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This paper tries to analyze the development of digital convergence in Taiwan and to come up with suggestions about current policies and corresponding revisions to laws and regulations. To adapt to changes in the digital age, the National Communications Commission , Taiwan’s governing agency for the telecommunications and communications media industries, has made efforts to speed up the convergence by breaking monopoly and offering a variety of platforms for competition on the one hand while establishing an objective calling for promoting cultural pluralism and safeguarding public rights and interests on the other. It is only appropriate for the NCC and other government agencies concerned to provide a stimulating market environment in which laws and decrees are relaxed and public order is maintained. Revisions can be made in such aspects as to ensure market order, foster industrial development, and protect rights and interests of consumers in line with the principle of “general business deregulation and tough control on content.”

1. Foreword

With rapid changes in technology, the role and boundary of conventional media have become blurred. Advances in computers, communications, consumer electronics, and digital contents have led to their merging, or convergence, which has been now dubbed 4C, a trend that is unlikely to be reversed . Joining the forces are, but not limited to, such new products as 3G cell phone, mobile TV, and video on demand . Cross-industry business is now the “in” thing.

The NCC was officially set up in March 2006, an independent agency viewed as Taiwan’s innovation in its governing system over the telecom and communications media industries. In its 2006 administrative report, the NCC listed its first objective as “promoting competition for efficiency in digital convergence.” It then made revisions to laws and rules as its focal points in administration, which include removing unnecessary administrative restrictions by undergoing revisions to telecom and communications media laws in reaction to the needs in digital convergence .

As conventional media are transmitting into digital convergence with their contents to become platform-oriented, telecom and media laws in the old days, like “Telecom Law” and three “Broadcasting Laws,” must be modified in order to maintain effective restraint and control. The problem, however, is that the NCC is only an organization that has “a stick but no carrot.” In contrast with this situation, the Government Information Office , part of whose functions was taken over by the NCC, is using its financial resources to facilitate the development of a so-called Public Broadcasting Group and a digital platform of terrestrial TV, and neglecting predicaments found in the development of digitalization of cable TV. The move leads to an imbalance in the development of multiple platforms. Besides, there are blurred boundaries in areas where the NCC can exercise control, resulting in uncertainty shown in planning and policy-making. This phenomenon has prompted worries for the future advancement of Taiwan’s digital convergence.

This paper tries to analyze the said development and to make suggestions concerning current policies and revisions to related laws by consulting experiences and models about the management and control of digital convergence in foreign countries, in the hope of rendering assistance in the development of Taiwan’s digital convergence.

2. Current Status of Taiwan’s Digital Convergence Development and Reforms

Digital convergence of telecommunications, communications media, and information refers to convergence in laws and decrees, operation platforms, transmission platforms, multiple contents, digital terminal and its applied services. As for the new trends of digital and technological convergence, they are composed of five major projects: the integration of digital platforms , next-generation video network , the integration of digital terminal , the initiation of digital contents , and the provision of applied services.

The broadcasting industries will move toward materializing the concept of “central kitchen” as well as becoming a new form of conglomerate. The development of blogs proves endless business opportunities on the Web and the development of digital home electronics is gearing toward being more human. Furthermore, digital contents will become an area in which their development is to be taken seriously in the years to come and services offered by the 3G cell phone will be diversified. All this indicates that digital convergence will introduce us to new ways of life.

Digital convergence helps create new industries, new business opportunities, and new revolutions. Its global production is estimated at US$3,300 billion, almost equivalent to the total GNP of Japan, an enormous change never seen before and expected to continue unabated. In fact, Taiwan is already slow in launching this type of digital revolution. The NCC has mapped three policy directions to catch up with the backwardness, namely digitized cable TV, preventing Chunghwa Telecom from monopoly, and encouragement for ushering in new technologies .

Earlier this year, in a forum on digital development marking the first anniversary of the establishment of the NCC, Dr. Su Yung-chin, its chairperson, stated in an address that its historical mission is to serve as “an independent agency between market and control, a civil society between telecom and traditional media, and a fairness and justice between the rule by law and control of law.” Only when doubts about political interference in the communications business are cleared can effective management of the communications content be implemented through self-discipline on the part of the media. Only when a favorable environment for digital convergence is emerging can the role of the NCC be downgraded” .

