With regard to the critical topics addressed below, the Committee respectfully urges the National Communications Commission (NCC), Taiwan Intellectual Property Office (TIPO) of the Ministry of Economic Affairs, and the Ministry of Transportation and Communications (MOTC) to review the relevant current regulations and make necessary revisions to support development of the telecommunications and media sectors in Taiwan. In the era of digitalization, wider accessibility to technology has brought many benefits, but it has also led to increased online copyright infringement. It has also generated various new video service platforms that compete with cable TV while the latter is still encumbered by rate caps and an unfavorable pricing scheme. In addition, the 590MHz bandwidth is expected to soon come up for bidding, causing telecom operators to be faced with huge spectrum fees. These issues, together with the requirement for cable-TV services to have written contracts with customers, are all factors contributing to a less competitive environment in Taiwan. We encourage the Taiwan government to make adjustments, in line with the suggestions given below, so as to create a more efficient telecommunications market for the good of both industry and the public.
Suggestion 1: Amend the Copyright Act to criminalize the manufacture, import, or sale of infringing Over-the-Top (OTT) boxes.
Rapid developments in digital technology have substantially impacted the ways in which copyrighted materials are reproduced and distributed. As a result, cases of online copyright infringement have become more prevalent in Taiwan over the past few years, particularly on-line infringements derived from apps or OTT boxes with pirating functions.
Online copyright infringers manufacture, import, and sell illegal OTT boxes to public users in Taiwan to access unauthorized video and audio content. The purchaser of an illegal box only has to pay a one-time price; there are no additional fees to view the unauthorized content. Due to the low cost, more and more consumers in Taiwan are purchasing illegal OTT boxes with pirating functions and are no longer subscribing to the legal pay-TV services. Those involved in the manufacture, import, or sale of infringing OTT boxes are making substantial profits and are causing great economic losses for the pay-TV industry, including content providers and platforms.
To resolve this issue, we propose to add a subparagraph to Articles 87 and 93 to the Copyright Law, stating that offenders will be subject to criminal liability when they provide a computer program with collected network addresses containing the unauthorized content for download and use by public users and/or manufacture, import, or sell equipment or devices built-in with the said computer program with the intention of enabling public users’ access to the unauthorized content publicly transmitted or broadcast via internet.
Suggestion 2: Lower spectrum fees to speed up mobile bandwidth (MBB) network development.
With the government’s release of the 590MHz bandwidth, the five major telecommunications companies paid about NT$4.2 billion in spectrum fees in 2017. If the government further releases spectrum for fifth generation (5G) wireless systems, having to pay such high spectrum fees will not only impose a heavy burden on the industry, but also affect the long-term interests of consumers, since the costs will necessarily be passed on to customers.
At present, the calculation of spectrum fees in Taiwan still follows the 2G model of charging by the unit, while in markets such as the United States, EU, UK, Japan, and South Korea subsidize spectrum fees by including them within spectrum administration costs. For example, the UK only charged the equivalent of NT$1.1 billion when it released the 642Mhz bandwidth and Germany charged the equivalent of NT$0.9 billion for the 688MHz bandwidth. We urge the NCC to adopt a similar model to ensure that spectrum fees do not jeopardize the development of Taiwan’s MBB market and technology
Suggestion 3: Terminate cable-TV rate regulation and delay the introduction of tiered pricing pending impact studies.
When the current rate regulations for cable TV in Taiwan were introduced in 1990, the cable-TV industry was the dominant video service. The rationale for rate regulation was to protect consumer rights because consumers had no choice regarding the service. However, the market has changed dramatically over the years and now multiple video services – such as cable TV, IPTV, and OTT – are available to consumers. Cable TV is no longer dominant.
At the end of 2017, there were about 5.2 million cable TV subscribers in Taiwan and over 1.7 million IPTV subscribers, together representing more than 32% of the video market.
OTT services have also gained a significant market.
When effective competition exists among video providers, there is no need for rate regulation because the consumer can choose among various types of services. That is the case in the United States. Based on the same consideration, the NCC should re-evaluate the need for rate regulation, and lift such regulation if it concludes that effective competition now exists among the video providers.
A rate cap for cable TV service of NT$600 per month per household was also set in 1990. The price cap has never been adjusted, although the consumer price index has risen substantially since 1990. The unreasonably low level of the cap has hindered the development of the cable-TV industry, satellite operators, and content providers. We strongly suggest that the NCC either remove the rate cap entirely or raise the level to reflect the increase in the price index over the past 27 years.
Further, cable-TV fees are charged by household rather than set-top box (STB). That price structure is unfair to lower-income households. A rich family with 10 TVs at home pays the same charge as a poor family with only one TV set. Consequently, the low-income families subsidize the wealthy households’ cable TV service. As Taiwan will reach nearly 100% digital-TV penetration by the end of 2018, it would be easy for cable-TV operators to shift to charging for service per STB. To create a more equitable system, we urge the NCC to revise the cable-TV tariff regulations to allow operators to charge by STB instead of by household.
