the end of the year approached, cable television channel operators and cable television system operators began to negotiate their contracts for the coming year. The system operators have to decide which channels to buy from the channel operators. Each channel operator usually provides a wide choice of channels from which the system operators can choose, after which a price has to be negotiated. Which channels the public get to see depends on the results of the negotiations between their system operators and the channel operators. What appears to be a simple business in fact caused a storm early this year. One of the big players in the cable television business, the Koo's Group failed to negotiate a new contract wth Rebar Eastern TV, which is a subsidiary of the other main player, Rebar. The result was that tens of thousands of subscribers saw changes in the channels available to them.
Koo's Group and Rebar have been operating cable television businesses for many years and are involved in program production, channel distribution and system laying. The Koo's Group and its ally, Filmate Corp., control 28 channels, including Star TV, CTN, Disney, NHK and Discovery; Rebar Eastern TV also controls 28 channels, including Sanlih and CSTV. TVBS's various channels, HBO, CNN and Super TV belong to independent channel operators.
There are currently 145 licensed cable TV firms in Taiwan. But about 60% of the system market is shared between the two majors. Koo's Group and Filmate have a 17% share of supply channels island-wide, while Eastern TV has a 40% share.
The two are well matched in terms of the channels they control, but Eastern TV has a larger number of subscribers. Koo's Group used Eastern TV's own figures to point out that because Eastern TV has 1.6 million subscribers and they only have 600,000 Eastern TV should pay a higher price for Koo's Group channels. Eastern TV refused to accept the Koo's Group price because they said their subscriber numbers had not been independently verified. The two sides also failed to agree in respect to other details, like whether the agreement would cover the whole of Taiwan or just Taipei, copyright fees and system charge standards. This meant that a new contract was not signed.
Since broadcasting without a valid contract would have been a violation of the intellectual property rights law, January 1st saw island-wide suspension of services affecting at least 200,000 subscribers as each of the two sides stopped broadcasting the other's channels. Although Eastern TV replaced the cut off channels with others, many subscribers felt that their rights had been infringed because they could not see the channels that they had originally paid to see.
As a result, the New Party's Taipei City councilors established the "Cable Television Consumer Protection Alliance" which called for consumers to boycott the two business groups' subsidiary banks, hotels and department stores. On January 3rd, the Consumer Protection Commission, Executive Yuan received several hundred complaints from consumers. Its Secretary-General Liu Chun-tang says that even if the operators and customers have no written agreement, the two still have a contract relationship. Stopping the broadcast of channels that were originally offered is a breach of contract. He says consumers can demand compensation or ask for a reduction in subscription charges.The commission is also willing to fight a court case on behalf of consumers. However, as of January 5th, only one consumer has been willing to engage in litigation. This does not meet the condition for "Group Litigation" in the "Consumer Protection Law," which requires that at least 20 people participate in an action.
To help protect consumers, on January 12 the government produced a standardized cable TV contract. It includes spaces for indicating specifically which channels the customer will get, and for what time periods. The contract will be included with receipts given by cable companies, and thus take effect automatically when a customer pays his or her bill. Meanwhile, some people have suggested that the government act to cut operators' lines or that consumers refuse to watch.
The Government Information Office is the cable television industry's central managing body. Director David Lee says that cutting operators' lines would harm the interests of the consumers. He strongly encouraged the two business groups to hold "peace talks." Because the leaders of the two groups, C.F. Koo and Rebar's Wang You-ceng, are both members of the KMT Central Standing Committee, KMT Secretary-General John Chang also attempted to bring the two sides together. In the end, the two sides reached an agreement on January 5th and agreed to buy each other's channels. However, at present there is only capacity for 74 channels, of which four cable TV companies already control much of the space, and there are 110 channels in total. Inevitably half the channels will be left out.
However, many academics believe that the core of the problem is that the government has not formulated a complete cable television policy, resulting in poor management. Professor Bonnie Peng of National Chengchi University's Department of Journalism says that when the government divided Taiwan into 51 areas with five operators in each area, they made it inevitable that the "baby" that was born was defective. This has resulted in destructive competition, and the smaller system operators, crushed between the two big players, have been forced to choose sides.
The Chairman of Eastern TV, Wang Ling-lin says that buying and selling of channels is a commercial activity and consumers can choose their system operator according to their tastes. Yang Kuang-hwa, associate professor of the Department of International Trade at National Chengchi University says that many of the products in the cable television market have their own special character and there is limited opportunity for substitution, which leaves a certain degree of monopoly. Hsiung Ping-kang, president of TV Time which provides CNN and HBO, says that because television programs have become indispensable necessities, not just ordinary commodities, trading should have some limitations.
In 2001, the Ministry of Transport and Communications is to open up the private network telecommunications service market. Professor Michael S.R. Kwan of the Department of Radio and Television, National Chengchi University says that at this time cable television operators will be able to provide many other added-value services, including security, electronic shopping and distance learning. What operators are fighting over is not just TV channels, it is control of distribution channels. Chang Ming-chung, director of the Industrial Economics Graduate School at National Central University says that many economists in the UK advocate the vertical separation of state-owned companies into upper and lower parts, with a single company only allowed to operate at one level, or dividing the country into several areas with companies only allowed to operate in one area.
Bonnie Peng believes that this crisis, which shows that Taiwan's telecommunications and media sectors are facing the impact of market liberalization, is the ideal time for the managing body to rethink policy." In response to the problems that were exposed, David Lee announced that this year will be the "Cable Television Reform Year" in which order will be brought to the business and the existing problems solved.
The Executive Yuan has, in fact, just passed an emergency "Draft Amendment to the Cable Television Law" to prevent a monopoly developing. It will work with the legislature to try to pass the proposed revisions within one year. Also, on January 7th, the Fair Trade Commission of the Executive Yuan announced that they were fining Eastern TV NT$3.2 million because they had not applied for approval before buying four system operators.
Apart from the suggestions of experts, there have also been some alternative views from the ranks of consumers; consumers can watch free terrestrial television and radio stations and use the Net connections to replace "watching cable television." This recent crisis signaled to the government that the cable TV market is not healthy. Consumers were also reminded that they should remember that they have choices and pay attention to their interests.
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The two big cable TV giants finally reached a cease-fire agreement. In a free moment before a press conference, the atmosphere looks strained between Koo's Group representative Koo Chi-yun (left) and Rebar's Wang Ling-lin. (photo by Lai Chia-huei)
