Even long-time veterans in the U.S. cable industry are often not familiar with the very vibrant international cable business.  It’s typical for some people to look to other countries for models of what might work in America, but it’s important to understand that the competitive landscape and regulatory infrastructure in those countries are dramatically different from our own.  Before you suggest we ought to do things like they’re done in Finland, it’s helpful to understand what’s going on in those markets.

For example, South Korea and Japan are viewed by some Westerners as great broadband success stories. In reality, those markets’ policies have prohibited certain kinds of competition, which has restricted broadband growth outside key areas. And as for their vaunted speeds, there is evidence to suggest that narrative is flawed as well.

Therefore, I’m pleased to present a guest post from John Medeiros, the Deputy Chief Executive Officer of the Cable & Satellite Broadcasting Association of Asia (CASBAA).  His organization is an industry-based advocacy group dedicated to the promotion of multichannel television via cable, satellite, broadband and wireless video networks across the Asia-Pacific.

Sitting in Asia, where the pay-TV industry is growing by leaps and bounds, and reading about the debate in the U.S. on the cable industry’s success (or lack thereof) in stimulating broadband development, leads one to muse about the definition of success.

Some American observers have argued that Asia is so far ahead in broadband that the U.S. should look here for tips on how to catch up.  But with 56% of US broadband connections supplied by the cable industry [according to SNL Kagan], and with many parts of the country witnessing aggressive, creative competition between cable companies, satellite providers, and traditional telcos, the U.S., as viewed from Asia, looks mighty good.

Of course, there’s no reason this had to be the case – what made the difference in North America was the shift of US regulatory policy beginning in the mid-1990s.   The pricing and bundling freedom that U.S. cable operators have enjoyed since then has made it possible to build out high-capacity networks and develop new, high-quality content offerings on a continental scale. It’s also spurred growth and competition from other platforms. The free hand the cable industry has enjoyed in making technological choices has ensured the networks meet the real demands of paying customers.

Contrast this relatively enlightened regulation with some of the protectionist psychology that still prevails in some Asian markets.  A good example is Taiwan, one of Asia’s richest markets, which has a regulatory system where the government applies a regulatory strait-jacket to all operators (cable and IPTV).   Cable operators are all required to run the same 90-plus analog channels, and – never mind the rising global prices for content – they have not been allowed to raise rates in over seven years (and last year, during elections, the companies were forced to swallow rate reductions that had no rational basis, other than “the constituents like it.”). The result has been very limited investment in new infrastructure or in quality content.  Taiwan is well behind Asia’s other advanced economies on the digital curve, with the first digital STBs rolling out only this year.

Another example of over-rigid regulation is India, at the other end of the per capita GDP chart.   Apart from rate controls that have no clear economic justification (why should every channel cost consumers precisely 5 rupees per month, no matter what kind of content it airs?), India’s regulators have hobbled the market by requiring that every pay TV system (whether cable, IPTV or one of the 6 DTH operators) has access to the same content on “non-discriminatory” conditions.  So TV becomes a commodity without differentiation.   The inevitable result is that in that country, too, cable network upgrades and digitization are proceeding slowly, and regulators fret that national digital development goals are not being met.

India’s initial cable-TV development was, by contrast, one of the great success stories of private entrepreneurship in human history.  In an infrastructure-weak developing country, totally private capital and skill were mobilized to wire more than 80 million homes in about 17 years – a huge accomplishment (in sharp contrast to the 50 million homes wired by the state-owned telecommunications establishment, in about 100 years of trying.)   But now, with the cable industry firmly established as a part of India’s modern infrastructure, the government insists on hobbling it in the name of “consumer interest.”   The result will be that cable networks – starved of enough revenue to justify rapid upgrading – will remain low-capacity and analog far longer than they should.

Despite these problems, the Asian pay-TV industry is growing very rapidly.   This continent is still in the rapid-build-out phase of connection.  One recent report estimated that the top 40 pay-TV operators will add 11 million new subs this year, for about a 20% annual growth rate.  Growth is strongest in the low-ARPU emerging markets such as China and India, but it is warped by uneven regulatory policies (because India’s cable regulations are so draconian, the biggest growth is coming on DTH platforms; China has lots of digital cable growth, but it is centrally-ordered not market-generated).

Of course, talking about “Asia” in a single breath is a bit nonsensical, as this continent is easily the world’s most diverse region when it comes to pay-TV development.  There are examples of over-rigidity in some places, but some other Asian markets have regulators who are among the world’s best – enlightened, transparent, market-friendly and globally aware.   And in places like Indonesia and Vietnam, the regulators and the industry are striving to liberalize their markets and bring them up to global benchmarks, in order to overcome the handicap of years of excessive state control.

It makes for a fascinating mix of issues.  People who are interested in learning more about the Asian pay-TV market – with all its opportunities and obstacles – should consider attending the Asian pay-TV industry’s annual convention. This year’s event will be held in Hong Kong from Nov. 3-5.  More info can be found here: www.casbaaconvention.com.

Tags: Asia, Broadband, CASBAA

This entry was posted on Friday, October 23rd, 2009 at 12:57 pm and is filed under Broadband. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.