LC Paper No. CB(1)393/98-99
(These minutes have been seen
by the Administration)

Ref : CB1/PL/ITB

Legislative Council
Panel on Information Technology and Broadcasting

Minutes of special meeting
held on Friday, 25 September 1998, at 10:45 am
in the Chamber of the Legislative Council Building

Members present :

Hon SIN Chung-kai (Chairman)
Hon MA Fung-kwok (Deputy Chairman)
Dr Hon Raymond HO Chung-tai, JP
Hon Fred LI Wah-ming
Hon James TO Kun-sun
Hon YEUNG Yiu-chung
Hon Emily LAU Wai-hing, JP
Hon LAW Chi-kwong, JP

Member attending :

Hon Mrs Selina CHOW LIANG Shuk-yee, JP

Members absent :
Hon Kenneth TING Woo-shou, JP
Hon David CHU Yu-lin
Hon Eric LI Ka-cheung, JP
Prof Hon NG Ching-fai
Hon Howard YOUNG, JP
Hon CHOY So-yuk
Hon Timothy FOK Tsun-ting, JP

Public officers attending :

Mrs Rita LAU

Acting Secretary for Information Technology and Broadcasting

Mr Eddy CHAN

Commissioner for Television and Entertainment Licensing

Mr M H AU

Acting Director - General of Telecommunications

Mr K S WONG

Assistant Director of Telecommunications

Mr Eddie MAK

Principal Assistant Secretary for Information

Technology and Broadcasting (A)

Attendance by invitation :

Asia Television Ltd.

Mr Kenneth KWOK

Acting Chief Executive Officer

Mr Desmond CHAN

Corporate Lawyer & Company Secretary

Galaxy Satellite Broadcasting Limited

Mr CHEUNG Leung, Bernard

Deputy General Manager, TVBI Company Limited

Mr TANG See Tin, Stanley

General Manager, Galaxy Satellite Broadcasting Ltd.

Hongkong Telecom VOD Limited

Miss Audrey BERRY

Senior Commercial and Regulatory Manager

Miss Karen TANG

General Manager, Commercial Development

IFPI (Hong Kong Group)

Mr FUNG Tim Chee

Chief Executive Officer, IFPI (Hong Kong Group)

Mr MOK Kwong Fai

Deputy Director, IFPI Asian Regional Office

Pacific Satellite International Ltd.

Mr TSANG Kwok Lung, Vincent

Director of Sales & Marketing

Mr CHUNG Wai Cheong, Billy

Assistant Project Manager

STAR TV Satellite Television Asian Region Ltd.

Ms Jannie POON

Corporate Affairs Manager

Television Broadcasts Limited

Mr Raymond WONG

Assistant General Manager

Mr Stephen CHAN

Controller, Programme Division and External

Affairs Division

Wharf Cable Limited

Mr Stephen T H NG

Chairman and Managing Director

Mr Vince T Y LAM

Vice President, Planning

Hong Kong Development and Strategic Research

Centre

Mr Mathias WOO

Chairman

Consumer Council

Mr Adrian WALKER-SMITH

Principal Trade Practices Officer

Mr HUNG Tin Yau, Victor

Chief Trade Practices Officer

Clerk in attendance :

Miss Polly YEUNG

Chief Assistant Secretary (1)3

Staff in attendance :

Ms Sarah YUEN

Senior Assistant Secretary (1)4

I."The 1998 Review of Television Policy - A Consultation Paper"

1 The Chairman welcomed the deputations and invited their views on the captioned consultation paper.

Meeting with Asia Television Ltd. (ATV)

(Submission tabled at the meeting and circulated to all Members thereafter vide LC Paper No. CB(1)258/98-99(03) and a further submission circulated to Panel members only vide LC Paper No. CB(1)306/98-99)

2 Mr Kenneth KWOK drew members' attention to the following points -

1. ATV supported the breaking up of vertical integration but felt that practicable competitive safeguards should be legislated to address the problem of market domination.

