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Licensing of New

Television Broadcasting Services

4 July 2000Information Technology & Broadcasting Bureau

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To widen programme choice

To encourage investment

To ensure fair and effective competition

To promote Hong Kong as a regional broadcasting and communications hub

Policy Objectives

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1998 Review of Television Policy

Policy decisions announced in December 1998

Among others, it was decided that the television market should be opened up for competition

Policy Decisions

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Guidance Note issued in August 1999 set out regulatory requirements set out assessment criteria

10 applications received in October 1999

Working Group under the Broadcasting Authority (BA)

Evaluation against the criteria in Guidance Note

Invitation of Applications

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Statutory requirements cross-media ownership restrictions

residence requirements for directors/principal officers, etc.

Compliance with TA Statement on in-building frequency layout plan Employment of spectrum-efficient technology

Regulatory Requirements

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Assessment Criteria

1. Service coverage of service

speed of service roll-out

2. Corporate competence knowledge about the local broadcasting

environment

quality control to ensure compliance with standards

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Assessment Criteria

3. Financial size of performance bond

financial capability

sufficiency of investment

feasibility of business plan

4. Technical technical feasibility

employment of advanced technology

technical readiness

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Assessment Criteria

5. Programming quantity and variety

6. Others benefits to the local broadcasting industry

benefits to the local economy

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5 successful

4 failing to meet regulatory requirements and/or assessment criteria

1 withdrawn

Evaluation Result

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Approval-in-principle for the following applicants:

1. Hong Kong Network TV Limited

2. Elmsdale Limited

3. Pacific Digital Media (HK) Corp. Limited

4. Hong Kong DTV Company Limited

5. Galaxy Satellite Broadcasting Limited

Successful Applicants

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Cable & Wireless HKT VOD Limited

Withdrawn as existing licence deemed a “domestic pay” licence

Turner International Asia Pacific Limited

Existing Hotel TV Services Licence deemed an “other licensable” licence

Others not successful for failing to meet the regulatory requirements and/or assessment criteria

Other Applicants

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Shareholding of Successful Applicants

1. NETV Sino-i.com Ltd. (100%)

2. Elmsdale Elmsdale Media Ltd. (90%)

Shaw Media Ltd. (10%)

3. Pacific Digital Pacific Digital Media Corporation (100%)

4. DTV STAR TV Ltd. (100%)

5. Galaxy Television Broadcasts Ltd. (100%)

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Commitments - Launch of Service

From Grant of Licence

1. NETV 12 months

2. Elmsdale 12 months

3. Pacific Digital 6 months

4. DTV 9 months

5. Galaxy 18 months

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Commitments - Programme Channels

1. NETV 65 channels (24 months)

2. Elmsdale VOD (12 months) +

10 channels (24 months)

3. Pacific Digital 20 channels (12 months)

4. DTV 14 channels (9 months)

5. Galaxy 40 channels (27 months)

Total: 149 channels

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Commitments -3-Year Capital Investment

1. NETV $140 million

2. Elmsdale $108 million

3. Pacific Digital $23 million

4. DTV $250 million

5. Galaxy $180 million

Total: $701 million

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Mode of Transmission

Broadband fixed telecom network : 2 NETV and Elmsdale

Satellite + SMATV : 3

Pacific Digital, DTV and Galaxy

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Galaxy - Considerations

Galaxy has submitted a compliant proposal

Galaxy is subsidiary of TVB

CE in C’s approval for exemption of “disqualified person” restriction, having regard to the following factors:

1. Effect on competition in relevant service market2. Widening of programme choice 3. Impact on the development of broadcasting

industry4. Overall benefits to the economy

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Galaxy - Special Conditions

To ensure that TVB and Galaxy will not engage in activities involving cross-subsidy or preferential treatment

cross-subsidization between the two companies will be prohibited as a licence condition

TVB cannot show undue preference to Galaxy or vice versa in respect of the supply of programmes, production facilities, programming services and artistes also as a licence condition

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Galaxy - Special Conditions

To ensure that there will be a level-playing field in the pay TV market

any exclusive programme deals between TVB and Galaxy will be subject to a competitive bidding process in the open market

Galaxy’s proposed pay service may only commence after 18 months from the grant of licence

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Galaxy - Special Conditions

To ensure that TVB’s free-to-air service will not be adversely affected

The beneficial ownership of TVB and its associates in Galaxy must be below 50% of the total shareholding in Galaxy

TVB may not invest more than 20% of its net asset value in Galaxy

TVB will spend not less than $2.7 billion annually, of which not less than $100 million on capital investment, in its free-to-air service

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BA may apply to the Court to impose financial penalty for contravention of competition provisions

$2 million; or

a sum not exceeding 10% of the turnover of the licensee in the relevant television programme service market in the period of the breach

(whichever is the the higher)

Sanctions

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Proposed safeguards constitute an effective “firewall” between TVB and Galaxy

Delayed commencement of Galaxy’s service will give a fair degree of head-start for other new entrants

Galaxy’s service would widen programme choice for viewers without compromising effective competition in the market

Galaxy -BA’s Assessment

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Liberalisation of TV Market

Open up the TV market Provide a fair and effective competition

environment for the TV market Additional 149 TV channels Total capital investment over $700 million More than 1,000 jobs to be directly

created Service launch within 6-12 months

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THANK YOU