The Committee recognizes the progress achieved by the National Communications Commission (NCC) in completing the 5G spectrum auction to lead Taiwan toward a DIGI+ environment, cracking down on pirated TV boxes to support intellectual property protection, and drafting world-leading OTT TV legislation that was enacted earlier this year.
While considerable progress has been made, further steps are needed for the satisfactory development of Taiwan’s telecoms and media. Current policies and regulation in certain respects are out of sync with actual market practice and the general level of investment in facilities. With that in mind, the Committee presents the following suggestions. We hope that government and industry can partner in reviewing current regulations to come up with reasonable and practical regulatory solutions.
Suggestion 1: Assist telecom operators to develop 5G by providing specific and clear policies and standards.
As the 5G industry has been positioned as the cornerstone for implementation of Taiwan’s Digital Nation and Innovative Economic Development Program (also known as “DIGI+”), the pace of development of 5G is bound to affect the interests of government, industry, and consumers.
Unfortunately, Taiwan’s recent 5G spectrum auction resulted in unreasonably high prices – in fact, the world’s most expensive for 5G spectrum. The total came to NT$142.19 billion (about US$4.74 billion), for an average cost per person per MHz in the 3.5 GHz band of NT$21.89, compared to the equivalent in Italy of NT$12.24 and in Germany of NT$5.83.
This result not only greatly increases the cost of 5G spectrum but will also severely reduce the telecommunications industry’s resources and momentum for investment in 5G network construction. Ultimately the high input cost is likely to be reflected in the rates paid by consumers as well.
This situation will have an adverse impact on Taiwan’s 5G industry development and make it less competitive internationally – an unfavorable outcome for government, industry, and consumers. Therefore, we strongly urge the government to adopt the following policies to ameliorate the situation by assisting the 5G industry’s rapid development:
Amend the Statute for Industrial Innovation and its sub-laws to extend the “Time for Investment Deduction Preference” to 10 years and increase the “Application Deduction Tax Credit” to NT$10 billion.
Provide telecommunication operators with tax relief and concessional financing in line with provisions of the Act for Promotion of Private Participation in Infrastructure Projects, Statute for Encouragement of Private Participation in Transportation Infrastructure Projects, and related regulations.
Provide telecom operators with half-price concessions or other subsidization for electricity usage.
Reduce 4G frequency usage fees and waive 5G frequency usage fees.
Increase the promised allocation of a portion of the spectrum auction income to set up a “5G Fund” to assist telecommunications operators in building networks and developing related application services. On December 4, 2019 the FCC announced plans to allocate US$9 billion from the spectrum auction income for this purpose. Considering the current circumstances, we suggest that the allocation be increased to an amount equal to half of the spectrum auction income. In addition, we recommend designation of the NCC as the “industry guidance agency” to oversee use of the 5G Fund to ensure the effective application of resources for 5G industry construction and R&D.
Refer to the experience of countries such as Japan in formulating a set of common rules for how the central and local governments may make use of public buildings and other facilities, such as road poles, light poles, electric poles, and other equipment for 5G networks. We also urge establishment of a government agency to coordinate across the central and local governments. Creation of this single coordination window, together with a set of clear and consistent application procedures and fee-charging standards, would help ensure that obstacles to 5G network construction are quickly and effectively resolved.
Suggestion 2: Ensure a level playing field for cable TV, IPTV, and OTT service competition in the same market.
Around the world, cable TV competes not only with IPTV but also with OTT service. People watch news, movies, and drama or variety shows via different platforms, and the operators of these various platform compete not only within their “industry” but also across “industry” lines.
In the U.S., the FCC has included CATV and IPTV within the MVPD (multichannel video programming distributor) market. Almost all cable systems in the U.S. are presumed to be subject to effective competition from direct broadcast satellite service and thus are not subject to rate regulation. However, in Hawaii and Massachusetts where cable systems still faced rate regulation, Charter Communication successfully petitioned the FCC that AT&T was a “local exchange carrier (LEC)” with 1) an existing broadband offering and 2) a streaming service, AT&T TV NOW – which combine to make up a close enough substitute for cable TV so that Charter no longer counted as a local monopoly. Charter’s legal argument only worked because AT&T was considered a “local exchange carrier” (LEC), a regulatory term for the telephone and cable providers falling under the purview of the FCC. LECs do not include VOD-only services like Netflix and Hulu, but with AT&T, Comcast, and other telecoms now launching their own streaming services, the LEC argument could be applied far more broadly in future.