2. ATV thought the abolishment of the royalty scheme was justified as competition had significantly increased with the number of TV channels increasing from four to more than 40 within the past ten years. In its place, a fund devoted to matters of common interest to the entire industry such as training and development of practitioners should be established with money contributed by the players based either on their profits or a proportion of their revenue income.

3 In reply to a member's question on 2(a), Mr KWOK advised that while ATV supported the competitive safeguards put forward in para. 14.3 of the consultation paper, it would also like to see the imposition of restrictions on monopolisation of local talents and the requirement on TV operators to carry a certain proportion of locally produced programmes to promote the development of an independent TV production industry.

Meeting with Galaxy Satellite Broadcasting Limited (Galaxy)

(LC Paper No. CB(1)221/98-99(08))

4 Mr TANG See Tin briefed members on Galaxy's submission. Members noted that Galaxy supported the proposed deregulation of the TV market in principle but had the following comments -

1. The commercial services which satellite broadcasting licensees would be allowed to provide to third parties upon the expiry of Hong Kong Telecom's exclusivity to provide facility-based satellite uplinking service on 1 January 2000 should include audio, video and data services, full-time and occasional feeds, and uplinking and downlinking services. Galaxy believed that broadening of the market could enhance Hong Kong's competitiveness in the region as in the case of Singapore which had attracted many world-class TV operators to set up their Asia-Pacific offices there.

2. Where deregulation of the pay TV market was concerned, satellite broadcasting licensees should be free to market their pay television services in Hong Kong and to sell, rent and install the reception equipment and decoders required by viewers.

3. As regards the development of direct-to-home (DTH) television services in Hong Kong, Galaxy opined that to guard against monopoly, service providers should not be limited to use of the four Ku-band channels allocated to Hong Kong by the International Telecommunication Union only but that the industry should be free to use the service of other available, freely competing satellite transponder service providers. Moreover, to ensure a level playing field, existing satellite broadcasting licensees should be allowed to apply for a licence to operate pay television services by means of DTH satellite broadcasting technology.

Meeting with Hongkong Telecom VOD Limited (HKTVOD)

(LC Paper No. CB(1)221/98-99(09))

5 Miss Audrey BERRY informed members that HKTVOD welcomed the Government's move to open up the telecommunications and broadcasting networks, introduce competition into pay television and VOD markets, amend the foreign voting control rules and the cross-media ownership rules, introduce changes to the VOD licence conditions, and to abolish advertising and subscription royalties. It however expressed concern over the proposed introduction of a new class of television services known as "other licensable television programme services", which according to HKTVOD's understanding, could serve up to 15% of the total number of households in Hong Kong. HKTVOD considered that if this new class of services was to target at specific viewer groups as intended by the Administration, a lower ceiling on target audience should be imposed.

6 In elaboration, Miss BERRY compared the said 15% target audience ceiling (i.e., nearly 300,000 households given the total number of households in Hong Kong was 1.9 million) with the subscriber base of Cable TV and HKTVOD ( at around 400,000 and less than 100,000 households respectively) to show that if the ceiling was not lowered, the new class of services would compete directly with VOD services. To differentiate between general pay TV aimed at catching the greatest number of Hong Kong households and the new services proposed to cater for the needs of a smaller-scale closed user group, Miss BERRY pointed out that a 5% ceiling for the latter should be imposed, lest a full domestic pay TV licence should be required to provide the new services.

7 In this connection, the Acting Secretary for Information Technology and Broadcasting (S/ITB) clarified that under the proposals, the target audience of such services should be below 5,000 households. In addition, a company should not be allowed to own "other licensable services" serving more than 15% of the total number of households in Hong Kong without the Chief Executive in Council's approval. Normally, under this circumstance, a domestic pay TV licence would be required.

