INTRODUCTION
1. The Consumer Council welcomes the opportunity to express its views on the above consultation paper. The paper raises a number of issues on which the Council would like to express its views. In a broad sense, those issues concern two objectives:
- ensuring consumer access to an adequate television service;
- administering regulatory safeguards to ensure there is an acceptable level of competition in relevant markets.
ENSURING CONSUMER ACCESS TO TELEVISION SERVICE
Choice of DTT standard for Hong Kong
2. The Government has made a preliminary view to adopt Digital Video Broadcasting-Terrestrial (DVB-T) as the Digital Terrestrial Television standard (DTT) standard for Hong Kong. In doing so it has recognised that to achieve better economies of scale, the selected DTT standard should preferably be the one which is adopted widely by overseas countries.
3. While this is a sound reason for choosing technology, there are also sound reasons for not ignoring the consequences for Hong Kong if China chooses a different standard. It is important to recognise that the economic and social interests of Hong Kong consumers and market participants will be constantly evolving through integration of the region with China.
4. In the same way that European countries have recognised the benefits of sharing common broadcasting standards, because of social and economic integration, there would appear to be direct benefits to Hong Kong consumers and market participants if Hong Kong uses the same DTT standard as that adopted in China.
economic interests
5. As social and economic integration evolves over time, the potential audience for Hong Kong free to air broadcasters in the near future will include a wider viewing audience in the region. As a result there will be potential benefits for the Hong Kong economy through, for example, an expansion in advertising revenue and content development. The ability for Hong Kong market participants to benefit from this integration in the future would appear to be diminished if a different broadcasting standard is used in Hong Kong to that in China.
signal interference
6. Using the same broadcasting standard would also lessen the possibility of signal interference occurring now and in the future, through the ability to better co-ordinate frequency allocation. Moreover, a residual benefit might also accrue to viewers in the future, who live in outlying Hong Kong areas, who would benefit from the extension of transmission infrastructure to cater for the potential wider viewing audience across the SAR border, and hence not suffer from reception problems.
cost of consumer goods
7. The economies of scale applying in China for manufacturing television sets and associated equipment that use the broadcasting standard in China provide the potential for low costs, and thereby low retail prices. If Hong Kong has the same broadcasting standard as that applying in China, Hong Kong consumers would be included within the same market for those television sets and associated equipment. As a result, it could be expected that Hong Kong consumers would share in the benefits of those economies of scale.
Bandwidth usage
8. The Council notes the Government's intention to increase the extent of entry into broadcasting, by maximising the number of channels within the available frequency band. However, the Council understands that some concerns have been raised regarding the effect that optimising bandwidth usage will have on signal reception and interference. The Council also understands that problems with signal reception and interference have occurred in other jurisdictions that have undertaken a similar conversion process, for example, in Australia.
9. Accordingly, the Council seeks an assurance from Government that it is taking appropriate measures to ensure that there will be no interference in reception for Hong Kong free to air viewers as a result of the conversion process. The Council suggests therefore that the Government develop planning guidelines that are designed to ensure that Hong Kong viewers' free to air analogue television service is protected from interference from digital transmissions. Moreover, that where interference does occur, resolution is to be achieved in a timely manner.
Maintaining a free to air service
10. It is noted that the Government intends to reserve "guaranteed slots" on two Multiple Frequency Network Multiplexes for simulcast of the existing free to air analogue television. Moreover, that the licensees of these two multiplexes should be required to carry the existing terrestrial broadcasters' analogue television programme services free of charge until these services are switched off.
11. The Council is concerned that a free to air service should continue, not only during the transition process, but also after transmission is fully converted. The Council has a concern that in the process of moving to DTT, the current free to air service does not by default become a pay television service. For example, where all viewers will be required to pay either a one off, or some form of regular payment to service providers for maintenance or tuning of a set top box, that is necessary to receive a signal.
12. The Council accepts that the existence of free to air broadcasting is largely dependent on the extent to which that service can attract an audience, and thereby attract adequate advertising revenue. However, free to air television is also considered to be an important medium in the community, providing not only entertainment services to the less advantaged, but an avenue for Government to disseminate, as widely as possible, information on emergency services and other important community announcements and information.
13. Ownership of a television set is for many people, even below the poverty line, not a discretionary purchase, but a necessary component in their interaction with society. As such, access to programming that does not require regular subscription payments, set with reference to a competitive market, would be considered essential.
14. The Council therefore urges the Government to maintain an appropriate licensing regime to support the continued existence of a free to air broadcasting service (as this is not apparent in current licensing conditions) and that its basic free to air nature will not be altered.
