29 March 2006

Rampant piracy, restrictive rules inhibit investments in local pay-TV - Rampant piracy and restrictive regulatory guidelines inhibit domestic and foreign investments in the Philippine pay-TV industry.
Manila Bulletin
(c) 2006 Manila Bulletin Publishing Corp. All rights reserved.

These are the findings of a study on the Philippines’ regulatory environment released yesterday by the Cable and Satellite Broadcasting Association of Asia (CASBAA), a regional industry body of 110 pay-TV companies.

The report, entitled "Regulating for Growth: Effective Regulation of the Pay-TV Industry in the Asia-Pacific," was undertaken by CASBAA in association with research firm Media Partners Asia.

The results were based on an assessment of regulatory regimes in 11 Asian markets along with two international benchmarks (the United States and the United Kingdom). Effective regulation was measured by evaluating 10 key aspects of the pay-TV regulatory framework: National regulatory body, copyright protection, level playing fields for convergence and competition, program distribution, rate regulation, program packaging, advertising, content, program supply, and non-domestic investment.

The report revealed that the Philippines continues to have underdeveloped pay-TV markets because of piracy and weak regulatory structures.

However, it held out hope that if pay-TV policy changes are adopted they should help the Philippines to leapfrog other markets and enjoy substantial benefits within a relatively short period.

In the meantime, enforcement of copyright law remains weak; signal piracy by rogue cable TV operators is theoretically a criminal offense but cases brought by the authorities are rare, the report said. It notes that license suspension or revocation as a sanction for copyright violators has not been effectively applied and this can be directly related to the lack of a clear mandate and resources for the National Telecommunications Commission (NTC).

"It (the NTC) issues cable operating licenses without examining whether programming is misappropriated and resold," the report indicated.

Although some features of the Philippine regulatory regime are pro-market — such as an absence of restrictions on tiering of program offerings, advertising, or rate regulation, industry players cannot fully leverage these and make successful investments either in content or technology because the end product – program content – is at risk of being stolen and resold while the government appears unable to address the problem.

Interventionist regulatory guidelines such as those prohibiting exclusivity of channel supply and a ban on foreign investment in pay-TV platforms further contribute to the stunted growth of the Philippine pay-TV industry. No foreign ownership is currently permitted in cable TV or DTH (direct-to-home) platforms; only China, where media ownership is controlled for political reasons, equals the Philippines’ strict ban.

Among the 11 Asian economies evaluated in the report, the Philippines ranked 9th in terms of pay-TV investment.

Annual pay-TV programming investment remains low (US$ 28.44 million) primarily because programmers are discouraged by the flagrant copyright infringement. The country is likewise lagging behind many other Asian markets in terms of investment in infrastructure and technology (US$ 49.25 million). This explains why much of the Philippines pay-TV infrastructure remains outdated while many countries are now enjoying the advantages of digital delivery systems and moving toward high-definition television and value-added interactive applications.

The CASBAA report warned that Filipino consumers would not be able to enjoy greater pay-TV choice, improved content and the benefits of new digital technologies unless intellectual property protection is improved.

"The results of the study demonstrate a direct relationship between effective regulation and increased investment and sector value," said Simon Twiston Davies, CASBAA CEO.