Number of bidders to play role in determining TV channel starting bid price
The number of bidders and the final number of high-definition (HD) variety-TV channel licences will be among the factors to determine the starting bid price for the upcoming auction of 24 licences to operate commercial terrestrial digital TV channels, according to a proposal by Chulalongkorn University's Economics Faculty to the National Broadcasting and Telecommunications Commission.The NBTC will not call for bids for licences in a category where the number of bidders are the same as or lower than the number of available licences in that category. This is to prevent possible criticism of low competition in the bidding, said an NBTC source. For example, if there are five bidders for five available news channel licences, the NBTC will not auction the news licences.
The NBTC broadcasting committee will meet today to decide whether to expand the number of HD variety-channel licences to five or to maintain at it at the present four. The NBTC source said that if the committee decides to expand the licence numbers to five, it would have to reduce the number of standard definition (SD) variety-channel licences to 9 from the present 10.
At present, the NBTC has allocated four licences for the HD variety category, 10 licences for the SD variety category, five licences for the SD news channel category, and five licences for the SD children's channel category.
If it is finalised at five HD variety-channel licences, the committee might ask Chulalongkorn University's Economic Faculty to revise the price range of the reserve price of these HD and SD variety licences, which were proposed by the faculty.
The broadcasting committee has hired the university's faculty to study the price range of the licence reserve price for all 24 licences. According to the study, the price range of the licence reserve price for an SD variety channel is between Bt702 million to Bt2.85 billion; that of an SD news channel is between Bt274 million to Bt2.35 billion; an SD children's channel between Bt123 million to Bt2.02 billion; and that of licence for an HD variety channel is between Bt2.94 billion to Bt15.48 billion.
After the broadcasting trial of digital terrestrial TV service by the Royal Thai Army, MCOT and Thai Public Broadcasting Service, the NBTC found that it was technically possible to make available five HD variety-channel licences, instead of four.
As part of the faculty's proposal, the higher the number of the bidders, the lower will be the starting price of the licences. If there are a certain high number of participating bidders in each of the four licence categories, the minimum reserve price of the licences will be discounted by a certain percentage for a lower starting price. The discount scheme will encourage many potential bidders to take part in the auction.
For example, the minimum licence reserve price of a SD variety channel is Bt702 million. The proposal suggests that if there are 11 bidders for these 10 licences, the reserve price will be discounted by 8.1 per cent to become a starting bid price of Bt645 million. If 20 bidders take part, the price will be discounted by 38.8 per cent to become a starting bid price of Bt 430 million. The proposal determines many discount rates depending on the number of bidders.
The broadcasting committee has a plan to auction all 24 licences at the same time on the same day. The auction may be delayed to the fourth quarter this year from the original date in August as the public-hearing process on related regulations may take time.
The ranges of licence reserve prices were calculated from total revenue and expenditure of existing analog terrestrial TV broadcasters, BEC's Channel 3, Royal Army's Channel 5, BBTV Channel 7, MCOT's Modernine TV and the Public Relations Department's Channel 11. It is also based on the estimated advertising revenue of the digital TV channels.
According to the same study, the total proceeds of the upcoming licence auction will be a minimum Bt20.79 billion. The licence term is 15 years. The broadcasting committee will convert the proceeds from the auctions into coupons, which will be distributed to 22 million households to help subsidise their purchase of digital TV set-top boxes. This is to ensure the smooth transition of Thailand to the digital TV era from the analog one.
The broadcasting committee will soon also finalise the limited number of overall licences one bidder can grab from all these four categories. It is mulling whether to allow each bidder to grab one licence from each of only two or three categories.
Industrialists viewed that not only will the move to digital television create billions of baht in investment for the broadcasting business, the advertising industry will also benefit if the new technology results in high-quality content. Of more than Bt135 billion spent per year on advertising, 60 per cent goes into free TV commercials, and that figure does not include cable and satellite television. The expansion in the next couple of years from the current six analog free-TV channels to 24 digital-TV operators will open many more doors for advertisers.