Thu, Feb 03, 2000 page1

• Cable titans cash in on connections

  MARKET WOES An intricate combination of power and wealth has allowed Taiwan's cable TV market to become dominated by two large conglomerates

  • By Monique Chu / STAFF REPORTER
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  Shih Jun-ji (施俊吉), a commissioner in the Cabinet-level Fair Trade Commission (FTC), is probably one of the few officials who has dared to pinpoint what goes on behind the scenes in Taiwan's cable TV business -- that is, political manipulation.

  "The problems with cable TV operations are due to the intricate relations between political and business circles," Shih said during a conference held by the Government Information Office (GIO) last week.

  "If the law stipulated that neither KMT central standing committee members nor those of other parties could be involved in the cable business, the state of operations would be improved," Shih said, drawing applause from many of those attending the conference.

  Shih's hopes, however, could be little more than wishful thinking since politicians employ a variety of means to manipulate the rules of the game in the cable TV market, according to insiders.

  Legislators have admitted that some of their colleagues who have their own interests at stake in the highly lucrative market have interfered with the rule-making process for their own benefit.

  "When the Legislative Yuan reviewed the amendment to the cable and broadcasting law in 1998, the intricate relationships between political and business circles made the process very chaotic," said KMT legislator Hung Hsiu-chu (洪秀柱).

  DPP legislator Fan Hsun-lu (范巽綠) was even more direct, naming KMT legislator Wang Ling-lin (王令麟) as the person who insisted that the maximum market share for conglomerates in the cable industry should be 33 percent, overturning a proposed ceiling of one-fifth.

  According to Fan, Wang said that cable operators needed to control at least one-third of the market share to survive.

  Wang is the chairman of Eastern Multimedia, one of Taiwan's largest cable TV operators.

  Officials at the local level have also used their political connections to influence cable regulations, insiders said.

  Following the 1998 amendment to the cable and broadcasting law, local governments were authorized to set subscription fee standards starting from 1999.

  But many found that political forces were interfering with what critics said should be a "professional" fee-reviewing process.

  Citing the experience of two of her colleagues, Liu Yu-li (劉幼琍), a media expert at National Chengchi University, said certain county commissioners simply told reviewing committee members their preferred fee standards, while other elected officials also sought to dictate fee charges.

  "I want to appeal to local councilors not to interfere [with the fee-reviewing process] by using political tactics," she said.

  Worse yet, industry insiders said, is that big companies involved in monopolized cable TV market have distorted market mechanisms through unfair practices and then used their political influence to head off any official investigation.

  The two big players in Taiwan's cable industry are Rebar Corporation's Eastern Multimedia (東森媒體科技) and the Koo's Group's United Communications (和信). Together, they control about 80 percent of Taiwan's cable TV market, according to observers.

  Eastern, which is now headed by KMT legislator Wang Ling-lin, was founded under the leadership of his father, Wang Yu-tsung (王又曾). United was started by Koo Chen-fu (辜振甫), a senior KMT figure who also chairs the Straits Exchange Foundation. It is now run by his son, Koo Chih-yun (辜啟允).

  The elder Koo and Wang are both members of the KMT's central standing committee.

  In late 1998, the two conglomerates took steps to end their bitter rivalry and cooperate in dividing up the market. Since they not only own cable system operations but also channel distribution businesses, they have achieved a "horizontal and vertical" domination of the market that prevents fair competition, Fan said.

  Citing statistics provided by independent cable TV operators, Fan said she suspected that the two groups had already exceeded the legal ceiling of one-third market share, adding that the GIO had turned a blind eye to the groups' monopolization of the industry.

  But GIO officials have cited statistics indicating that the nominal market share controlled by the conglomerates does not violate the law. Among the 74 cable TV operators in Taiwan, 13 were run under the Eastern banner and another 12 under United, the statistics showed.

  However, one GIO official who asked not to be named said the statistics were a product of the conglomerates' deceit.

  Their trick, the official said, was to use the names of people who do not have direct connections with the conglomerate to open new companies.

  Independent cable TV operators, meanwhile, have accused the two groups of having taken action that violated the Fair Trade Law.

  The two groups are often united in offering a "genre" or "bouquet" of bundled channels to independent cable operators on a "take-it-or-leave-it" basis, alleged Frank Lai (賴文雄), secretary-general of a cable TV operators' association that mostly comprises independent operators.

  Legislators and scholars have criticized the FTC for being too passive in investigating unfair business practices -- such as the two groups' bundling of channels -- in the cable TV market.

  Shih denied that the FTC had failed to take any action, but admitted the existence of political intervention in the FTC's investigations. He said the FTC has levied fines of NT$27 million for violations of the Fair Trade Law in the cable TV market in the past two years. Eastern and United were among those fined, Shih said.

  According to Shih, several cable TV companies under the Eastern banner were fined NT$7.5 million last year for their concerted efforts to raise prices. United was fined a total of NT$10 million last year for similar behavior.

  Shih acknowledged that both conglomerates were able to engage in practices that were on the verge of violating the law because of their "good" connections within political circles.

  To underscore his point, Shih mentioned how the Cabinet-level Committee of Administration Appeal overturned the FTC's decision to punish Eastern for engaging in illegal practices two years ago.

  "I won't rule out the possibility that political interference affected the committee's decision," he said.

  But Shih said he still believed that one of the best solutions for curing the ills in Taiwan's cable TV operations is to severely punish the wrongdoings that have distorted market transactions.

  Critics say the remedy is to redesign the legal framework to increase competition in the market.

  "Behind the dispute over Taiwan's cable TV operations is a problem that is economic in nature," said attorney Nigel Li (李念祖).

  Chuang Chuen-fa (莊春發), an economist at National Chunghsing University, said the government should work "to raise competition" in the cable market. Chuang said the government should consider amending the law to allow more competitors to enter the cable TV market.

  "The government should show its determination to correct current practices in the cable TV market," he said.
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