It is evident from the foregoing remarks that the NCC hopes to achieve its goal in governance by striking a balance among competition, convergence, and protection of consumers. While making efforts to open up the market, thereby bringing in capital, technology and competition, the agency also intends to limit its administrative involvement to a level of “true necessity,” similar to the practice of being “least intrusive with light touch” adopted by the British OFCOM. In other words, the NCC clearly shows that its policy is moving toward relaxation of various laws and regulations governing the industries.

Although convergence is becoming a world trend that cannot be reversed and the NCC and other government agencies concerned have recognized this development, the NCC fails to meet the expectation of the local public for timely revisions to corresponding laws and rules. In addition, the GIO has by and large ignored the trend, making all the players face a difficult situation. But the dilemma continues to lie in the fact that the revision to laws and rules simply cannot catch up with the development of the industries. As a result, advancement of the industries slows down almost to a halt.

3. Experience of Reforms on Management and Control of Digital Convergence in the U.S. and the European Union
Digital convergence is generally regarded as the combining of telecom, the Web, and broadcasting and TV -- three independent industries in the past. The realization of the combining can be traced technically in two aspects:

From the technical point of view, digital convergence comes from expansion of its original business in speech sounds and pure information by the conventional telecom industry into broadband and content as well as from that of broadcasting into other businesses, with the latter allowing the cable industry to gain capability of two-way communication. Despite different platforms and contents provider, service contents provided in the two business models are identical. From the foreign experience, the emphasis of control with the traditional telecom is on economical infrastructure while that with the conventional broadcasters on the content. As the two industries are not overlapping in business before, there is no unified control system that the two can abide by. Things change with the development of integration and application in technology. While the advancement allows telecom to step into the area of such types of contents as IPTV on the one hand, it lets the broadcast industry make inroads into the service of speech communication and internet through broadband on the other. Thus a right combination of two distinct control systems should be carried out in no time .

U.S. – Encourage Competition, Relieve Control, Provide Incentives, Promote Technological Innovations, Offer Reasonable Access Rights and Prevalent Services

The policy objective of the Federal Communications Commissionis to encourage competition, relax control, create incentives, promote technological innovation, as well as offer justified access rights and universal services. Beginning from 1980, it asked main players in the telecom industry to separate their basic and value-added services, and stripped away the regulation on cross-subsidizing in 1986. The revision of the “Telecommunications Act” of 1996 further relaxed rules on cross business between the two industries. Although terrestrial and cable broadcasting as well as telecom services have their own chapters in the revised Act, the FCC gives its explanation about how to categorize new services on a case-by-case basis in order to bridge any gaps that may exist in the conventional genes.

The European Union – Clear Policy but Straddle Attitude Because of Indeterminacy
In reference to such documents as a 1997 report on , a 1999 statement on Towards a New Framework for Electronic Communications Infrastructure and Associated Services-- The 1999 Communications Review, and a ruling on joint control systems for electronic communication network and services」, it is obvious that the Union is adopting a straddle attitude toward the issue :

①Guidelines in adjusting to the convergence must be limited to factual necessity. Using different rules to govern different technologies offering identical and similar services may hinder competition, investment, or provision of other services.
②There is lingering uncertainty over the developmental process of convergence. Therefore, whether a unified control system is needed remains to be seen.
③Hindrance to convergence will surface if regulations are uncertain.
④Other problems like access rights, set-top box , property rights, licensing, and public interests may also emerge during the process.

It is understood that the United States adopts an open policy with the aim of helping conventional media transform and of encouraging the new media to be bold in making innovations. As for the European Union, it takes a non-firm attitude toward convergence, although its policy is rather clear. In view of the fact that public media conglomerates play an important role in the Union, close attention has been paid on consumer benefits and market fairness. In comparison, Taiwan is taking the two fronts into consideration, a practice that will speed up convergence through which monopoly can be broken and at the same time cultural pluralism promoted and public interests protected.

