|
| Industry
Omnibus
|
|
|
|
|
 |
In
our business of media and advertising timely information sharing
is knowledge creation. Industry Omnibus is an endeavor to
showcase industry best practices through industry wide research,
case studies, industry newsletters and other relevant information
with exchange4media subscribers. Industry Omnibus further
meets the expectations of our industry, which has made exchange4media
an industry resource. |
|
|
|
 |
| Regulating
for Growth
A CASBAA Study on Effective Regulation of the
Pay-TV Industries in the Asia-Pacific Region
Summary
October 2005 |
| |
| SUMMARY
OF MAIN POINTS |
| |
 In
the 15 years since the launch of subscription television services
in the Asia-Pacific the pay-TV market has grown rapidly into a US$
15 billion industry1 and is now an established generator of national
benefit, making a substantial contribution to economic growth and
employment. With consumer and government recognition of the benefits
of subscription television, demand for a wide variety of quality
and niche programming continues to grow rapidly.
As
industry and regulators look to accelerate investment to meet consumer
needs in the context of the expansion of Asian digital infrastructure,
it is a critical time to consider the extent to which an effective
regulatory framework can spur competition, promote consumer choice
and maximize the economic contribution of the pay-TV industry.
The
results of this CASBAA study demonstrate that there is a direct
relationship between an effective,market-oriented regulatory environment
and pay-TV industry growth and investment. Regulatory practices
and economic data in a sample of 11 Asian jurisdictions (Australia,
China, India, Japan, Hong Kong, Malaysia, the Philippines, Singapore,
South Korea, Taiwan and Thailand) were compared with each other
and against two international “benchmark” jurisdictions,
the United Kingdom and the United States.
The
results of the study indicate that regulatory approaches are evolving
– in some cases rapidly — in most Asia Pacific markets.
In some jurisdictions, as in other parts of the world, the authorities
have thrown off outmoded utility-oriented concepts of the pay-TV
model and established regulatory mechanisms designed to promote
competitive markets. These jurisdictions have been rewarded with
rapid increases in investment and industry development, as well
as the delivery of enhanced consumer choice. In other jurisdictions,
regulation remains uneven and unfavorable to the further development
of a healthy competitive industry. |
| INTRODUCTION |
| |
| |
| |
| INTRODUCTION |
| It
is important to note that all 13 jurisdictions in this study are
at different stages of industry development and each has strengths
and weaknesses in its regulatory framework. Hong Kong, for example,
receives a strong evaluation given its move to implement a framework
characterized by low barriers to market entry and freedom from restrictive
regulation. Prior to 2000, when cable television remained a government
authorized monopoly, the evaluation of Hong Kong’s regulatory
framework would have been less positive. |
| |
| Following
is the result of the evaluation of regulatory practices, indicated
in Exhibit 2.
|
|
|
USA,
UK: Effective regulation boosting
healthy
competition and a dynamic pay-TV
sector
HK, Japan: Free
market regulation boosting consumer competition and pay-TV investment
and growth
Australia, Malaysia & Singapore:
High
level of pay-TV investment with reasonable regulation but limited
competition
Korea, Taiwan: Highest
penetrated pay-TV markets but development remains curtailed by
utility mindsets and protectionism
Philippines,Thailand:
Under-developed
pay-TV markets held back by piracy andweak regulatory structures
India: Fast growing
pay-TV market but uneven regulation could impact future investment
and competition
China: Pay-TV industry
yet to mature;
regulatory flexibility needed to support
future development
|
| INTRODUCTION |
| It
is important to note that all 13 jurisdictions in this study are
at different stages of industry development and each has strengths
and weaknesses in its regulatory framework. Hong Kong, for example,
receives a strong evaluation given its move to implement a framework
characterized by low barriers to market entry and freedom from restrictive
regulation. Prior to 2000, when cable television remained a government
authorized monopoly, the evaluation of Hong Kong’s regulatory
framework would have been less positive.
Following is the result of the evaluation of regulatory practices,
indicated in Exhibit 2.
|
| |
 |
| |
| Growth
and sector value of the industry is measured across 15 criteria
within two main categories: investment in infrastructure and programming;
and revenue from subscription and advertising. The data compilation
covers the last three calendar years, as sourced from industry associations,
annual reports of publicly listed companies, and various databases
derived by MPA. The result of this compilation is an overall Investment
& Sector Value Index score.
