Telcos bring competition to HK pay TV – News Analysis

Telcos bring competition to HK pay TV – News Analysis – Hong Kong

Fiona Chau

After years of slow take-up and false starts it could be the introduction of different delivery platforms that finally shakes up Hong Kong’s newly-liberalized pay TV market.

Ironically, the competitive threat is coming from companies more associated with providing capacity than content.

Hong Kong Broadband Network (HKBN) and Galaxy Satellite start services later this year, competing head-to-head with i-Cable Communications.

HKBN, a joint venture between local reseller CTI and Japan’s KDDI, plans to deliver programming through its metro Ethernet network using IP multicasting technology.

The company will launch the service in mid-year, with a monthly fee of HK$100-$150, undercutting i-Cable, whose tariffs range from HK$200-$300.

HKBN aims to attract 25,000 subscribers in its first year of operation through the provisioning of niche programming such as language education and religion.

The other newcomer, Galaxy Satellite, is backed by the city’s dominant free TV provider, TVB. Two years after losing Malaysia’s Astro Broadcast Corp. as a partner, TVB is back on track after clinching a surprise deal with Intelsat.

Like HKBN, Galaxy is also planning to compete against i-Cable with “very competitive pricing” and localized content, says Intelsat.

The company is providing $53 million in cash and $17 million in transponder capacity–at market rates–over three years for the 51% stake in Galaxy, with TVB responsible for programming.

Joe Romm, president of Intelsat’s video business unit, insists the move into the TV business has not scared off broadcasting customers.

“They are reacting the same way that we feel, that it is not a great variation from the other aspects of the platforms we have been involved in, other than it is a joint venture.”

According to Intelsat, the Galaxy package will include 24 channels at launch, with an extra eight pay-per-view channels within 18 months.

Regulatory gray area

But the complicating factor in the market is the entry of HKBN, which does not have a broadcast license.

A spokesperson for the government’s Information Technology and Broadcasting Bureau said HKBN did not need a pay TV license because it was Internet-based. Companies delivering content through the Internet are regarded as content providers, not broadcasters, she says.

This, in other words, offers a backdoor entry for telcos, broadband service providers and the like who want to take a slice of the pay TV market.

For i-Cable, which only just broke into the black in late 2001, after six years of losses, this is not good news.

Indeed, i-Cable, like any cable operator around the world, is facing more competition from a band of new players who consider video as a means of diversifying their service offerings and revenue streams.

In fact, broadband providers in other Asian countries like Korea and Japan have also started offering cable TV services through their broadband networks, says Simon Twiston Davies, CEO of the regional industry body, the Cable & Satellite Broadcasting Association of Asia (CASBAA).

The latest example is Japan’s Softbank, which last month launched commercial pay TV services through its ADSL network.

Room for growth

The entry of HKBN and Galaxy into the Hong Kong market should certainly lift the penetration rate, market watchers believe.

Currently i-Cable has over 600,000 home users, or 30% market penetration. Although two other licensed pay TV operators, TV Plus and UK-based Yes TV, started service last year, their impact has been minimal.

As such, there is still a lot of room for growth, says Twiston Davies. He expects the market could reach an optimal penetration level of 60%, perhaps in the next five years, with the entry of new players like HKBN.

Additionally, HKBN’s entry into the market will also provide more opportunities for content providers.

“Broadcasters and pay TV operators are always looking for new distribution opportunities,” he says. “The announcement of HKBN’s rollout plan will provide content players like MTV, StarTV and Disney with more opportunities to sell content to HKBN.”

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