Set top box and receiver standards
15. In its previous response to the 1998 review, the Council urged Government to ensure that the technological co-operation that the Government was encouraging between network owners and broadcasters should extend to ensuring that consumers do not need different set top boxes and remote controllers for each network. The Council welcomes the Government's decision to require that set top boxes and idTVs be licensed and regulated under the Telecommunications Ordinance and that a separate consultation will carried out in regard to licensing conditions.
Public broadcasting
16. In the prologue to The 1998 Review of Television Policy' in Hong Kong, it was stated, amongst other things, that "The Government's long-standing policy on television broadcasting has been to widen viewers choice of quality programming to ensure television programmes meet the diverse needs of society......".
17. Meeting the diverse needs of society through the medium of television has also been a concern of the Council. For example, in its 1996 Report 'Ensuring Competition in the Dynamic Television Market', it made certain recommendations concerning the need for public broadcasting to provide educational, information and current affairs programming that would not normally be met by the market.
18. The digitisation of television broadcasting and opening up of more channels would seem to provide an opportunity to increase the scope for public broadcasting to be expanded in Hong Kong, while maintaining the current access that RTHK currently has on free to air television. The Council suggests that the Government could be more proactive in its efforts at facilitating the development of a suitable vehicle for established and recognised public organisations to produce and broadcast specialist programming.
COMPETITIVE SAFEGUARDS
Licensing
19. The Council welcomes the approach of adopting a "separate licensing" scheme for the three kinds of services in relation to DTT, viz. multiplex operator, programme service provider and additional service provider, as a means of exercising regulatory control over service providers.
Limitations on licence ownership
20. The Government proposes that multiplex operators will be issued licences under the Telecommunications Ordinance, and will not be allowed to submit applications for more than two multiplex licences.
21. However, in the course of market development, there is the possibility of future consolidation amongst licensees. Given the current absence of specific powers by the Telecommunications Authority to challenge mergers or acquisitions, the Government's intentions to maximise the number of players in the market might be frustrated unless specific rules are provided to prevent anti-competitive consolidations.
22. The Council suggests therefore, that the TA should be specifically empowered to examine the possible anti-competitive effects of mergers and acquisitions between multiplex operators, including the attainment of indirect interests between operators, and to take appropriate action. For example, to prevent the acquisitions or conduct from going ahead, and/or to require the divestiture of assets or beneficial ownership.
Television programme information
23. The Council welcomes the decision by Government to make the provision of an electronic programme guide service to be regulated under the competition provisions of the Broadcasting Ordinance and/or the Telecommunications Ordinance as appropriate.
Administering competition rules
24. The Council is pleased to note that the Government has taken steps to introduce general competition rules for the broadcasting industry, through the recent Broadcasting Ordinance, and the issuing of guidelines on the application of the law.
25. However, the Council repeats its earlier concerns that practical difficulties might arise in enforcing sector specific competition safeguards where the conduct that is having a detrimental effect on the sector takes place wholly or partly outside the regulated sector. A competition law, of general application, having the same prohibitions against abuse of a dominant position, and anti-competitive agreements between competitors, as found in the Telecommunications Ordinance, and the Broadcasting Ordinance would provide a general safety net. As such it would address anti-competitive conduct that is not caught by the limits of the Government's sector specific approach.
26. The Council acknowledges that Government has taken a firm stance on sector specific competition regulation, rather than general regulation. Having regard to the Government's firm stance, and to avoid some of the potential problems, the Council proposes widening the ambit of the regulatory environment for the communications sector. For example, to include general prohibitions against conduct by persons taking place in markets within the context of 'electronically delivered entertainment and/or information services'. This would seem to be a logical approach that recognises the ability for consumers to access entertainment programmes from a wide variety of sources. This is also in line with current Government policy subjecting broadcasting, telecommunications and information technology under one bureau secretary, i.e. Information Technology and Broadcasting Bureau.
27. Under this scenario, while only licensees would be under the licensing scrutiny of the Broadcasting Authority (BA) or Telecommunications Authority (TA) and be subject to licensing sanctions, other non licensees would be prohibited by law from engaging in the stated anti-competitive conduct within that wider industry definition. They would therefore be subject to civil action. For example, the seeking of injunctions and other orders (similar to those applying to licensees) brought by either the BA, the TA, or a private party in a court of law.
28. In addition, now that the BA is vested with enhanced powers to address anti-competitive conduct, some thought needs to be given as to the most efficient means of meeting the resource needs for undertaking complicated competition analysis. There are currently two regulators; i.e. the BA and the TA, examining competition issues in related industries. There are also the resources within the Information Technology and Broadcasting Bureau. Given the synergies between the telecommunications, broadcasting sectors and information technology sectors, particularly with the use of similar technologies by market players, it would seem preferable that competition investigation and analysis expertise be pooled together and used in carrying out similar work in the area of electronically delivered entertainment/information.
