The massive financial scandal surrounding the Rebar Asia Pacific Group (
On the surface, the irregularities have highlighted the government's serious delinquency in its oversight and management role. But on a deeper level, it reflects the disorder caused by government policies aimed at boosting Taiwan's national telecommunications industry. The mess created by the opening up of the fixed network industry, which the government specially designated for deregulation in 1999, is yet another example of the ugly consequences of the entanglement between state and business interests, which has remained even after the Democratic Progressive Party (DPP) took power in 2000.
At the end of the Chinese Nationalist Party (KMT) era in 1999, in the name of market liberalization, the Ministry of Transportation and Communications (MOTC) formally announced that it would begin accepting applications for special licenses permitting companies to enter the fixed network market. This drew the interest of a number of large companies, which raced to group together to compete for the licenses.
Another main goal of liberalization was to speed up construction and modernization of the domestic broadband infrastructure, as well as the overall development of all telecommunications networks by allowing new companies into the market. The MOTC set a high threshold for applying, requiring groups to have NT$40 billion (US$1.22 billion) in capital. Several companies intending to apply competed to raise funds on capital markets. Banking on a rosy future and high profitability for the industry, they raised large amounts of capital by issuing shares. Taiwan Fixed Network (台灣固網), Eastern Broadband Telecom and New Century Infocomm Tech Co (新世紀資通), the three companies that won the licenses, raised NT$92.2 billion, NT$65.7 billion and NT$47.5 billion respectively.
However, the problems caused by this NT$200 billion in capital are just now about to emerge. Not long after they received their permits, word came out that the three private companies would not immediately invest the money in building infrastructure. Instead, they would inappropriately use it for other purposes. The media covered the story extensively and there were repeated reports that prosecutors would probe the matter. This all resulted from the government's serious inability to monitor and set standards for private fixed network companies. This amounted to a veiled incentive for companies to misuse their capital.
At the time that it began issuing the licenses, the MOTC declared the plan would help reach the goal of an "extensive Internet infrastructure, and broadband in 6 million households."
The three companies were contractually obligated to finish connecting 1 million subscribers and network loops within six years. However, after succeeding in raising such a large reserve of funds, for years they only built the most easily constructed Internet framework. For example, Taiwan Fixed Network had to rely on investment from the MOTC's Taiwan Railway Administration to provide for its nation-wide fiber optic network. Meanwhile the licensed companies were slow to construct a broadband network to connect consumer subscribers.
Most outrageous of all, when the DPP came to power after the licenses were issued, it proved unable to effectively encourage the companies to expand their broadband networks. The old slogan of "broadband in 6 million households" quickly vanished into thin air. At the end of 2003, the government's "Mobile Taiwan" plan to develop wireless regional networks included a plan to construct underground broadband pipes. Now taxpayers have had to foot the bill for the NT$37 billion budget, which was to carry on the task of laying 6,000km of underground broadband pipes across the country in the hope of achieving a complete fixed network for Internet, cable television and mobile phones.
It's been more than seven years since the fixed network market was opened up. As countries like South Korea and Japan have forged into the fiber optic network era, Taiwan has floundered, and its mission of creating a complete telecommunications network is back where it started. Now there are major doubts and suspicions about just where APBT's money went.
Look at the situation from the perspective of those outside companies that were denied licenses because they couldn't raise NT$40 billion to apply, or the previously state-run Chunghwa Telecom as it continues working to establish a broadband and fiber optic network, or the stock holders who invested enthusiastically in what looked like such promising companies.
All they can do is shake their heads.
Simon Chang is chairman of Chunghwa Telecom Workers' Union. Translated by Daniel Cheng and Marc Langer
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