In Europe, the Audiovisual Media Service Directive (AVMSD) issued by the European Union in 2007 has included radio and television services and video services in its specifications and divided the service model into “linear services” and “non-linear on-demand services.” AVMSD says it seeks to “guarantee conditions of fair competition” but also recognizes that “the distinction between linear and on-demand services is the basis for a graduated regulatory approach. In a two-tier system of rules, the Directive acknowledges a set of core societal values applicable to all audiovisual media services, but provides lighter regulation to on-demand services where the users have a more active, ‘lean-forward’ approach and decide on the content and the time of viewing.”
In the UK, linear OTT and radio and television services must obtain a “television licensable content service” (TLCS) license from Ofcom, the UK’s telecommunications regulator, which means treating IPTV and CATV as being in the same pay TV market. For VOD services, Ofcom has also said that “there will be no ‘country of destination’ style regulation” and that it “will only regulate a service if both its head office and editorial decision-making capacity are based in the UK. Video on demand services not under UK jurisdiction that are currently available to UK audiences will continue to be available.”
Similarly, the emergence of IPTV and OTT in Taiwan has caused competition with cable system operators. The contents provided by IPTV, CATV, and OTT video services are the same, and consumers in Taiwan may choose among them to enjoy video service.
We suggest that NCC officially announce that cable TV, IPTV, and OTT service are in the same market. As NCC has decided to regulate OTT service with a light-touch approach, it should follow up that announcement by amending the relevant laws and regulations to regulate cable TV and IPTV in the same way as OTT.
Suggestion 3: Deregulate the cable TV rate review.
Cable TV rates are strictly regulated in Taiwan on the rationale that cable TV operators are the dominant video service providers within each area of operation, leaving consumers with no choice. This rationale was appropriate in the 1990s, but it is no longer applicable as consumers now have multiple choices for video service, such as cable TV, IPTV, and OTT.
The deregulation of cable TV rates has become a global trend. In the U.S., England, Germany, Japan, South Korea, Australia, New Zealand, Vietnam, and Thailand, governments will not review cable TV rates when effective competition exists in the market, instead leaving it to the market to decide.
As mentioned in issue 2 above, the U.S. FCC has deemed cable TV, IPTV, and OTT to be part of the same market. The FCC has concluded that if the second operator has at least a 16% market share, there is an efficient competition and cable TV rate review is no longer required.
As of the end of 2019, Taiwan had about 4.9 million cable TV subscribers and 2.1 million IPTV subscribers. OTT services have also obtained a significant market. We suggest that the NCC refer to the FCC’s practice, re-evaluate the effective status of competition, and remove the rate review when there is efficient competition.
Suggestion 4: Maintain a light-touch regulatory environment for OTT TV services.
The OTT TV/Video on Demand (VOD) industry is still at a nascent stage of development but offers tremendous growth potential. Although competition is keen, Taiwan has an opportunity to be an important part of the global production value chain and showcase the best of Taiwanese talent and culture to a global audience. To realize this potential, it is critical to have a conducive regulatory environment. The current light-touch approach is delivering results by allowing services to effectively invest, innovate, and compete. We encourage the government to closely partner with industry by maintaining this approach so that Taiwan continues to be well positioned for success.
We commend NCC for actively deliberating how to develop reasonable and practical regulatory solutions for OTT TV. Regulation that was designed for traditional linear broadcast services may not necessarily suit OTT TV. For example, licensing is unnecessary as OTT TV does not utilize a scarce resource like spectrum and licensing is at odds with the open nature of the internet. A quota system would also be ineffective as consumers choose exactly what content they wish to watch. Such measures would not only be ineffective but are potentially harmful as licensing adds a barrier to entry and content quotas drive the creation of inexpensive low-quality content. Either option would put Taiwan at a competitive disadvantage.
The ideal solution is a light-touch approach that addresses key regulatory concerns while remaining practical and reasonable. For example, if a registration system is desired to establish clear communication channels and information exchange with industry players, that is a sensible option – and keeping it as simple as possible encourages greater support from players big and small. Such a registration system should not 1) require a local presence, 2) involve any onerous requirements, or 3) impose fines or penalties. Otherwise, it would be registration in name but masquerade as a license in practice.
Another useful solution would be industry self-regulation, which has already achieved some success in places like India and Southeast Asia. By partnering with industry in developing effective self-regulation standards, government can help achieve a win-win outcome.
台灣的影音串流平台（OTT）與隨選視訊（VOD，Video On Demand）產業，仍在初步發展階段，卻富有潛力。即使產業競爭激烈，台灣有機會成為全球內容產製產業鏈的重要環節，向世界展示台灣人才的創意與文化。而要能確保產業走向良性發展，台灣就必須建構有利的法規環境。目前輕度管制的管理方式帶來了投資、產業創新、產業健康競爭等成效。我們鼓勵政府能與產業界密切合作，維持輕度管制的法規環境，為台灣奠定良好的根基。