Taiwan Digital Cable TV Summit 2003

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Taiwan Digital Cable TV Summit 2003

• September 1, 2003

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Taiwan Cable TV Market Key Positives

• High cable TV penetration rate 83 (Y/E 2002)
• High audience ratings 65 vs 35 for terrestrial
  TV
• Cable TV ad spend growth 76 for 1998-2002
• High population density/low capital expenditure
• Installed island-wide broadband infrastructure
  70 750 Mhz
• MSO monopolies in most franchise areas with focus
  on clusters
• Consolidation 3 MSOs have more than 60 of subs
• Stable cash flow generator (US260 mil. at Y/E
  2002)
• Ability to exploit and expand distribution scale
• Ability to adopt and deploy digital content
  technology
• Distribution and content combination

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Taiwan Cable TV Market Key Negatives

• Unfavorable regulatory and competitive
  environment
• Restrictions on rates, program tiers and service
  offerings
• Only 0.4 digital STB penetration
• Piracy and lack of addressability
• Cash flow growth prospects limited by regulation
• Video competition from ADSL (CHT) on unfavorable
  terms
• New digital content being created for A-P but not
  Taiwan
• Past MSO abuse of monopolies and distribution
  content combination has ensured GIO and consumer
  skepticism
• Ignorance of improved local cable TV leadership

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A Global Leader in Penetration
(Y/E Dec. 2002) Market Cable DTH Sat
TV Pen US 85  Canada 84  Taiwan 83  Korea 65 
Germany 64  India 52  Finland 45  UK 41  New
Zealand 40  France 37  Singapore 35  Spain 32
  Hong Kong 30  China 28  Malaysia 22  Australi
a 21  Japan 18 includes CS and cable TV
excludes BS 
Taiwan Cable TV Penetration Historical
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High Audience Ratings
Source Media Partners Asia
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Capital Expenditure Comparisons
Per Home Passed (US)
Source Media Partners Asia
7
Cable MSO Industry Fundamentals
(US mil.)
Source Media Partners Asia
8
Leading MSO's By Subscribers
(in 000)
Source Media Partners Asia
9
Leading Cable TV MSO's By Y/E 2002 Revenues
(US mil.)
Source Media Partners Asia
10
Leading MSO's by ARPU (US)
Source Media Partners Asia
11
Leading Cable TV MSO's By Y/E 2002 Operating
Cash Flow/EBITDA
(US mil.)
Source Media Partners Asia
12
Leading Cable TV MSO's By Y/E 2002 Operating
Margins
Source Media Partners Asia
13
Latest Trends in Global Digital STB Penetration
(As of TVHH)
Source Media Partners Asia
14
Taiwan Average Monthly Cable TV RatesHistorical
Growth (US)
Source Media Partners Asia
15
Historical Growth in Monthly U.S. Basic Cable TV
Rates
Source Media Partners Asia
16
Global Trends in Monthly Average Revenue Per
Subscriber Cable TV (Y/E 2002)
Source Media Partners Asia
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The Digital Dilemma

• CNS has invested US240 mil. in digital but
  rollout has stalled to under 2,000 boxes due to
  regulation
• EMC will not commit to further digital capEx
  unless there is deregulation
• TBC marketing its digital tier but regulations
  curtail its strategy
• Channel providers will not commit to new digital
  and interactive programming unless there is
  deregulation
• Broadband cable modem subs at around 400K but
  bundling broadband HS Net access with digital
  video tier could lead to exponential growth

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Whats The Regulatory Climate Now?

• Cable TV regulated as a utility
  telecommunications liberalized and protected by
  the government
• No centralization central local governments
  both approve applications for CATV rates
• Operators allow to retail basic packages at up to
  NT600/US17 per month.
• PPV channels allowed
• Offer of a-la carte price capped pay channels
  also allowed
• No approval of tiers and lifting of rate caps
• Proposed break up of cable TV monopoly

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Unsustainable Model For Digital

• The government wants 80 STB penetration by 2006
• Current regulatory focus on price capped a-la
  carte sales model will not deliver 80
  penetration
• Channel and program tiers and STB-based
  strategies essential for operators, broadcasters
  and consumers
• Essential to governments aim for unlocking
  investment and jobs in digital and broadband
  content industries

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Deregulation Critical To The Cause

• Lifting existing restrictions on cable TV rates
  and allowing operators to offer program tiers
  at prices determined by market forces
• Establishing a level playing field between cable
  TV and ADSL
• The creation of an independent, accountable and
  centralized media regulator with expert
  intelligence and global exposure
• Breaking the influence and role of cable
  television sales agents to limit distribution to
  a direct relationship between the operator and
  the channel
• Enforcing laws against advertising piracy
  protecting the intellectual property
  of broadcasters  
• Enforcing laws to increase foreign direct
  investment in cable TV to 49 from a current 20