Chunghwa Telecom Challenges Cable TV Operators with MOD Services

Taiwan's state-run telecom service provider Chunghwa Telecom Co. has mounted a campaign, featuring attractive television commercials and the slogan "Be the Master of Your Time," to promote its new broadband service—multimedia on demand (MOD).

The new service allows subscribers to choose their favorite TV programs at any time via an interactive system. C.D. Ho, Chunghwa's chairman, reports that the new service has signed up 34,000 subscribers since it was introduced in March this year, greatly exceeding the original goal of 20,000.

The company plans to expand its MOD subscriber lines in Taipei city and county this July, and lines in other cities in the second half of the year. Meanwhile, the period during which preferential rates are offered will be extended to attract more subscribers.

The new MOD service, which was under planning for five years, poses a serious threat to the island's cable-TV operators. Observers believe that Chunghwa is in a better position than other operators to dominate the domestic interactive-TV market because of its unmatched resources, although the state-owned company itself will have to overcome numerous obstacles on the road to success.

For example, the existing cable-TV operators persuaded the Government Information Office, which is the island's media regulator, to require Chunghwa to undergo trial broadcasting before inaugurating full-scale MOD services. The company was also asked to apply for a broadcasting license, as cable-TV operators must do.

When Chunghwa was allowed to begin offering full services in early March, a flood of eager subscribers immediately strained its supply of the set-top boxes that constitute the core of the interactive-TV system. All of the company's 20,000 employees throughout Taiwan were mobilized to tout the service, with Ho himself acting as super-salesman.

One of Chunghwa's advantages its is abundant amount of capital, which allows it to buy plenty of programs for broadcasting. It has acquired exclusive Taiwan rights to broadcast 70 Yomiuri Giants baseball games (to be played in Japan), and is cooperating with the local Chinese Television to produce news and sports programs as well as drama and variety shows.

The company also plans to buy the rights to broadcast Disney programs, as well as those of a local channel, and to add Microsoft Xbox and Sony PS2 interactive games to its service. In addition, it is in cooperation talks with the Hong Kong telecom-service provider Pacific Century CyberWorks (PCCW).

Network Advantages

Furthermore, Chunghwa owns Taiwan's largest telecom network and has signed up the island's largest number of telephone subscribers (13 million land-line customers). Since the MOD service is built on the asymmetrical digital subscriber line (ADSL) network, and since Chunghwa boasts the island's largest number of ADSL subscribers (3.1 million of them), the existing cable-TV providers are caught in a difficult position.

In early May, the company spent around US$21.5 million on a next-generation synchronous digital system, made by UT Starcom of the United States, to boost its MOD and ADSL speeds in preparation for future market expansion.

Some observers point to Chunghwa's competitive disadvantages in the MOD market, including a lack of adult movie and stock market channels.

Ho emphasizes that his company will stick to clean programs in its MOD service (although the firm says that it will offer adult movie channels on a pay basis), despite the fact that cable-TV operators depend on adult and stock-market content for a large portion of their income.

Some local industry watchers suggest that Chunghwa should also offer unique programming instead of merely providing what everybody else does, since many customers are tired of the same old programs all the time.

One of the cable-TV companies that is feeling the heat from Chunghwa's MOD service is Jilung Cable TV, which concentrates on Keelung City and currently offers one interactive music channel and one interactive adult movie channel. The company has decided to reduce its fees for interactive TV services. Its annual interactive-service subscribers have to pay only NT$50 to NT$100 (US$1.5-3.0 at NT$33:US$1) a month to receive a channel (plus a refundable deposit of N$1,000, or US$30). Jilung Cable TV does not charge an installation fee for set-top boxes, which usually amounts to NT$6,000 (US$181).

Industry watchers are also urging the island's Internet service providers (ISPs) to become involved in interactive-TV services as quickly as possible in order to boost the declining rates of growth in their business. Taiwan's TV penetration is close to 100%, they note, while computer penetration is only about half that figure.