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LCQ5: Domestic free television programme service licence applications

Following is a question by the Hon Frederick Fung and a reply by the Secretary for Commerce and Economic Development, Mr Gregory So, in the Legislative Council meeting today (December 4):


The Government announced on October 15 this year the decision made by the Chief Executive (CE) in Council on domestic free television programme service licence (the licence) applications. Among the three applicants, two were granted approval in principle whereas the other one was unsuccessful (cherry-pick two out of three). When explaining the decision on November 5, the Secretary for Commerce and Economic Development (the Secretary) said that, according to the analyses contained in the consultancy reports (reports), the market would be able to sustain the operation of three operators (including the two existing licensees), and perhaps four operators under a favourable market condition, but it could hardly sustain a total of five players. Holding the view that a gradual and orderly approach should be adopted in introducing competition to the domestic free television (free TV) market, the authorities thus made the decision to cherry-pick two out of three. Subsequently, the managing partner of the consultancy firm which wrote the consultancy reports disclosed to the media that her firm had not suggested to cherry-pick two out of three for the issue in question. In addition, she considered that the Government might have misled the public by incomprehensively citing the reports out of context, and its decision was based on outdated data analyses. She stated clearly that she would be willing to explain the reports to the Executive Council (ExCo) so as to avoid any misunderstanding among ExCo Members. She also described the Government's act of adding new assessment criteria after the applicants had submitted their applications as an act tantamount to "race fixing". In this connection, will the Government inform this Council:

(a) whether it has examined if the Secretary's remarks concerning the capacity of the free TV market mentioned in the reports contradict the aforesaid comments made by the managing partner; whether it has assessed if errors or personal preferences might have been involved when the reports were being consolidated or interpreted at the initial stage, which has led to the conclusion that a gradual and orderly approach should be adopted in introducing competition into the free TV market; if it has assessed, of the details; whether the authorities will invite the consultancy firm to explain the reports to ExCo; of the remedial measures available should errors be detected after the assessment; whether the Government will conduct afresh another public consultation or consultancy study on the option of cherry-picking two out of three;

(b) as CE has indicated that the Government will seriously follow up and deal with the aforesaid comments made by the managing partner, of the details concerning the Government's follow-up action and efforts in dealing with the comments; whether the authorities will re-examine the entire process of vetting and approval of licence applications, including if decisions had been made on the basis of outdated data analyses and if altering the assessment criteria after receiving applications was unfair to the applicants, etc.; if they will, of the details; if they will not, the reasons for that; and

(c) given the strong views expressed by members of the public on the Government's decision on the licence applications and some ExCo Members' comments on the significant discrepancy between the decision and the public's demand and expectations, whether the authorities will, taking into account the latest situation, listen to the views of the public and respond accordingly to start afresh the process of vetting and approval of the licence applications, and grant licences to all three applicants which have met the requirements; if they will not, of the reasons for that?


Acting President,

Before replying to the Hon Frederick Fung's main question, I would like to first make a few clarifications. On October 15, 2013, the Government announced that the Chief Executive (CE) in Council had decided to grant approval-in-principle to the applications of Fantastic Television Limited and HK Television Entertainment Company Limited for a domestic free television programme service (free TV) licence, and reject Hong Kong Television Network Limited's application (the Decision). Subsequently, the Government has on different occasions publicly explained the assessment criteria and the reasoning leading to the Decision. The Government has also elucidated the 11 relevant factors which the CE in Council took into consideration before making the Decision. These factors are: the three applications; the recommendation submitted by the former Broadcasting Authority (now the Communications Authority) (hereafter collectively referred to as the Authority); the statutory requirements under the Broadcasting Ordinance (Cap. 562); the assessment criteria in the Authority's "Guidance Note for Those Interested in Applying for Domestic Free Television Programme Service Licences in Hong Kong"; sustainability of the free TV market as a whole; the consultant (the Consultant)'s reports on the impact of introducing new competitors on the competition environment of the free TV market (the Consultant's Reports) (including the Consultant's assessment of the relative competitiveness of each applicant); all representations/responses by relevant parties, and all relevant documents; all relevant latest developments; all public views received; the Government's prevailing broadcasting policy; and public interest.

