Thu, Feb 03, 2000 - Page 1 News List

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

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.

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