LEGISLATIVE COUNCIL BRIEF RENEWAL OF DOMESTIC PAY TELEVISION PROGRAMME SERVICE LICENCE OF HONG KONG CABLE TELEVISION LIMITED

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1 File Ref: CTB(CR) 9/6/10(04) Pt. 5 LEGISLATIVE COUNCIL BRIEF RENEWAL OF DOMESTIC PAY TELEVISION PROGRAMME SERVICE LICENCE OF HONG KONG CABLE TELEVISION LIMITED INTRODUCTION At the meeting of the Executive Council on 25 May 2005, the Council ADVISED and the Chief Executive ORDERED that Annex (a) the recommendations of the Broadcasting Authority (BA) on the requirements to be included in the renewed licence of Hong Kong Cable Television Limited (HKCTV), set out at Annex, be accepted; and (b) the licence of HKCTV be renewed with a validity period of 12 years from 1 June 2005 to 31 May 2017 (both dates inclusive) under section 11(5) of the Broadcasting Ordinance (BO) (Cap. 562). JUSTIFICATIONS Background 2. HKCTV (formerly Wharf Cable Limited) was granted a subscription television licence under the repealed Television Ordinance (Cap. 52) in 1993, initially with an exclusive right to provide a subscription television broadcasting service. Following a review of television policy in 1998, the Government decided to liberalize the television market and introduced a new regulatory regime in 2000 by enacting the BO, which replaced the Television Ordinance.

2 3. Under this liberalized regime, there is no limit on the number of television licences to be issued. Since then the Government has granted four more domestic pay television service licences to Galaxy, TV Plus and Yes TV in 2000, and PCCW VOD in Criteria for renewal 4. The BA will recommend the renewal of a television programme service licence if it is satisfied with the performance of the licensee in service quality, compliance with statutory requirements on corporate management, licensing conditions and the codes of practice respectively on programming, advertising and technical standards. In formulating the conditions to be included in the renewed licence, the BA will balance public opinion, commercial considerations and government policy to improve the business environment. The BA collects public opinion through public hearing and opinion surveys. Recommendations of the BA Performance 5. The BA was satisfied with the past performance of HKCTV. By the end of 2003, HKCTV s service was available to two million premises, exceeding its licensing obligation to cover about 1.8 million premises by Currently HKCTV is digitizing the transmission of its service and offering 77 channels on its digitized platform. They will be increased to 120 channels after the completion of its digitization programme in Public views on HKCTV s service are generally positive. An opinion survey commissioned by the BA in 2003 revealed that 90% of the subscribers considered the quality of HKCTV s programmes satisfactory and 78% were satisfied with the diversity of its service. 2

3 Compliance 7. The BA was satisfied that HKCTV had maintained a good track record of compliance with the relevant statutory requirements, licensing conditions and codes of practice. 8. The BA thus recommended the renewal of HKCTV s licence. It did not propose any significant changes to the conditions in its current licence. Licensing conditions 9. The BA recommended that the licence for HKCTV be renewed for another 12 years, from 1 June 2005 to 31 May 2017 (both dates inclusive). This period is consistent with that applicable to the other four licensees (see paragraph 3 above) and is appropriate and necessary for providing certainty for the licensees for investment and service planning. Also on consistency grounds vis-à-vis the other four licensees, the BA did not seek to include a mid-term review requirement during this period. If circumstances arise in future that warrant a review within the period of the licence, the Chief Executive in Council may order the licence to be reviewed pursuant to section 4(1) of Schedule 4 and section 1 of Schedule 5 to the BO. The BA also did not propose to impose any performance bond requirement as in the case of the other four licensees given that HKCTV had a proven track record and commitment. 10. During a public hearing conducted by the BA on HKCTV s licence renewal application, some members of the public suggested that HKCTV s service should cover the whole territory, include a more diversified line-up of channels and more subtitling for the hearing impaired. The issue of territory-wide coverage is tantamount to universal service requirement and is irrelevant for a pay television service, which is not a utility. HKCTV has however submitted further undertaking to maintain its existing wide service coverage (see paragraph 5 above). It has also pledged to continue to acquire programmes to meet the diverse needs of viewers and provide a new channel to cater to the needs of the hearing impaired. The renewed licence contains a condition providing that these commitments are part of the service proposals in HKCTV s application which are binding on HKCTV. 3

