SINGAPORE BROADCASTING CORPORATION LICENCE FEE INCREASES

6.20 pm

Mr S. Chandra Das (Chong Boon): Mr Speaker, Sir, I have obtained the right to raise a matter of public concern on the Motion for the Adjournment today. I am really sorry the Member for Anson lost in a very democratic ballot and I would urge him to continue to try and not to seek special concessions for himself.

Sir, on the question of SBC licence fees, let me at the outset refer to what the then Hon. Minister for Communications and Acting Minister for Culture said in moving the Second Reading of the Singapore Broadcasting Corporation Rill in this House on 21st September 1979 and I quote:

'The reason for converting RTS into a statutory body is to free the Department of Broadcasting from administrative and financial constraints so that the organisation can expand and develop into a lively radio and television station.

The Singapore Broadcasting Corporation as a statutory body will have the authority and flexibility to recruit artistes, producers, script-writers, choreographers and other personnel, and to determine their emoluments, to improve and expand services, facilities and equipment, and to acquire new technology in accordance with the needs of the broadcasting services.

Financial support from the Government is vital if the Singapore Broadcasting Corporation is to develop into a reputable organisation capable of producing good quality programmes. The Corporation, by its nature, performs a public service and cannot be entirely profit-oriented.'

Sir, the Singapore Broadcasting Corporaion is now in its fourth year of existence as a statutory board. With the policy, operational and financial flexibilities of a statutory board, one must assume that the SBC today is a better organization than its former self, Radio and TV Singapore (RTS).

Now I propose to examine only the financial performance of SBC. I am just confining myself to that. According to the SBC's published Annual Reports, the Board has been notching up significant surpluses since 1981. SBC's first fiscal year covered a period of 14 months from 1st February 1980 to 31st March 1981. For the year ending 31st March 1981, SBC had an operating income of $65.5 million with $50.4 million or 77% originating from advertising, $13.1 million or 20% from licence fees and $2 million or 3% from other income. In 1984, revenue from new licence fees would contribute about 33% of operating expenditure compared with 29% in 1983. With an operating expenditure of only $48.7 million, SBC recorded a surplus of $14.3 million.

In 1982, the operating income shot up to $78 million or an increase of 19% over 1981 while operating expenditure rose to $57.6 million, up 18%.

Sir, from the statistics, one cannot but conclude that the SBC has not only been very lively as the then Hon. Minister said when moving the Bill but extremely profitable. As at 31st March 1982, SBC had an accumulated surplus of $34.5 million. Moreover, one notices a hefty sum of $51.5 million sitting in fixed deposits in banks.

Aside from these surpluses, with the revised licence fees, SBC is expected to earn another $11.2 million, further aggravating the burden of its existing surpluses. Incidentally, the additional income from the new rates alone would be adequate to finance the forthcoming Channel 12 which has an estimated annual operating cost of $3 million for about 3 1/2 years.

Sir, let us now look at the experience of other countries. I have taken the liberty of circulating a Table (Cols. 397 - 398) which shows the licence fees that are charged in the United Kingdom, Japan, Australia, Hong Kong, Taiwan and South Korea. From this Table we can make two significant inferences. First, in all these countries where TV stations are both commercially-sponsored and government-sponsored, the licence fees are either free or optional or distinctly lower than the rates in Singapore. The only exception seems to be the United Kingdom where the licence fee is about $140 per annum compared with $80 in Singapore. Sir, with the o falling, we may catch up with them very quickly! Table - A COMPARISON OF CTV LICENCE FEE IN SELECTED COUNTRIES (Cols. 397 - 398)

The other significant observation is that radio and television in these countries are financed by grants from governments or strictly from commercial advertisements.

Mr Speaker, Sir, from the figures I have given you, it is clear that SBC has to find better and more innovative ways of financing its operations. To my mind, the options open are broadly as follows:-

(1) It has to improve its productivity through manpower training and upgrading, thus reducing expenditure. I have no doubt that SBC will continue to step up its efforts in this direction.

