Why granting a licence to HKTV would be good for the market
Mike Rowse says even given a 'step by step' expansion, competition policy favours a new player
It took an act of divine intervention to deny Hong Kong Television (HKTV) a free-to-air licence in the recent government exercise, I can exclusively reveal.
Consider the circumstances: there are four existing players in the TV market, two with free-to-air licences (TVB and ATV) and two with cable operations (Now TV owned by PCCW, and i-Cable owned by Wharf). There were three applicants for new free-to-air licences: the two cable operators, and HKTV, owned by maverick media personality Ricky Wong Wai-kay.
The government had previously indicated that there was no limit to the number of additional licences that could be issued. The Broadcasting Authority, the principal advisory body, had supported all three applications.
In the circumstances, the decision by the Chief Executive in Council, after more than two years of consideration within the administration, came as something of a surprise: there would after all be a limit on the number of new licences issued, the successful ones were those by the incumbent cable operators and the sole new bidder would be the only applicant to miss out.
Does this result ring any bells? Regular churchgoers will have spotted the parallel immediately. The Gospel according to Saint Matthew, Chapter 13, Verse 12: "For whosoever hath, to him shall be given, and he shall have more abundance…"
Enough frivolity, we must blow away some of the froth and focus on key issues.
Let us deal with the froth first. Of course, final authority rests with the Chief Executive in Council and of course the contents of its deliberations must remain confidential. And there is absolutely no way a previous minister would or could have promised HKTV that a licence would be granted. Bearing in mind all the hoops to jump through, it is simply not in the minister's gift. The most anyone could have said is that interested parties were free to apply if they felt they met the conditions.
All that said, given the political storm fast erupting, it is essential that the government give a much more detailed explanation for its thinking.
The main angle that needs to be addressed is the administration's commitment to open competition. It is sometimes overlooked that the minister responsible for broadcasting issues - the secretary for commerce and economic development - is also responsible for competition policy.
One explanation for the decision to approve only two licences is a consultant's report, which suggested the market could only support a total of four free-to-air licences.
But that report presumably does not tell us which four, and the traditional Hong Kong way of settling an issue like this is to let the market decide: give all qualified applicants a licence and see who survives.
The consultant could be wrong: it might be only three, it could be all five. But the government should not be taking the decision on the public's behalf; it should be made by consumer choice.
If we set the purest option on one side for a moment, and accept that the market should be expanded "step by step", then the question arises who should get the first new licences.
From the perspective of competition policy, priority should surely be given to new applicants not already present in the market, provided they meet the minimum conditions.
Since all three applications were endorsed by the Broadcasting Authority, we can assume that HKTV did meet the conditions.
The logic here is that a new entrant is starting from scratch and needs time and space to build up market share. Existing operators would still be able to join in later because they have a base from which to grow, whereas the new guy would find it very difficult to start out when there were already four free-to-air licencees out there.
So, there you have it, even if HKTV were judged to be the weakest of the new applicants (and we do not know for sure that was the case), provided it met minimum conditions, the company should still have got the first new licence to be issued, on competition policy grounds.
Before closing, I should finish the quote from Mathew which I began above "…but whosoever hath not, from him shall be taken away even that he hath."
Poor Ricky. We should all remember him in our prayers.
Mike Rowse is managing director of Stanton Chase International and an adjunct professor at the Chinese University of Hong Kong. email@example.com