LC: Second reading of Broadcasting Bill

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Following is the speech by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, in moving the second reading of the Broadcasting Bill in the Legislative Council today (Wednesday):

Madam President,

I move the Second Reading of the Broadcasting Bill.

Rapid advances and convergence in information and communications technologies are bringing revolutionary changes to the broadcasting scene. To ensure that our regulatory framework is in step with technological and market developments, we conducted a comprehensive review of the television policy in 1998. After two rounds of thorough consultation with the industry and the community and having carefully considered all the submissions received during the consultation exercise, the Government announced in December 1998 the decisions on a package of policy initiatives which are aimed at keeping Hong Kong in the forefront of the broadcasting industry in the Asia-Pacific Region.

The main purpose of the Bill is to give effect to those policy initiatives which require statutory backing. Specifically, the Bill seeks to provide a technology-neutral statutory framework governing the licensing and regulation of television programme services. The Bill when enacted will repeal and replace the Television Ordinance to cover all types of television programme services, including the terrestrial and satellite television services now separately licensed under the Television Ordinance and the Telecommunication Ordinance respectively.

Policy Objectives

The Bill marks an important milestone in advancing our broadcasting policy objectives, which are to:

(a) widen programming choice to cater for the diversified tastes and interests of the community;

(b) encourage investment, innovation and technology transfer in the broadcasting industry;

(d) ensure that broadcasting services provided are up to the expectations and do not offend the tastes and decency of the community; and

(e) promote the development of Hong Kong as a regional broadcasting and communications hub.

I will now introduce the more important provisions of the Bill to Members.

Licensable broadcasting services

We propose that the regulation of television programme services should be commensurate with the characteristics and pervasiveness of the services offered. Under the Bill, "television programme services" are classified into four categories which will be subject to varying degrees of regulation. They are -

(a) domestic free television programme service;

(b) domestic pay television programme service;

(d) other licensable television programme service.

Of these four categories of broadcasting services, two are domestic services, i.e., services primarily targeting Hong Kong. They cover free or subscription services intended or available for reception by over 5,000 premises. One is non-domestic services, i.e., free or subscription services not primarily targeting Hong Kong. The remaining is otherwise licensable services which are intended or available for reception by not more than 5,000 premises in Hong Kong.

Services not regarded as television programme services

To clearly define the scope of regulation, we propose that certain services should be excluded from the application of the Bill. These include the provision of a service consisting only of an audio-visual programme that is made solely for the performance or display in a public place, or is intended wholly or mainly for the purposes of the trade, business, employment or profession of the recipient.

Apart from the above clarifications, we propose that certain services which may involve the transmission of audio-visual services by telecommunications should be exempted from the application of the Bill. To allow flexibility in the regulatory framework to cater for the fast-changing broadcasting and multi-media environment, these exemptions are specified in a schedule of the Bill so that it can be amended by subsidiary legislation. The exemptions include -

(a) telecommunications services that are currently exempted from the application of the Television Ordinance. These include, for example, transactional services and video conferencing;

(b) services provided on the Internet. While video and audio services are now available on the Internet, we consider that their existing mode of operation is different from broadcasting and their pervasiveness is not yet comparable to television programme services currently operating in Hong Kong. Our policy intent is that this type of service should be exempted from the application of the Bill for the time being unless and until its pervasiveness and mode of operation draw much closer to broadcasting and the question of effective enforcement can be resolved; and

(c) free-to-air satellite television services uplinked from places outside but receivable in Hong Kong. At present, these services are allowed to be received and distributed without a licence. In line with our open-sky policy on broadcasting, this type of service should continue to be exempted from the application of the Bill.

Codes of Practice and Guidelines

To facilitate the Broadcasting Authority (BA) in discharging the functions conferred on it by the Bill, we propose that the Authority should be empowered to issue codes of practice and guidelines. Codes of practice may be approved for the purpose of providing practical guidance to licensees in respect of requirements under the Bill imposed on licensees or in respect of licence conditions. Guidelines may be published for the benefit of licensees to help them understand the considerations the Authority intends to adopt in performing its statutory functions.

Competition provisions

In an open and competitive television market, we consider it most important to provide a level-playing field for both incumbents and new comers. Against this background, we propose that competition provisions should be enshrined in the Bill to safeguard fair competition in the market. The Bill includes a general provision prohibiting a licensee from engaging in anti-competitive conduct. Such conduct include, among others, agreements to fix the price in a television programme service market; conduct restricting supply of services to competitors; and agreements to share any television programme service market on agreed geographic or customer lines.

