cable tv - past, present and future · 2009. 1. 13. · cable tv system operators are still...

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FAIR TRADE COMMISSION, EXECUTIVE YUAN, R.O.C. (Taiwan)

Creating a Quality Competition Environment in Taiwan

Taiwan FTC NewsletterNo.010

Taiwan FTC NewsletterPublisher: Fair Trade Commission, Executive Yuan, R.O.C. (Taiwan)Publish Date: November 2008

Cable TV - Past,Present and Future

Cable TV - Past,Present and Future

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Special TopicCable TV - Past, Present and Future

Selected CasesDifferential Treatment on Channel Licensing

Multi-system Operators that Purchase and Acquire Independent System Operators

shall Pay Attention to Market Structure in Operation Districts

Joint Specification of Cable TV Set Top Boxes – A Big Leap

FTC Statistics Statistics on Competition Restraint Involving Cable TV

FTC Activities FTC Activities in September 2008

FTC International Exchanges FTC International Exchanges in September 2008

Taiwan FTC NewsletterNo.0102008.11

Taiwan FTC Newsletter

Taiwan FTC Newsletter No.010 / 2008. 11 00101

Past

TV has gradually developed to become the domi-

nant mass media for the dissemination of informa-

tion and entertainment. Its impact on everyday life

is significant, influencing social trends and culture

and, for many, it has become an indispensable

household item. In Taiwan, the rapid growth of the

cable TV phenomenon is largely due to the geo-

graphical characteristics of our narrow and small

island nation, the diversity of programs provided

by channel providers and the high level of accep-

tance by the media audience. Nevertheless, cable

TV enterprises are cost and technology intensive

enterprises and are restricted by the size of the

markets they serve and the limitations of the tech-

nology that it delivers. In certain areas of Taiwan

these services have developed such that they dis-

play naturally monopolistic characteristics.

In recognition of these factors, the Draft of the

Cable Radio and Television Act was developed

and this was originally administered by the

Government Information Office as the competent

authority responsible for domestic cable radio and

television in the Republic of China (Taiwan).

Cable TV system operators are still regulated in

each district via the issue of Special permits.

A Study of Area-division Operation of Cable TV

in Taiwan , which was commissioned from the

Graduate Institute of Urban Planning, National

Chung Hsing University in 1990, still forms the

main basis upon which the issue of permits is

determined. The study examined many essential

factors including location, landscape, socio-eco-

nomic characteristics and an evaluation of the size

of the target audience. The study established con-

ditions for administratively dividing each district,

county and city into separate divisions with a po-

pulation of approximately 150,000. This was con-

sidered to be the smallest possible scale for the

successful operation of these services taking into

consideration the current and likely developments

in the areas of technological, economic and admi-

nistrative management.

Drawing on the study’s conclusions, the

Government Information Office, created separate

divisions based on existing local administrative

and district boundaries and joined those smaller

districts such as the offshore islands (Penghu

County, Kinmen County and Lienchiang County)

while proceeding to make proportionate adjust-

ments in counties and cities where the density of

population was much higher (such as Taipei

County and Taipei City). Similarly, vast areas,

where the population is widespread (such as

Miaoli County and Taitung County), were amalga-

mated to form a single division. Ultimately, the

Government Information Office determined that

there should be 51 operational districts for the sup-

ply of domestic cable TV services.

Present

Since the introduction of laws to regulate cable TV

enterprises, there have been considerable transfor-

mations in the technological development of rela-

ted industries, changes to market order, variations

Cable TV - Past, Present and Future

Special Topic


in economies of scale and other alterations that

have impacted on the industry. Through integra-

tion, acquisition and applications for cancellation,

service providers have gradually merged to lower

costs and seek efficiency gains. This phenomenon

has resulted in a gradual increase in the number of

situations where a single service provider operates

in one district. As at the end of June 2008, 65 ser-

vice providers operated in the entire nation which

is comprised of 51 operational districts.

Consequently, 37 operational districts had only one

service provider and this accounts for 57% or more

of the total number of viewers. The remaining 14

operational districts operated with only two service

providers in a single district which still places

them in a market categorized as an oligopoly. The

industry’s continued independent adjustment over

many years has resulted in the market structure

gradually being restricted to the point where it

seems to be moving down the path of one service

provider for each district”. The inevitable result

was that the dominant market positions of the

industry participants led to low service quality, a

monopolization of resources and media channels

and adverse affects on the rights and benefits of

viewers.

In the overall market structure, only a few inde-

pendent system operators remain in the industry

and multiple system operators currently dominate

the current domestic cable TV industry. There are

five main multiple system operators including, the

Carlyle (Kbro) group, the MBK-CNS group, the

Macquarie (Taiwan Broadband) group, the Taiwan

Fixed Network system and the Taiwan

Infrastructure Network Provider system. In terms

of the current total of 61 cable TV enterprises

nationwide, these five large operators control

approximately 41 cable TV enterprises and their

occupancy ratio is 67%. If the occupancy ratio is

calculated in terms of the number of viewers, it is

even higher at 78%. Independent system operators

have been left with the remaining occupancy ratio

of 33% of total operators or just 22% of viewer

population.

