Panel on Broadcasting, Culture and Sport (Papers) 6 Feb 98

1998 Review of the Television Environment

Introduction

In March 1996, Government completed a review on pay television in Hong Kong and announced, among other things, that a comprehensive review of the television environment should be conducted in 1998 to consider what adjustments should be made to the regulatory framework governing television broadcasting and to assess the impact of convergence on broadcasting policies in the light of technological developments. In the second and third quarters of 1997, the industry and other interested parties were consulted on the areas to be included in the review. This paper sets out the key considerations, the scope and the timetable of the review.

Background

2. Until 1991, Hong Kong had just two television stations - ATV (Asia Television Limited) and TVB (Television Broadcasts Limited) - each broadcasting two channels, one in Cantonese and one in English. In 1991, Hutchvision Hong Kong Limited started the first regional satellite television service, STAR TV, and uplinked its service from Hong Kong. Four of its free-to-air channels are now receivable in Hong Kong. Two years later, Wharf Cable Limited launched its subscription television service with 8 channels, which increased to some 35 channels to date. Given the heavy capital investment needed for a territory-wide cable network, Government granted a three-year exclusivity to Wharf Cable during its 12-year licence term. This exclusivity ended in mid-1996. In March 1997, legislation was amended to create a new category of television broadcasting licence under the Television Ordinance to cater for the introduction of video-on-demand (VOD) programme services. In May 1997, applications were invited from interested parties to provide a VOD programme service in Hong Kong. As a result, 4 applications were received. In November 1997, Government announced the approval in principle to grant a VOD programme service licence to Hong Kong Telecom VOD Limited, which will enable the viewers in Hong Kong to access interactive television services on formal grant of licence. Decision on the award of a second licence was deferred until the legal implication of a civil litigation involving two of the applicants had been duly assessed. On 16 January 1998, Government announced a package of new measures to liberalize the regulation of satellite broadcasting services. Under the revamped licensing regime, the term of a satellite television uplink and downlink licence can be varied up to 12 years, the restrictions on foreign ownership and residency requirements which had hitherto been considered as entry barriers by foreign companies are removed, and licence fees are reduced.

Objectives of the Current Review

3. As a long term policy objective and in line with the global trend of deregulation for the telecommunication and broadcasting industries, Government is committed to further liberalizing the television industry and opening up the market for more competition. This commitment is also guided by the long established and well-recognized policy objective to encourage the exploitation of new technologies and the optimal use of resources in order to increase viewers programme choice as well as to enhance Hong Kong's position as a pre-eminent regional broadcasting hub. In an increasingly open and competitive market, Government will maintain its role to provide a conducive environment for the development of the broadcasting industry. In so far as market demands exist and the advance of technologies allows, no artificial limits should be set for the number of players in the field. Government's role should be to ensure that there is free and fair competition and that all players will have the freedom to make business decisions and respond to market forces. Against this background, the 1998 review is set to achieve the following objectives :-

to take stock of the current developments in local television broadcasting and to examine how new technologies impact on existing policies;
to review the existing regulatory regime in the light of technological developments and changing market demands; and
to identify ways to further advance Government's broadcasting policy objectives of broadening programme choice, encouraging innovation and promoting Hong Kong as a regional broadcasting hub.

Scope of the Review

4.1The review will cover the following aspects :-

Technological development

Broadband network services and interactive television

4.2 The capability of the broadband networks will be huge when the cable and fixed telecommunication network services (FTNS) networks are fully upgraded to fibre optics. We will consider whether television licensees and telephone companies should be allowed to perform both telecommunication and broadcasting functions including interactive television and, to the extent that there are already provisions requiring mandatory interconnection of networks by law, whether and how cable and broadband networks should be further opened up, and if so, what measures need to be put in place to ensure fairness (as between proprietors who have substantially invested in the networks and potential network users who will be the driving force for information technology development) and to prevent anti-competitive practices.