The Bill also contains a specific provision prohibiting a licensee in a dominant position in a television programme service market from abusing its position. In considering whether a licensee is dominant in a television programme service market, we propose that the following factors, among others, should be taken into account - the market share of the licensee; the licensee's power to make pricing or other decisions; and any market entry barriers. A licensee should be considered to have abused its dominant position if it has engaged in conduct such as predatory pricing, price discrimination, or imposing in an agreement conditions which are harsh or unrelated to the subject of the agreement.

The BA, which is currently charged with the statutory responsibility for regulating the broadcasting industry, will be the authority to enforce these competition provisions. To enable the BA to enforce these provisions effectively and efficiently, we propose that the Authority should be empowered to require a licensee and other persons to supply information; to determine dominance in a television programme service market; to investigate and make determinations of anti-competitive conduct; and to require a licensee to cease and desist from a practice determined to be in breach of the competition provisions.

The enforcement of competition provisions will require detailed guidelines setting out how and in what circumstances the BA will enforce the competition provisions. The Authority is working on a set of draft competition guidelines for consultation with the industry.

Enforcement of Licences and Sanctions

The current maximum levels of financial penalty that the BA may impose on a licensee for breaches of the regulatory provisions are $50,000 for the first occasion, $100,000 for the second occasion and $250,000 for any subsequent occasion. They were set in 1988. We propose in the Bill that these levels should be increased by four times to $200,000, $400,000 and $1,000,000 respectively having regard to, among others, the need to catch up with inflation.

Ownership Restrictions

To avoid conflicts of interest and the build-up of media monopoly, we consider that the existing cross-media ownership restrictions should be retained. Nonetheless, in the light of increased cross-market developments in a technology-convergent environment, we propose that "companies which transmit sound or television material", "companies which supply programmes for broadcasting by a licensee" and "the sole or dominant supplier of a public switched telephone service by wire to residential premises in Hong Kong" should be deleted from the list of disqualified persons, i.e. persons prohibited from exercising control of domestic free and domestic pay service licensees except with the prior approval of the Chief Executive in Council.

At present, the restrictions on the exercise of voting control by persons not ordinarily resident in Hong Kong (i.e. unqualified voting controller) apply to all licensees under the Television Ordinance. We propose that these restrictions should be confined to domestic free licensees only under the new regulatory regime provided for by the Bill. We also propose that the incremental steps of voting control by unqualified voting controllers at which approval of the BA is required should be relaxed from 2%, 4%, 6%, 8% and 10% to 2%, 6% and 10%.

Royalty and Licence Fees

Under the existing regulatory regime, royalties are payable by broadcasting licensees who are conferred with the privilege to operate in an environment with limited competition. Now that the Government has decided to open up the television market for free competition, we consider that the maintenance of a royalty scheme is not appropriate. We propose that the charging of royalties should be abolished with the repeal of the Television Ordinance; and that the full-cost recovery licence fees should be payable immediately.

We believe that the above regulatory relaxation would stimulate investment in and help foster the development of the local broadcasting industry.

Transitional Provisions

To ensure a seamless transition to the new regulatory regime, we have proposed two transitional arrangements for existing licensees. First, we propose that each existing television broadcasting licence issued under the Television Ordinance or Telecommunication Ordinance should be expressly deemed to be a certain category of licence issued under the Bill. Second, considering that the competition provisions may affect existing contracts that a licensee has already entered into, we propose that agreements lawfully entered into before the gazettal date of the Bill, i.e., 28 January 2000, should be exempted from the application of the general competition provision for two years from that date. The details of these provisions are set out in Schedule 8 of the Bill.

Conclusion

Madam President, the Broadcasting Bill seeks to establish a fair, predictable and business-friendly regulatory regime for the television broadcasting industry which would be flexible enough to embrace new services made possible by convergence in technologies. The Bill will help to speed up technology transfer, promote competition, attract investment and stimulate the growth of broadcasting and other related industries. The policy issues of the Bill have been the subject of extensive consultation. To enable the Hong Kong broadcasting industry to capitalize the opportunities in the Information Age ahead, I wish to appeal Members that the Bill should be examined at the earliest opportunity.

END/Wednesday, February, 16, 2000

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