On another matter, in 2013 the NCC announced plans to implement a tiered-pricing scheme for cable TV services. The Commission updated the scheme in 2016 and a year later proposed a new version – the “Cable Television Multiple Choice Payment Scheme” – with the goal of offering more channel options to users. The Committee notes that in today’s environment in which the number of cable subscribers is declining due to the availability of IPTV and OTT options, this regulation is no longer relevant and there is no need to establish a tiered-pricing scheme for basic cable TV channels.
To stay competitive against emerging platforms and media companies, operators need to plan and offer new products and services, such as channels in combination with app-based content or subscription video-on-demand (SVOD) in combination with OTT services.
The cable system is just one of today’s diversified audio-visual platforms. Cable system operators have been working with providers of IPTV and app-based or OTT services to co-launch a wide variety of audio-visual products. In keeping with the spirit of fair competition under the Fair Trade Act, the authorities should transfer the right to set pricing to cable-TV providers as well as to providers of IPTV, OTT, and other new services. The pricing rates need to be determined by the market itself without being regulated by the government.
Article 44 of the Cable Radio and Television Act stipulates the following rate-setting procedure: “Cable system operators shall report the amount of subscription fees to special municipality or county (city) governments within a month after the 1st of August every year. The special municipality or county (city) government will examine it in accordance with the standard of service fees enacted by the central regulatory agency and then make an announcement accordingly.” The Article does not authorize the NCC to be involved in or take charge of tiered-pricing schemes for cable TV services. The NCC should consider removing cable-TV rate regulation and price caps, thereby avoiding direct involvement in stipulating the basic channels or types of channels to be offered by cable providers, as well as the applicable rates, procedures for review, and other requirements.
As mentioned above, the NCC lacks authorization to act as the competent authority for planning and regulating a tiered-pricing scheme for cable TV services, yet it has still proposed various versions of such a scheme. Although some local government officials, cable system operators, and channel operators repeatedly voiced their opinions in favor of the scheme at NCC-organized public hearings, their views did not take into consideration the potential impact on related parties, which besides subscribers, cable system operators, and channel operators also include local-programming production houses and vendors on both ends of the supply chain. The uncertainty will obviously affect relevant industries’ future investment plans.
For channel/content providers, revenue from advertising and channel distribution are the two major profit sources. Any change in the existing basic price scheme or an uncertain income forecast will dramatically affect profitability, with a direct impact on future investment willingness or even the continuation of current local production activities.
The NCC has stated that the tiering scheme will “enable the cable-TV market to establish a brand-new operating and pricing model in preparation for the trend of four-in-one digital streaming (i.e. data, audio, video, and mobile),” as well as to “allow for more operational flexibility in the industry in hopes of better growth” and to enable subscribers to “enjoy better content and more options of TV programs.”
Yet experts have expressed serious concerns and doubts as to whether the NCC’s expectations can in fact be met, citing the absence of a comprehensive impact assessment as the basis for the NCC’s policy making. We therefore suggest that the tiered-pricing mechanism be temporarily delayed until a proper legal basis is established and until the NCC has filed a comprehensive industry impact report.
Suggestion 4: Amend Article 50 of the Cable Radio and Television Act to enable subscribers to communicate via TV Mail with legal effect.
Since the advent of digital cable-TV service, big data and ratings surveys have played increasingly important roles in the TV industry. By using interactive features from an STB, advertisers can access more audience information than ever, and networks and content providers use data to guide their programming decisions. In the TV industry, data has become the key to profitability.
Currently the Cable Radio and Television Act, the major regulation governing cable-TV operators, expressly stipulates that cable TV operators must enter into written service contracts with subscribers. In accordance with the Personal Information Protection Act, cable-TV operators are also required to obtain consent from subscribers before including them in ratings surveys. Further, when cable operators use electronic means, such as TV Mail, instead of written documents, Article 9 of the Electronic Signatures Act states that the document using an electronic signature shall be applied.
The best practice for cable-TV operators in conducting ratings surveys is to use TV Mail to send offers to STB subscribers. The subscribers can return the consent information with a click of the button on the device. Unfortunately, this method does not meet the requirement of an “electronic signature” as specified in the Electronic Signatures Act.
It is neither necessary nor reasonable to prohibit cable-TV operators from using TV Mail as legally recognized documents. Such a regulation presents a barrier to the cable-TV industry’s growth and development.
In the era of digitalization, there is no need to require service contracts made between cable-TV operators and subscribers to be in writing. To resolve this issue, we propose to delete the word “written” in Article 50 of the Cable Radio and Television Act and revise this article to state that “system operators shall sign contracts with their subscribers for visual and audio services.” When disputes regarding subscriber consent occur, the burden to display the TV Mail records would lie with the cable-TV operators. This method will not only consider the rights of consumers but also provide an efficient way for cable-TV operators to legally obtain access to the needed data.