In the absence of redefined operational districts the

market structures of monopoly and oligopoly

remain well established and industry is now cha-

racterized by a lack of competition. At the same

time, the multi-system operators, Kbro group,

China Network group and Taiwan Fixed Network

system, have all expanded their services to the sup-

ply of up-stream channel programs, thus achieving

both horizontal and vertical integration in the cable

TV industry.

The Fair Trade Commission (FTC) has constantly

and actively applied its powers to investigate and

address monopoly and oligopoly issues in the

cable TV industry. It has undertaken many tho-

rough examinations of mergers, concerted actions

and acts of unfair competition including:

the merger of Fu Yang Investment Holding

Company, Shin Ho Cable TV Co Ltd and

Mangrove Cable TV Co, Ltd;

the merger of China Network Systems Co Ltd,

Tashin Cable TV Ltd and Great Kaohsiung


Cable TV Ltd;

a concerted action in violation of the Fair Trade

Act between Dah Fung CATV Co Ltd and Hai

Sun Cable Broadcasting System Co Ltd;

a concerted action between King's Channel

CATV Co Ltd and Everlasting Cable TV Co

Ltd;

a case where Feng Meng Engineering Limited

acquired the sole distributorship within an ope-

rational district; and

an unfair competition case where New Visual

Wave Cable Communications Co Ltd traded on

conditions that improperly restrained the busi-

ness activities of its trading counterparts.

In statistical terms, between 1992 and the end of

August 2008, 23 decisions were made by the FTC

in respect of acts restraining competition or

obstructing fair competition by enterprises in the

cable TV industry. The total number of enterprises

being subject to disciplinary actions was 33 and

the amount of fines reached as high as NT$ 42

million.

From an industrial economics perspective, the

existing government policy regarding the prescrip-

tion of district boundaries for operating cable TV

has made it difficult for the current market struc-

ture to achieve the benefits afforded by competi-

tion. If market conditions had allowed an unre-

stricted industry, both consumers and the economy

may have been better placed to reap the rewards

that a competitive environment delivers. The FTC,

as the competent authority for competition law, has

in many instances had to deal with the investiga-

tion and handling of anticompetitive conduct after

the event. Without significant changes in market

structure, the business conduct of enterprises is

unlikely to undergo any substantial improvement.

Future

The market problems derived from cable TV enter-

prises’ monopoly and oligopoly positions has long

been recognized by the general public as being

unhelpful to the improvement of the overall vie-

wing environments. Many of the existing market

problems have arisen because cable TV enterprises

tenaciously pursue the existing benefits of opera-

ting in a restricted market and are unable to effec-

tively operate cross-sector. However, this is chan-

ging and one of the key areas has been in the trend

toward digital technology integration.

The cable TV industry is evolving from simply

operating as a single cable TV network and is

Special Topic


embracing the era of diverse telecommunication

and broadband networks. In more recent times, the

technology of cross-sector operation between cable

TV and telecommunication networks has become

increasingly mature and the development of digital

technology convergence has gradually allowed

broader access by the broadcasting, correspon-

dence and information industries. With the conver-

gence of telecommunication and broadcasting

technologies and the development of broadband

technology, internet service providers can now

provide audio and visual services that were previ-

ously the sole domain of the broadcast operators.

In the same way, fixed communication network

business operators can also, via broadband tech-

nology, provide audio and visual services that pre-

viously only cable TV enterprises provided. As a

direct result of this trend toward digital conver-

gence, it is now feasible to develop a different

competition environment for the various TV view-

ing platforms. Through this new technology it is

hoped that past problems, derived from a lack of

competition in the cable TV market, can be

reduced and eventually eliminated.

While the development of digital convergence

promises improvement in the industry as a whole,

there will always be the prospect that enterprises

will seek to engage in anticompetitive conduct and

other issues of competition restraint will no doubt

arise. In this regard the FTC will continue its close

cooperation efforts with the National

Communications Commission. The immediate

challenges that lie ahead for both of these authori-

ties include:

fair acquisition of program channels;

demarcation of new operational districts for

cable TV;

vertical price squeezes following the significant

entry of telecommunication enterprises into the

cable TVmarket;

merger control in a cross-platform industry; and

neutralization of specifications, standards and

new technologies.

Rest assured that the cooperative efforts of the

FTC and the NCC will clearly focus on competi-

tion advocacy and minimal regulation to facilitate

a fair, open and competitive TV industry that will

benefit us all.


Selected Cases

Differential Treatment on Channel Licensing

The Establishment of Market Presenceby Telecommunication Enterprises in theCable TV Industry

Equality of information acquisition is an important

cornerstone for the operation of a fair and demo-

cratic society. We also know from the content of

the domestic J. Y. Interpretation No. 364 that peo-

ple not only enjoy passive freedom of speech, but

they should also have equal access to media

and their right to freedom of choice. Despite these

fundamental principles, the natural monopolies

and high market concentrations that are characte-

ristic of the cable radio and television markets has

necessitated that many countries still adopt a more

protectionist attitude toward these industries.

