the purpose of the study was to analyse regulation of the satellite services industry in 21 countries across Asia, divided by size and value into primary markets and secondary markets. Although the focus was to examine key aspects of regulatory effectiveness – and not to simply to promote an Open Skies policy – the overwhelming conclusion of the analysis is that markets with an Open Skies policy benefit greatly from the increased business and overall market values afforded by free and open competition. Governments throughout the region have not been slow to pick up on this, and there is now a clear trend towards Open Skies policies, with more than two thirds of the markets allowing open competition. Malaysia is a good example of a jurisdiction which has opened its skies in the last 1-2 years. In consequence, users in Malaysia now have a plethora of choice and a number of non-domestic operators have signed agreements with customers in the jurisdiction. The Asia Pacific Satellite industry has seen the negotiation of the first bilateral regulatory agreement, between Indonesia and Malaysia, guaranteeing operators and service providers from each jurisdiction access to markets in the other. This may be one of the first signs of a more enlightened regulatory climate which will promote regionwide growth. The measurement of effective regulation (in the primary markets only) was based on the evaluation of seven key aspects of the satellite regulatory framework: • Regulatory effectiveness, independence and transparency • Satellite access regulations • Fair competition • Taxation issues • Overall business climate • Dish and other ground equipment restrictions • Imposition of unreasonable technical standards. The result of this evaluation was the basis for a Regulatory Environment Index for each jurisdiction. This was used to consider the impact effective regulation has on sector value and growth in each jurisdiction based on the following representative criteria: • Estimated satellite revenues • Estimated DTH subscriber and ARPU numbers • Estimated VSAT investment Broadly speaking, the conclusion is that markets with light handed regulation experience more growth and value. However, the correlation is not exact due to the simple but distorting factor of size, both geographic and economic. Hong Kong is an example. With the second highest score on the Regulatory Environment Index, Hong Kong – while geographically one of the smallest jurisdictions in the region – is home to three separate regional satellite systems and a large number of international broadcasters. This makes Hong Kong the second most valuable market after Japan, a market that benefits from the largest satellite fleet among the jurisdictions and the highest number of DTH subscribers. Undoubtedly Hong Kong’s regulatory environment has been the major factor in encouraging satellite operators and broadcasters to call it home. Singapore, with similar geographic constraints, scores lower on the REI; its national policy does not encourage the use of satellite services domestically. Among other policies, there is a prohibition on the installation and operation of individual TVRO dishes to receive satellite television. We can also draw a direct correlation between the REI score and VSAT investment in the three largest geographic jurisdictions in the region, Australia, India and China. All three countries have significant infrastructural challenges to which an ideal solution is VSAT communications. Despite having the smallest population and GDP by far, Australia has the highest number of VSAT terminals installed, a direct consequence of the jurisdiction opening its skies to competition in 1997. Thailand and Korea are examples of jurisdictions which have adopted a policy of restricting market access to non-domestic satellite systems. In Thailand’s case, this has not prevented the domestic operator from selling its services outside of its home base, a strategy which may lead to more bilateral type arrangements similar to those being introduced by Indonesia. Thailand and Korea have both made significant investment in striving to provide sufficient capacity to satisfy domestic demand, and both have been largely successful in this endeavour. However, it is the conclusion of this study that customers within the two jurisdictions pay a higher price than they would expect if a greater level of competition prevailed in their domestic markets. As stated, it is sometimes difficult to demonstrate a direct relationship between effective regulation and increased investment and sector value because of the distorting effect of the larger markets. However, it is the conclusion of this study that those jurisdictions with the most onerous regulation are subject to increasingly pent-up demand which is not being satisfied. This translates into lost revenues, lost income tax and lost jobs. From the perspective of lost satellite industry revenues, broad estimates of deals which did not proceed due to regulatory interference are as high as US$150million per year. It should be noted that in the case of the deals identified, there was insufficient domestic capacity available, meaning that approximately US$150million was not invested to the benefit of the satellite, DTH or VSAT industries. As the market shows signs of consolidation and a reduction in capacity over-supply as demand increases, it will be increasingly difficult for jurisdictions to maintain policies of heavy handed regulation. TVAplus
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