4. Communications Policy Under Digital Convergence
In the future development of digital convergence, consideration must be given to an equal treatment of maintaining market order, strengthening industrial development, and protecting consumer rights. The goal is to come up with laws and regulations that can ensure ways to serve public interests and facilitate industrial development simultaneously.

Maintain Market Order by Establishing a Unified Control System and Upholding Fair Competition in Market
Digital convergence is now a dominant trend. Cross business and integrated service are new directions for both telecom and conventional communications media industries. Taiwan’s ruling party has long neglected the development of the telecom and communications media industries, a practice that leads to a situation where laws and decrees are not keeping pace with technology and that even gets the market into chaos, let alone the absence of suitable laws and regulations. But the commencement of operation on the part of the NCC has raised new hopes. Issues like cable TV digitalization, communication devices and the rules of charge, development of mobile communication, and cross business between telecom players must be jointly tackled by all government agencies concerned.

For example, the Cable Television Law does not rule Chunghwa Telecom’s MOD TV, which is capable of providing programs similar to those offered by cable operators. In other words, the Chunghwa service is not governed by a cable law stipulation that political parties, the government, and the military should not hold ownership of media firms. And yet the same services are under two different control systems, resulting in an unequal competition. Although the NCC has requested Chunghwa not to offer services identical to those available on the conventional media, conflicts occur and therefore new market order must be imposed.

Moreover, Triple Play , the so-called three in one service out of digital convergence, is also becoming a future star, with telecom players from at least 34 telecom owner in the world are marching into the broadband war. As the new convergence service is expected to bring in enormous digital contents and help develop peripheral equipment, all governments are sparing no effort to support concerned technologies and industries connected to the new service in order to improve national competitiveness. But the invention of new telecom products has helped produce alternative products for cable TV and telecom services, two totally distinct industries in the past, and the new products have forced the conventional industries to face stiff competition never experienced before. To ensure new products are compatible with conventional services, the NCC has to do its utmost to undertake thorough revisions and adjustments to both policy and law under “a consistent guideline.”

Strengthen Industrial Development by Relieving Restraint and Encouraging Media Exchange Between the Two Sides of the Taiwan Strait

In comparison with multinational media groups rich in financial resources, programs, and global marketing channels, their counterparts in Taiwan are facing a situation in which the foundation for industrial development is weak and the hinterland is limited. Consequently, survival is uneasy . After entry into the WTO, Taiwan has to meet the external challenge in the form of business dumping and cultural invasion, that from the Chinese mainland in particular.

Since the government has adopted its “Taiwan first” policy, it is natural that one sees only an imbalanced cultural and entertainment exchange between Taipei and Beijing. There is in fact a lack of sound policies and regulations that can help the industries concerned expand. Worse still, Taiwan is losing its advantage over development in this regard to South Korea. Unless some concrete measures are taken to facilitate revisions to laws and regulations and relax restrictions on the exchange between the two sides of the Taiwan Strait, and carry out a timely policy on digitalization for the film and entertainment industries, it is hard for Taiwan to achieve any breakthrough.

With the entry into various world organizations, Taiwan must adopt a policy of “more encouragement and less control” in international exchanges, including those with the Chinese mainland. On the other hand, as people from both Taiwan and China speak the same language and share the same culture; it is perfectly suitable for them to share information and to encourage media exchange.

Taiwan’s media industry had enjoyed a time of high development, and thus gained considerable experience, technology, and talent. But because of the depression and over-competition among the players, the industry and consumers both suffered. Only when Taiwan takes a positive attitude in international cooperation and promote cross-strait exchange can its telecom and communications media industries survive in globalization.

Protect Consumer Rights by Creating Needs and Providing Multiple Innovative Services

Despite the fact that players have made investment into digitalization and the development of various related products, acceptance on the part of the general public is rather low. Take the set-top box for example; the number of subscribers is small, although cable operators have been promoting it for years. The public seems to find no incentives from the new technology. The NCC recently suggested that operators offer free set-top boxes for the facilitation of cable digitalization. Whether the move will succeed remains to be seen. But it is clear that the public tends to be rather conservative when facing the digital convergence.