Meeting with the International Federation of the Phonographic Industry (Hong Kong Group) (IFPI)

(LC Paper No. CB(1) 221/98-99(10))

8 Mr FUNG Tim Chee advised that IFPI was in favour of the proliferation of digital technology to benefit the future of broadcasting in Hong Kong and, as copyright owners and content providers, IFPI members saw this as an opportunity to broaden the use of their copyright. However, IFPI was at the same time concerned about the delivery of unprotected digital audio/visual sources to home users for fear of a rise in unauthorised reproduction, and would therefore like to advise the proposed Joint Government-Industry steering committee (the Steering Committee) to be established to steer and co-ordinate the conduct of technical trials on digital terrestrial television (DTT) and high definition television (HDTV) on encryption and other copyright protection techniques. IFPI was also concerned about the proposed removal of programme suppliers from the list of "disqualified persons" under sections 2, 10 and 11A(1) of the Television Ordinance to lift the restrictions on cross-control of television and programme providers. In its view, as promotion on broadcasting media was essential to the success of the music industry's new copyright products and artists, broadcasters who were allowed to compete as music content providers as well would have an unfair advantage over other providers who were not also broadcasters.

9 Elaborating further on the position of the IFPI, Mr FUNG confirmed that in general, IFPI members were not in favour of lifting the restrictions on cross-control for three reasons. First, broadcasting required huge investments which the music industry could ill afford. As such, not only was the music industry unable to compete with broadcasters in the broadcasting field to achieve any gains, it would also be exposed to much keener competition in its own field as a result of such cross-market developments. Second, in view of the existence of a dominant player in the TV market, new entrants could hardly survive unless opening of the market would proceed by phases. Third, the absence of anti-trust laws in Hong Kong to ensure a level playing field was not conducive to opening the TV market to programme providers, especially as the merging of the telecommunications and broadcasting markets might lead to the emergence of more players and tougher competition. IFPI was in support of maintaining the status quo and continuing to rely on commercial negotiations to achieve media exposure for its products and artists.

Meeting with Pacific Satellite International Ltd. (Pacific Satellite)

(LC Paper No. CB(1)235/98-99(06))

10 Mr Vincent TSANG stated Pacific Satellite's support for the proposals put forward in the consultation paper but drew members' attention to the following -

1. While supporting the proposal to open Wharf Cable's broadband network for use by other television and telecommunications service providers, Pacific Satellite was of the view that service providers should be allowed to hire only part of the network as some small providers might ill afford to hire the whole network.

2. The Government should issue more Satellite Television Uplink and Downlink Licences to enhance competition so as to lower relevant service charges.

3. Pacific Satellite welcomed the proposal to allow Satellite Master Antenna Television (SMATV) operators to carry pay television services but suggested that relevant restrictions be lifted to enable blocks belonging to the same housing estate but situated in different streets to share one SMATV system.

4. Regarding "other licensable television programme services", the target audience of "5,000 households/premises/set-top boxes" as stated in para. 11.2(d) of the consultation paper should be enlarged to 10% of the total number of households in Hong Kong. "Set-top boxes" should also be deleted as this would give the wrong impression that set-top boxes were invariably necessary for access to such services and might limit the transmission techniques applicable to delivery of such services. Moreover, building access rights should be clearly provided for this type of licensees to facilitate service provision and there should be clear guidelines as to the categories of programmes that required parental locking device for access control.

5. The membership of the Steering Committee should be representative of all sectors of the industry and should include SMATV operators.

11 In reply to a member's question on the rationale behind Pacific Satellite's proposal to lift restrictions on sharing of SMATV systems, which in the member's view might affect the business opportunities of SMATV operators, Mr TSANG explained that Pacific Satellite had made the proposal in consideration of public interest. However, while the proposal might lead to decreased need for SMATV systems, Pacific Satellite believed that the resultant lower service costs would in the long run lead to higher demand for the service and hence, business growth for SMATV operators. He further pointed out that the proposal would also benefit those estates which had already installed more than one SMATV system as the spare capacity made available by the sharing of systems could be redeployed to distribute more channels.

Meeting with STAR TV Satellite Television Asian Region Ltd. (STAR TV)

(LC Paper No. CB(1)258/98-99(04))

12 Ms Jannie POON elaborated on STAR TV's position. Notwithstanding its support for the proposals put forward in the consultation paper, STAR TV was concerned about the congestion in in-building distribution networks, and opined that equal access should be ensured to really open up the market. Moreover, to ensure fair competition, the Government should actively address the issue of interconnection and enhance the transparency of the mechanism of how interconnection charges were set. STAR TV also requested the Government to study carefully the views of the industry before finalising its policy decisions.

