the desirability of giving Hong Kong viewers as wide a choice of programmes/channels as possible and not restricting their freedom to choose, to any extent more than is predicated by the reasonable requirements of a broadcasting regulatory system; and
(e)
by
the need to observe the principle that the success of a commercial venture is determined
market forces rather
by over-protective government policies.
Financial Viability of Cable TV
21
than
A fundamental issue that must also be addressed is an assessment of the financial viability of the cable TV network planned for Hong Kong. HKCC have recently provided detailed arguments and figures to support the contention, as at paragraph 13 (b)
13(b) above, that their investment would face a potentially fatal
from satellite television broadcasting distributed through (unregulated SMATV systems. Their paper is attached at Annex C to this Memorandum.
22
threat
There are unavoidable difficulties in analysing a case like that submitted by HKCC. It is essentially a matter of
predictions, the reliability of which cannot be verified in advance. Nevertheless, it is reasonable to believe that the initial penetration rate of cable TV would be adversely affected by the widespread operation of SMATV systems in Hong Kong. The huge initial capital outlay required for cable TV will inevitably make it particularly vulnerable in the embryonic stage. We also take account of the fact that HKCC's estimate of the impact of the loss of 17% of their revenue on their financial viability is roughly in line with the assessment of the financial viability of this project at the time of the original tender by independent consultants engaged by the Government.
HKCC has made it clear that it is so genuinely concerned by this threat to its operations that it is ready to re-consider whether it is worth proceeding with the project or not unless it is given adequate protection. Clearly, it is impossible to be absolutely certain whether or not this is a bluff. We feel convinced, however, that it is not and that failure to provide adequate protection for HKCC will result in the break-up of the consortium and the foundering of the cable TV project approved by Members on 1 August 1989. Any such withdrawal would lead to a very difficult situation. We must be vividly aware of the possibility that failure to protect HKCC now may lead to a possible collapse of the cable television and second telecommunications network project.