2005-11-17

Interpreting Taiwan's law, "taken in the business sense"

Jujuflop noted the GIO of "ROC in Taiwan" Pasuya Yao 's brachiosaurus brain has issued an official statement 'admitting its TVBS [mis]-handling

  • "Judging from the background and intention of the legislation as outlined above, it is clear that “directly held,” as stipulated in Article 10 of the Satellite Broadcasting Act, should not be taken in the literal sense to merely indicate “direct investment by foreigners.” Instead, it should go one step further to include foreign investors achieving the purpose of direct investment in satellite broadcasting enterprises through a 100 percent indirect investment. The GIO concludes, therefore, that the TVBS ownership structure clearly violates Article 10 of the Satellite Broadcasting Act" - GIO
Apparently Taiwan's law should not be taken in the "literal" sense, then what about in the "business" sense?

First, here are the different ways to deliver video signal to your home

  1. Terrestrial (broadcast) TV: must have a local broadcast tower, limited bandwidth, wide reach (to anyone within 20-40km radius)
  2. Cable TV: must have local infrastructure (HFC) to deliver, virtually unlimited bandwidth, 100s of channels
  3. [ADSL TV]: this is similar to Cable TV; delivered through your telephone line (copper wire), bandwidth smaller than Cable TV, but technology will improve quickly
  4. Satellite TV: a satellite's typical footprint is almost 1/6 of the earth surface (typically 6 to cover the whole earth), you only need a satellite dish to receive (in reality, many satellite TV signals were relayed through local Cable TV or ADSL TV); virtually unlimited bandwidth, 100s channels
  5. Broadband TV/video: this delivers to your computer; no geographic or infrastructure restriction, your broadband internet bandwidth is the only constraint. Example: the streaming or downloadable video clip we watch over the internet today.
  6. [IPTV is a technology which can be send via any network, but more pratical in 2-way networks such as 2/3/5]

Taiwan's broadcast law was drafted with extreme clarity, as part of the obligation to open market in its accession to the WTO, with good business rationale

  1. Terrestrial TV: foreign shareholder strictly forbidden (due to its wide reach)
  2. Cable TV: Direct+indirect foreign ownership must be less than 60%, in which direct ownership must be lower than 20%
  3. Satellite: Direct foreign ownership must be under 50%. It is clear that here is no restriction on indirect ownership, since it must otherwise be stated there when this law was drafted together with the Cable TV law
  4. Taiwan does not have ADSL TV yet (HK's PCCW is already in service and gain significant market share). There is also no regulation you can put on broadband TV, unless you set up a great-firewall-full-of-holes like mainland China does.

The legislation makes perfect sense because there is no point in regulating satellite TV to restrict foreign ownership. Because satellite stations such as NHK (Japan) and CCTV (mainland China) can be received anywhere in Taiwan already. Why not legalize it by requiring a local intermediate entity, so that you can retain control (such as when there is legal or financial dispute), enforce transparency and collect some fees? By granting such license you also allow local Cable TV to relay the signals to extend the coverage. But you retain the flexibility to block them because you still have full control on the Cable TV operators.

-----

The legal definition of direct and indirect ownership is very simple and straightforward

  • Direct: the company that is immediately above in the org chart, and its name appears in the legal document as "shareholder"
  • Indirect: the company that you can trace up the hierarchy of "shareholder's shareholder" in the org chart

These definitions are very clear, in ANY COUNTRY, ANY LANGUAGUE.

  • Mainland China failed to clarify 'direct' and 'indirect' in its telecom law and opened a loophole in the 1990s, it only required the shareholder to be "Chinese". Many foreign investors set up the so called C-CF(China--China-Foreign) JV (joint venture) to circumvent the law, so that INDIRECT foreign holding can be over 50%. It was subsequently corrected in 1999, by re-drafting the law. At least even the "communist" did not try to apply literally interpretation to its own laws.

The legal discussion is a tired topic. It is amazing that Pasuya would so blatantly disregard the legal advice he received (I suppose someone must have given him some advice). It is even more amazing many people in Taiwan, including the Taipei Times and Hsiech Chang-ting (his superior and a lawyer) preferred to cheat themselves by supporting Pasuya's mistake. Perhaps Chen Shui Bian is happy to watch Pasuya dragging Hsieh down, as there may be a power struggle within DPP.

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