13 In response to the deputation's concern about necessary information on frequency allocation for in-building coaxial cable systems, S/ITB pointed out that the information was outlined in Annex A of the consultation paper.

Meeting with Television Broadcasts Limited (TVB)

(LC Paper No. CB(1)221/98-99(12))

14 Mr Raymond WONG briefed members on the following salient points of TVB's submission -

1. TVB supported the abolition of the charging of advertising royalties for all television programme services as with the opening of the television market and the devaluation of radio spectrum, "exclusive market franchise" no longer existed.

2. While TVB welcomed the opening of the TV market to foreign broadcasters which were mostly media giants, it saw the need for the Government to understand the global nature of the competition and ensure a level playing field. In other words, in addition to being technology neutral, the new policy should also refrain from differentiating between domestic and non-domestic markets, between free and pay TV, and should not raise any regulatory obstacles to the diversification and growth of local broadcasters.

3. While TVB recognised the need to maintain English language services, it thought the Government should relax existing restrictions on non-designated language programming and advertising to give broadcasters greater flexibility to generate more profits.

4. TVB believed all regulations currently in place to dictate the logistics of the broadcasting of advertising should be discontinued as there was already sufficient competition in the marketplace to regulate the advertising behaviour of the terrestrial broadcasters and that competition was steadily increasing. Moreover, terrestrial broadcasters, like all other television service licensees, should also be exempted from advertising time restrictions.

15 A member opined that in consideration of the pervasiveness of domestic free TV, there was a need to open the market to more competition to safeguard against market domination. In response, Mr WONG pointed out that as a result of technological developments, there were at present many different modes of transmission that could achieve as much penetration as domestic free TV. He added that the coverage of satellite TV was so permeated that TVB was no longer the only dominant player. Notwithstanding, TVB supported total deregulation of the domestic free TV market and welcomed the issue of further terrestrial licences as long as there was spectrum availability and a level playing field.

16 Responding to another member's comment that TVB's overwhelming control of local talents and Cantonese programme production had left very little room for other TV operators to compete with it, Mr WONG highlighted the principle of free market and pointed out that it was unfair to accuse TVB of monopolising local actors and producers because they chose to work for TVB. Moreover, it was up to individual TV operators to recruit and retain talents with an attractive package and to build up its own pool of talents.

Meeting with Wharf Cable Limited (Cable TV)

(Submission circulated to all Members after the meeting vide LC Paper No. CB(1)271/98-99(03))

17 Mr Stephen NG highlighted the problem of market domination and pointed out that the problem could not be effectively addressed by the issue of further licences only. Instead, the following recommendations should be considered -

1. Instead of abolishing the charging of advertising royalties, the Government should impose more restrictions on the dominant players. For example, to require TV operators to transmit a certain proportion of programmes produced by local independent TV production companies. Such a move could encourage the development of the local TV production industry as well as deter TV operators from monopolising talents.

2. To ensure fair competition, there was a need to open up the domestic free TV market because protection of the market from competition would only strengthen the position of the existing dominant player. Moreover, the introduction of a technology-neutral regulatory regime that enabled domestic free TV operators to use any form of transmission also meant that the limited availability of spectrum for terrestrial broadcasting should no longer restrict the issue of further domestic free TV licences.

3. With the convergence in telecommunications and broadcasting, there was a need to guard against Hong Kong Telecom emerging as another dominant player in the TV market with its control of the telecommunications networks.

4. To tackle the problem of market domination, all existing artificial market entry barriers should be removed to allow greater flexibility for operators other than the dominant players to operate free and pay TV at the same time.

Meeting with the Hong Kong Development and Strategic Research Centre (the Centre)

(LC Paper No. CB(1)221/98-99(13))

18 On behalf of the Centre and from the perspective of the general public, Mr Mathias WOO made various comments on the consultation paper and pointed out that the consultation exercise was too limited in both scope and duration to be able to gauge the views of the public. In the Centre's view, the paper was also not comprehensive enough as it failed to address the question of content control of TV programmes and the post-deregulation roles of the Broadcasting Authority (BA) and Radio Television Hong Kong. Members' attention was also drawn to the various recommendations of the Centre to tackle its perceived problems of over-concentration of policy making power, failure to respond to technological developments and public aspirations, and inadequate policy research.