4 11. During the public hearing, there were comments that the subscription and installation fees for HKCTV service could be reduced. At present, the BA does not regulate these fees since they should be subject to market forces. The BA maintained this position in the case of HKCTV s licence renewal application. IMPLICATIONS 12. The renewal of the licence will continue to engender demand for content and technical services, and create employment opportunities. It is in conformity with the Basic Law, including the provisions concerning human rights. It has no financial and civil service, productivity or environmental implications. It also has no significant sustainability implications. PUBLIC CONSULTATION 13. The BA gathered public views on HKCTV s performance and public expectations of its service by commissioning an opinion survey in June-July 2003 and conducting a public hearing in November The Administration also briefed the Legislative Council Panel on Information Technology and Broadcasting on the public views relating to the licence renewal in January HKCTV was also consulted in the process of licence renewal. PUBLICITY 14. The Administration will issue a press release on 25 May 2005 to announce the decision. The renewed licence will be posted on the web site of Communications and Technology Branch, Commerce, Industry and Technology Bureau at Communications and Technology Branch Commerce, Industry and Technology Bureau 25 May

5 The BA s Recommendations on HKCTV s Licence Conditions Annex I. Licence condition to be modified Existing Requirement Recommendation Premises Passed Use best endeavours to meet the milestones regarding premises passed. As HKCTV has fulfilled its obligation under the existing licence in respect of premises passed, the BA agreed that there is no need to retain a premises passed requirement in the licence. However, HKCTV is required to submit an undertaking to maintain the existing level of service coverage. The undertaking will form part of the Licensee s Proposal in the licence if renewed by the Chief Executive in Council. II. New licence condition to be added Existing Requirement Reason Transmission HKCTV s use of frequency channels in in-building coaxial cable distribution system (IBCCDS) shall be subject to the Telecommunications Authority (TA) s direction or approval. In line with other domestic pay TV licences. HKCTV should be required to apply to the BA for any substantial change in its transmission means or arrangement.

6 III. Licence conditions to be deleted Existing Requirement Reason Programme Choice & Quality To provide for a subscription service which offers television viewers in Hong Kong the widest possible choice of good quality programmes at affordable prices, distributed through updated technology. In line with other domestic pay TV licences. HKCTV has committed to providing diversified programming in its application for licence renewal, which will form part of its Licensee s Proposal in the licence if renewed by the Chief Executive in Council. Minimum Broadcasting Hours Not less than five hours per day for each channel except pay-per-view channel. In line with other domestic pay TV licences. Advertising Time Advertising material or non-programme material should only be broadcast in breaks within or between programmes. Restriction on placement of advertising and non-programme material is already provided for in the Advertising Code. Teloping Teloping without the prior approval of the BA is prohibited. Restriction on the use of teloping is already provided for in the Advertising Code. Royalties Pay advertising and subscription royalties. To reflect the abolition of royalties after the enactment of the BO. Spectrum Utilization Fee Pay spectrum utilization fee for the use of Microwave Multipoint Distribution System (MMDS) every year. To be moved to the carrier licence to reflect the separation of licensing of transmission service and programme service after the enactment of the BO. Block Promotions HKCTV may market its service through block promotions subject to the condition that it should not oblige individual resident to subscribe the service. In line with other domestic pay TV licences. 2

7 Free Competition HKCTV shall not enter into any agreement or arrangement which will restrict competition in relation to the establishment, provision or operation of any telecommunication or broadcasting service. Restriction on anti-competitive conduct is covered by the competition provisions in the Broadcasting Ordinance. 3