The Committee appreciates the Taiwan authorities’ hard work in driving the introduction and development of Taiwan’s domestic 5G ecosystem, as well as its efforts to create a reasonable regulatory environment for Taiwan’s increasingly diversified media services industry to flourish.
At the same time, business activities in the ever-changing global economy have been accelerated by digitalization and technological innovation. The speed of change has often created friction between digital industries, traditional industries, and the Taiwan authorities. The Committee expects the upcoming Ministry of Digital Development to help reconcile some of those differences by becoming a true champion of Taiwan’s digital transformation with supporting mechanisms or rewards systems as encouragement for digital innovation, by drawing on experiences of reputable businesses elsewhere to support its operations in Taiwan, and by committing to open communication with stakeholders (See the Digital Economy Committee section).
We offer the following suggestions as ways to enhance those efforts and ensure that industry can continue to innovate, foster Taiwan’s digital transformation, and provide the highest quality of service to customers.
Suggestion 1: Promote a healthy and robust environment for 5G development in Taiwan.
Countries across the world continue to improve their telecommunications environment, allowing industries to upgrade existing services and assist in bringing about digital transformation. Advanced countries are accelerating the development of 5G, an increasingly mainstream technology. For example, South Korea completed auctions for 5G spectrum in 2018, and the following year its government announced the “5G+ Strategy” aimed at creating new 5G-related industries and services. Most significantly, Korea’s government has adjusted regulations and increased investment incentives for telecom operators in order to promote 5G commercialization.
Taiwan’s government in 2016 introduced the Digital Nation & Innovative Economy Development Program (DIGI+), as well as other ICT-related policy initiatives. Its vision is to develop an environment that encourages Taiwan’s telecommunications and broadcasting industry to move toward digital transformation, of which a major facet is 5G adoption and expansion. However, telecom operators have suffered from exorbitantly high 5G spectrum costs and difficulties related to the deployment and construction of their respective 5G networks. As a result, 5G development in Taiwan has been slower than in other advanced countries.
Taking into account recent international trends and the practical needs of Taiwan’s telecommunications industry, we propose the following policy suggestions. We sincerely hope that the government will take them into consideration and enable the telecommunications industry to take a leading role in Taiwan’s digital transformation.
1.1 Accelerate the development of the digital economy: We suggest that the proposed Ministry of Digital Development (MODD) establish a system of rewards and incentives to encourage development of the telecom industry. To ensure that sufficient resources are available for that system to be successful, we recommend that it be given at least as large a budget as the Executive Yuan National Science and Technology Development Fund.
1.2 Create a level playing field: Taiwan’s telecom operators have long operated in a highly regulated environment. In the interest of fairness, market newcomers such as foreign service-providers of 5G or non-terrestrial networks (NTN) in Taiwan and local businesses deploying private networks (or Non-Public Networks) should be required to abide by the same regulations as Taiwan telecom operators with regard to license applications, national security, information security, lawful interception, consumer protection, etc.
1.3 Incentivize innovation: The life cycle of communications technologies is often 10 years or longer, yet innovation continues even after that life cycle ends. In order to encourage the development of innovative new services by telecommunications companies, including those related to 5G, we reiterate our request from last year’s White Paper that the government amend the Statute for Industrial Innovation and its related regulations to double the allowable period for applying for tax deductions on investments to 10 years and increasing the tax credit by 10 times to NT$10 billion to reflect current needs in the Taiwan market.
1.4 Improve the telecommunications environment:The government could help drive the development of 5G by reducing the investment costs shouldered by the telecommunications industry. In particular, it could decrease 4G frequency usage fees and waive such fees for 5G altogether. Furthermore, we recommend broadening the provisions of the Act for Promotion of Private Participation in Infrastructure Projects, the Statute for Encouragement of Private Participation in Transportation Infrastructure Projects, and other related regulations to extend the benefits of tax relief and concessional financing to telecom operators. In addition, we urge the government to amend the Electricity Act to enable telecom operators engaging in projects related to public infrastructure or aiding underprivileged groups to receive subsidies for electricity usage.
1.5 Reduce barriers to building infrastructure: 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 streetlights, traffic lights, electricity poles, and other equipment, for building out 5G networks. We also urge establishment of a government agency tasked with ensuring coordination on 5G policy across the central and local levels. This agency, 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.
1.6 Refrain from imposing regulatory restrictions on RAN equipment. As network operators worldwide invest in the deployment of 5G, there is a growing concern that a shortage of supplier options, particularly in the Radio Access Network (RAN) sphere, could leave global network operators with either limited options or sub-standard equipment to build their future network infrastructure. Potential security concerns are also at issue.
In this regard, it is vital to ensure a diverse, innovative and competitive O-RAN over the long term. To leverage industry leadership and competitive market conditions to drive innovation in the most efficient way possible, we encourage the government to engage in regular dialogue with industry to share best practices.
1.7 Refrain from mandating specific technological solutions. The concerns here are similar to those in 1.6 above. While we believe that governments should encourage O-RAN, the technology is still nascent, and different solutions may be appropriate depending upon the use case. Therefore, governments should avoid mandates or set-aside arrangements for O-RAN or any other network solution. Instead, it can incentivize the use of such technology to ensure its future adoption and long-term success.
