Nurturing a market environment that is welcoming to new technology and provides broad consumer choice.
The Committee urges the National Communications Commission (NCC) and Ministry of Transportation and Communications to review current regulations affecting the telecommunications and media sector in the interest of facilitating the application of advanced technology and promoting the industry’s long-term development. The expectation of high fees for 5G spectrum bidding and usage is having a negative impact on telecom companies’ willingness to invest on 5G network infrastructure. The prospective launch of tiered pricing for cable-TV in 2020 is another concern for the industry, as are the requirements for written customer contracts and the provision of free set-top boxes to customers.
As outlined below, we encourage the Taiwan government to make adjustments in several draft regulations, so as not to hinder the long-term development of the industry.
Suggestion 1: Reduce the charges for frequency usage to promote development of the mobile broadband industry.
According to the NCC, telecom company revenue in Taiwan’s mobile communications has declined over the past seven years, from NT$217.2 billion in 2011 to NT$178 billion in 2018. That steady decline in revenue and profits has been coming at the same time as regulatory charges have been rising, with the added costs from the advent of 5G service fast approaching. The squeeze deters telecom operators from investing as much in new services as they might otherwise, to the detriment of consumers.
Some 590MHz of spectrum have been released in Taiwan, and the five major telecom companies paid a total of nearly NT$3.4 billion in frequency usage fees annually in 2017 and 2018. When the prospective 5G spectrum is released, the burden will be even heavier. There will be a negative impact on investment in the 5G network infrastructure, and therefore on Taiwan’s ICT industry development and the long-term interests of consumers.
The “Frequency Usage Fee” and the “Bidding Fee for Radio Frequency Release” are separate issues. Because of the scarcity of spectrum resources, competitive bidding is conducted at the time of spectrum release to establish user rights, while the frequency usage fee is designed to cover management costs to “improve the effective use of frequency resources.” That principle is widely recognized and adopted by regulatory agencies around the world. In the United States, Germany, Finland, Singapore, and other countries, the purpose of collecting the frequency usage fee is “to cover the cost of spectrum management costs.” Hence, we suggest that the total amount of the “Frequency Usage Fee” should not exceed the actual frequency management cost.
From this year, the NCC has adjusted the “per-MHz frequency usage fee” and the “band adjustment factor” to reduce the total frequency usage fee. But overall the billing mechanism and standards for frequency usage fees are still based on a system established in the 2G era more than 20 years ago. Since 2001 when Taiwan began rely on competitive bidding for the release of frequency, the “frequency value” has been reflected in the bid bond, but the formula for calculating the frequency usage fee has not been adjusted. We recommend that the government follow the example of the U.S., UK, EU, Japan, South Korea and other countries to offset the management costs with frequency usage fees, as was done with the release of 642MHz in the UK and the release of 688MHz in Germany. We also suggest referencing the frequency management costs charged by the UK and Germany in those cases, adjusting for purchasing power parity.
Considering that the bidding fee in Taiwan is much higher than in most foreign countries, it is unreasonable to charge high frequency-usage fees. Therefore, we urge the government to review the mechanism for charging frequency usage fees as soon as possible to return to the principle that the frequency usage fees should not exceed the actual management cost – lowering the fees gradually year by year until that goal is met. This policy will definitely help the business and technological development of Taiwan’s mobile broadband industry.
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 limited choices regarding the service. However, with the advancement and popularization of digital technology, the market has changed dramatically over the years. Now multiple video services, such as IPTV and OTT, have become powerful competitors to the traditional cable system. At the end of 2018, Taiwan had over 2 million IPTV subscribers, accounting for a roughly 40% share of the cable-TV market. OTT services have also gained a significant market.
Furthermore, the NCC in recent years has issued new cable licenses and allowed existing operators to operate in different franchises. Since cable-TV operators today face a high degree of internal and external competition, and the sector no longer dominates the video service market, the government should deregulate its strict controls over tariffs.
When effective competition exists among video providers, there is no need for rate-control regulation because the consumer can choose among a variety of services. That is the case in the U.S, UK, Germany, Japan, South Korea, Australia, New Zealand, Vietnam, and Thailand. In addition, deregulation enables cable operators to obtain sufficient capital for investment in emerging digital services.