(2) Increase its revenue from commercials. Sir, here I would commend the SBC for its proposal to introduce what has been dubbed as "prime-time advertising" within the peak newscast periods. According to a newspaper report, this innovation of introducing commercial breaks into its daily English and Mandarin news bulletins is expected to rake in an additional $15 million per annum for SBC.

(3) The third option is of course to increase licence fees. Here, I am afraid that SBC has succumbed to the "soft option" of passing the buck to the consumers without exhausting the other potential sources of revenue, particularly TV commercials. It would be interesting if the Minister could tell us the financial cost and the manpower incurred to administer and collect licence fees, apart from the cost incurred by the law enforcement agencies to police the scheme. At this juncture, I would like to make the point that the SBC is a state monopoly and should avoid the temptation to resort to price increases at the slightest opportunity. Perhaps it should take note of other statutory boards like Telecoms, including the PUB, where savings from technological advances and oil price fluctuations have been passed on immediately to consumers.

(4) Sir, the fourth option is to allow for some form of limited competition. At the moment, there is some form of competition from a neighbouring country. In fact, Singaporeans can own a colour television and watch TV programmes without having to switch on to SBC. Consumer feedback suggests that some of these foreign programmes are quite good. Perhaps SBC might want to give such consumers a discount on the existing licence fees!

Sir, let me refer again to the Table and examine the competitive co-existence of both government-sponsored as well as commercially-sponsored radio and TV stations or channels in those countries. We can form the following inferences again.

(i) The general indication is that such a limited competition has compelled both sectors to be efficient in terms of producing better programmes for the consumers.

(ii) It is generally accepted that competitive co-existence between government and commercial broadcasting does not necessarily undermine specific or general national and governmental objectives or priorities. The Hong Kong Commercial TV, for example, is a case in point. In both cases, conditions have been laid whereby the station must dedicate a certain amount of air time for public affairs and educational programmes.

I am not suggesting, Sir, that commercialization will solve all our problems. Neither am I suggesting that we allow free market forces to run wild. Rather, I am merely proposing that we study the feasibility of introducing some form of competition to further enhance SBC's efficiency.

(iii) Apart from the element of competition, an alternative commercial arrangement could bring in financial advantages. For example, corporate taxes from a commercial station or channel could be used to cross-subsidize SBC's expenditure. Moreover, if SBC were to lease one of its channels or existing channels to the private sector, then the revenue could offset SBC's operating deficit or reduce the extent of Government subsidy. 6.30 pm

I must admit, however, that there is a strong case for a certain amount of Government subsidy for an intangible service like radio and TV broadcasting. The key issues are to ensure the efficient use of public funds and to reduce the direct financial burden of Government and the indirect burden on the wage earner.

Sir, in conclusion, I would like to just comment that over the last six to eight months, Singaporeans have been subjected to a spate of price increases from the Government sector. It would appear that the Government was the pace-setter for our domestic inflation. In fact, many of my constituents have even suggested that the income tax reliefs granted over the years have now been more than offset by the various price increases. No one, I must concede, quarrels with some of the price hikes associated with specific Government policies, such as car population control. However, increases in SBC's licence fees do not appear to go down too well with the grassroots. One can think of several reasons for this adverse grassroots reaction towards price increases. One possibility could be the speed and proximity within which the various increases were implemented. This "batching together" has understandably created a sense of anxiety over perceived falling standards of living.

At this juncture, may I suggest, Sir, that the Government monitor closely all proposals for price increases, specifically those by Government departments and statutory boards. Taken by itself, certain price hikes or proposals can be justified. However, unless there is some form of coordination, the cumulative burden of a series of price hikes within a short period of time can create a lot of anxieties, especially among the lower income groups.

Last but not least, Sir, I would like to add that the interests of our consumers have not been totally neglected. Here, I would like to commend the Consumers' Association of Singapore (CASE) for coming out openly to protest, for the first time, against a major Government price increase.

