Media Platform Competition - Adoption, Usage, and Global Impact of Broadband Technologies - page 259

According to the Point-Topic report of Feb-
ruary 2005, delivering IPTV is now a part of
many operators' plans. However, providing this
service is a high-cost and low-margin business. In
Taiwan, Chunghwa Telecom (CHT) is the major
IPTV service provider. It was issued a license in
February 2004 by the former broadcast regula-
tor the Government Information Office (GIO)
to offer IPTV service to its ADSL subscribers.
CHT dominated the telecommunications services
market until 2000 when the government opened
up three new fixed networks. It still dominates the
broadband market, because it owns most of the
local loops in Taiwan. CHT, however, is not the
only telecommunications company that provides
video service in the world. Fastweb TV in Italy,
Verizon in the United States, and PCCW in Hong
Kong have all entered the video service market.
Foley found four main reasons why telecommu-
nications carriers wish to enter video markets:
(1) the local phone revenue does not increase; (2)
they wish to fully utilize the extra broadband; (3)
the home video market may have the potential for
more revenue; and (4) they can more fully exploit
the economies of scale (Foley, 1992). The above
four reasons can all explain why CHT is eager to
provide IPTV service.
In Taiwan, the cable TV penetration rate is
over 80%. Most viewers watch terrestrial TV
through cable TV. The rate of DBS penetration
is only 2%. Since CHT started to provide IPTV
service in 2004, the Taiwanese people have had
another alternative to watching TV. The govern-
ment and the public welcome the competition, but
the cable operators are greatly concerned about
the new competitor. They have complained to
the regulator that CHT is allegedly a dominant
telecommunications operator and that its IPTV
platform is a national service, while the cable
systems are local services. They are afraid that
they might lose many subscribers because of this
giant TV platform. Therefore, they have been
trying every means to deter the development of
CHT's IPTV service. They have even threatened

the channel operators not to provide content to
CHT's IPTV platform.
CHT's IPTV service has also been confronted
with another obstacle. In December 2003, the Leg-
islative Yuan revised three broadcasting-related
laws requiring all the government, military, and
party shares to be withdrawn from the broadcast,
cable TV and satellite TV by December 2005.
Since more than one third of CHT's shares are still
owned by the government, the newly-established
regulator, the National Communications Com-
mission (NCC), ruled in January 2007 that CHT
could only act as an open platform and that it could
not produce programs and aggregate channels. It
could, however, provide VOD and interactive ser-
vices, because the subscribers had full autonomy
to choose their interested content. CHT's IPTV
platform could also provide content through third
parties, namely, other content providers and ag-
gregators (www.ncc.gov.tw). Even though CHT's
IPTV is not similar to IPTV services worldwide,
it is still very interesting and important to know
whether there will be any displacement effect of
IPTV on cable TV.
In fact, most studies that compare the relation-
ship between new and existing media focus on the
competitive displacement effect (Dutta-Bergman,
2004), by which is meant that different kinds of
media will compete for the same resources such
as consumers' time, place, and attention. However,
most of the displacement effect studies compare
different media such as the Internet's impact on
traditional media (newspaper, radio and TV). Very
few studies compare the competition among dif-
ferent TV platforms, not to mention the IPTV's
displacement effect on cable TV.
The purpose of this chapter is to study the
IPTV's impact on cable TV and find out whether
IPTV exerts a displacement effect on cable TV.
If there is time displacement, it then needs to
be asked what is the relationship between the
displacement effect and other variables such as
functional consideration for subscription/adop-
tion, frequently used services, the viewing hours,