The strict rate control in Taiwan is not only contrary to world trends, but has led to a situation where tariffs have actually been dropping. Even as the Consumer Price Index inevitably rises year by year, the average cable rate has declined from NT$579 a month in 2001 to the current NT$518. The unreasonably low price cap has seriously hindered the development of the cable-TV and content industries, including satellite operators.
Given that effective competition now exists among video providers, the Committee urges the NCC to eliminate the rate control system for cable-TV tariffs.
Suggestion 3: Drop proposed regulations on basic channel tiering as beyond the NCC’s authority.
In March 4 this year, the NCC issued draft “Fee-Charging Standards for Cable Radio and Television System Operators.” According to Article 3, cable radio and television system operators shall provide at least two tiers of basic channel groups to be broadcast by HDTV or Ultra HDTV.
The proposed regulation exceeds the authority granted under the Cable Radio and Television Act (usually referred to as the Cable Act). Article 44 of the Act states: “System operators shall report the subscription fees to special municipality or county (city) governments within a month after the first of August every year. The special municipality or county (city) government will examine the report in accordance with the standards of service fees enacted by the central regulatory agency and then make an announcement” regarding the fee to be set for the following year.
The legislative purpose of the provision is to define the role of the municipality or county (city) government in the yearly review process of operators’ subscription fees. Nothing in the regulations authorize the central-government authority to formulate a cable-TV tiering scheme or otherwise regulate cable-TV operators’ channel combinations. Furthermore, the draft regulations would constitute a mandatory order to system operators to provide tiering service with basic channel groups in HDTV or Ultra HDTV. But since cable systems are private property built and invested in by the operators, the regulation would clearly restrict the operators’ rights and obligations without legal authorization. As a result, the draft regulation clearly violates the people’s property rights as safeguarded by Article 15 of the Constitution.
In view of the problems mentioned above, the Committee urges the NCC to drop its proposed draft regulation.
Suggestion 4: Remove the requirement that system operators allow subscribers to borrow two digital STBs free of charge.
The draft amendment to the “Fee-Charging Standards for Cable Radio and Television System Operators” not only forces system operators to provide at least two grouping basic channels, but also requires them to lend two digital set-top boxes (STBs) to subscribers for free. This regulation clearly violates Article 15 of the Constitution regarding the protection of private property rights. As mentioned in Suggestion 3, the NCC needs to have clear legal authorization before it can implement the basic channel grouping policy.
Further, forcing system operators to lend two digital STBs to subscribers free of charge is not conducive to the long-term development of the industry. In the process of digitalization, operators’ investment in carrying out the government’s digitalization policy is estimated to have been as much as NT$55.4 billion – money that has not yet been recovered. Adding in the cost of the two free digital STBs per subscriber increases what is already a heavy financial burden for the operators.
The draft does not even include a provision for compensation if the subscriber, upon suspension or termination of the cable service, discards the borrowed STB or even auctions it online, depriving the operator of the opportunity to reuse or recycle the equipment. Consequently, the operators will be less willing to introduce high-end digital STBs, subscribers will be disappointed in the quality of the service, and development of the industry will suffer.
Instead of compelling operators to lend the digital STBs to subscribers, the subscribers should be required to rent or borrow them according to the principle of fair user charge, including their return in good order upon termination of the contract.
Suggestion 5: Enable system operators to enter into service contracts with subscribers without written signatures.
Currently the Cable Radio and Television Act, the major regulation governing system operators, expressly stipulates that system operators must enter into written service contracts with subscribers. That requirement ignores the advances in communications technology, as well as the Taiwan government’s advocacy of environmental protection and its promotion of e-policies such as the use of electronic and paperless documents. At the same time, the stipulation that the service contracts be made in writing makes local operators less flexible and efficient when competing internationally.
In addition, that stipulation appears to be directly contradicted by provisions of the Electronic Signature Act, which expressly permits system operators to use electronic documents such as TV Mail to replace subscribers’ written consent on paper, as well as allowing subscribers to sign service contracts with an electronic signature.
In the era of digitalization, there is no need to require service contracts 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.” Besides being more environmentally friendly, this approach will be more flexible and convenient for both system operators and subscribers.