19 In response to Mr WOO's comment on consultation undertaken by the Panel, the Chairman explained that the Panel would like to canvass as many public views on the consultation paper as possible but it should be borne in mind that it was virtually impossible for the Panel to seek the views of all interested persons. Having regard to the nature of the subject matter and the limited time available for arranging the meeting, the Panel had come to the view that it would extend invitation to and invite submissions from the parties (including existing TV licensees) which had submitted views on the Administration's previous consultation paper issued in February 1998. The Chairman further stressed that submissions from other interested persons would be welcomed.

Meeting with the Consumer Council (CC)

(LC Paper No. CB(1)235/98-99(05))

20 Mr Adrian WALKER-SMITH briefed members on CC's position and highlighted the following points -

1. As the public relied heavily on TV for news and information, the Government should ensure that all groups of consumers, including the disadvantaged, had easy access to the new digital technology before ending analogue broadcasting.

2. The technological co-operation which the Government was encouraging between network owners and broadcasters should also aim at ensuring that consumers would not need different set-top boxes and remote controllers for different networks.

3. The control of content was such a complicated issue that more consideration should be given to it in the consultation paper. The Government should give further thoughts to administrative arrangements to prevent companies that had a dominant position in the provision of content from exercising control over broadcasters. In view of the relationship between content control and market domination, Hong Kong might also need to have a general competition regulator as in overseas countries.

21 At members' invitation to comment on whether allowing pay TV operators to provide free TV service as well would enhance competition, Mr WALKER-SMITH pointed out that the resultant increase in the number of channels and the permission for operators who had the technological capability to optimise that capability would undoubtedly enhance competition.

General deliberations

22 In reply to members' questions on opening the domestic free TV market to more players such as Cable TV, Mr Kenneth KWOK of ATV and Mr Raymond WONG of TVB said they welcomed the issue of further licences. However, Mr Stephen NG of Cable TV reiterated that issuing more licences alone could not introduce more competition into the market as the present question was market domination and not whether the market could accommodate more players. In his view, unless market domination could be tackled, there would not be genuine competition. He further pointed out that Cable TV's proposal to lift the cross-media ownership restrictions would help disintegrate dominant market forces.

23 On the proposal to divorce "content" from "carriage", and to require TV operators to transmit programmes produced by independent producers, both ATV and TVB's response was positive. Mr Stephen CHAN of TVB added that TVB had already been buying 40% of its programmes from outside. He however also stressed that TV operators should have the freedom of choice as regards the quality, quantity and sources of such bought programmes. Mr Mathias WOO of the Centre, on the other hand, pointed out that the limited availability of spectrum for terrestrial broadcasting and the need to ensure proper standards and variety of services had made it necessary for more obligations such as the above proposed requirement to be imposed on domestic free TV. In his view, the BA should play an active role and exercise relatively greater regulation on the content of free TV programmes. He also pointed out that in exercising content control, equal access was a more important factor than the issue of more licences. As such, the Government should help mediate and ensure equal access to buildings to enable every household to have the same array of pay and free TV services to choose from.

24 A member stressed the need for the Administration to make the whole decision making process that would follow this consultation exercise as transparent as possible and urged the Administration to actively consult the industry before finalising its policy decisions. Members agreed that to enable the Panel to monitor further developments, the Administration should provide its response to concerns/views of the non-government organisations and individuals who had responded to the two Reviews on TV and Fixed Telecommunications.

(Post meeting note: The Panel subsequently decided to consider the said response at its November meeting.)

25 The Chairman thanked the deputations for attending the meeting and informed them that there would be a motion debate on this subject at the Legislative Council meeting on 30 September 1998. Deputations would be welcomed to submit further views to the Panel in writing and/or to observe the said debate.

26 The meeting ended at 1:00 p.m.


Legislative Council Secretariat
30 October 1998