In more recent times, the technology of cross-sec-

tor operation between cable TV and telecommuni-

cation networks has become increasingly mature

and the development of digital technology conver-

gence has gradually allowed broader access by the

broadcasting, correspondence and information

industries that previously enjoyed the benefits of

operating in restricted markets. The convergence

of telecommunication and broadcasting technolo-

gies together with the development of broadband

technology has allowed telecommunication enter-

prises and internet content providers to provide

audio and visual services. It has also provided a

different competition environment for the con-

struction of new TV viewing platforms that are

evolving as a result of the trend toward digital con-

vergence. This, in turn is resolving some of the

problems that occurred in the cable TV industry

where previously monopoly enterprises existed.

Telecommunication enterprises around the world

are establishing a firm presence in the broadcast

and cable TV markets through the use of technolo-

gy such as internet protocol television (IPTV)1 and

other services that provide multimedia video on

demand (VOD). This, in turn, is bringing new

competition and new services to the TV broadcast

and audio-visual markets. The future trends of

IPTV promise the integration of television, inter-

net, telecommunications, shopping, living informa-

tion, education, finance, security, remote monito-

ring and control, all in a single unit that will

become the core of the digital family.

In respect of the domestic provision of IPTV, the

National Communications Commission (NCC), as

the competent authority for the industry, has deter-

mined that all multimedia platforms that are simi-

lar to MVOD will be considered to be services of

Transmission Platforms of Multimedia Content .

It has expressly provided that this type of service

falls within the scope of local telephone services.

Currently, MOD is provided by Chunghwa

Telecom Co Ltd and other local telephone service

providers may follow this initiative and similarly

provide the service. The cable radio and television

system operators are also eligible to operate MOD

services by crossing sectors but they must firstly

acquire a special license for local telephone services.

Presently, some enterprises have already acquired

the special license and actively invest in the opera-

tion of IPTV businesses.

1. Under an Internet protocol agreement, IPTV is defined as a television broadcasting service that has upload and download

functions and is a service offered via a broadband service.


Channel Program Licensing for IPTVEnterprises should Gradually Improve

In the past, the FTC had received complaints from

IPTV enterprises claiming that channel enterprises

or their agents refused to supply licenses for the

broadcast of their channel programs but would

supply the same content to cable TV operators. Of

particular concern to the IPTV enterprises was that

there was no valid justification given for the diffe-

rential treatment.

Following investigation by the FTC, two key areas

of concern were examined to determine if a more

equitable approach to the provision of media ser-

vices could be established. While recognizing that

some concerns currently exist, the FTC is of the

view that there has been a gradual improvement

and no intervention is warranted at this stage. The

two key areas of concern are discussed below.

Limitations on Intellectual PropertyRights Licensing Agreements

Advice from the Intellectual Property Office,

Ministry of Economic Affairs, R.O.C., indicated

that IPTV businesses are required to acquire a

license if they are involved in delivering a service

by either public broadcast or public transmis-

sion . Because MVOD services are provided in

the form of interactive data transmitted via com-

puters or the internet, they are categorized as a

public transmission for the purposes of the

Copyright Act. Public transmission was inclu-

ded in amendments to the Copyright Act in 2003

because the capacity to speedily transmit via the

internet and conveniently copy material had the

potential to impact directly on the rights of copy-

right holders. The result was that the terms

public broadcast and public transmission

became specifically differentiated. Consequently,

separate licenses are required for either broadcast

or transmission, depending upon the manner in

which the services are being provided to the pub-

lic. Since the majority of domestic channel enter-

prises that supply content to both cable television

operators and IPTV enterprises have not yet

acquired rights for public transmission, they are

precluded from re-assigning the rights or licenses

to IPTV enterprises and are, in many instances,

limited to supplying cable TV operators.

Consideration of Transaction Limits andCosts

As noted above specific intellectual property rights

licenses must be acquired for the purpose of broad-

casting channel programs via multimedia transmis-

sion platforms such as IPTV. The cost to channel

enterprises’ of acquiring licenses for public

transmission is higher than the cost of cable TV

operators’ acquisition of licenses for public

broadcast . This is because IPTV services are

more readily duplicated and easily broadcast by

computer or in an online environment. However,

because IPTV platform services are part of an

emerging and developing industry the number of

customers accessing these services is still limited.

In the circumstances, it is difficult to expect that

the costs, from channel program organizations,

incurred by IPTV enterprises should be on a par


Selected Cases

with a mature market (such as cable TV) when the

IPTV enterprises currently have a more limited

opportunity to recover those costs. However, as

markets, technologies and demand from con-

sumers matures, all parties will gradually reach

consensus on reasonable commercial arrange-

ments.

The FTC understands that IPTV enterprises have

acquired licenses from channel enterprises for

some self-produced and outside produced pro-

grams and the enterprises have further proceeded

to negotiate arrangements concerning a suitable

system for the calculation of profits from adverti-

sing. These steps indicate a welcome preparedness

by the industry to progressively resolve issues of

mutual concern.

Following careful consideration by the FTC of the

abovementioned issues, it was considered that

insufficient evidence existed to establish that the

conduct of the channel enterprises were likely to

constitute a violation of the Fair Trade Act.

