The NCC Should Cease Enforcing a Bad Law
China Times editorial (Taipei, Taiwan, ROC)
September 9, 2010
Some of the most prominent companies on Taiwan, including TSMC, MediaTek, and HTC, are Interested in digital convergence. They hope to invest in the radio and television industries. How has the National Communications Commission (NCC) responded? It has turned them down flat, saying it violates the clause stipulating that political parties, the government, and the armed forces may not own media companies. This is the absurd consequence of bad law combined with ossified reasoning by legal hacks.
The Broadcasting Act contains a so-called "Media Reform Clause." Its primary purpose was to correct problems arising from involvement by political parties, the government, and the armed forces in the media industry. The law was a product of its time. It stipulated that political parties, the government, and the armed forces may not hold even a single share in of stock in the electronic media, directly or indirectly. The law was harsh and unreasonable. This has become only too clear over the past two years. The victims are too numerous to list. Superficially, the Broadcasting Act was a highly substantive media reform act that drove political parties, the government, and the armed forces out of the electronic media. In fact it was a bad law that has seriously hampered industry growth and business operations.
Take for example Delta Investment, a blue-chip company which operates Erda, a satellite broadcasting technology company. Erda's products are sold in Chunghwa Telecom's MOD. Government funds have been invested in Delta. Therefore the NCC has ruled that it "violates the political party, government, and armed forces clause," and forced the company to sell off its holdings. Take for example Kai Bo, Taiwan's largest broadcasting network. Foreign shareholders include ASE, the leading domestic IC closed beta testing company. Government funds have also been invested in ASE. Therefore it too is classified as "illegal" and is being punished. Some broadcasting network shareholders are investment companies. Some investment companies are also listed. These listed companies have "shareholders' shareholders," who including government funds. Therefore, they too are off limits.
The biggest victim so far has been Taiwan Mobile, a subsidiary of the Fubon Group. Last year in September it purchased Kai Bo from the Carlyle Group. The total transaction amount was 32.8 billion NT. It also assumed over 24 billion NT in Carlyle debt. Its total investment was nearly 57 billion NT. But this investment failed to pass NCC approval, because Fubon Financial held shares in Taiwan Mobile. A few years ago, Fubon Bank merged with Taipei City's flagship bank, the Taipei Bank, The Taipei City Government holds Fubon shares. The NCC peeled away layer after layer, and lo and behold, it found that once again someone had violated the "political party, government, and armed forces clause." Once again, a company had reached dead end. When Fubon attempted to purchase Kai Bo in a private capacity, the price skyrocket nearly two billion NT in less than a year. The NCC's improper enforcement of a bad law merely provided the Carlyle Group with a massive windfall profit.
Recently, the China Television Company (CTV), under the name of CTVShop, attempted to purchase four channels, including the Travel and Living Channel and the Gala Television Channel. It was rebuffed by the NCC on all counts. The reason offered was equally absurd. The NCC said it "discovered by chance" that the Taipei City Government holds shares in Fubon Financial Holding. Fubon Financial Holding holds shares in Fubon Life. Fubon Life in turn holds shares in CTV. CTV in turn holds shares in CTVShop. Therefore even a company that is merely a "great, great, great grandson" is still considered in violation of the "political party, government, and armed forces clause" of the Broadcasting Act.
The above trail of blood shows what is wrong with the "political party, government, and armed forces clause." Add to this the NCC's legal hack mentality, and the entire industry has suffered a severe blow. The "political party, government, and armed forces clause" was a product of its time, with its own historical background and historical considerations. Its purpose was to prevent political parties, the government, and the armed forces from controlling the electronic media. The NCC, which is enforcing the law, remains oblivious to its underlying spirit. It has single-mindedly fixated on the "may not either directly or indirectly hold even a single share" clause, leading to this absurd and ridiculous result.
Leave aside the industry merger that resulted in the Taipei City Government holdings shares in Fubon Financial Holding. The government owns four major funds that continue to invest in the stock market. Its holdings are mostly blue chip stocks in various large scale industry leaders. The NCC cannot be bothered to ask whether the government has a controlling interest in these companies, let alone the right to operate these companies. Everyone of them is considered suspect and must be investigated. This essentially guarantees that every major public and blue chip company will be prevented from entering the broadcasting industry. Because, as long as one peels away enough layers, one will eventually discover government funds.
The NCC is utterly ignoring the fact that these government funds are merely financial investments. The percentage of shares held is very low. The government has no operating rights and no controlling interest. Even if it invests in the broadcasting industry, it has not in fact violated the spirit or substance of the "political party, government, and armed forces clause" of the Broadcasting Act. The NCC's "strict review" is merely hobbling the growth of the radio and television industry. It is merely making it harder for them to survive. It is merely making it more difficult for them to establish successful businesses and operate them efficiently.
The political party, government, and armed forces clause is unreasonable. The NCC is not totally oblivious to this fact. That is why it has proposed amending and loosening the law. But amending the law will require considerable time. Until the law has been amended, the NCC insists on enforcing the terms of the political party, government, and armed forces clause in an unreasonable manner. It continues to victimize industry. Digital convergence is under way. Television, radio, and newspapers are being combined into one. Frankly speaking, the NCC's approach has retarded the entire nation's economic growth.
In the past, political parties, the government, and the armed forces were a single entity. Their control over all forms of the media is a thing of the past. It was corrected by draconian measures that, if truth be told, amounted to overkill. Perhaps they were necessary at the time. But ruling party change has become the norm. The media has entered an era of intense competition. The Broadcast Act no longer has any meaning. If anything, political party, government, and armed forces interference in the media is far less likely and far less threatening than the large-scale influx of foreign capital. We hope the government will amend the law as soon as possible. Until the law has been amended, the NCC must understand the spirit of the law and the needs of industry. It must not rigidly adhere to the letter of the law, by reviewing cases with the mentality of legal hacks.