With 10,000 channels and 365m subscribers, Asia's pay television industry is booming. Revenues are forecast to double over the next decade. But this bright picture is not preprogrammed.

Like the free-to-air terrestrial channels it is replacing, the industry is an easy target for governments worried about pricing, politics or cultural priorities.

It faces a massive increase in piracy from unlicensed internet competitors that steal programmes or even complete channels. Both present a threat to its long-term growth.

For the moment, the signals are mainly positive.

The number of subscribers rose by 9 per cent in 2010, with penetration reaching 48 per cent of homes equipped with a television.

Even more encouraging, the market keeps getting bigger, as economic growth increases both the number of homes that can afford a television receiver and the proportion that can afford a pay TV package.

Vivek Couto, executive director of Media Partners Asia, a Hong Kong-based research consultancy, says subscriber numbers will rise to 570m by 2020, which will still be only 62 per cent of homes with TVs.

In addition to revenue from subscribers, the industry is benefiting from two other factors: advertising, which becomes both more attractive and more expensive as subscriber number rise, and the switch from analogue to digital broadcasting, which is now widespread in China and India, and is due to be completed this decade in markets such as Japan.

Digital helps raise consumer numbers by overcoming infrastructure constraints – it can be delivered by satellite and either fixed line or mobile broadband as well as cable. But it also allows operators to introduce value-added services such as interactive TV, video on demand, and high definition and 3D channels.

Total revenues of all pay TV operators in Asia grew by 14 per cent last year to $38bn and are forecast to rise to $78bn by 2020. But this rosy overall picture hides big differences between national markets.

Casbaa, a Hong Kong-based group that represents platform operators and content providers, says annual revenues vary dramatically among 14 markets around the region, with Australia producing $906 per household and Vietnam only $46.

In part, the results reflect levels of economic development. But there is more to it than that. Casbaa ranked the same 14 countries according to their regulatory style and found a clear correlation between low revenue levels and intrusive regulators.

Nine of the 10 countries with the lightest regulatory touch appear in the group's revenue Top 10. Those at the top, led by Australia, New Zealand, Japan, Malaysia and South Korea have sought to foster open competition, says Casbaa.

The laggards are either closed to outside participation, like China, or suffer from serious regulatory interference that distorts the market and limits its growth.

This takes a variety of forms. Regulators in India and Taiwan set prices directly, depressing margins and discouraging competition. Investment in Taiwan is so low that the tech savvy country has the lowest digital TV penetration rate in the region.

Some governments impose content rules that make life difficult for channels that broadcast to more than one country. Examples include content labelling regulations in South Korea, local production requirements for advertising shown in Indonesia, and language and censorship rules in Vietnam.

Others offend by failing to protect intellectual property rights. Signal theft by line tappers is treated as a minor misdemeanour in Taiwan, says Casbaa, while cable operators in the Philippines pirate entire programme streams with impunity.

The biggest threat, though, comes from the aptly named "Over the Top" internet sites, which can be based almost anywhere, are usually unlicensed and offer pirated content to consumers across a broad range of countries. These sites often specialise in broadcasting in sports events, for which the Pay TV companies have paid substantial licensing fees.

From the operators' point of view, there has been some improvement among regional regulators. South Korea carried through a significant liberalisation in 2007 and Thailand has dropped a total ban on advertising, prompting the creation of 100 new channels.

National governments are beginning to take tough action on internet piracy. New Zealand introduced a "three strikes and you're out" law in September, under which internet users suspected of illegal file sharing will receive three warning letters followed by prosecution.

South Korea is considering similar legislation, while some TV executives are pushing for legal moves to stop financial transfers to unlicensed web sites, which could limit the threat they pose by interfering with their business model.

Such moves will help. But controversy over the impact on freedom of expression is likely to limit their effectiveness. New Zealand's opposition has promised to scrap provisions in the new law that would allow offenders' internet access to be terminated.

Meanwhile, internet piracy is growing even faster than pay TV revenues. Instead of setting prices, Asia's governments should be joining forces to deal with the issue. If they do not, there may one day be nothing left to regulate.

Kevin Brown is the FT's Asia regional correspondent