1 Licensing of New Television Broadcasting Services 4 July 2000 Information Technology & Broadcasting Bureau

2 r To widen programme choice r To encourage investment r To ensure fair and effective competition r To promote Hong Kong as a regional broadcasting and communications hub Policy Objectives

Review of Television Policy Policy decisions announced in December 1998 Among others, it was decided that the television market should be opened up for competition Policy Decisions

4 r Guidance Note issued in August 1999 ¯set out regulatory requirements ¯set out assessment criteria r10 applications received in October 1999 rWorking Group under the Broadcasting Authority (BA) rEvaluation against the criteria in Guidance Note Invitation of Applications

5 Statutory requirements cross-media ownership restrictions residence requirements for directors/principal officers, etc. Compliance with TA Statement on in- building frequency layout plan Employment of spectrum-efficient technology Regulatory Requirements

6 Assessment Criteria 1. Service coverage of service speed of service roll-out 2.Corporate competence knowledge about the local broadcasting environment quality control to ensure compliance with standards

7 Assessment Criteria 3.Financial size of performance bond financial capability sufficiency of investment feasibility of business plan 4.Technical technical feasibility employment of advanced technology technical readiness

8 Assessment Criteria 5.Programming quantity and variety 6.Others benefits to the local broadcasting industry benefits to the local economy

9 5 successful 4 failing to meet regulatory requirements and/or assessment criteria 1 withdrawn Evaluation Result

10 Approval-in-principle for the following applicants: 1.Hong Kong Network TV Limited 2.Elmsdale Limited 3.Pacific Digital Media (HK) Corp. Limited 4.Hong Kong DTV Company Limited 5.Galaxy Satellite Broadcasting Limited Successful Applicants

11 Cable & Wireless HKT VOD Limited Withdrawn as existing licence deemed a domestic pay licence Turner International Asia Pacific Limited Existing Hotel TV Services Licence deemed an other licensable licence Others not successful for failing to meet the regulatory requirements and/or assessment criteria Other Applicants

12 Shareholding of Successful Applicants 1.NETV Sino-i.com Ltd. (100%) 2.Elmsdale Elmsdale Media Ltd. (90%) Shaw Media Ltd. (10%) 3.Pacific Digital Pacific Digital Media Corporation (100%) 4.DTV STAR TV Ltd. (100%) 5.Galaxy Television Broadcasts Ltd. (100%)

13 Commitments - Launch of Service From Grant of Licence 1.NETV 12 months 2.Elmsdale 12 months 3.Pacific Digital 6 months 4.DTV 9 months 5.Galaxy 18 months

14 Commitments - Programme Channels 1.NETV 65 channels (24 months) 2.Elmsdale VOD (12 months) + 10 channels (24 months) 3.Pacific Digital 20 channels (12 months) 4.DTV 14 channels (9 months) 5.Galaxy 40 channels (27 months) Total:149 channels

15 Commitments - 3-Year Capital Investment 1.NETV $140 million 2.Elmsdale $108 million 3.Pacific Digital $23 million 4.DTV $250 million 5.Galaxy $180 million Total:$701 million

16 Mode of Transmission rBroadband fixed telecom network : 2 NETV and Elmsdale rSatellite + SMATV : 3 Pacific Digital, DTV and Galaxy

17 Galaxy - Considerations rGalaxy has submitted a compliant proposal rGalaxy is subsidiary of TVB rCE in Cs approval for exemption of disqualified person restriction, having regard to the following factors: 1.Effect on competition in relevant service market 2.Widening of programme choice 3.Impact on the development of broadcasting industry 4.Overall benefits to the economy

18 Galaxy - Special Conditions To ensure that TVB and Galaxy will not engage in activities involving cross-subsidy or preferential treatment cross-subsidization between the two companies will be prohibited as a licence condition TVB cannot show undue preference to Galaxy or vice versa in respect of the supply of programmes, production facilities, programming services and artistes also as a licence condition

19 Galaxy - Special Conditions To ensure that there will be a level-playing field in the pay TV market any exclusive programme deals between TVB and Galaxy will be subject to a competitive bidding process in the open market Galaxys proposed pay service may only commence after 18 months from the grant of licence

20 Galaxy - Special Conditions To ensure that TVBs free-to-air service will not be adversely affected The beneficial ownership of TVB and its associates in Galaxy must be below 50% of the total shareholding in Galaxy TVB may not invest more than 20% of its net asset value in Galaxy TVB will spend not less than $2.7 billion annually, of which not less than $100 million on capital investment, in its free-to-air service

21 BA may apply to the Court to impose financial penalty for contravention of competition provisions $2 million; or a sum not exceeding 10% of the turnover of the licensee in the relevant television programme service market in the period of the breach (whichever is the the higher) Sanctions

22 Proposed safeguards constitute an effective firewall between TVB and Galaxy Delayed commencement of Galaxys service will give a fair degree of head-start for other new entrants Galaxys service would widen programme choice for viewers without compromising effective competition in the market Galaxy - BAs Assessment

23 Liberalisation of TV Market r Open up the TV market r Provide a fair and effective competition environment for the TV market r Additional 149 TV channels r Total capital investment over $700 million r More than 1,000 jobs to be directly created r Service launch within 6-12 months

24 THANK YOU