The exhibits below depict underlying investment and revenue indicators
for each of the jurisdictions covered in the study.
|
| |
 |
| |
| The
results of the study demonstrate a direct relationship between effective
regulation and increased investment and sector value. Equally clear
is that the regulatory frameworks and he stages of industry development
in each of the jurisdictions vary considerably. This is indicated
in the section starting overleaf, which summarizes the results of
the study for each jurisdiction. |
| |
| KEY
POINTS BY JURISDICTION |
| The
study demonstrates that the regulatory frameworks of the United
States (U.S.) and the United
Kingdom (U.K.) provide a benchmark for effectiveness.
|
| |
 |
| |
| Key
points include:
|
Following
the abandonment of a utility-oriented regulatory approach practiced
in the 1980s and early 1990s, the U.S. pay-TV industry and its consumers
have benefited substantially. With the introduction
of the Telecommunications Act of 1996, the national policy towards
pay-TV in the U.S. became conducive to industry development. The
1996 Act deregulated cable TV in many respects, including most of
its retail prices. This allowed the cable industry to invest and
compete with new content and technology.
Deregulation
has also helped the cable TV industry contribute to the financial
health of the U.S.,
accounting for US$ 173 billion in gross annual economic output and.
million jobs. Consumers have benefited through greater choice and
quality in programs and new interactive services. Pay-TV penetration
reached 87% in 2004, driven by level playing field competition between
cable and direct-to-home (DTH) satellite operators
The
U.K. maintains a favorable regulatory environment for the development
of pay-TV with regulation supporting both investment
and competition. This is underlined by the growth of investment
over the past decade alongside continued competition in the delivery
of digital pay-TV services over cable, satellite and telecom networks.
In 2004, pay-TV penetration reached 43% and over the past 3 years,
cumulative investment has topped US$7 billion.
Largely
for historical reasons, the U.K. playing field is not level, as
the regulatory system provides for intervention in the favor of
the public service broadcasters. The U.K. regulator
is currently reviewing the regulatory environment for public service
broadcasting.
|
| KEY
POINTS BY JURISDICTION |
| |
| The
majority of regulatory practices in Hong
Kong and Japan
are consistent with globally established benchmarks. This has helped
boost competition, investment and revenue generation in the pay-TV
industries of both markets. |
| |
 |
| |
Highlights
include:
Hong
Kong’s regulatory framework is determined by market mechanisms
and professional, evenhanded regulators. This, together
with liberalization and a level playing field for competition, has
meant that Hong Kong’s consumers enjoy the highest level of
choice and greatest variety of programming of any in the Asia Pacific.
Competition
in Hong Kong has also grown rapidly with four providers
of pay-TV services over cable, satellite, telephone and Ethernet
networks battling for audiences in a market over just over million
TV homes. Pay-TV penetration has increased, reaching 44% in 2004
versus 26% in 2000. The industry is digitized and investment in
programming continues to grow as unregulated program exclusivity
and differentiation remain a driver of industry development.
The
one serious flaw in Hong Kong concerns pay-TV piracy.
There is a thriving “sub rosa” trade in devices intended
to make pay-TV signal theft possible, and the law provides no criminal
penalties against individual end-users. Moreover, while it is a
criminal offence to make unauthorized commercial use of pay-TV signals
distributed by Hong Kong licensed companies, the same law does not
apply to unauthorized commercial use of foreign pay-TV services.
This ensures a significant level of revenue leakage for major industry
stakeholders.
Japan’s
regulatory environment is even-handed and growth-oriented with market
forces driving the development of pay-TV. This is evident in the
cable TV sector, where there are no restrictions on foreign direct
investment, and also in the overall pay-TV industry,
where the distribution and pricing of services is left to the market.
Convergence is encouraged with competition between cable, satellite
and telephone networks occurring over a level playing field.
Pay-TV
penetration in Japan nevertheless remains low but this is partly
due to a myriad of media choices for consumers.