However, in order to ensure that IPTV enterprises

can acquire channel programs fairly, the FTC has

written to the key channel enterprises in the indus-

try requesting them to provide licensing opportuni-

ties to IPTV enterprises on equal terms as those

applicable to cable TV operators. The FTC will

also continue to monitor the development of mat-

ters relevant to the licensing of channel programs

for use on transmission platforms as multimedia

content.

IPTV has already shown a trend toward accelera-

ting development and channel programs have

always been the key to sustaining this develop-

ment. Both cable TV system operators and IPTV

enterprises need to be aware that they operate in

competition with one another and as such horizon-

tal arrangements need to be considered in the con-

text of the Fair Trade Law.

Channel providers and cable TV system operators

should also carefully consider their conduct in

light of regulations relevant to differential treat-

ment and acts of boycott provided for by the Fair

Trade Act. Conduct of specific concern to the FTC

that should be avoided includes:

threats by System operators to move the channel

positions of channel providers;

threats to take channels off the market;

threats to adjust channel license fees;

threats to withhold licenses for channel pro-

grams from IPTV enterprises; and

obstructing IPTV enterprises from participating

in the market by other means of unfair competi-

tion.

The FTC will continue to observe the development

of the market dynamic to ensure that opportunities

for fair access to content exists for IPTV enterpri-

ses and to facilitate fair competition between IPTV

and cable TV enterprises. Through the creation of

a competitive environment in the industry, con-

sumers should benefit from greater choices and

higher quality while industry benefits with greater

opportunities to expand into broader markets with

the potential for further sales.


Multi-system Operators that Purchase and Acquire Independent SystemOperators shall Pay Attention to Market Structure in Operation Districts

The Cable Radio and Television Act provides that

domestic cable TV system operators are restricted

to certain area-divisions such that they may not

conduct trans-regional operations. Consequently,

monopoly and oligopoly markets with only one or

two providers in each operational area are charac-

teristic of this industry sector. Over time, many

cable TV systems in different districts have inte-

grated and become affiliates of the same holding

company and such entities are known as a Multiple

System Operators (MSOs).

The function of an MSO, as a holding company

with shareholdings in a number of cable TV sys-

tem operators, is to integrate and share resources

among subsidiary systems. By combining the

technology, management and economic benefits of

each of the subsidiary enterprises the MSO can

rationalize organizational structures and drive effi-

ciencies to optimize business returns. MSOs are

predominant in the current domestic cable TV

industry and only a few independent system opera-

tors remain. There are currently 5 main MSOs

including the Carlyle (Kbro) group, the MBK-CNS

group, the Macquarie (Taiwan Broadband) group,

the Taiwan Fixed Network system and the Taiwan

Infrastructure Network Provider system.

Of the 61 cable TV enterprises that currently make

up the industry in Taiwan, the five large operators

control approximately 41 cable TV enterprises.

This means that MSOs have an occupancy ratio of

67% and if this ratio is calculated in terms of (the

number of) viewers, it is even higher reaching

78%. Independent system operators have been left

with the remaining occupancy ratio of 33% of total

operators or just 22% of viewer population.

System Operators that may be under Control of MSOs Number of Viewers Ratio

Kbro Group

Yang Ming Shan Cable TV Co. Ltd., King's ChannelCATV Co., Ltd., New Taipei Cable TV Co., Ltd., DA-AN WenShan Cable TV. Co. Ltd., New Tang-ChengCable Co., Ltd., United Cable Television Co., Ltd.,Chendao Cable T.V. Company Ltd., Feng MengEngineering Limited, Nan Tian CATV Corp., NorthTaoyuan Cable TV Co., Ltd., New Channel Cable TVCo., Ltd., and Kuan Sheng CATV Corp.

Approximately 1.1million

23.85%

MBK-CNS Group

Everlasting Cable TV Co., Ltd., Li Guan Cable TV Co.,Wonderful Cable TV., New Visual Wave CableCommunications Co., Ltd., Ga Ho Cable Co., Ltd.,Prosperity CATV Corp., Suncrown CATV Co. Ltd., GangDu Cable TV Co., Ltd., Ching Lian incorporated,Telefirst Cable Communication Co. LT., Twinstar CATVCo.,Ltd., Clearvision CATV Ltd., HARBORVIEW CableTV Co., Ltd.

Approximately1.09 million

23.3%


System Operators that may be under Control of MSOs Number of Viewers Ratio

Australian MacquarieGroup

Nan Taoyuan Cable Television Co., Ltd., Best Cable TVCompany, Shin Ho Cable Television, Chun-Chien CableTelevision Co., Ltd., Chi Yuan Cable TV Inc, Ltd.

Approximately680,000

14.7%

Taiwan Fixed NetworkSystem

K.T.S.CATV Co. Ltd., Feng Shing Cable Television Co.,Ltd., UNIONCATV Cable TV Co., Ltd., Yeong Jia LehCable TV Co., Ltd., North Coast Cable TV. Inc., Shin HoCable TV Co., Ltd., Mangrove Cable TV Co., Ltd.


