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Overview

With the trend of convergence between telecommunications and media, Taiwan's legal and regulatory regime was out of date and even hindered the sound development of the technology, media and telecom (TMT) sector. To achieve the policy goals of 'deregulation' and fostering market competition, the Taiwan government has made a series of amendments to the primary legislation so as to encourage new entrants and eliminate hurdles to conducting TMT businesses.

Nevertheless, in the wake of emerging over-the-top (OTT) services, which are not regulated under the current TMT regulatory regime, the difference in regulation level between the traditional telecom and broadcasting operators and OTT service providers has been raised by the former, and they are striving to introduce a policy wherein 'the same legal requirements should apply to services with the same nature'. In this context, the Taiwan government is also trying to reach a balance between 'deregulation' and 'fairness of competition'.

Regulation

i The regulators

Before 22 February 2006, Taiwan's telecom and broadcasting sectors were regulated by the Directorate General of Telecommunications, the Ministry of Transportation and Communications (MoTC) and the Government Information Office, the Executive Yuan, respectively. With the trend of digital convergence, in the spring of 2006, the two authorities consolidated and formed a new independent regulatory agency, the National Communications Commission (NCC), which consists of seven full-time commissioners appointed by the Premier of the Executive Yuan (i.e., the highest administrative body in Taiwan) with the consent of the Legislative Yuan (i.e., Taiwan's congressional body). These seven commissioners serve a four-year term and may be reappointed for a second consecutive term.

The NCC's principal duties include, inter alia:

  1. developing communications and broadcasting policies and regulations;
  2. regulating the communications and broadcasting sector and processing applications for licences;
  3. assigning radio frequency spectrum and allocating telecom numbers; and
  4. setting information and communications security standards and technical specifications.

To ensure national cybersecurity, foster the digital economy and accelerate Taiwan's digital transformation, the Executive Yuan recently established a brand new agency in charge of overseeing strategy for Taiwan's overall digital developments and promoting cybersecurity, namely the Ministry of Digital Affairs (MoDA). Commencing operations on 27 August 2022, the MoDA integrates those duties spread among the Executive Yuan's cybersecurity department, the Ministry of Economic Affairs (MoEA), the MoTC, the NCC and the National Development Council (NDC), including, but not limited to, the supervision of cybersecurity matters and universal service, as well as allocation of radio frequencies, telecom numbers and domain names.

ii Main sources of law

The Telecommunications Act (TA) was the main source of law for the telecom sector in Taiwan until the Telecommunications Management Act (TMA) was enacted. To respond to industrial development trends and remove out-of-date restrictions, the TMA was passed by the Legislative Yuan on 31 May 2019 and came into force on 1 July 2020, with a three-year transition period from 1 July 2020 to 30 June 2023. During the three-year transition period, existing telecom operators that do not file an application with the NCC for cancelling their telecom licences granted under the TA or registering as a telecom operator pursuant to the TMA will continue to be regulated by the NCC in accordance with the TA.

For the broadcasting sector, the main sources of law are the 'three broadcast laws': the Radio and Television Act (RTA), the Cable Radio and Television Act (CRTA) and the Satellite Broadcasting Act (SBA).

iii Regulated activities

Before the TMA was enacted, anyone who wanted to operate a telecom business had to apply for a licence from the NCC in accordance with the applicable laws and regulations. Nonetheless, the NCC holds the view that purely internet-based services should not be deemed as telecom services and thus do not require a telecom licence.

Under the TA, telecom operators can be divided into two categories: Type I telecom operators and Type II telecom operators. Pursuant to Article 11 of the TA, Type I telecom operators refer to enterprises that install telecommunications line facilities and equipment to provide telecom services. The aforesaid 'telecommunications line facilities and equipment' refer to the network transmission facilities and equipment that connect the sending and receiving terminals, the switching facilities and equipment installed to be integrated with the network transmission facilities and equipment, as well as the auxiliary facilities and equipment of both. Type II telecom operators are telecom operators other than any Type I telecom operator. Type I telecom operators are generally perceived as 'facility-based' telecom operators, while Type II telecom operators are generally perceived as 'service-based' telecom operators.

According to the Administrative Rules on Type II Telecommunications Businesses (Type II Regulations), Type II telecom businesses can be further divided into two categories: ordinary Type II services and special Type II services. Special Type II services include voice simple resale services (including domestic long-distance calls and international calls), E.164 and non-E.164 voice over internet protocol (VoIP) services, international communications services provided to non-specific persons by using an international private leased circuit and other telecom services designated by the NCC. Ordinary Type II services are Type II services other than any special Type II service.

Under the TMA, telecom operators are no longer divided into Type I or Type II telecom operators, and the mechanism of market participation has changed from a licence mechanism to voluntary registration. Only those intending to provide telecom services by using certain resources (such as radio frequencies or telecom numbers) or rights (e.g., mandatorily requiring other registered telecom operators to negotiate an interconnection agreement) conferred by the TMA need to register with the NCC. As a result, most existing Type I telecom operators still need to be registered as a telecom operator under the TMA. Nonetheless, for most types of Type II telecom services, it would be possible for the service providers to choose not to register as a telecom operator pursuant to the TMA.

With regard to a broadcasting business, the NCC's prior approval is also required for conducting any of the following activities: providing radio and television broadcasting services; providing cable television (CATV) services; and providing satellite broadcasting services.

iv Ownership and market access restrictions

Under the TA, for a Type I telecom operator, the total direct shareholding by foreigners shall not exceed 49 per cent, and the sum of direct and indirect shareholding by foreigners shall not exceed 60 per cent. Nonetheless, there is no restriction on foreign investments in a Type II telecom operator. Therefore, foreign investors may acquire a 100 per cent equity interest in a Type II telecom operator. Under the TMA, only a registered telecom operator establishing a public telecommunications network using radio frequencies or telecom numbers would be subject to those foreign ownership restrictions imposed on existing Type I telecom operators.

Foreign investment in a radio or television broadcasting business operator is prohibited. A foreign natural person is not allowed to be a direct shareholder of a CATV operator, and the total direct shareholding thereof by foreign legal persons shall not exceed 20 per cent, while the sum of direct and indirect shareholding thereof by foreigners shall not exceed 60 per cent. Direct foreign investment in a domestic satellite broadcasting business operator shall be less than 50 per cent of the total issued shares. An offshore satellite broadcasting business operator may offer programmes in Taiwan by setting up a branch office or appointing a distributor, provided that the NCC has granted a broadcasting licence.

v Transfers of control and assignments

In principle, all licences issued by the NCC are non-transferrable. If a Type I telecom operator would like to assign all or a substantial part of its business or assets, make investments in or merge with other Type I telecom operators, prior approval from the NCC would be required. On the other hand, if a Type II telecom operator wishes to be merged into another Type II telecom operator or other non-telecom operators, the Type II telecom operator also needs to file a consolidated business plan with the NCC for approval in advance. Under the TMA, if a registered telecom operator being assigned spectrum or holding a 25 per cent market share or more in a certain relevant market would like to assign all or a substantial part of its business or assets, make investments in or merge with other registered telecom operators, prior approval from the NCC would be required.

Transferring shares of a radio or television broadcasting business operator also requires the NCC's approval. If a CATV operator intends to assign its business, merge with, or make investments in other CATV operators, the CATV operator must file a written application and an updated business plan with the NCC for approval. In addition, neither CATV operators nor satellite broadcasting business operators shall commission the operation of broadcasting business to a third party.