At the same time, investment and revenue generation is among the
highest in Asia, partly due to economic factors and partly due to
a favorable regulatory framework. |
|
| KEY
POINTS BY JURISDICTION |
| |
| Regulatory
frameworks in Australia,
Malaysia and Singapore
are largely favorable, helping the pay-TV industry to attract high
levels of investment and generate a significant level of revenue.
Competition and consumer choice is limited, though the regulatory
environment is stable enough to allow operators to successfully
launch new digital and interactive pay-TV services and commit capital
towards technology upgrade and the acquisition of programming content.
|
| |
| |
| |
Key
points include:
Australia’s
regulatory environment generally supports pay-TV development with
one notable exception — a restrictive anti-siphoning regime.
The country’s anti-siphoning rules prohibit pay-TV operators
from acquiring, on an exclusive basis, the broadcast rights to a
wide range of sports events. Such legislation has strengthened the
free-to-air terrestrial TV industry, reduced the viability of mass-market
focused pay-TV providers, and undermined business models.
Malaysia’s
regulators continue to strive for a technology-neutral regime, and
do not seek to involve themselves in commercial decisions on rates
or programming. There is some unfavorable regulation,
such as a “Made in Malaysia” requirement for advertising
and comprehensive content laws. Competition is limited but is gradually
increasing. Overall, a stable regulatory environment has helped
boost pay-TV development with penetration reaching 30% in 2004 and
investment running over US$250 per pay-TV household
Singapore’s
regulatory regime allows international broadcasters freedom of action
and a framework that supports investment in setting up headquarters.
The treatment of pay-TV aimed at local consumers is more interventionist.
In addition to investment restrictions, there are controls
on content. Consideration is also being given to involvement in
contractual relations between pay-TV channels and operators. The
regulator has attempted to increase competition but a challenger
to the incumbent operator, which has 38% of a small TV market, has
yet to emerge.
|
| KEY
POINTS BY JURISDICTION |
| Korea
and Taiwan, both highly
penetrated pay-TV markets, are characterized by uneven regulatory
frameworks. This has undermined investment, competition and transparency
in the pay-TV industries of both markets. |
| |
| |
| |
Key
points include:
Regulation
in Korea is evolving but remains largely uneven.
In recent years, restrictions on foreign and domestic investment
in pay-TV have been reduced. This has helped unlock investment from
international private equity firms, especially in the area of cable
and satellite distribution infrastructure, which, in turn has helped
promote greater consolidation and scale in the market.
However,
investment by strategic international investors remains negligible
and investment in pay-TV programming is limited,
due to continued restrictions on the retransmission of foreign channels;
burdensome local programming quotas; and lack of both a level playing
field for competition between terrestrial and pay-TV platforms and
outside competition to domestic monopolies in terrestrial and pay-TV.
These
trends have helped reinforce utility-type pricing for pay-TV services
in Korea with average consumer spend on pay-TV estimated
at US$6 per month in 2004, 70% lower than spend (US$20/month) on
broadband services, which are typically a commodity in other parts
of the world.
Pay-TV
regulation in Taiwan remains characterized by overly complex and
restrictive practices, involving multiple levels of government in
extensive and overlapping rules covering retail rates and program
packaging. Such regulation has undermined incentives to upgrade
technology and invest meaningfully in programming content, as shown
by the slow response to the government’s drive to digitize.
Historically,
Taiwan has attracted considerable investment in pay-TV distribution
and programming content from strategic global media investors. However,
where the island was once an innovator in technology and content
and also a major regional destination for pay-TV-focused media investors,
it is now increasingly losing its
attraction for investors and industry-relevant players. |
|
| KEY
POINTS BY JURISDICTION |
| |
| India
is a fast growing pay-TV market with industry turnover growing at
an average annual rate of 18% since 2000. Penetration levels reached
56% in 2004 and the pay-TV sector contributed approximately 0.42%
to national GDP in 2004. Critical to the future development of the
pay-TV industry is regulation. While the Ministry of Information
& Broadcasting (I&B) and Telecom Regulatory Authority of
India (TRAI) are generally effective institutions, there remains
uncertainty about the direction of regulatory policy in India. |
| |
| |
| |
Key
points include:
The
Government of India and its institutions have expanded regulation
of the pay-TV industry and are considering further tightening,
a direct contrast to its continued deregulation of the telecoms
sector.
