I am also looking for good blogs and bloggers, any thoughts? There is a pretty good list in the Taiwanderful 2009 Blog Awards.

The Taiwan government is powerless to stop the activities due to strong laws protecting assembly of private citizens.

The broad question this raise to me is whether Taiwan will change China due to the opening of cross straits.

Hong Kong (and Macau) are unlikely to change China because they are:

- Small (Fewer than 8 million people)
- Lacking lively political debate
- Cantonese-speaking

The rule of law and free expression in Hong Kong are interesting characteristics, but my sense is that Hong Kong is still considered a culture apart.

Taiwan, on the other hand, is:

- Fairly large (22 million people, I think)
- Quite prominent on the mainland (Taiwan has long been considered a renegade province, so always part of China)
- Mandarin-speaking
- Politically lively

Taiwan is a great counter-argument to those who think that Chinese culture rejects democracy/self-rule (a view expressed on this blog recently)

Will Taiwan change China? (How could China change Taiwan?)

When I pitched this business idea about a week ago in a blog post, I received numerous emails of encouragement and some with helpful suggestions. This is a refined version of the business plan presented on video and set to drumbeat.

Would you want this service?

Having left journalism to take up business development with one of Asia’s more successful serial entrepreneurs, I’m always on the lookout for new business opportunities.

This idea strikes me as quite complex to accomplish alone, but too compelling to drop.

For that reason, I wrote it up and now share the idea here online in the hopes of feedback or – who knows – potential partners. What do you think?

Executive Summary:

Taiwan companies export most of the world’s large flatscreen televisions, but Taiwanese buy relatively few.

Why? Taiwan television is bad. Really bad.

Hampered by regulations, cable companies in Taiwan have no incentive to invest in compelling content or develop new distribution models.

Stuck in the 1990s, Taiwan suffers one of the world’s biggest digital TV deficits.

Taiwan’s digital TV deficit is so great that it may actually offer a business opportunity.

For my full idea, please read below the fold.

The Business Case for Selling a New Type of Digital TV box for Taiwan

June 10, 2008
By Thomas Crampton

Taiwan is one of the world’s most high tech and developed places
- A population of 22 million with GDP per capita of around US$15,500 makes Taiwan an attractive consumer market.
- Taiwan’s broadband penetration ranks in the world’s top 20, according to the ITU.
- Taiwan companies supply the world with everything digital, from laptops to flat screen televisions.
- The Taiwan government has long nurtured high tech ambitions, with a current goal of making Taiwan the WiMax capital of the world.

Taiwan cable television penetration is among the highest in the world
One of the first markets in Asia to liberalize pay-TV, Taiwan’s cable penetration has increased from 17 percent of households in 1990 to nearly 90 percent today, according to Media Partners Asia.

Yet digital television virtually does not exist in Taiwan
Digital delivery of television, which allows High Definition TV, movies on demand, pay-per-view, etc barely reaches six percent of the population, according to CASBAA.
Irony alert: Almost nobody in Taiwan is able to use the HDTV sets so successfully exported by Taiwan’s manufacturers.

Why do Taiwan cable companies invest so little in digital TV?
No incentive. The national government restricts Taiwan cable operators to subscription fees of roughly NT$500 (US$18) per month. Local officials further influence pricing, with the Taipei mayor recently making lower cable fees part of his election platform.
Faced with dismal returns, Taiwan’s cable companies invested an annual average of US$68 per household, compared with US$230 in Hong Kong, US$281 in Singapore and US$605 in the United States, according to CASBAA.

Why are Taiwan TV programs so bad?
There are more than 100 channels, but no way for cable operators to charge a premium for special programs. The only hope is to make everything cheap, mass market and hope to sell advertising. As a result, all cable operators offer a very similar set of programs. Government regulations inhibit selling premium-priced “bouquets” of special channels. Subscription restrictions mean that revenues at cable companies are roughly 70 percent from advertising and 30 percent from subscription, I am told.

What is the market context for Taiwan’s cable companies?
Taiwan’s cable companies have divided up the market with little geographical overlap. The top 3 players control a 60 percent market share, according to the Government Information Office.