As the Government has repeatedly emphasised when explaining the Decision, the Consultant's Reports are but one of the many factors that the CE in Council took into account when considering the three applications. The Government has never stated that the Decision was the recommendation in the Consultant's Reports. In fact, the 11 factors, apart from the Consultant's Reports, also include the consideration of all representations submitted by the relevant parties subsequent to the completion of the Consultant's Reports and the latest market situation. In the course of processing the applications, the CE in Council had disclosed the relevant information to all applicants, including the Consultant's Reports, the Administration's inclination to adopt a gradual and orderly approach in introducing competition into the free TV market, and the four assessment criteria. The applicants had been given ample time and opportunities to submit rounds of representations on these matters, the Consultant's relevant assessments as well as other relevant issues. Thus, the requirement of procedural fairness was adhered to throughout the process.

In brief, the CE in Council had considered a vast volume of information and made a holistic assessment in accordance with the established system, procedures and policies before reaching the Decision in a prudent manner.

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

(a) One of the study items covered in the Consultant's Reports was to analyse, based on the business plans and estimates submitted by the three applicants, the impact on the free TV market in Hong Kong if licences were to be granted to them. In this regard, the Consultant's findings revealed that the local free TV market might not be able to sustain five players. Such information has been set out in the Legislative Council (LegCo) Brief issued by the Government on October 15, 2013 and the paper submitted by the Authority to the LegCo Panel on Information Technology and Broadcasting on November 7, 2013. It is a factual statement about the Consultant's relevant findings. While the Authority's recommendation is not the same as the Decision made by the CE in Council, their factual statements about the Consultant's findings on the sustainability of the applicants and licensees in the free TV market are consistent. This clearly illustrates that the Government has never twisted the Consultant's findings. Moreover, I would like to clarify that the Government has never requested the Consultant to make any recommendation on the gradual and orderly approach in introducing competition or whether approval should be granted to the three applications. In fact, apart from matters in relation to the Consultant's Reports, the Consultant was not involved in other procedures in processing the three applications. For example, the Consultant did not take part in rounds of representations submitted by the applicants on matters such as the Consultant's Reports and relevant assessments, as well as the Administration's inclination to adopt a gradual and orderly approach in introducing competition into the free TV market. The Consultant's Reports were but one of the many factors that the CE in Council took into account in assessing the three applications. As such, we consider that the Consultant's remarks were probably based on incomplete information and misunderstandings about its role and the Decision. I wish to reiterate that the CE in Council, having regard to the 11 factors, had decided that it would be in the public interest to adopt a gradual and orderly approach in introducing competition into the free TV market, while not precluding the possibility of allowing more free TV operator(s) as and when appropriate.

(b) We are surprised and perplexed with the recent remarks publicly made by the Consultant on the Decision. In the deliberation of various policy issues, the Government would from time to time seek consultants' advice and refer to such advice when making a decision. Generally speaking, unless invited by the Government, the consultants concerned should not participate in any open discussion on the items which they were commissioned to study or issues relevant to those items, let alone getting themselves involved in the relevant political discussions which may cause the public to call their objectiveness and neutrality into question. This is the most basic professional ethical requirement one would expect from any person serving as a consultant. The Consultant's disregard on this occasion of its professional ethics and getting itself involved in the political discussions is much regretted. As regards the Consultant's remarks about the licensing matter, the Government considers such action inappropriate and finds it in conflict with the role of a consultant. We disagree with the personal views expressed by the Consultant, and note that it has some misunderstandings about the Government's licensing policy and procedures. The Government hopes that the Consultant will respect the spirit of contract and maintain the neutrality as a consultant.

(c) The CE in Council made the Decision after a holistic consideration of all relevant factors. The Government appreciates the public concern over the outcome of the three applications, and understands the different views expressed by various parties on different occasions. The CE in Council had already taken into account the public views before making the Decision. The Government has repeatedly explained that notwithstanding that there is no prescribed ceiling on the number of licences to be issued under the prevailing policy and legislation, it cannot be interpreted as that any applicant meeting certain basic requirements must be granted a licence. Whether a licence is granted is subject to the recommendations by the Authority and then the consideration by the CE in Council against all relevant factors, such as the sustainability of the free TV market as a whole. The CE in Council considers that the Decision will reap the benefits of introducing competition into the free TV market while at the same time to minimise any possible adverse impact on the free TV market as a whole. Not only is the Decision in line with the established broadcasting policy, but it also ensures the healthy development of the free TV market for the protection of public interest.

If the two applicants to whom approvals-in-principle were given are finally granted licences, it will be the first time in 40 years that new operators are introduced into the free TV market. The Government will continue to complete the residual work relating to the free TV licence applications in a fair and prudent manner, with a view to introducing more competition into the free TV market as soon as possible for the provision of more and better programming choices to the public.

Thank you Acting President.

Wednesday, December 4, 2013