Therefore, finding out the real needs of the masses is the key to making full digitalization a success. That is not easy. It seems that people have their fixed views with regard to telecom and communications media. Take the cell phone for example, services they frequently use are ones for text and speech sound. In order to urge the public to upgrade from 2G to 3G, operators offer such new services as “video conversation” and “easy service.” But things are not getting better. Even among those who already own 3G phone numbers, the use of 3G is less than expected .

Among a variety of new consumer products, e-commerce performs well, non-store retailing emerging as a new star. According to the Ministry of Economic Affairs, Taiwan’s total production value for retail reached NT$2,930.6 billion in 2004, an increase of 8.28 percent over the preceding year. Of the total, non-store retailing stood at NT$61.9 billion, up 12 percent from the year before, far surpassing the growth of the overall production value . Sales in Web and TV shopping registered an astounding increase in 2006.

A prediction made in a report published in December 2006 by three major technology research institutes in Taiwan – including Industrial Economics & Knowledge Centerof Industrial Technology Research Institute, Market Intelligence Centerand Topology Research Institute -- indicated that sales in Web auction and shopping will continue to rise. In 2006, total production value in Taiwan’s e-commerce market, including Web auction and shopping, was estimated at NT$145 billion. It will be up by 12 percent in 2007, reaching NT$222.1 billion, up 53 percent from the year before. Another survey by Institute For Information Industry showed the hottest item on the shopping list on the Web was travel, 63 percent, followed by beauty and boutique products, with a growth rate of 90 percent, or each buyer paying an average of NT9,103 .

TV shopping is another place contested by all strategists. Three major players – Eastern TV, Viva TV, and Momo TV – are doing their best to meet the needs of consumers. Currently, the government has set a ceiling of one-tenth of the total number of channels on shopping. As the compression technology is able to make available more than 600 channels, the government should consider lifting the ban and allowing the market scheme to decide the number.

In a free market, consumers are end beneficiaries. Those who can offer innovative services, new incentives and multiple choices will be able to lead the way in the age of digital convergence.

All this is proof that promotion of the development of digital convergence cannot be accomplished in one move. Only through thorough planning can a sound development be attained. Speaking of an overall communications revolution, the greatest impact of convergence on the legal structure of Taiwan’s telecom and communications media industries is the regulations on carriers of the players. Under the current laws – such as “Telecom Law,” “Broadcasting Law,” “Cable TV Law” and “Satellite Broadcasting Law” – the establishment and operation of transmission carriers need special permit from the government. In the aftermath of convergence, different carriers are able to provide identical or similar services. Under the current rules, carrier operators are not allowed to offer services unless they receive approval from the authorities concerned. This will restrict players in making their service packages flexible and will even produce an adverse effect on the timing of their entry into market .

It is essential to take into consideration social trends and needs in formulating laws. Government can positively help improve investment climate and foster the overall development of the said industries. Furthermore, policies that can take care of both functions of guidance and control with a cultural and business touch are what the industries need

It is therefore the belief of the authors of this paper that the objective of regulatory revisions is to relax control over management but place strict control on contents. And at the same time neither the transmission system nor transmission carriers should be the center of any legal structure. In short, content is now the key and the major criterion for evaluating media quality.

5. Conclusion and Discussion

We learn from experience that business vigor shows in a market environment where policies are open and regulations relaxed. And an environment where regulations are clear and order is maintained will stimulate the development of the said industries. In the age of digital convergence, therefore, the government must take a positive attitude in implementing a communications policy that suits the world trends.

The authors are of the opinion that the objective is to speed up the convergence by breaking monopoly and offering a wide range of platforms for competition on the one hand and promoting cultural pluralism and protecting public interests on the other. Besides, lifting close control over the industries and stripping away the tradition of regarding the transmission system and transmission carrier as the core of the legal structure are the starting point toward establishing a sound system.

In fact, the revitalization of the communications industry relies on sound policies and regulations as well as timely assistance from the government. The NCC must stick to the principle of “general business deregulation and tough control on content” and step up communication with other government agencies concerned. And the government itself should also give its full support to the NCC. The final goal is to create an environment that satisfies the government, the industries, and consumers.

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