Private Equity, of course
Taiwan’s top 3 cable players received investment from private equity investors in recent years:
CNS: Former Carlyle Asia chairman Michael Kim bought a 60% stake for a reported NT$30.9 billion in 2006.
KBRO: Carlyle Group acquired KBRO in 2006.
TBC: This month (June 2008) Macquarie Korea Opportunities Fund (MKOF) is set to buy Macquarie Media Group’s 60% stake in TBC for $400 million. This is a 34% rate of return from the two years of MMG ownership.

Stagnant revenues
While private equity investors streamlined internal operations, there seems to be little opportunity for them to increase actual revenues until regulations are dropped.
The average monthly fees per user in Taiwan increased 0.4 percent over 2003 to 2006, compared with a fee increase of 14 percent in Australia, 6 percent in the UK and 5 percent in the United States, according to CASBAA.

What is Digital TV state of play?
The major cable companies have nascent digital offerings with 20 to 30 thousand subscribers, but the government-owned Chunghwa Telecom claims the largest number of set top boxes.


How many people really use Chunghwa’s digital TV?
Claiming roughly 400,000 boxes so far, Chunghwa hopes to reach 1.2 million homes by the end of this year, thanks to their exclusive rights to broadcast the Olympics online.
The only way for people in Taiwan to watch the Olympics in High Definition will be through Chunghwa’s service.
Based on calls to consumers in Taiwan, however, I really wonder how many Chunghwa boxes are actually operational.
One consumer I called described the Chunghwa broadband installer as insisting that he leave a digital TV box, even though the customer’s television was too old to use the service. “But I am not permitted to bring the box back to the office,” the repairman told the customer. That box now sits unopened in the original packaging.

What does Chunghwa offer consumers?
Chunghwa’s offering, called MOD, costs NT$89 per month, with the NT$800 installation fee waived for a 12-month contract. You get 14 channels for the basic subscription and then a range of other channels if you pay more. The extra channels heavily promote their “adult” content. Unlike Taiwan’s cable companies offerings, you can select specific channel subscriptions and even order movies on demand. Movies range from free to NT$20 to NT$90 for recent hits.

So where is the business opportunity?
So long as the restrictive regulations remain in place, Taiwan’s broadband-enabled households have televisions stuck in the analog era.

How do you bring digital TV without being a digital cable company?
There’s a number of boxes, but none I know designed to suit Taiwan’s exact situation.

You would need:

• Timeshifting: A digital video recorder such as TiVo could record the 100 cable channels and allow for a later viewing of the content, a sort of video on demand.
• On Demand: Additional content could be brought in through a system similar to Vudu, which downloads movies, TV shows and HD films over broadband.
• Wireless: Wimax, being pushed heavily by the government, could offer a wireless route for downloading content, while Fon routers could be another. Or, to simplify things, the box could be hooked up to a regular broadband connection by wire.
• Transactional: E-commerce should be built in, so that revenue could continue after selling the box.
• Cheap: It must be cheap. Super cheap. Preferably US$20 to the consumer (perhaps with subscription to make up the remaining cost).

What content?
One difficulty is cutting deals with content providers, who usually work on a geographical basis through agents. If the device were left open to show any program on the Internet, users could watch any program available online. More and more US programs are available through the web, for example. Or perhaps you work with Hulu or Joost, providing them with a direct link to Taiwan’s television sets.

The sales pitch
You must convince consumers that – in addition to their cable subscription – they should buy a box. In order to make the box business worthwhile, there should be a subscription or way to encourage further purchases.

The danger!
One inherent danger with this project is, of course, that government regulations change and cable companies can install digital boxes. Presumably they have already put the infrastructure in place for this to take place quickly.
The recently elected government of Ma Ying-Jeou has promised economic reforms and deregulation, but taken no steps on the cable TV so far.
On the other hand, such a device might be applied to other markets with similar problems and with similar potential demand. China and India come to mind.

What are your thoughts?
This is an open business pitch. If you have any further thoughts, refinements, ideas or desire to develop, co-invest or partner, contact me.

Update:
Paul Denlinger at ChinaVortex suggests looking at:
1- Gaming company Shanda’s launch of Ezpod with 1,000+ systems engineers at the height. Test launched in Yiwu flopped, leaving retailers stuck with unwanted dead boxes.
2- TiVo’s Taiwan launch could have some useful lessons. Here are Tivo Taiwan advertisements.
Bill suggests looking at Gigamedia, which may have been doing something similar before they switched from broadband/convergence into a gaming company.