CONFIDENTIAL
XCC(91)194
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Separately, TVB have made a submission to the Government and the Broadcasting Authority on the deterioration in their business environment since the grant of their licence in 1988. They are likely to find an ally in ATV on these issues. By no means all of the alleged deterioration can be ascribed to the presence of satellite television and the prospect of subscription television. Other, probably more significant, factors include the loss of tobacco advertising, the royalty arrangements and restrictions on corporate structure included in the current licence and increasing costs within the industry. From the other side, also, we should not overlook the possible effects of a sheer lessening in creativity within the terrestrial television broadcasters in driving away audience together with the destructive war for the same audience and the same performers in which ATV and TVB have been engaged. Nonetheless, we consider that the state of the terrestrial television broadcasters does merit a review of its own. This would amount to a bringing forward of the mid-term review which was envisaged in the licences to take place in 1994. Our view has been endorsed by the BA.
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We therefore propose that we should bring forward the mid-term review of the licences of the terrestrial television broadcasters and initiate action on this as soon as possible. Legislative amendments to the Television Ordinance (Chapter 52) will be necessary.
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Pending completion of that review, we consider it absolutely necessary to retain the current restrictions on the use of Cantonese in free- to-air satellite TV services. These would accordingly continue to be applied to HV and would be included in any licence granted to a new satellite TV operator. What this would mean is that HV or any new satellite TV operator could apply to run subscription-funded channels in the Cantonese language (on the basis proposed in paragraph 17) but not channels funded through advertising revenue. This would be a practical proposition. It would be quite straight forward, for example for HV, to add a couple of channels in encrypted format to their current line-up of five free-to-air channels. Subscribers would be given a decoder in order to obtain these additional channels. The justification for this proposal is -
(a) it would offer the Hong Kong viewer a greater choice of programmes in the language of the majority of the local population;