9.61%

Taiwan InfrastructureNetwork Provider

System

DA-TUN Cable TV CO., LTD., Chia Lien Cable TV Co.,Ltd., CNT CATV Co., Ltd., Peikang Cable TV Co., Ltd.,West Coast CATV


6.59%

Avenger International Limited Filed aMerger Report to the FTC Regarding itsIntention to Merge with Cable-GiantCATV Co., Ltd.

In April, 2008, the FTC received a merger report

filed by Avenger International Limited of the

Cayman Island. It planned to publicly purchase,

through its domestic and overseas multi-level rein-

vestment companies, up to 100% of the sharehol-

ding of Cable-Giant CATV Co Ltd.

In Hsindian District, Taipei County, there were

only two cable TV system operators, Cable-Giant

CATV Co Ltd being one of these cable TV system

operators and New Tang-Cheng Cable Co Ltd

being the other. The market share of each was

50%.

The New Tang-Chey Cable Co Ltd was controlled

by a cable TV system operated by the Carlyle

(Kbro) Group. Originally, the merger of Avenger

International Limited and Cable-Giant CATV Co

Ltd only involved the transfer of the shareholding

of Cable-Giant CATV Co Ltd and the merger was

unlikely to impact greatly on market competition.

As New Tang-Cheng Cable Co Ltd did not form

part of the cable TV system controlled by Avenger

International Limited, two cable TV systems con-

tinued to be operated by two different MSOs.

However, while the FTC was examining the case,

it discovered that managers from the Carlyle

(Kbro) Group were involved in the entire process

of purchasing Cable-Giant CATV Co Ltd by

Avenger International Limited. Consequently, the

FTC looked further into the holding groups that

were behind the two system operators. To do this it

issued letters to relevant enterprises requesting

them to explain the various interrelationships and

also sought advice from the Investment

Commission, the Ministry of Economic Affairs

and the National Communications Commission

seeking clarification of the structure of the multi-

level reinvestments of all relevant enterprises.

Specifically, the FTC wanted to know whether

Avenger International Limited and its upper and

lower level reinvestment businesses were connec-

ted to the Carlyle (Kbro) Group. If they were, then

the merger was likely to have a substantial impact

on competition in respect of cable TV systems in

the Hsindian District.

After the FTC conducted a substantial investiga-

tion, it found that the Carlyle (Kbro) Group was

Selected Cases


indeed connected to the merger in this case.

However, the structure of the multi-level reinvest-

ments of the businesses revealed that the applicant

in this case, Avenger International Limited, and its

co-investor, Hamlet Investment Holdings Limited,

respectively held 86.5% and 13.5% of the shares

of Infomax Cable Investors Ltd. Infomax Cable

Investors Ltd merged with Cable-Giant CATV Co

Ltd via the structure of its multi-level reinvest-

ments and Investment Holdings Limited was the

reinvestment company of the Carlyle (Kbro)

Group. Therefore, it seemed that the Carlyle

(Kbro) Group had already indirectly acquired

13.5% of the shares of Cable-Giant CATV Co Ltd.

With respect to the issue whether Avenger

International Limited was connected to the Carlyle

(Kbro) Group, the FTC was unable to ascertain,

from the available evidence concerning the status

of upper level investments, that any substantive

connection existed. Further, a 13.5% shareholding

of Cable-Giant CATV Co Ltd was unlikely to

afford sufficient control of the business operations

or to afford it the ability to influence recruitment

and retention policies. For these reasons the FTC

found there were no reasonable grounds to prohibit

the merger which was approved but only after cer-

tain conditions were attached.

Attached Conditions were PioneeringWorks of Past Merger Cases

While the FTC did not have sufficient evidence to

prohibit the merger it still had concerns with the

proposal. After the FTC’s thorough consideration,

the FTC imposed two conditions of a type that had

not previously been sought in any other merger

proposal. The conditions were designed to prevent

enterprises related to the Carlyle (Kbro) Group

from directly or indirectly receiving data relating

to the business operations of the related enterprise

Cable-Giant CATV Co Ltd. The FTC also sought

to minimize the risk that the merger might result in

the companies conducting other acts of competi-

tion restraint or unfair competition. To eliminate

any concerns about competition restraint that may

arise in the Hsindian District cable TV market as a

result of the abovementioned merger and acquisi-

tion, the FTC imposed the following two specific

conditions:

1. Enterprises related to the Carlyle (Kbro) Group

may not serve as directors and supervisors of

Cable-Giant CATV Co Ltd.

2. Cable-Giant CATV Co Ltd and New Tang-

Cheng Cable Co Ltd may not commission the

same enterprise or staff to purchase channel pro-

grams in concert, proceed to joint marketing and

advertising, jointly use service counters, or pro-

ceed to other concerted actions which are so-called

by Article 7 of the Fair Trade Act.