Suggestion 2: Amend regulations on cable TV to allow it to remain competitive.
Today’s media marketplace encompasses multiple platforms, providing more ways to access and enjoy content than ever before. Broadcast television is increasingly shifting toward digital formats, and 138 countries now have over-the-top (OTT) video markets. The number of OTT users worldwide is projected to grow to over 650 million by 2021; global OTT video revenues are expected to reach US$129 billion by 2023. Given this trend, consumers are increasingly demanding services tailored to their individual preferences. New technologies, the increasing adoption of various devices, and heightened data usage have led consumers to expect quality, convenience, and mobility from content services.
These demand and supply-side developments increase competition in the media sector. In Taiwan, cable TV no longer dominates the market, since IPTV and OTT have provided an alternative for consumers to enjoy content on demand.
While the media services environment has evolved significantly, cable TV regulations remain heavy and unchanged. We encourage the NCC to consider the following suggestions:
Relax regulatory requirements for cable TV. Legacy regulations imposed on cable TV are no longer suitable for the current market, and they disadvantage cable TV operators in competing with other content service providers. We welcome the NCC’s decision to regulate OTT services with a “light touch” approach and hope the Commission can extend the same treatment to cable TV services. We urge the NCC to refrain from imposing local content investment requirements on international audio-visual service providers in Taiwan, including cable TV service providers.
Discontinue the NCC’s review of cable TV rates. Such reviews are inconsistent with standard global practices, especially in markets such as Taiwan where there is sufficient market competition to guide cable TV pricing. One area of particular concern is the NCC’s consideration of whether to regulate license fees charged by content providers according to a ratings system. Another is the recent proposal to implement a channel dispute arbitration mechanism, which could impact the subscription fees charged by cable TV operators (currently an average of NT$530 per month). Such proposals could distort market supply and demand, affect production quality and investment in local productions, and ultimately impact the diversity of content options available to Taiwanese consumers.
Lighten procedural requirements related to permit renewals and channel evaluations. The process and requirements associated with channel evaluations are burdensome, and the legitimate public policy objectives of such evaluations are not always clear. We suggest that the NCC revise such requirements to increase transparency and the ease of doing business for cable TV service providers.
Finally, we encourage the NCC to maintain an open and regular dialogue with the cable TV industry in order to share experiences and exchange information. The media landscape is fast changing, and such communication would be helpful in ensuring mutual understanding, trust, and collaboration.
Suggestion 3: Commit to transparency and the involvement of multiple stakeholders in determining how to proceed with the draft OTT Act.
We commend the NCC for actively deliberating on how to develop an appropriate regulatory framework for the young and dynamic video on demand (VOD) industry. However, we emphasize that any new regulatory measures should be extensively and transparently discussed with industry and other relevant stakeholders before being implemented.
Last year, Committee members provided, on short notice, detailed comments on the draft Internet Audiovisual Service Management Act (OTT Act). The Committee is keen to continue its involvement in the legislative process for the OTT Act. We recommend that in moving forward with the Act, the government consider the diverse and evolving nature of the online video marketplace, acknowledging that no one-size-fits-all approach can work. In particular, regulations designed for broadcasters and cable providers are inappropriate for platforms that specialize in user-generated content because such platforms do not exercise the same degree of editorial control over content asserted by traditional media companies. As a result, regulations should specify that intermediary platforms hosting predominantly user-generated content are explicitly outside the scope of the OTT Act.
Echoing comments made in last year’s White Paper, we emphasize that industry self-regulation can be a highly effective means of governing the OTT environment. Established industry players have often already developed policies or set up organizations to protect customers, as well as protecting their brands and reputations. However, reputable businesses should not be forced to join such organizations, particularly those that have received government funding and work closely with the relevant authorities, as they may not be the most appropriate representatives of industry interests. In addition, government-mandated membership in an organization that is essentially a government proxy could create an additional regulatory burden on businesses, for example because of unnecessary formalities or unspoken rules. It might also set a bad example that could tarnish Taiwan’s reputation regarding digital governance.
The requirement in the draft OTT Act that businesses publicly disclose the quota or proportion of Taiwan-produced content they offer raises serious questions regarding the purpose and practicality of such a condition. First, such quotas are ineffective in the current online environment where users make viewing decisions based on the quality of content, not on sheer quantity. Second, requiring businesses to display such information on user interfaces does not serve a clear purpose. Finally, combining penalties with what is ostensibly a voluntary system to create more local content is counterintuitive and reduces the ease of doing business in Taiwan. Alternatively, the government could reward compliance – for example, by providing greater incentives or business facilitation services.
The light-touch regulatory approach adopted in Taiwan thus far has proven to be effective. The OTT Act should continue this approach, allowing businesses to invest, innovate, and compete in this emerging, competitive market. Anticipating the Taiwan government’s proposed structural reorganizations, including the establishment of the MODD and the additional responsibilities of the NCC, we recommend that the government reassess the content of the draft OTT Act and seek to develop an OTT regulatory framework that enhances industry self-regulation and dialogue between government and relevant stakeholders.