Speeches and Presentations




LCQ7: Digital Broadcasting Corporation Hong Kong Limited

Following is a question by the Hon Leung Kwok-hung and a written reply by the Acting Secretary for Financial Services and the Treasury, Ms Julia Leung (in the absence of the Secretary for Commerce and Economic Development), in the Legislative Council today (October 31):

Question:

Quite a number of members of the public and overseas Chinese have complained to me that while the Government puts in great efforts to promote digital audio broadcasting on the one hand, it has earlier looked on with folded arms the disagreement among the shareholders of Digital Broadcasting Corporation Hong Kong Limited (DBC) on the other hand, resulting in DBC once discontinuing its broadcasting services which affected quite a number of members of the public. In this connection, will the Government honestly inform this Council:

(a) given that the Government informed this Council on October 17 this year that it was aware of the disagreement among the shareholders of DBC and it had followed up closely on the developments, of the contents of the disagreement; and whether it has examined if DBC and its shareholders had breached the licensing conditions or legislation in the aforesaid incident; if it has, of the results;

(b) as the Government has indicated that the Commerce and Economic Development Bureau (CEDB) had twice written to DBC for clarification on media reports on the aforesaid incident, whether it can provide copies or contents of these letters;

(c) given that the Government has indicated that CEDB had met with DBC management for more than once, of the number of meetings held between CEDB and DBC management on the aforesaid incident and the details (set out in the table below);

Date Time Meeting
venue
Name of
management
staff
Officials
in charge
Discussion in
contents
Results
_____ _____ _______ __________ _______ _______ _______
_____ _____ _______ __________ _______ _______ _______
_____ _____ _______ __________ _______ _______ _______
_____ _____ _______ __________ _______ _______ _______

(d) whether the shareholders of DBC have given any undertaking to the Government in applying for the licence and whether they are required to comply with any licensing conditions; if so, whether the Government has required each shareholder that they must fulfill their undertakings and comply with the licensing conditions, as well as explained to them the legal consequences they have to bear personally of their failure to fulfill their undertakings and comply with the licensing conditions; if so, when it has done so; if not, of the shareholders whom the Government has not yet been successful in contacting and the number of those who have refused to cooperate;

(e) whether the Government has critically examined DBC's financial capability before granting a licence to it; if so, whether it has assessed the reasons why DBC still defaulted on employees' wages or service fees; if not, why the Government had then refused to grant a radio licence to Citizens' Radio on the ground of its financial capability;

(f) whether, by making reference to the practices of handling the closing down of the Commercial Television and the telecast of the London 2012 Olympic Games, the Government will immediately intervene in DBC's discontinuation of broadcasting services, so as to enable members of the public in Hong Kong and overseas Chinese to continue to listen to DBC's programmes; if so, when and how it will do so; if not, of the reasons for that;

(g) as it was reported on October 17 this year that a DBC shareholder had successfully applied to the High Court for appointing an accounting firm as the interim receiver of DBC, whether the Government has reflected to the accounting firm immediately that DBC must comply with the licensing conditions and continue to provide broadcasting services; if so, when it has done so; if not, of the reasons for that;

(h) whether the Secretary for Commerce and Economic Development (SCED) has taken any actions to effectively make DBC continue broadcasting; if so, of the contents and effects of such actions; if not, the reasons for that;

(i) whether the Chief Executive (CE) or the Chief Secretary for Administration has requested SCED to intervene in DBC's discontinuation of broadcasting services or stopped him from doing so; if so, when he or she has done so; if not, of the reasons for that;

(j) whether the Government will provide, on the ground of DBC's discontinuation of broadcasting services, pecuniary compensation to those members of the public who have bought digital radio sets in response to the Government’s publicity on the promotion of digital audio broadcasting and out of their preference to listen to DBC's programmes;

(k) whether the Government has assessed the impact of DBC's discontinuation of broadcasting services on those members of the public and overseas Chinese who listen to its programmes every day;

(l) given that quite a number of members of the public have indicated that they have requested, through Facebook, fax, telephone and email, SCED to intervene in the aforesaid discontinuation of broadcasting services and ensure that DBC will continue to broadcast, but SCED has made no response so far, whether the Government will arrange for SCED to meet with and respond to all the complaining members of the public in person, so as to respond to CE's advocacy of politically appointed officials visiting various districts more to listen to the views of the public; if it will, when it will make the arrangement; if not, of the reasons for that; and

(m) whether it has assessed if the discontinuation of broadcasting services was the result of SCED's failure to monitor DBC properly; if the assessment result is in the affirmative, whether it will hold SCED politically accountable and require him to step down; if it will, when SCED will step down; if not, of the reasons for that?

Reply:

President,

In March 2011, the Chief Executive in Council (CE in C) granted Digital Broadcasting Corporation Hong Kong Limited (DBC), Metro Broadcast Corporation Limited (Metro) and Phoenix U Radio Limited (Phoenix U) sound broadcasting licences to provide digital audio broadcasting (DAB) services. The three commercial broadcasters, together with Radio Television Hong Kong (RTHK), provide a total of 18 DAB channels in phases. As an independent statutory regulatory body, the Communications Authority (CA) is responsible for monitoring the licensees' compliance with the requirements of the relevant legislation and licence conditions.