The above case demonstrates that the FTC careful-

ly examines all aspects of merger proposals to

ensure that the structure of the cable TV system

market is not further aggravated. The FTC will in

all cases seek to lift the corporate veil when exa-

mining mergers within the cable TV industry to

ensure that upper and lower level reinvestment

businesses are not used as a means of circumven-

ting regulations and to prevent MSOs from pur-

chasing and acquiring, through multi-level rein-

vestments, those independent cable TV system

operators, with the possible result that this would

impact on fair market competition. Consequently,

if an MSO intends to purchase and acquire an

independent system operator, it needs to pay care-

ful attention to the market structure within the rele-

vant operational district.


Joint Specification of Cable TV Set Top Boxes – A Big Leap

Beijing has just closed the curtain on the 2008

Olympic Games. In addition to the traditional

wireless television stations, the public could, for

the first time, view and appreciate each spectacular

sporting event via the internet, on their mobile

phones, through wireless digital television and as

multimedia on demand (MOD). This new techno-

logy not only brings many ways for the public to

view TV programs, but it also points to the way

forward for relevant industries in respect of the

development of television digitalization. In the

same way, the National Communications

Commission, on 27 March 2008, passed the

Program of Strategies of Facilitation for

Digitalization Development of Cable Television

in the 233rd Commissioners’ Meeting. It is hoped

that, in accordance with the policy, the government

will completely remove analog channels of terres-

trial wireless television in 2010 and guide the

cable TV industry to actively develop towards di-

gitalization for the benefit of all local information,

communication and broadcasting industries.

28 Cable TV System Operators Appliedfor Exceptional Permit of ConcertedAction

In order to cooperate with the National

Communications Commission’s desire to drive the

abovementioned policy for digitalization of cable

TV and provide a more competitive market

between digital wireless television stations and

MOD, 28 enterprises researched, drafted and joint-

ly formulated a uniform specification standard for

cable TV set top box technology. Each of the

enterprises hoped that following the introduction

of digitalization, this concerted action would:

lower operational costs of cable TV;

improve the reception quality of cable TV;

further production efficiency of cable TV sys-

tem operators; and

facilitate a fair and reasonable system for all

system operators.

According to Article 14(1) of the Fair Trade Law,

no enterprise shall have any concerted action

unless the concerted action is beneficial to the

economy as a whole, in the public interest and an

application with the central competent authority

for such concerted action has been approved.

Consequently, the system operators applied to the

FTC for the approval of the concerted action.

Kbro

(12)

Taiwan Broadband

Communications (5)

DA-AN WenShan CableTV. Co. Ltd., Yang MingShan Cable TV Co. Ltd.,

King's Channel CATV Co.,Ltd., New Taipei Cable TVCo., Ltd., New Tang-Cheng

Cable Co., Ltd., UnitedCable Television Co., Ltd.,

Chendao Cable T.V.Company Ltd., Feng MengEngineering Limited, NanTian CATV Corp., NorthTaoyuan Cable TV Co.,

Ltd., New Channel CableTV Co., Ltd., and Kuan

Sheng CATV Corp.

Nan Taoyuan CableTelevision Co., Ltd.,

Best Cable TVCompany, Shin HoCable Television,

Chi-Yuan CATV Co.Ltd., Chun-ChienCable Television

Co., Ltd.

Shin Ho Cable TVCo., Ltd.,

Mangrove CableTV Co., Ltd.

Globalview CableTV Co, Ltd.,

Phoenix Cable TVCo., Ltd., UNION-CATV Cable TVCo., Ltd., YeongJia Leh Cable TV

Co.Ltd.

DA-TUN Cable TVCO., LTD., Chia LienCable TV Co., Ltd.,

CNT CATV Co., Ltd.,Peikang Cable TV

Co., Ltd., West CoastCATV

Taiwan Infrastructure

Network Provider (5)

Broadband Company

Limited (2)

Taiwan Fixed

Network (4)

Selected Cases


This application for concerted action drew much

attention from a variety of different fields.

Government organizations, academic institutions

and set top box suppliers provided many construc-

tive suggestions. After due consideration of all of

these submissions, the FTC broadly accepted that

the uniform specification standard for technology

of cable TV set top boxes had the effect of lowe-

ring the Applicants’ purchase cost and therefore

prices for consumers would also be lower. Overall,

the FTC considered the proposed standards would

have a beneficial economic effect on the domestic

cable TV industry, digital content industry and di-

gital set top box manufacturing industry. The

application in this case could facilitate the devel-

opment of cable TV systems towards digitaliza-

tion. Therefore, the FTC approved the application

but attached certain conditions and obligations.

Conditions and Obligations Attached tothe Permit of the Concerted Action

The FTC attached the following conditions and

obligations to prevent the applicants from utilizing

the authorization, for this concerted action, for the

purposes of engaging in conduct that would be

likely to restrain competition or constitute unfair

competition. At the same time the FTC also had

regard to whether the benefits of the proposal

would outweigh any disadvantages that might

result.

1. The Applicants may not utilize the authorization of the concerted action to purchase digital set top boxes or termi-

nal systems in concert with other competing enterprises.

2. The Applicants may not utilize the authorization of the concerted action to mutually restrict business activities as

regards prices and quantity of digital or analog cable TV system services, transaction areas, trading counterparts

or other transaction requirements.