The Minister for Foreign Affairs and Minister for Culture (Mr S. Dhanabalan): Mr Speaker, Sir, first of all I would like to thank the Member for Chong Boon for bringing up this matter because it gives me an opportunity to explain the recent TV and Radio licence fee increases. The broadcasting service that SBC provides is a public service much like other public services. The cost of operating this public service must be borne by the beneficiaries. In the case of SBC, the beneficiaries are the listeners and the viewers and the advertising clients. It is true that SBC has accumulated a surplus and that this surplus has been achieved in spite of major organizational changes, massive inputs of personnel in administration, programme production, technical areas, recruitment of performing talents as well as very substantial investments in engineering facilities and in premises. For example, the personnel employed by SBC now stands at about 2,600 compared to 1,300 when SBC was established and took over the staff and facilities from RTS. New equipment and facilities of more than $30 million has been invested. TV output, since SBC was established, has increased from 104 hours a week to 116 hours a week. But what is even more significant is that local production of TV programmes increased from 26 1/2 hours a week to 42 1/2 hours a week. When SBC was established local production accounted for 27% of all telecast and now local production accounts for 37%.

Since TV licence fees have not increased since 1978, these increases have obviously been funded from other sources and SBC certainly did not resort to any soft option or to increasing licence fees at the first opportunity, as suggested by the Member for Chong Boon, Firstly, SBC has been successful in increasing advertising revenue which accounted for 65% of SBC's total revenue. This figure is before the increase in revenue as a result of the licence fee increases. Rates for commercials have been increased four times since January 1980. Advertising revenue has increased from about $20 million in the fiscal year 1979/80 to $72 million in the fiscal year 1983/84, the last figure, of course, is an estimated figure. This increase has been possible because of better programmes, improved scheduling and strong sales effort to optimize air time sales for programmes that draw a large viewership, or in the case of radio, listener- ship. Innovative and aggressive marketing increased SBC's share of the total advertising expenditure in Singapore from 26% in 1979 to 29% in the last fiscal year.

The second major source of funds for SBC has been Government grants, and this was as agreed by the government when SBC was established. All new investments have been funded by Government grants. Government has approved an allocation of $67 million, since SBC was established, to fund various capital projects. In addition, as agreed again when SBC was established, all replacement of old equipment is for the account of SBC. Since SBC was established, it has spent $12 1/2 million to replace old equipment. I must point out that the replacement of much of the equipment cost more than the original cost of the equipment which SBC took over from RTS.

New sources of revenue have also been explored. SBC set up a Commercial Production Unit to produce commercials which were produced on tape instead of the more expensive method of producing them on film. These taped commercials are, of course, used over SBC. The Corporation also set up a Publications Unit. These two units have contributed $4 to $5 million per year to SBC's revenue. Thus it is not true that SBC has increased its fee at the slightest opportunity. All these measures which SBC has taken will continue to be pursued and SBC will constantly look for new sources of revenue.

Why then have we increased licence fees, especially in the light of the fact that SBC has surpluses?

Firstly, we cannot assume that revenues will continue to increase. Costs will increase with improvements in programmes. Costs of manpower and talent and acquired programmes will increase. I have already pointed out that replacement costs of much of the equipment will be much more than the original cost at which they were taken over by SBC. As SBC acquires better and better programmes from abroad, costs are bo(ind to increase. As an example, Sir, the Singapore public likes to have attractive feature films during holidays. SBC used to telecast films that cost $2,000 to $3,000 per film. Lately, we have tried to purchase or lease more up-to-date films, and this can cost as much as $15,000 to $20,000 each. This money, of course, has to come from somewhere. Members must note that whether one person watches a programme or 10 million watch a programme, the cost of telecasting is the same. But the revenue varies according to viewership. This is limited by the size of the population. In the case of Singapore this small population is further restricted by being segmented into four language groups. So the potential for revenue is not as great as in many other countries. Further, if we want to maintain a balance between popular entertainment programmes and programmes of high educational, informative and cultural content, the scope for advertising revenue must be limited.

Prudent controls have enabled a reserve fund to be built up by SBC. Given the slow world economic recovery and if the trend in the rate of growth of expenditure outpacing the rate of growth of income continues, SBC's reserves will soon be depleted.

