Sat, Jan 08, 2011 - Page 3 News List

FEATURE: Amendment seeks to end cable TV monopoly

By Shelley Shan  /  Staff Reporter

Although the NCC lacks the legal tools to impose these principles on Dafu, it suggested the company make those commitments voluntarily to secure approval for the deal, he said.

The Dafu-Kbro deal also sheds light on how little progress the nation has made in terms of introducing a digital cable service, despite the huge amount of capital that has been brought to the nation by private equity funds since 2005.

Over the past five years, the cable service market has been dominated by five major MSOs, including Kbro, CNS, Taiwan Broadband Communications (台灣寬頻, TBC), Taiwan Fixed Network (台固媒體) and the Taiwan Infrastructure Technology Company (台灣數位光訊).

Kbro, CNS and TBC are backed by foreign investors, who hold about 60 percent of the subscribers nationwide.

Statistics from NCC indciate that the penetration rate of the digital cable service is about 7 percent. When examining the data year by year, the penetration rate was 3.59 percent in 2007, 4.06 percent in 2008, and 4.5 percent in 2009.

Luo Shih-hung (羅世宏) of National Chung Cheng University said it was never the intention of these overseas investors to raise the penetration rate.

“They were hunting around the world for potential targets to invest in,” Luo said. “Unfortunately, Taiwan’s cable service market appeared on their radar screen and eventually became their prey.”

Luo said the return on the investment in the nation’s cable service market is estimated to be between 20 and 30 percent.

“This is essentially a profit--guaranteed business,” he said. “You start by borrowing money from the bank and use the money to invest in cable operators, who have a steady cash flow from the monthly subscription fees. What’s even better is that virtually all the operators enjoy a monopoly in their service areas. There is no need to upgrade the facilities because there is no competition.”

A former NCC official, who spoke on condition of anonymity, said that allowing foreign investors to enter the cable service market was a big mistake. It was almost impossible to ask them to offer digital service, he said.

Other than terminating the service area monpolies, the fact that the commission asked Kbro and CNS in 2008 to reduce the endorsed guarantees borne by cable operators in their systems by 20 percent within two years as an important condition of license renewal could also be another reason why foreign investors want to withdraw, he said. These policy changes will not only reduce their profits it will alter their capital structures, he said.

“In the long run, you want someone who is serious about having a sustainable business rather than someone who is good at using leverage,” he said.

Lee, however, argued that simply blaming foreign investors for the low penetration rate of digital service is rash.

“Five years ago, none of the local conglomerates were interested in entering the cable service market because of the complicated dealings between cable operators and the channels,” Lee said. “These foreign investors came, brought in corporate management styles and changed the environment. Local conglomerates want to take over because the operational risks are relatively lower now.”

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top