New OTT regulations in Indonesia and Thailand: inching towards a level playing field?
May23

New OTT regulations in Indonesia and Thailand: inching towards a level playing field?

New regulations are on the way that will impact providers of “over-the-top” (OTT) services targeting Indonesia and Thailand. Rapid digitalisation of multiple sectors in Asia is marking the dawn of a new era for policy and regulatory frameworks. Due to the availability of wireless broadband and prolific smartphone usage, OTT services such as mobile VoIP mobile applications, mobile instant messaging, online video and TV, and online music services have experienced unprecedented growth. Traditional onshore broadcasters and telecommunications companies have suffered at the hands of the availability of domestic and foreign OTT services which have cannibalised advertising and viewing figures, often whilst increasing strain on bandwidth. A key challenge in this new era is how to regulate the growing number of onshore and offshore OTT services. Examples include online global video services like Netflix and digital TV channels in Thailand that are broadcasting their programmes on OTT platforms, such as Workpoint and channels 3, 7 and 8. Other OTT services include transportation services like Malaysia’s Grab and Indonesia’s GoJek; communication tools like Facebook, LinkedIn, WhatsApp, Snapchat and LINE; as well as e-commerce platforms like Indonesia’s Tokopedia. Historically, OTT services which reach users via telecommunication companies’ networks have not required a licence or been required to pay any licensing fee; and in the case of offshore OTT services, have not been subject to local taxation. Policy-makers in Indonesia and Thailand are the latest to try to tackle this issue. Both have recently announced plans to introduce regulations aimed at OTT services. In this post, we look at the proposed changes and what they might mean for OTT services in these countries. What has changed in Indonesia? Offshore OTT services targeting Indonesia could find themselves subject to the payment of domestic corporate income tax in the country. The Director General of Tax issued Circular Letter 4/2017, which builds on the guidance set by Circular Letter No. 3/2016. The 2016 Circular states that applications and/or content services delivered over the internet can be provided by a foreign individual or business entity if they have a “permanent establishment” (known in Indonesia as a Badan Usaha Tetap or “BUT”). The primary aim of Circular Letter 4/2017 is to establish criteria to ensure that the owners and operators of foreign OTT services (which make their services available in and generate revenues from Indonesia) will be subject to the payment of domestic corporate income tax set out under Article 17 of Income-Tax Law 2000, equal to a 25% rate of taxable income plus 20% branch profit tax, the latter being a levy payable only by foreign entities. Why is the shift happening in Indonesia? The key driver...

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IP in the Cloud: the South-East Asia Perspective
May05

IP in the Cloud: the South-East Asia Perspective

The fourth industrial revolution is transforming business in South-Asia faster and more dramatically than in almost any other region. Across South-East Asia, from emerging powerhouse economies such as Indonesia and Vietnam, to Singapore, already an established global economy, there is one issue that our clients consistently tell us is their boardroom priority: digital transformation. With the explosion in smartphone adoption, rapidly-improving broadband infrastructure and a generally young, tech-savvy population, the opportunity for organisations and governments to leverage new technologies to improve services and drive growth is clear – whether it is using digital wallet technologies to transform payments in Myanmar, or leveraging tele-health platforms to bring healthcare services to patients in remote locations in Indonesia and the Philippines. Many of these technologies are being built on cloud services, often provided by third party service providers. The cloud offers the ability to expand to new markets or new businesses faster than ever before. However, these new opportunities can come with new challenges and, like every transaction with a supplier, customers need to assess any associated risks . We have covered the region’s increasingly-supportive regulatory environment for cloud adoption in previous posts. This post focuses, instead, on an often-overlooked legal consideration in moving to the cloud – intellectual property (IP). What are the IP considerations associated with a move to the cloud for organisations in South-East Asia, and how can they be addressed? The IP landscape for companies in South-East Asia Let’s start by looking at the IP landscape in the region. There is a tendency to generalise about IP in South-East Asia. This is a mistake. While every country in South-East Asia has an IP regime designed to protect rights holders through patents, copyright, trade marks, and so on, it is still incorrect to assume that there is any real consistency across jurisdictions. Despite efforts to harmonise at an international level, the landscape still differs significantly from one country to the next – both in terms of the underlying legal framework and, even more so, in terms of the approach to enforcement. There is little value in comparing Vietnam, which has substantial room for improvement in terms of its patent system and approach to enforcement against infringers, with Singapore, which has a more-established system and is investing in becoming an IP hub for the region. What this all means for companies who do business across South-East Asia is that the picture is one of fragmentation, uncertainty and risk. Although the commercial team may regard South-East Asia as a single trading area, the legal and compliance team needs to navigate the myriad different legal systems and advise their board accordingly. The...

