27 October 2005

Report Faults Asia Pay-TV Controls
The Wall Street Journal
(Copyright (c) 2005, Dow Jones & Company, Inc.)

By Cris Prystay

Tight regulation in many Asian countries is impeding growth of the pay-television industry by deterring foreign investment as well as controlling fees and programming, according to a report by the Cable & Satellite Broadcasting Association of Asia.

Casbaa, as the regional industry's main trade group is known, said Asia's cable- and satellite-TV industry, which generated $15 billion in revenue last year, is constrained in many countries by laws that limit or bar foreign investment, restrict the rates cable operators and broadcasters can charge, or control programming and content.

The highly regulated cable industries in China, Thailand and South Korea, for example, have drawn a fraction of the investment -- and generated a fraction of the revenue -- of those in Hong Kong and Japan, which have deregulated their pay-TV industries.

In the three years ended Dec. 31, the annual level of investment per household subscribing to pay-TV was $438 in Japan, $393 in Hong Kong and $391 in Singapore, the report said.

South Korea, with a more rigid regulatory framework, drew in just $89 per pay-TV household a year. The industry invested $84 per year in the Philippines and $139 in Thailand, two markets constrained by investment rules and rampant piracy. In China, where foreign investment is barred, state-owned companies invested $7 per pay-TV household per year.

Over the same three years, the annual level of investment was $758 per subscribing household in the U.S. and $695 in the United Kingdom, which Casbaa says have "benchmark" regulatory regimes.

The study showed that markets with the highest investment per subscribing household also produced the highest revenue levels. Japan and Hong Kong topped the list, generating annual revenue of $493 and $324, respectively, per subscribing household over the three years.

"There is a real relationship between effective regulation and growth in this industry," said John Medeiros, Casbaa's vice president for regulatory affairs.

The study, covering 11 Asian markets, was conducted by a panel of industry experts from Casbaa together with research and consulting company Media Partners Asia.

The pay-TV industry is evolving quickly, the study showed. Hong Kong's cable industry, for example, was only deregulated in 2002. But competition already has produced Asia's widest choice of programming, according to Casbaa, while cable penetration rose to 44% of households in 2004 from 26% in 2000.

South Korea raised the cap on foreign investment in the pay-TV industry last year to 49% from about 30% and lifted the quota on foreign channels offered by one cable operator to 20% from 10%. But regulators can take years to approve a foreign channel, industry executives say.

India allows as much as 49% foreign investment in cable-TV systems and 20% in satellite networks. But its regulators have placed controls on the rates cable operators can charge consumers and on what they pay to broadcasters.

Beijing doesn't allow foreign broadcasts, outside of limited offerings in southern China and in hotels and foreign residential compounds.