All the parties involved in broadcasting have had to pay more. Advertisers have paid more. SBC has paid more in purchasing foreign programmes as well as in the production of local programmes. Only the viewer has had his fees at a constant level since 1979 for TV; and since 1938 for Radio. Any further delay in revising the Radio and TV licence fees will simply mean that when the revision is actually done, the increase will be so substantial that it will give rise to a hue and cry. It is preferable all round if the necessary revision in the fees were made in periodic and gradual steps.

The TV licence fee must, of course, be seen in proper perspective. The fee of $80 per year for colour TV, for example, means 22 cents per day. And what does the viewer get for his 22 cents a day? He gets a choice of 17 hours of TV, 93 hours of Radio and 200 pages of SBC Text. I think, by any criteria this is very good value for money. Singaporeans are not hesitant about spending money on entertainment. It is estimated that about one-third of the households in Singapore have video tape recorders. It costs $5 to $8 to rent a feature film or serial of only 1 1/2 to 3 hours. And many are spending $40 to $100 a month to hire video cassettes. So I cannot understand this wringing of hands over 22 cents per day.

In any case, Sir, we have not increased the fee for monochrome TV sets, or black and white TV sets. For those who own black and white TV sets to be considered as the poor who need special treatment speaks very much about how far Singaporeans have come in their expectations of what they ought to have.

The Member has quoted licence fees of other countries. This game of comparison, of course, can be played by more than one without any conclusive results. I can quote that apart from the UK, the fee in Italy is $118, in Denmark it is $250, in Austria it is $203. These are all countries With a larger viewership and thus have a larger advertising revenue potential. So we cannot really prove anything by making these comparisons.

Coming to the penultimate point that the Member for Chong Boon made, ie, the introduction of commercial station in order to have some competition, I will not deny that competition can increase efficiency and improve productivity and even generate new ideas in radio and TV broadcasting in Singapore. But that is only one side of the coin. The main factor in Singapore is a limited market and very limited supply of talent. Two stations competing for programmes from overseas, including direct telecast of important events, will only increase costs, not quality. For example, two stations competing for the FA Cup Final or the Wimbledon Final will mean that finally at the end of the day we pay more but we are not going to get anything more than one Final for paying more.

The same goes for the expertise and talent. An increase in cost will not necessarily mean an increase in supply or quality. Hong Kong was mentioned as an example of a place which has more than one TV station competing on a commercial basis. In Hong Kong there was, in fact, a Third TV company which went into receivership, and Hong Kong has a much larger population than Singapore and virtually a monolingual market. Even with foreign capital and expertise, one of the remaining two companies in Hong Kong is barely able to stay afloat. I am sure Members must have read some of these things in the newspapers. What is even more significant is that cut-throat competition in Hong Kong television has led to programmes that are increasingly difficult for us to accept in Singapore. It is because of this that we have to place special emphasis on building up our Chinese drama production unit in SBC. Even in serious programmes,, for example in America, when it comes to News and other informational programmes, because of severe competition, there is a tendency to indulge in sensationalism and to attempt to be hypocritical of every move by the Government in order to attract viewer attention - all to the detriment of the society. If commercial considerations are paramount, there is no doubt about the quality of programmes that we will get. Members have just to look at the kind of films screened in our theatres and the kind of films that have long runs and they will have an idea of the quality of the films that will be featured if commercial considerations are paramount.

The impact of TV as a media is immense. The cumulative effect of sustained weekly programming of popular TV shows that can deliver mass audiences to the advertisers must mean that shows will appeal more and more to baser tastes. This is one of the unfortunate effects of making commercial considerations the paramount consideration. Such a development will completely negate the kind of values which are relevant to our survival and progress. I would therefore not favour at the present juncture a private commercial channel.

The last point made by the Member for Chong Boon is about the series of increases as a result of Government decision. I want to assure the Member that no increase by Government or a statutory body is introduced without thorough consideration. In fact, the Ministry of Trade and Industry has to first study each increase for its impact on the cost of living before it is approved. And the Ministry of Trade and Industry continues to monitor such increases and the consequences of these increases.

Question put, and agreed to.

Resolved,

That Parliament do now adjourn.

Adjourned accordingly at Thirteen minutes to Seven o'clock pm to a date to be fixed.