The sound broadcasting licences of the three commercial operators require them to formally launch their service within 18 months after the licence grant date (i.e. by September 21, 2012). In the licence of DBC, the company is required to provide seven 24-hour programme channels (including a "Talk Radio" Channel, an Ethnic Minorities Channel and two Music Channels, and three other channels which can be a News and Market Update Channel, Leisure Life Channel, Community Channel or Music Channel) at its formal launch. DBC soft launched its services in August 2011 and had formally launched its services in September 2012 as required by the licence.

My reply to the 13-part question is as follows:

(a) to (c) The media first reported in late July this year that a dispute had arisen among the shareholders of DBC over the injection of capital, leading to a lack of working capital. Subsequently, the Commerce and Economic Development Bureau (CEDB) met with the management of DBC at their request on July 27 and September 26 respectively. The management of the company mentioned to the Bureau in the meetings that the shareholders of the company had disputed on the injection of capital. Details on the abovementioned meetings are set out at Annex.

According to the licence of DBC, the company shall provide seven channels and broadcast 24 hours a day. As DBC had ceased service earlier from 8pm, October 10 to 7am, October 15, there is prima facie evidence it might constitute a contravention of licence condition. DBC had subsequently resumed broadcasting on October 15. The Office of the Communications Authority (OFCA) had written to DBC on October 10, 12, 15, 18 and 19 to request the company to provide details or representations on matters relating to the cessation or resumption of service. Separately, as the broadcasting service of DBC was limited to the playing of music or re-run programmes from around 11pm on October 21, OFCA had written to DBC on October 22 to request for an explanation. OFCA received on October 25 a reply from the interim receiver of DBC, applying to the CA for permission to play only music or re-run programmes in seven channels in 60 days beginning from October 21, so that it may resolve the problem of lack of capital. CA will discuss the application shortly.

(d) and (e) As regards the total amount of investment of DBC, its licence has only contained conditions regulating the total investment by the licensee (i.e. DBC) during the period of 2011 to 2017. The investment commitments of individual shareholders to the company are beyond the regulatory scope of the licence conditions and should be handled by the licence-holding company on its own. According to information available, the amount of capital provided by DBC shareholders as of February 2012 had exceeded the planned investment on capital expenditure and programme expenditure for the first year as committed by the company.

The former Broadcasting Authority (former BA) had examined the financial soundness of DBC before recommending to the CE in C to grant a licence to the company, and the company also submitted that it had secured funding of over $100 million from its shareholders. The former BA had therefore no reason to doubt the financial strengths of DBC. Should there be any problems on matters relating to the payment by the company of its employees' wages or service fees, it should be settled according to the relevant legislation or through legal means.

(f) The Government and CA has all along respected the independent operation and editorial independence of broadcasting licensees, and acted according to the regulatory regime. Broadcasting licensees are obliged to comply with the relevant laws, licensing conditions or codes of practice, and the Government would not interfere in the internal matters of licensed companies. Against this background, the Government has all along maintained close contact with the management of DBC, and monitored the company in its compliance with the Telecommunications Ordinance (TO) (Cap. 106) and licence conditions. Matters relating to the Commercial Television Limited and the telecast of the London 2012 Olympic Games are completely different from the DBC incident in nature and circumstances and a direct comparison cannot be drawn.

(g) to (i) The media reported on October 17 that a shareholder of DBC had successfully applied to the High Court for appointing Deloitte Touche Tohmatsu as the interim receiver of DBC. This Bureau contacted DBC on the same day and confirmed the appointment of the accounting firm as interim receiver. After DBC has been taken over by the interim receiver, the Bureau and OFCA have written to the company to ascertain any impact on the company's operation arising from the appointment of interim receiver. The authorities will continue to follow up on developments with the interim receiver, keep a close watch on the compliance of DBC of its licence condition and the TO, and take follow up actions in accordance with the law. It is the Government's position that it would be inappropriate to interfere with the internal operation of broadcasting companies, nor to play the role of commercial mediator to resolve disagreements among shareholders.

(j) and (k) We understand that the recent disagreement among shareholders of DBC has resulted in operational problems in the company and has affected the DAB service, in particular the listeners of DBC's programmes. We hope that the shareholders of DBC can resolve their disagreement in a pragmatic manner. In any event, RTHK and the other two commercial broadcasters are currently providing DAB service according to their plan or licence requirements. Apart from the current eight programme channels which have been formally launched by these operators, the total number of programme channels will progressively increase to 11. DAB radios sold in the market can receive these programme channels and the question of compensation by the Government does not exist. We hope that the audience will give time and space for this new service to continue to develop.

(l) and (m) CEDB and OFCA have received complaints and enquiries on the DBC incident. The authorities have arranged to reply as soon as possible, and the Secretary for Commerce and Economic Development (SCED) has uploaded the response of the Government to this incident onto the Facebook. To keep the public informed of developments and the follow up actions of the Government, the authorities have issued press releases on the matter for a number of times. SCED has also responded to the matter by meeting the media and explained the follow up actions of the Government at interviews and radio phone-in programmes on October 10 and 11. The Bureau has explained in detail the incident and the Government's stance and follow up actions taken at the meeting of the Legislative Council Panel on Information Technology and Broadcasting held on October 26. As mentioned above, the incident was caused by the disagreement among shareholders over the injection of capital which led to a lack of working capital. It is the responsibility of a broadcasting licensee to properly manage its internal affairs. The Government has all along closely followed up on the developments from a regulatory angle and kept a close watch on the compliance of DBC of its licence condition and the TO. As such, the Government authorities have all along been carrying out their regulatory responsibilities in an appropriate and conscientious manner.

Wednesday, October 31, 2012

Annex PDF

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