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Guest Column: Regulating video in the internet age: Pressing challenges, slow movement
Jan09

Guest Column: Regulating video in the internet age: Pressing challenges, slow movement

Video markets in Asia, as in other parts of the world, are being swept by a wave of commercial and technological adjustment to the rise of internet-delivered video, frequently referred to as “OTT” television.  Unfortunately, in most countries adjustment of regulatory policies by governments is way behind. Asia’s cities, in particular, are rapidly being wired for broadband connectivity.  In developing countries like Thailand, the Philippines, Indonesia and India a broad digital divide has opened, with major urban areas enjoying improving connectivity and the countryside still reliant on more traditional modes of video delivery to consumers. That divide is a problem needing attention, but in the meantime urban populations, at least, are enjoying a “sweet spot” of improving broadband and adequate disposable income to pay for services consumers want.  As a result, they have become the object of a “race to serve” on the part of video providers on every scale: • Traditional pay-TV operators are upgrading their VOD offerings and broadening device access to include smartphones and tablets. • At the same time, new entrants are seeking to construct the right content offerings at the right price to win over consumers.  Major global providers (Netflix and Amazon Prime) entered Asia during 2016, and immediately were confronted with the need to adapt a global approach to Asian realities (including lower price points). • A raft of regional Asian OTT platforms have expanded their offerings (including Viu TV, Hooq, IFlix, and Catchplay), alongside a plethora of locally-oriented offerings (like Hotstar, Dittotv and Voot in India, plus Toggle, Monomaxx, Doonee, USeeTV, MyK+, etc., in Southeast Asia.) These market developments have significantly ratcheted up the pressure on governments, who are seeing more and more consumers migrate to lightly-regulated (or totally unregulated) online content supply, and away from the heavily-regulated traditional TV sectors.   Governments are in a quandary – most do not wish to impede their citizens’ access to global information sources, but at the same time they see evident challenges to long-established policies for content acceptability, broadcaster licensing, taxation, advertising etc.   At the extreme, “pirate” OTT services happily locate offshore, respect no rules and meet no obligations of any kind (not limited to copyright authorization), all the while reaping millions in subscription and/or advertising revenues.  Local content industries are crying foul. This very unbalanced competitive landscape causes deep damage to network operators, content creators at home and abroad, and investors in local economies.  In general, it isn’t possible to subject online content supply to outdated “legacy” broadcasting rules, so alternative solutions have to be considered, including self-regulatory approaches (which can gain acceptance from legitimate OTT suppliers, if not the pirate scofflaws)...

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Mapping the Social Commerce Revolution in Asia
Feb24

Mapping the Social Commerce Revolution in Asia

The convergence of social and e-commerce continues apace in Asia. More established e-commerce businesses, led by the likes of Alibaba and Rakuten, are investing heavily in social to maintain growth momentum and give them direct access to millions of users via social networks and messaging apps. One only needs to look at Rakuten’s $900 million acquisition of chat app Viber just last week, and Alibaba’s $586 million investment in the Sina Weibo microblogging platform last year, to see that e-commerce businesses are betting big on social. Across the way, social platforms are finally starting to monetise the retail opportunities that their platforms create. Alibaba’s Sina Weibo investment was seen as an effort to see off competition from its big rival, TenCent, and its messaging app WeChat, which is increasingly active in e-commerce and has a staggering 300 million users. In other parts of the region, fast-growing messaging apps like KakaoTalk and Line are partnering with retailers by offering official shopping channels, discounts and flash sales. Meanwhile, “social first” e-commerce startups are building their businesses right in the area of convergence between social and retail, whilst payment providers like Doku and service providers like aCommerce and Shopify are cashing in on all of this activity. Let’s look at some of the investments, acquisitions, partnerships and startups that are leading the social commerce revolution in Asia. Who? What? Social grabbing a piece of retail TenCent It’s no wonder that Alibaba is investing in social. A clear challenge is coming from its big Chinese rival, TenCent, and its WeChat messaging app, which has around 300 million users. In November 2013, device manufacturer Xiaomi managed to sell 150,000 units of its Mi-3 device in less than 10 minutes – exclusively via WeChat. And much more established businesses are also working closely with WeChat in the social commerce space. Chinese McDonalds fans can now pay for their meals via WeChat. Facebook, Instagram, WhatsApp Facebook is having a good deal of success with so-called “F-Commerce” in the region, taking advantage of the absence of global players like eBay and Amazon. Thailand is a good example. There are 24 million Facebook users in the country. Small and medium sized operators are using the platform to sell an ever-increasing range of products and merchants are now starting to invest in advertising on the platform. The company’s incredible $19 billion acquisition of WhatsApp will see it move into messaging apps and, one imagines, a broader range of social commerce opportunities. The acquisition also hit the share prices of the platform’s Asian competitors, like Line and WeChat. Line Japan’s Line messaging app, with its estimated 300 million users, is...

