29 January, 2019
Content on demand and video on demand, also known as OTT (over-the-top) TV services, quickly generated interest and support from local users after entering Vietnam. In response to pressing complaints from some local service providers that there is unequal treatment between foreign service providers and domestic service providers (domestic providers have many obligations related to content, taxes, and charges that are not imposed on cross-border providers), the Ministry of Information and Communication (MIC) has plans to amend the current Decree 6 on the management, provision, and utilization of broadcasting and TV services. In this regard, the MIC released a draft decree for public consultation from July 23 to September 23, 2018.
After the release of the draft decree, which aims to improve the regulation of OTT TV services and cross-border provision of such services, there were many concerns regarding the potential burdens and unattractive environment the draft could create for businesses and investment. On December 12, 2018, local and foreign chambers of commerce coordinated to organize a workshop to collect comments on the draft decree from stakeholders in the TV industry and relevant state agencies. The draft decree used for this workshop was marked as “Draft 4,” which is the most current available draft to date.
Below is a summary of some of the key contents of Draft 4, and related concerns for stakeholders:
1. Definition of Terms
The definition of radio and TV services has been expanded to include the provision of on-demand content over broadcasting infrastructure to service users. The definition of internet TV services has also been expanded to include services provided via Vietnam-managed websites and internet apps (meaning OTT TV services are covered), and a new definition of on-demand internet content services has been introduced that also includes OTT TV services. On-demand content is defined broadly as “domestic and foreign radio/TV programs including live shows at the time of an event; film and content containing domestic or international audio or visual which meet requirements of relevant laws and regulations of Vietnam and are provided to subscribers on demand.”
Concerns: The very broad definition of terms would lead to a broad and vague scope of application. For example, it is unclear whether audio and visual content created and uploaded by users of social networks, at the demand of others, would be considered as falling into the definition of on-demand content. In addition, it is unclear whether classifying the provision of on-demand internet content under radio and TV services is appropriate and in line with relevant law (i.e., Appendix 4 of the Investment Law, which lists conditional businesses) and international CPC classifications.
2. Licensing of Paid OTT TV Services
Draft 4 sets out new licensing requirements with regard to paid OTT TV services and requires that enterprises wanting to provide paid OTT TV services must be Vietnamese enterprises, and approval in principle must be obtained from the prime minister in respect of foreign investments to establish a company in Vietnam in this field. This may mean that foreign companies cannot provide cross-border OTT TV services to users in Vietnam as they are currently doing, but may have to establish a company in Vietnam. However, the draft does not prescribe any limits or ceilings on the ratio of foreign ownership, which are also not mentioned in Vietnam’s WTO commitments.
One of the conditions for licensing under the draft is that the company must submit the content group category of on-demand content of their services along with relevant copyright agreements for on-demand content.
Concerns: The licensing requirement could be considered a barrier to market entry, and would not be promoting foreign investment and the overall business environment. Instead of following the traditional approach of licensing whenever there is a new type of service provided in the market, the MIC needs to manage based on risk and the mechanism of post-checks. The MIC may also consider an alternative management measure, for example, taxing the cross-border provision of OTT services.
The MIC should consider revising the draft so that instead of submitting the copyright agreement in advance for licensing, service providers can update the list of copyright agreements whenever content is updated.
3. Translation and Editing Requirements for Foreign Content
The duration of a license to edit foreign channels on pay TV services is proposed to be reduced from 10 years to 5 years in Draft 4.
The draft also expands the list of foreign content which must be translated to include TV shows (reality TV, game shows), and the translation and editing must be done by a licensed press agency.
Concerns: Because of the huge amount of constantly updated on-demand content, this requirement will create unnecessary burdens in terms of time and expense, while the quality of the translation and editing is not guaranteed. It may be more efficient and appropriate to consider letting OTT service providers conduct their own translation and editing, instead of using licensed press agencies, provided they bear responsibility for the translated and edited content.
4. Pre-installed Advertisements
Draft 4 does not allow pre-installed advertisement from overseas and requires licensed press agencies to be responsible for the installation of any advertisement in Vietnam.
Concerns: This requirement could be considered a restriction of advertisement from overseas and may violate Vietnam’s WTO commitments, because the WTO commitments do not restrict advertisement from overseas to Vietnam. In addition, with regard to services such as social networks which allow users to broadcast content on demand, it is unclear which entity should be responsible for installation of advertisements.
5. Proportion of Domestic Programs
The draft requires the proportion of domestic programs with regard to on-demand internet TV services to be not less than 30% of the total programs.
Concerns: In order to meet this requirement, either the domestic program production capacity must significantly increase or the content catalogue must be reduced significantly, thus, restricting users’ market access and creating difficulties for enterprises. This proportion should be left for the market to decide.
6. Other Changes
The draft requires certain sports programs having social impact to be rebroadcast over free broadcasting services for certain periods.
Concerns: Enterprises may spend huge amounts of money on the broadcast rights to certain sporting events, and need to recover the costs by re-selling the programs to other companies to rebroadcast.
The draft regulates that the MIC, based on development targets for the broadcasting sector stipulated in the broadcasting development plan, will decide on the number of domestic and foreign program channels.
Concerns: This matter should be left for the market to decide, instead of the MIC.
Outlook
After the workshop, in early January 2019, local chambers of commerce submitted comments to the MIC and the MIC is now revising the draft decree, but no new draft is yet available.
It is worth noting that on the first day of 2019, the government issued Resolution 02/NQ-CP on duties and measures to improve the business environment and enhance national competitiveness. With the government’s strong inclination toward creating a better and healthier business environment, it is expected that many business conditions and licensing requirements will be eliminated or reduced significantly. Therefore, it is expected that the MIC will reconsider the draft very carefully to be in line with government policy to create a more attractive investment and business environment in the broadcasting and TV field.
Because the nature of OTT TV services is different from the nature of traditional broadcasting and TV services, there are also recommendations that the government should consider developing a separate decree on the management, provision and utilization of OTT TV services and online content instead of regulating these services under Decree 6.
For further information, please contact:
Thomas J. Treutler, Partner, Tilleke & Gibbins
thomas.t@tilleke.com