Convergence of broadcasting, telecommunication and computing

4.3 The development of digital technology has meant that voice, data and video can be reduced to the fundamental elements of bits, or in numerical terms, 1 or 0, for storage and delivery. This digital facility, coupled with greater bandwidth availability and improved compression techniques, means it is technically feasible to transmit all forms of media through different forms of transmission channels (copper wire, coaxial cable, optical fibre, radio spectrum). As a result, the telephone, broadcasting and computing industries are moving inexorably towards each other's markets at both technical and service levels. The global trend of deregulation has also enabled telephone companies to deliver cable television service and vice versa and thus opened the door to competition. Against this background, we will look at :-

· How we should define 'broadcasting' in the light of convergence;

· Where we stand in the face of the changing nature of media services from what used to be free-to-air 'broadcast' to one that is characterized by pay-per-view and point-to-point interactive transmission targeting towards the niche markets;

· The impact of the Internet on television broadcasting - how do we regulate content transmitted on the Internet?

· The possibilities and practicality of continuing to maintain two separate legislative frameworks for regulating telecommunication and broadcasting services.

Direct to home satellite broadcasting

4.4 The International Telecommunications Union (ITU) has recently allocated 4 high-powered frequencies with footprint covering Hong Kong and Guangdong for broadcasting satellite service (BSS). Details of the allocated frequencies are attached. The signals of BSS can be received by a relatively small receiving antenna connected to the television set at home (hence it is also known as direct-to-home service), or through cable or satellite master antenna television headends for subsequent distribution to consumers. Government intends to use the 4 frequencies for the development of direct-to-home services targeting Hong Kong, and we will assess the market potential and readiness in the review. We will also study the direction the Government should take in regulating direct-to-home services.

Digital broadcasting

4.5 With the launch of a trial on digital audio broadcasting (DAB) later this year, the potentials of DAB will be assessed and a long-term strategy on the introduction of DAB in Hong Kong will be mapped out following a separate public consultation exercise. In this review, we will look at the application of digital technology in local television services and the transformation it will bring to commercial television, especially with regard to the development of high definition TV and multi-channel TV. We will examine where Hong Kong stands vis-à-vis other countries in the exploitation of digital technology and the direction we should take in this regard in the future.

Regulatory control

Ownership restrictions

4.6 We will critically examine the merits, need and relevance of the existing control over 'unqualified persons' 'disqualified persons' cross-media ownership restriction and investment restrictions imposed on broadcasting licensees under the Television Ordinance in the light of the development of the industry, the trend of convergence and Government's policy objectives.

Licensing issues, royalties and licence fees

4.7 We will examine the practicability of separate licensing of content and carriage. In the light of increased competition, we will consider the views received from broadcasters on the charging of royalties in exchange for the privilege of a licence to provide a television broadcasting service. While we will adhere to the full-cost recovery principle in determining licence fees, we will re-appraise the existing licensing administration to identify possible cost-efficiency measures for achieving a charging regime which is more conducive to the long term development of the television industry.

Content and language control

4.8 We will appraise the challenges brought about by convergence on content control and examine whether the control imposed on various broadcasting media could be made more flexible to take account of the different nature of services. We will look in particular whether the current restrictions on live programmes in programme services should be lifted, and whether a more relaxed standard for pay-per-view programmes should be adopted subject to the observance of general community acceptance. We will also take a look at the existing language control on terrestrial television services, and will address whether the existing restrictions over English programming should be relaxed or changed to allow for the introduction of more multi-language programming.

Restrictions on advertising

4.9 We will review the restrictions on advertising having regard to the emergence of new forms of advertising such as 'infomercials', and examine if we can give licensees more flexibility without compromising the interests and viewing pleasure of audience.

Future development

4.10 We will assess the extent to which our society will benefit from the introduction of new services such as satellite pay television services, district pay television services or other multi-media services. We will also assess whether our regulatory regime is sufficiently robust and sustainable to meet the challenges of future broadcasting developments.

Timetable

5. You are welcomed to send in your views, comments and suggestions to the Broadcasting, Culture and Sport Bureau at the address shown in the paragraph below before 7 April 1998. Your views will be given full consideration by the Government and reflected, where appropriate, in a consultation document to be issued in Summer 1998. Final recommendations will be drawn up following public consultation and the conclusions of the review will be publicly announced in the last quarter of 1998.

Enquiries

6. For enquiries, please write to :

You may also fax your enquiries to 2511 1458, e-mail to bcsbasb1@hkstar.com or contact Ms Mimi Lee at telephone no. 2594 6611 or Mr Samuel Lui at telephone no. 2594 6620.

Broadcasting, Culture and Sport Bureau

File Ref. BCSB/B 1036/177(97)

2 February 1998

19985.doc/tracy