Taiwan Mobile Co., Ltd., Sheng-Ting, Kbro and 12 Cable Television Companies Controlled by Kbro

Case:

Key Words:

cable television, 4C industry, digital convergence, last mile, required undertakings

Reference:

Fair Trade Commission Decision of December 2, 2009 (the 943rd Commissioners' Meeting)

Industry:

Telecommunications (6100), Cable Television System (6022)

Relevant Laws:

Article 6, 11 and 12 of the Fair Trade Law

Summary:

1. Taiwan Mobile Co., Ltd. (hereinafter referred to as Taiwan Mobile) intended to obtain 77% of stock of Sheng-Ting Co., Ltd. (hereinafter referred to as Sheng-Ting) through its subsidiary, Da-Fu Media Technology Co., Ltd. to control the business operations and personnel appointments of Sheng-Ting and its subsidiary, Kbro Co., Ltd. (hereinafter referred to as Kbro). Taiwan Mobile also intended to indirectly obtain Kbro's 88.36% of stock of 12 cable television companies in Da-An and Wen-Shan districts and control the business operations and personnel appointments of these companies. The goal was to make Taiwan Mobile the largest multiple system operator (MSO) in the nation. Such intention of Taiwan Mobile constituted the merger type set forth in Article 6(1)(ii) and (v) of the Fair Trade Law. Due to the facts that the 16 cable television system operators participating in this merger case possessed more than one-third of the market share in their respective districts of operations; and that that both Taiwan Mobile and Kbro reached certain amount of sales that was the threshold for the filing of the pre-merger notification set forth in Article 11(1) of the Fair Trade Law without being subject to the exceptional circumstances set forth in Article 11-1, Taiwan Mobile filed a pre-merger notification in accordance with the law.

2. Findings of the FTC after investigation showed that this merger should have the following three major economic benefits: 1. having a breakthrough in the advantageous market position possessed by the leading companies for a long time in the fixed communications services market, known as the "last mile," and promoting the competition in the broadband network services; 2. promoting the development of digitalization of cable television which can help the development of the video media industry and provision of various selections to the consumers; and 3. integrating the resources of mobile, broadband, and cable television to provide renovated digital convergence services and benefit the development and competition of the digital convergence industry. At the same time, this case might give rise to the concerns of restricting competition by the applicants and their subsidiaries, such as exploiting their market power, causing market foreclosure, or increasing the level of difficulties for non-participants to enter into certain markets. However, after considering the future advancement of communications technologies, digitalization of cable television, fixed communications operators' participation in the competition of multimedia contents transmission services, convergence of 4C industry markets and services resulted from the digital convergence, and the existing governance by the relevant laws and regulations, the FTC believed that these concerns would be reduced to a certain degree in the future. At the same time, the FTC would require necessary undertakings, such as appropriate control of the structure and behaviors, to further ease the concerns about the restrictive competition.

3. Upon comprehensive considerations of the existing regulatory framework, relevant market structure and competition, evaluating opinions from various stakeholders, trend of future technological development, and maintenance of future market competitiveness after the digital convergence, it was found by the FTC that the overall economic benefits would outweigh the disadvantages resulting from the competition restraints. Therefore, in accordance with Article 12(2) of the Fair Trade Law, the FTC did not prohibit this merger but will require additional undertakings. The ten undertakings imposed by the FTC were as follows:
   (1)The applicant shall dispose of the entire stock of one of the cable television companies that is directly or indirectly controlled by the applicant within one year from the day after the receipt of this merger decision.
   (2)The applicant and its subsidiaries shall not appoint any representative to serve as the president, supervisor, or general manager of Mangrove Cable TV Inc. within three years from the day after the receipt of this merger decision.
   (3)The number of analog satellite radio and television programs the applicant and its subsidiaries produce, represent, or sell shall not be more than twenty-one within three years from the day after the receipt of this merger decision.
   (4)Without justifiable causes, the applicant and its subsidiaries shall not refuse to license the satellite radio and television programs produced or represented by them to other cable television operators, live satellite broadcast television services operators, multimedia contents transmission services providers, or other competing cable or Internet channel services providers, or engage in other discriminative conducts.
   (5)Without justifiable causes, the applicant and its subsidiaries shall not sell use a different price or attach additional conditions to license the satellite radio and television programs produced or represented by them to other cable television operators, live satellite broadcast television service operators, multimedia contents transmission services providers, or other competing cable or Internet channel services providers.
   (6)The applicant shall submit the names of the satellite radio and television programs produced, represented, or sold by the applicant and its subsidiaries along with the representation agreement to the FTC by July 1 of each year within three years from the day after the receipt of this merger decision.
   (7)The applicant shall submit information on the quotes, licensing prices, promotions, and sales targets of the satellite radio and television programs produced, represented, or sold by the applicant and its subsidiaries to the FTC by July 1 of each year within three years from the day after the receipt of this merger decision.
   (8)The applicant shall submit trade information, such as the retail and wholesale prices of the Internet services of the applicant or its subsidiaries and interconnection bandwidth costs with other major ISPs, to the FTC by July 1 of each year within three years from the day after the receipt of this merger decision.
   (9)The applicant and its subsidiaries shall use the amount of communications as the calculation base or the mechanism for proper free interconnection with regard to the quotes of the bandwidth costs for the Internet of their cable television network system within six months from the day after the receipt of this merger decision.
   (10)The applicant and its subsidiaries shall perform the following tasks that are beneficial to the overall economic interest with regard to their cable television network system within three years from the day after the receipt of this merger decision: 1. completing the digitalization of cable television and two-way construction of the cable television system network; 2. establishing open common platforms that are beneficial to the digital convergence, such as "standard open network platform," "user interface of convergence," and "convergence platform of customer service" of telecommunications and cable television networks and services; and 3. participating in the competition by providing better prices, quantity, quality, services, or other trade conditions than existing ISPs with regard to the broadband Internet services market.

Appendix:
Taiwan Mobile Co., Ltd.'s Uniform Invoice Number: 97176270

Summarized by Chang, Tsai, Hui-Chi; supervised by Liu, Chi-Jung