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The Premier League, Sponsored by…Asia?
Feb15

The Premier League, Sponsored by…Asia?

Asia’s interest in the Premier League is at an all-time high. A population of young, increasingly affluent and increasingly connected Asian fans are following the Premier League in their hundreds of millions. At last count, the Premier League had 820 million fans in Asia, spanning the length and breadth of the continent. Put simply, the Premier League has more supporters in Asia than anywhere else. Asian interest in the Premier League is not new. What is new, however, is the fact that fans in Asia have more money to spend, and more smartphones, tablets and PCs to watch football on, than ever before. The commercial opportunities created by this fanbase have not been lost on Premier League clubs or indeed on Asian brands and broadcasters. Cash-rich brands from Asia are pouring millions of sponsorship dollars into Premier League clubs. Premier League clubs are responding to the opportunity by bolstering their commercial teams to entice brands with increasingly innovative partnership opportunities. Asian broadcasters are in total spending more on broadcast rights than those in any other continent. This report looks at what is driving these developments, highlights some of the deals that have already been done and considers the challenges and opportunities that lie ahead on both sides of the negotiating table. Shirt sponsorships Let’s start with the shirt sponsors. It is fair to say that Asian brands are rapidly buying up the “shirt real estate” of Premier League clubs. Almost a third of Premier League clubs now have an Asian brand as their main shirt sponsor. The 2013-2014 season sees players from six of the 20 Premier League clubs stepping onto the pitch with an Asian brand emblazoned on their chest. The proportion is even higher (eight out of 23) if one includes Wigan and QPR, who were relegated at the end of the 2012-2013 but who continue to have an Asian brand shirt sponsor. Contrast this with the Premier League ten years ago, in the 2003-2004 season, when just one Asian brand was involved as a shirt sponsor, in the form of Chinese telecoms company, Kejian, which sponsored Everton. Let’s look at the deals that have now been done: Club Shirt Sponsor Country Industry Aston Villa Dafabet Cagayan, Philippines Betting and gaming Cardiff City Malaysia Malaysia Tourism Chelsea Samsung Korea Electronics Everton Chang Beer Thailand Alcoholic beverages Swansea City GWFX Hong Kong Financial services Tottenham Hotspur AIA (cup, full shirt sponsor from next season) Hong Kong Insurance Queens Park Rangers* Air Asia Malaysia Airline Wigan Athletic* 12BET Cagayan, Philippines Betting and gaming *Relegated 2012-2013 A growing menu of partnership opportunities on offer The days when shirt, perimeter fence...

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The battle for World Cup TV rights isn’t over yet
Jan30

The battle for World Cup TV rights isn’t over yet

In case it escaped your attention, the FIFA World Cup is a mere five months away. As Ronaldo, Messi and the rest gear up for the world’s single most-viewed sporting event, the battle for broadcasting rights in South-East Asia isn’t over yet. Indeed, the international coaches are not the only ones who are fine-tuning their World Cup tactics: there is plenty for broadcasters in Singapore and Thailand to play for too. Singapore: negotiations heading for extra time? FIFA’s list of media rights licensees around the world reveals a notable omission: Singapore. Broadcasters in more than 200 territories worldwide have closed broadcasting rights deals with FIFA but Singapore is not on the list. The reason is that the country’s two biggest telcos, StarHub and SingTel, have been engaged in negotiations with FIFA over the rights for a couple of years and there is no sign yet that a deal is going to be signed soon. This isn’t the first time this has happened in Singapore. The 2010 broadcasting rights deal was closed just 35 days before the first ball was kicked. There are broadly two issues that would seem to explain the late-running of the negotiations in 2014: Cost: This is the obvious one. FIFA reportedly secured only about 50% of its asking price for the rights in 2010 and may perhaps be seeking more in 2014. The negotiation on price will not be helped by timezones: the matches will be on in the middle of the night. No problem for the hardened football fans but it will undoubtedly hit viewing figures and, by association, the level of interest amongst broadcast sponsors. The cross-carriage rules: The fact that an exclusive licensee is required to make exclusive content available to its rivals across other platforms. This issue came to the fore in 2013 when SingTel was required to allow StarHub to cross-carry the FA Premier League content, after it was determined that SingTel had done an exclusive rights deal for the content (which it disputes). Thailand: free-to-air rights now in question In Thailand, a debate is unfolding as to whether the matches should be available on free-to-air TV. Back in 2012, Thailand’s “must have” rules came into effect. These would require all 64 matches from the 2014 World Cup to be aired on a free-to-air basis. But that is not the end of the story. RS International Broadcasting & Sports Management Co. Ltd, listed by FIFA as the holder of radio, TV and internet rights, argues that  the whistle had already gone on its rights deal with FIFA when the “must-have” rules came into effect. RS closed its broadcast deal back in 2005, well before...

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