Competition and Cross-media
In January 2006, the Broadcasting Authority concluded an investigation into
a competition complaint lodged by a member of the public on
the collective subscription fees charged by HKCTV for provision
of a general entertainment television channel. The complainant
alleged that HKCTV had engaged in predatory and discriminatory
pricing thereby in breach of section 14 of the Broadcasting
Ordinance. The grounds for the complaint were that the collective
subscription fee charged by the licensee to a housing estate
for the provision of the channel for 12 months worked out
at less than $2 per month per household. At the same time,
the same channel was offered to individual subscribers as
a stand-alone premium service at $30 per month.
After conducting a preliminary investigation, the Authority
found that HKCTV had not breached section 14 of the Broadcasting
Ordinance because the programmes in the general entertainment
channel were duplicates of those in the licensee's basic service
and thus the cost of the channel was lower than that for an
"ordinary" channel. The low subscription fee was collectively
offered to housing estates and it amounted to a volume discount
which could be justified in cost terms and did not contribute
discriminatory or predatory pricing. There was no evidence
that the conduct of HKCTV has a substantial foreclosing effect
against competition as competitors were not excluded from
acquiring customers in the same housing estates to which the
channel concerned from HKCTV was made available.
Review of Competition Guidelines
In order to provide more practical guidance and transparency
to the industry on how the Authority would perform its statutory
functions in respect of competition provisions of sections
13 and 14 in the Broadcasting Ordinance, the Authority updated
the two sets of competition guidelines, viz., the "Guidelines
to the Application of the Competition Provisions of the Broadcasting
Ordinance" and "Competition Investigation Procedures" for
industry consultation in September 2006. After five years
of implementation, the Authority found it opportune to update
the guidelines issued in 2001 to take into account its implementation
experiences and international best practices. The Authority
planned to finalise the guidelines and promulgate them around
the second quarter of 2007.
Enforcement of the TVB-TVB Pay Vision's "Firewall" Provisions
The licences of TVB and TVB Pay Vision contain a number of
special conditions21 in their respective licences
as a safeguard to ensure an effective "firewall" between the
operations of the two companies to mitigate concerns of unfair
competition and media concentration and prevent cross-subsidization
or preferential treatment between the two companies. During
the year under review, the Authority processed three complaint
cases alleging breaches of the firewall provisions in the
licences of TVB and TVB Pay Vision.
The first case concerned the failure of TVB, as required under its licence conditions, to notify other licensees in a timely manner and provide adequate details of six transactions relating to TVB's provision of different services to TVB Pay Vision in 2004 and 2005. TVB was advised to observe more closely the relevant licence condition and to re-issue the notifications with adequate details of these transactions. The Authority also took the opportunity to approve a notification form which would provide clearer guidance to TVB on the information required. The second case was about the belated submission of general meeting documents by TVB Pay Vision to the Authority. TVB Pay Vision was accordingly advised to observe more closely the relevant licence condition.
The third case was about an open tender exercise involving the non-exclusive supply of two television channels by TVB. Having examined the details of TVB's offer to other licensees, the Authority considered that TVB had given TVB Pay Vision more negotiation time and lead time for the launch of the channels than that offered to other licensees. The Authority therefore decided that the allegation of undue preference on the non-exclusive supply of two channels was justified. Taking into account the mitigating factor that none of the other licensees had shown any interest in the offer or initiated any discussion with TVB, TVB and TVB Pay Vision were each given a warning to observe more closely the relevant licence conditions.
Enforcement of "Disqualified Person" Provisions
The Broadcasting Ordinance contains disqualified person restrictions22 to safeguard against the risks of media concentration and editorial uniformity. In 2006, the Authority considered a breach of disqualified person restrictions by ATV in allowing nine disqualified persons by virtue of their association with a newspaper as defined in Section 2(1) of the Broadcasting Ordinance, viz Phoenix Weekly Magazine, to exercise control of ATV without approval of the Chief Executive in Council during the period from 7 July 2000 to 1 June 2005. Apart from imposing financial penalty, the Authority also directed ATV to enhance its internal monitoring system in order to prevent similar breaches in future.
The Authority drew up an accounting manual in order to assist
television programme service licensees to comply with the
accounting separation provision under section 17 of the Broadcasting
Ordinance. The manual sought to give guidance to television
programme service licensees, which also held telecommunications
licences under the Telecommunications Ordinance, to facilitate
the separation of accounts for their television broadcasting
and telecommunications businesses so as to provide transparency
in their operations and guard against anti-competitive practices
(such as cross-subsidisation or discriminatory pricing). The
manual was promulgated by the Authority in August 2006, following
industry consultation held in February 2006.
TVB and TVB Pay Vision are prohibited from including in their services any television programme wholly or substantially produced by the other if the programme has already been included in the service of the other within a period of 12 months. TVB and TVB Pay Vision are also prohibited from supplying or obtaining from each other any exclusive programmes or channels without going through an open bidding process, or on a non-exclusive basis, any programme or channel unless the same is made available to other licensees on no less favourable terms. There are also provisions governing arm's length transactions, undue preference and unfair cross-subsidization between TVB and TVB Pay Vision.
Under the Broadcasting Ordinance,
individuals or companies engaged in or are associated
with certain types of businesses are not allowed to
hold a domestic free or pay television programme service
licence or exercise control of such a licensee unless
the Chief Executive in Council is satisfied that public
interest so requires and approves otherwise. These individuals
or companies, who are defined as "disqualified persons"
under the Broadcasting Ordinance, are -
(a) another television programme service licensee;
(b) a sound broadcasting licensee;
(c) an advertising agency;
(d) a proprietor of a newspaper (including magazine)
printed or produced in Hong Kong;
(e) persons exercising control of (a) to (d) above;
(f) associates of (a) to (e) above.