Foreign
direct investment (FDI) levels are not consistent in the media and
communications industry and restrictions continue to adversely impact
the levels of investment that flow into pay-TV distribution infrastructure.
At present, 49% FDI is permitted in cable TV systems; 20% in DTH
satellite networks; and 26% in news-focused pay-TV program networks.
This contrasts unfavorably with 74% in telecom networks and 100%
in Internet service providers.
Cable
TV industry rates are tightly regulated at both retail and wholesale
levels. TRAI imposed a freeze in the rates that
cable operators may charge end user subscribers as well as the rates
local cable operators pay to cable multi-system operators (MSOs)
and MSOs pay to channel providers. In December 2004, TRAI modified
its rate regulation to allow for a 7% rate increase for 2005. The
increase was smaller than the typical 10% – 15% annual industry
increase before the prize freeze and undermines the ability of both
broadcasters and operators to invest in both content and distribution.
Competition
in the pay-TV industry is limited at present. The
government has awarded licenses to 3 pay- TV DTH service providers
and 1 free-to-air DTH service provider. This is a welcome move but
the caveat is that “must provide” regulation provides
a substantial hurdle to DTH subscriber growth and could deny any
new services the possibility of offering consumers superior content
in order to penetrate markets. (“Must provide”
regulation dictates that broadcasters must make available all channels
on a nondiscriminatory basis to all cable and satellite TV providers.)
All
DTH licensees need to pay an annual fee equivalent to 10% of gross
revenues. In
addition, the DTH operator must pay a spectrum royalty fee, currently
fixed at 2% of gross revenues. These rules are fairly cumbersome
relative to industry norms.
|
| KEY
POINTS BY JURISDICTION |
| The
pay-TV industries of the Philippines
and Thailand remain
underdeveloped due to high levels of piracy and less-than-compelling
economic and regulatory factors. |
| |
 |
| |
Key
points include:
The
overriding problem in the Philippines remains the inability of legitimate
broadcasters to prevent illegal misappropriation and resale of their
signals. Widespread resale of pirate signals has
sapped the vitality of the legitimate cable TV industry and handicapped
potential competition from DTH or Internet Protocol Television (IPTV)
services.
Pay
TV development in the Philippines also remains hampered by an outdated
regulatory regime.
While some features of the regulatory framework are pro-market,
such as the absence of restrictions on tiering, advertising and
rates, others are interventionist, including restrictions on exclusivity
and a ban on foreign investment.
Thailand
urgently needs a modern, independent regulator,
but the establishment of a new National Broadcasting Commission
(NBC) has been subject to prolonged delay. Improvement of the pay
TV environment does not seem to be high on the NBC’s agenda.
Lacking
a competent regulator, the industry finds itself in an ambiguous
and uncertain situation with selective enforcement of rules.
Thailand’s intellectual property environment is also
poor: the pay-TV industry has been unable to achieve enforcement
of its broadcast rights and pay-TV content is widely pirated.
In
most other respects, Thai regulatory practices are benign:
there is no interference in relationships between channels and platform
operators, content regulation is not onerous and operators can package
their programming freely.
There
is one major negative regulatory constraint on Thai pay-TV industry
growth: advertisements
are entirely prohibited on pay-TV, and the industry can only rely
on subscription revenue. This limits the market for pay-TV program
providers and undermines investment in pay-TV programming content.
|
|
| KEY
POINTS BY JURISDICTION |
| |
| China’s
state-owned cable TV industry is a free-to-air based utility with
significant commercial pay-TV potential. At present, the majority
of China’s 105 million cable homes pay nominal fees to access
the retransmission of free-to-air TV channels. Since 2003, the cable
TV industry, backed by the regulatory framework, has begun to develop
pay-TV services, supported by the rollout of digital technology
and the introduction of pay-TV programming content by domestic media
groups. At end-June 2005, there were approximately 600,000 feepaying
subscribers to digital services in China. Competition to cable TV
is expected to increase in the future through the commercial launch
of IP-based pay-TV services over nationwide telecom networks and
digital DTH satellite networks.
|
| |
 |
| |
The
key China-centric points of the study include:
China’s
political and industrial leaders appear to be gradually unifying
in their support for digital pay- TV deployment with new incentives
and regulations emerging. More momentum is needed
if the cable TV industry is to transform its social service —
a mature basic video business driven by free-to-air channels —
into a commercial service based on high-growth digital tiers, driven
by pay-TV channels.