3. With respect to digital set top boxes purchased on the basis of the standard specification of technology formulated

via the application of the authorization of the concerted action, the Applicants may not utilize built-in chip cards

or other means of installing components in these digital set top boxes to increase the cost of switching from a sub-

scriber to a trading counterpart.

4. Without proper reasons, the Applicants may not refuse cable TV system operators to participate in or withdraw

from the concerted action. If there is a change in the main part of the concerted action, the Applicants shall report

to the Commission for recordation and reference; furthermore, if the concerted action requires the sharing of

expenses for, or interests in, the patent licensing, any conditions imposed on the new participants or cable TV sys-

tem operators shall be reasonable and without differential treatment.

5. Without proper reasons, the Applicants may not refuse digital set top box production enterprises or cable TV sys-

tem operators from acquiring the information related to the standard specification of technology that was stipula-

ted by the authorisation of the concerted action.

6. The Applicants may not utilize the authorisation of the concerted action to restrain an individual Applicant from

undertaking the improvement of the quality of digital set top boxes, and may not jointly determine the sales prices

of digital set top boxes via contracts, agreements or any other form of mutual understanding.

7. The Applicants may not restrain other enterprises from manufacturing digital set top boxes that conform to the

standard specification of technology stipulated by the authorisation of the concerted action.

8. Where the Applicants hold related meetings to stipulate the standard specification of technology in concert, they

shall provide relevant meeting materials and resolutions and report them to the Commission for recordation and

reference.


Statistics on Competition Restraint Involving Cable TV

Domestic Cable TV origins and history

After 1971, frequencies used by wireless televi-sion were not open to other enterprises and an oli-gopoly of three wireless television stations wasformed. It was not until approximately 1973 that acommon antenna television” enterprise appeared

in the market – it broadcasted some low-cost pro-grams, such as videos or stocks. As the operationcosts of the common antenna television enterprisewas low, broadcasting enterprises in the form ofcommon antenna television proliferated. The onlyregulation at that time related to the broadcastingof content without a license which would havebeen a contravention of the Copyright Act.

Cable TV businesses were not specifically regula-ted until 1993 when the government promulgatedand implemented the Cable TV Act. This act regu-lated cable TV broadcasting businesses, and estab-lished 51 operational districts that were open toapplications for a cable TV license. At that time,181 applications were made for the establishmentof a cable TV service and 156 permits were ulti-mately issued and this formed the basis of theindustry. By the end of August 2008, the numberof domestic cable TV system operators was just 61and the number of cable TV broadcasting stationswas 4. As at 30 June 2008, the number of cable TVsubscribers was 4.78 million (the percentage ofhouseholds having access to cable TV was63.09%) and the number of subscribers to cableTV digital services was 190 thousand (the percen-tage of households having access to cable TV was3.97%).

According to the FTC’s statistics, from 1992 to theend of August 2008, the number of FTC decisionson competition restraint involving cable TV was23. Of this total, 18 cases related to violations ofmerger laws and this represents 78% of the totalnumber of FTC decisions on competition restraintinvolving cable TV. The second largest categoryrelates to cases where concerted actions were vio-lation of regulations and these amounted to only 4cases (This represents 17% of the total number ofFTC decisions on competition restraint involvingcable TV). The number of cases where personswere forced to participate in competition restraint

was just one. Ignoring those cases that wereresolved administratively, a total of 33 enterpriseswere convicted for various violations of the FairTrade Act and the total amount of fines imposedwas NT$ 42.85 million.

Having regard to the significant level of finesimposed within this single industry, the FTCimposed fines which totaled NT$ 12 million ontwo cable TV enterprises in Taipei City. Thesefines were the highest amount ever imposed andwere for a concerted action of jointly dividingtrading counterparts in 2006. This conduct wasconsidered to have been sufficient to affect thecompetitive dynamics of the cable TV market ofthe relevant district. With regard to decisions forviolation of regulations on merger, the averageamount of fine imposed on each enterprise wasNT$ 1.14 million.

For further information on the Fair Trade Act withspecific reference to the Cable TV industry pleaserefer to the FTC website (http://www.ftc.gov.tw/)and click on Guidelines” and then Introduc-tions and Guidelines to the Cable Television-Related Industry, as Stipulated in the Fair TradeAct”.

Statistical Graph of Decisions onCompetition Restraint Involving

Cable TV

As at the end of August 2008

Acts Violating Regulations on

Concerted Actions 17%

Acts Impeding Fair

Competition 5%

Acts Violating Regulations on

Merger 78%

FTC Statistics


FTC Activities in September 2008

On September 2, the FTC held a “Workshop on

Issues Related to Merger of Financial Services”

in Taipei City.

On September 5 and 6, the FTC held the “30th

Meeting (Directors General) on Coordination of

Businesses between the Commission and Local

Competent Authorities” in Kaohsiung City.

On September 9, the FTC attended a meeting on

Review of Matters of Central Authority’s

2009-2010 Program on Consumer Protection”

held by the Consumer Protection Commission,

Executive Yuan (Taiwan).

On September 12, the FTC held the “2008

Advocacy Activities on Analysis of Laws and

Orders, and Cases with Respect to Multi-Level

Sales Enterprises” in Taichung City.

