VZCZCXRO3943
PP RUEHCN RUEHGH RUEHVC
DE RUEHIN #0476/01 1100942
ZNR UUUUU ZZH
P 200942Z APR 09
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 1422
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 TAIPEI 000476 
 
STATE FOR EAP/RSP/TC, EAP/EP, EEB 
STATE PASS TO AIT/W FOR RICK RUZICKA 
STATE PLEASE PASS USTR 
USTR FOR ALTBACH AND MCHALE 
USDOC FOR 4430/ITA/MAC/AP/OPB/TAIWAN 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD ECON ECPS TW
SUBJECT: Taiwan Telecom: Cable Appeals Stuck in EY 
 
Reftels: 2007 Taipei 2370; Taipei 99 
 
Summary 
------- 
 
¶1. (SBU) Since fall 2008, Taiwan's National Communications 
Commission (NCC) has added financial conditions to license renewals 
by foreign-owned cable companies.  The Carlyle Group-owned Kbro 
Company has appealed the NCC's licensing decisions to the Executive 
Yuan (EY) Appeals Committee, but the NCC has refused to cooperate 
with the Appeals Committee, and the Committee has failed to hand 
down its ruling within the legally-mandated five-month period. 
Minister Kao Su-po, who overseas the Appeals Committee, is reluctant 
to direct the Committee to make a decision, and suggested AIT ask 
the Premier or Vice Premier to force a decision.  End summary. 
 
Background 
---------- 
 
¶2.  (U) About 80 percent of households in Taiwan have cable TV, 
giving the island one of the highest cable-TV penetration rates in 
the world. Taiwan's three major cable TV multi-system operators 
(MSOs), Kbro, China Network Systems (CNS), and Taiwan Broadband 
Communications (TBC), are owned by the Carlyle Group, Korea's MBK 
investment group, and Australia's Macquarie, respectively.  These 
three companies provide 66 percent of cable TV service in Taiwan. 
 
¶3. (SBU) Since the creation of the NCC in 2006, representatives of 
these three cable companies have complained to AIT that the 
Commission has opaque, inconsistent, and at times anti-competitive 
policymaking.  Since the latest group of Commissioners took office 
in August 2008, industry has grown increasingly concerned that the 
Commissioners mistrust foreign investment in the Taiwan cable 
market, and subject Kbro, CNS, and TBC to a higher level of 
regulatory scrutiny. 
 
¶4. (SBU) In September 2008, when licenses were up for renewal for 
Kbro's  Yangmingshan Cable TV and CNS's Jia-he Cable TV, the NCC 
deferred renewing these licenses, cited concerns about these local 
entities' loan guaranty endorsements for their parent companies. 
According to the NCC, Yangmingshan and Jia-he each have insufficient 
registered capital to cover the loan-guaranty endorsements the two 
companies have made to their respective parent companies. 
 
¶5. (SBU) After a week of internal deliberation, the NCC 
Commissioners re-convened and unanimously approved the nine-year 
license applications of both Jia-he and Yangmingshan, but added two 
conditions: 
 
--Within six months, each company must arrange for a local bank to 
issue a "performance bond" guaranteeing re-payment to pre-paid 
customers if the company goes out of business. 
 
--Within three months, each company must provide a plan for reducing 
by 20 percent within two years the loan guarantees made by local 
partners on behalf of their foreign parent companies. 
 
¶6. (SBU) Kbro appealed  the NCC's decision, since it believed that 
the law does not allow the Commission to change conditions after a 
license is issued.  According to Taiwan's Cable TV Act, the NCC has 
the authority to do one of three things with a license application: 
 
 
--deny the license. 
 
--issue a temporary, one-year license with conditions to fulfill to 
convert it into a normal nine-year license. 
 
--issue a standard, nine-year license without conditions. 
 
Nowhwere in the law is there any discussion of "conditional" 
licenses. 
 
¶7. (SBU) Despite the uncertain legal ground for conditional 
licenses, since fall 2008, the NCC has issued eight more conditional 
licenses to foreign-owned cable providers, requiring the companies 
to take the additional, burdensome step of issuing performance 
bonds, and demanding the companies restructure the local units' 
financial leveraging. The NCC recently confirmed to AIT that the 
Commission has not added such requirements to license renewals made 
by locally-owned cable companies. 
 
Kbro Appeals NCC Decisions 
-------------------------- 
 
¶8. (SBU) On October 24, 2008, Kbro made administrative appeals to 
 
TAIPEI 00000476  002 OF 002 
 
 
the EY Appeals Committee on the issue of the legality of the NCC's 
granting of conditional licenses, requesting that the EY overturn 
the NCC's decision to grant such licenses.  The EY accepted the 
appeals for review, and also asked Taiwan's Supreme Administrative 
Court (SAC) to clarify the EY's role vis-a-vis the NCC. In December 
2008, the SAC confirmed that NCC decisions are subject to the review 
of EY. 
 
¶9. (SBU) Despite this ruling, the NCC continues to assert that 
first-instance appeals of NCC decisions must go through the 
Commission itself, and has refused to answer the EY's request for 
information on its decision to grant conditional licenses to 
Kbro-owned local cable providers. 
 
EY Appeals Committee Refuses to Make a Decision 
--------------------------------------------- -- 
 
¶10. (SBU) According to Article 85 of the Administrative Appeal Act, 
the EY Appeals Committee, supervised by Minister-without-Portfolio 
Kao Su-po, must hand down a decision on an appeal within five months 
of accepting the appeal. According to Kao's Senior Executive 
Assistant, Ning Yeh, the Appeals Committee has discussed the Kbro 
appeal at several of its weekly meetings. The Committee, however, 
has not acted on the Kbro appeal for over five months, and has not 
indicated to Kbro when the Committee will make a decision. 
 
¶11. (SBU) On April 15, AIT Deputy Director Robert Wang met with 
Minister Kao, who acknowledged the Appeals Committee has had the 
case for over the five-month limit set by the Administrative Appeal 
Act, and said the Committee will make a decision "at some point in 
the future." Kao, however, said the Committee is reluctant to hand 
down a decision without input from the NCC. He also said, since the 
NCC was created by the KMT and has a majority of KMT-nominated 
commissioners, the EY is in an "awkward" situation politically, and 
does not want to push the Committee to act. 
 
¶12. (SBU) Kao requested AIT's "support" to overcome this political 
impasse by asking either Premier Liu Chao-shiuan or Vice Premier 
CHIU Cheng-hsiung to demand a decision from the Appeals Committee. 
Kao also recommended if Kbro does not want to wait for a decision, 
the company is welcome to take its case to the Taipei High 
Administrative Court, which handles the next level of administrative 
appeals after the EY. 
 
Comment 
------- 
 
¶13. (SBU) Regardless of whether or not it is within the NCC's 
authority to add conditions license renewals or the merits of the 
arguments of the case, it is troubling that the appeals process 
appears to have broken down.  We plan to bring the matter up with 
the Premier or Vice Premier at the earliest opportunity. We will 
also continue to engage with NCC Commissioners over industry's 
concerns over the Commission's treatment of foreign-owned cable 
operators.  End comment. 
 
YOUNG