Foreign
investment in cable and pay-TV distribution infrastructure remains
banned. In contrast, foreign investment in telecom networks is allowed
up to 25%, going up to 49% in 2007.
Investment in cable infrastructure has largely been driven by the
government while technology upgrade has been funded through loans
from various state-owned banks.
At
present, Chinese policy also does not facilitate foreign broadcasts,
and is not designed to sustain a market-based system.
There are notable exceptions, driven by government liberalization
in recent years with regard to allowing six foreign broadcasters
to legitimately broadcast 4-hour TV channels on cable systems in
Southern China, while another 51 broadcasters are allowed to distribute
programs in threestar and above hotels and residential foreign compounds.
Foreign
investors are not allowed to own any stake in TV channels (terrestrial
or cable TV).
In November 2004 the rules governing foreign ownership of joint
ventures involved in program production were relaxed, allowing overseas
broadcasters to hold up to a 49% stake. However, in July and August
2005, new and existing restrictions were upheld with regard to prohibiting
Chinese broadcasters from co-operating with international media
and any cooperation with foreign companies in the broadcast of regular
and live programs. |
|
|
| KEY
POINTS BY JURISDICTION |
| |
The
government has also stated that it will not grant any additional
licenses to foreign-owned TV channels for either limited broadcasting
rights to hotels and foreign compounds or cable landing rights for
Southern China. The
government is also tightening restrictions over the licensed foreign
satellite broadcasters currently operating in China, in order to
“safeguard national cultural safety.” Sino-foreign coproductions
of video content will also face stricter censorship.
As
the pay-TV industry develops, regulatory models are likely to evolve
with the focus on maximizing the economic contribution of the industry
to the benefit of domestic industry stakeholders, overseas partners
and Chinese consumers. For the present, however, the environment
is marked by considerable regulatory uncertainty, as the pace and
direction of future change is unclear. |
|
|
| Compiled
by the Cable & Satellite Broadcasting Association of Asia with
Economic Analysis by Media Partners Asia |
| |
802,
Wilson House
19-27 Wyndham Street
Central, Hong Kong
Tel: +852 2854 9913
www.casbaa.com |
| |
| The
Cable & Satellite Broadcasting Association of Asia holds all
copyrights to this report unless otherwise stated, and no part thereof
may be reproduced or replicated without prior explicit and written
permission.
|
| |
| |
| Archive |
Trends in Mumbai print battle- October 29, 05
C & S Homes: The big debate- September 14, 05
Household Potential Index(HPI) from IRS- July 13, 05
THE TV SPORT MAP IN 2004- June 14, 05
Asia Pacific C&S Markets 2005- Apr 28, 05
Consumer Spending Poll- Nov 08, 04
M- SPECTRA : MADISON’S MULTI-MEDIA REACH FREQUENCY ESTIMATOR-
Oct 04, 04
Effective Return on Cricket Ground Signage- Aug 18, 04
Media effect and its measurement in Rural India- Aug 11, 04
Euro 2004 – Performance Analysis- Jul 22, 04
Business Media Opportunities in India- Jul 10, 04
Election 2004: Monitoring of TV Coverage - Jun 26, 04
Election 2004 A Study by MAXUS - May 29, 04
SMS users are open to brand marketing - April 22, 04
Celebrity Endorsements Inside Out: A CyberMedia Study - April
17, 04
Understanding women Study by MCI - March 20, 04
Consultation Note on Issues relating to Broadcasting and Cable
Services -
Jan 01,
04
SMS Selling Made Smarter?!- Dec 04, 03
ICCO World report October 2003- Nov 20, 03
DTH Studyby Initiative media- sep 23, 03
IRS Study- sep 17, 03
CyberMedia Research - July 17, 03
Media Financial Wellbeing - A Study by ATG - June 06, 03
The "Surer" way of consumer contact -May 15 03
TOWN & COUNTRY - June 24 02
All
in All!
Mudra
|
|
| |
|