On September 16, 26 and 30, the FTC held a

“Fair Trade Commission Propagation Regarding

Regulations Governing the Insurance Industry”

in Taichung City, Kaohsiung City and Taipei

City respectively.

On September 20, the FTC cooperated with the

Consumer Protection Commission, Executive

Yuan (Taiwan) to hold the “Consumer

Protection Fair on Exhibition of Playing with

Consumer Safety, and Low Carbon Lifestyle

Together’ ” in Danshui, Fisherman's Wharf and

established stalls advocating the Fair Trade Act.

On September 26, the FTC held a Fair Trade

Commission Propagation Regarding

Regulations Governing the Sales of, and

Maintenance and Repair by, Elevator

Enterprises” in Taipei. Individuals from each

field, associations of relevant industries, enter-

prises and representatives of the government

authorities were invited to participate in the

meeting.

On September 30, the FTC held a workshop on

Problems Related to Untrue Advertisements of

Television Enterprises.”

On September 30, the FTC invited Assistant

Professor LIN Li-Chin of the Soochow

University School of Law to present a speech on

Fashion Imitation and the Applicability of the

Fair Trade Act.”

1 2

1. The FTC held a Workshop on Issues Related to Merger of Financial Services in Taipei City.

2. A group photo of participants of the 30th Meeting (Directors General) on Coordination of Businesses between the Commission and Local Competent

Authorities.

FTC Activities


3. The FTC held a Fair Trade Commission Propagation regarding Regulations Governing the Insurance Industry in Kaohsiung City.

4. Participation in the Consumer Protection Fair on Exhibition of Playing with Consumer Safety, and Low Carbon Lifestyle Together’ held by the

Consumer Protection Commission, Executive Yuan (Taiwan) in Danshui, Fisherman's Wharf where the FTC established stalls advocating the Fair Trade

Act.

On September 8, Chairman PECINA Martin of

the Office of the Protection of Competition,

Czech Republic, visited the FTC; he attended a

bilateral meeting and presented a speech.

On September 16, Deputy General Director DANG

Hoang Hai of the Competition Administration

Department, Ministry of Trade, Socialist Republic

of Vietnam visited the FTC.

FTC International Exchanges in September 2008

3 4

1. Chairperson TANG Jinn-chuan of the FTC (first from left) received the officials from the Office of the Protection of Competition, Czech Republic (from left

to right: Chairman PECINA Martin of the Office of the Protection of Competition, Director SEVCIKOVÁ Katerina of the International Relations

Department, and the representative of the Czech Economic and Cultural Office Taipei, DOLECEK Jaroslav

2. The chairman of the Office of the Protection of Competition, Czech Republic, presented a speech on General Information on Activities of Office for the

Protection of Competition of the Czech Public.”

3. Officials from the Competition Administration Department, Ministry of Trade, Socialist Republic of Vietnam visiteded the FTC.

4. Chief Secretary WU Jesse (left) received the deputy general director DANG Hoang Hai of the Competition Administration Department, Ministry of Trade,

Socialist Republic of Vietnam.

1 2

3 4

FTC Activities FTC International Exchanges

Taiwan FTC Newsletter

Publisher: Tang, Jinn-ChuanEditor- in-Chief: Hu, Kuang-YuCo-editor: Cheng, Chia-Lin

Tso, Tien-LiangWu,Ting-HungHu, Tzu-ShunCho, Chiu-JungLi, Yueh-ChiaoChang, Ying-Fen

Publishers & Editorial Office: Fair Trade Commission, Executive Yuan, R.O.C.Address: 12-14 F., No. 2-2 Jinan Rd., Sec. 1, Taipei, Taiwan,R.O.C. Website: http://www.ftc.gov.twTelephone: 886-2-23517588Fax: 886-2-23278155E-mail: [email protected] Date of Publication: November 2008First Date of Publication: February 2008Frequency of Publication: Monthly (both Chinese version and English Version)Price: NT$ 30 per single copy, NT$ 500 per year (bothChinese version and English version) and NT$ 250 per language versionSubscription Phone Line: 886-2-2351-0022Subscription Fax: 886-2-2397-4997

Exhibition Place:Service Center on the 13th Floor of the CommissionTelephone: 886-2-2351-0022Address: 13 F, No. 2-2 Jinan Rd., Sec. 1, Taipei, Taiwan,R.O.C.

Wunan Book Co., Ltd.Telephone: 886-4-2226-0330Address: No. 6, Chungshan Road, Taichung City

Printer: Suhai Design and Production Inc.Address: 5th Floor, Building B, No. 35, Guangfu South Road,Taipei CityTelephone: 886-2-2761-8117

In order to improve the quality of our Taiwan

FTC Newsletter, we would like to request a few mi-

nutes of your time to fill in the questionnaire below.

When completed, it would be appreciated if you

would please send it by e-mail to [email protected] or

directly fill in the questionnaire at the website

(http://www.ftc.gov.tw) before February 10th 2009.

Thanks for your assistance and cooperation.

Fair Trade Commission

Regards

Taiwan FTC NewsletterReaders Survey

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