Across from the Taipei Railway Station, one of the most bustling landmarks in Taiwan's capital city, SNG (satellite news gathering) trucks line up in front of the Chong Sheng Building, ready to head out in pursuit of a breaking story. The location was once the birthplace of Eastern Multimedia Group chairman Gary Wang's dreams.

In 2006, Wang, sitting in the Eastern Television headquarters in the imposing building, described his vision of a media empire to CommonWealth Magazine. Leaning forward unable to contain his enthusiasm, Wang extended four fingers to make his point. "In four years, the world's three biggest media headquarters will be in Beijing, New York, and Taipei," he boldly predicted.

He not only was bullish on digital development in Taiwan, he also envisioned Taipei as Asia's telecommunications hub.

But times have changed dramatically over the past six years. Wang was imprisoned at one point and remains embroiled in a legal battle over his role in the embezzlement of NT$41.2 billion from the Wang family business – the Rebar Asia Pacific Group – between 1998 and 2007. Wang was originally sentenced to 18 years in jail, but his jail term was reduced on appeal to five years and eight months in late October 2011. The verdict can still be appealed.

Yet despite his legal entanglements, Wang today has emerged as a critical partner of the Tsai family, who control the Want Want Group in a fierce battle against a different family also with the surname of Tsai, who control the Fubon Group  to build the dominant telecommunications and media empire in Taiwan. The struggle, once confined to competing cable TV systems, has now extended to other sectors, and Wang's hands seem to be everywhere.

Gary Wang's Pivotal Position

In 2010, Daniel Tsai, the head of the Fubon Group, and his brother Richard Tsai, chairman of Fubon Group subsidiary Taiwan Mobile, formed a separate company called Da-Fu Media Technology Co., Ltd. to get around regulatory constraints, and invested NT$65 billion of their own money to take over cable TV operator Kbro Co. Kbro was once known as Eastern Multimedia Co. and belonged to Wang.

In the competing camp, Want Want Group chairman Tsai Eng-meng had his son Tsai Shao-chung found Want Want China Broadband, which is set to acquire  Taiwan-based China Network Systems Co. and its network of 11 cable system operators for NT$73.5 billion. Behind the scenes helping put the deal together was Gary Wang.

"(Wang) has never abandoned his dream," says one scholar who has long followed the business tycoon's moves.

Neihu District, in the northeastern part of Taipei, stands out as Taiwan's media and technology center and is also the epicenter of the battle of the two Tsai families. The 1-kilometer stretch between Ruiguang Rd. (where Kbro is headquartered) and Minquan East Rd., Section 6 (where the China Times Group, the Want Want Group's media property, has its offices), is the main battleground in the competing families' quests to emerge as Taiwan's king of cable.

The Tsais' media businesses have a combined 54 percent share of domestic cable TV systems, controlling the television sets of 2.73 million households or nearly 10 million viewers.

The Fubon Group's diversified portfolio gives it extensive media market penetration. From subsidiary Taiwan Mobile's 6.57 million mobile phone users and its Momo home shopping network and Momokids channel, to its cable TV network of 1.66 million households, representing a 32 percent share of the domestic market, the Fubon Tsais can reach the eyes and ears of over 10 million people, or nearly half of Taiwan's population.

The Fubon Tsais: Going after Chunghwa Telecom

Daniel Tsai is truly invested in this battle, according to Kbro chairman James C. Jeng.

"This new digital convergence media is (Daniel Tsai's) greatest dream," says Jeng. Every two weeks, he spends half a day at Kbro's offices discussing the company's future moves with its executives. "There's a lot of pressure  because the chairman keeps a close eye on things at all times," Jeng explains.

Daniel Tsai, in particular cares about the "delivery channels" at the center of the digital convergence revolution.

Weber Lai, president of the Taipei-based Chinese Communication Society and also an associate professor with the Department of Radio and Television at National Taiwan University of Arts, says the Fubon Group chief's ambition has always been clear. He knows he cannot dislodge Chunghwa Telecom from its perch at the top of the industry, Lai says, so he has taken the roundabout route of leveraging Fubon's cable TV network to occupy the "last mile" of access to the customer, hoping to use his broadband edge to offer a genuine "quadruple play" experience more quickly.

In a quadruple play network, subscribers need only a single account to access information or content from the cloud through their mobile phones, televisions, computers or wireless tablets.

The Want Want Tsais: Shooting for Media Influence

Want Want's mastermind Tsai Eng-meng has decidedly different ambitions. He wants to build a vertically integrated "media conglomerate" encompasses newspapers, magazines, terrestrial and cable TV channels, Internet sites, and also cable TV systems.

Acquiring China Network Systems would enable the Want Want Group to control the televisions of 1.3 million households, raising concerns among Taiwanese  scholars that the group might use its media influence to affect public opinion.

National Taiwan University (NTU) economics professor Show-Ling Jang became especially alarmed after reading a report by National Communications Commission (NCC) members Chung Chi-hui and Weng Hsiao-ling, calculating themedia concentration the Want Want Group would achieve if its acquisition of China Network Systems were to receive formal approval. The report was based on standards the NCC members learned from a fact-finding visit to the German Commission on Concentration in the Media (KEK).

Based on standards of media influence developed by KEK, Jang found that the audience penetration of all of Want Want's media subsidiaries in Taiwan had reached 140 percent.( see table ) By comparison, the German government has mandated that when media conglomerates' KEK "viewer ratings" exceed 30 percent, they are not allowed to make any further acquisitions in the media sector.

Allowing a single group to control an entire country's discourse erodes the possibility of a diversity of perspectives in the media. Zhang Jin-hua, a professor in NTU's Graduate Institute of Journalism, worries about Want Want's potential dominance of the market, especially because media influence is cumulative and has a synergistic effect.

Still, calculations for the Want Want China Group's "media concentration" based on the KEK standard have proven controversial. If Want Want's subsidiary cable channel agents and cable system operators as well as Gary Wang's Eastern Multimedia Group are set aside, the group's KEK value falls to 22.3 percent. Because of the discrepancy, the NCC, which regulates the media, has yet to come to a decision on Want Want's acquisition of China Network Systems.

"We don't understand it either," said Tsai Shao-chung when asked about the situation by CommonWealth Magazine. But for all practical purposes, Want Want China Broadband already seems determined to move forward in the cable TV realm.

Huge Gross Margins

Behind the Tsai families' ambition to build media empires is the most basic of incentives: profit.

Former Financial Supervisory Commission chairman Shih Jun-ji has had no fewer than 300 meetings with cable TV system operators over the past 15 year, and, based on information he collected from cable system operators' public financial statements, he was shocked to discover how high gross margins were in the industry.

Based on average annual revenues of NT$620 million for individual system operators, Taiwan's multi system operators (MSOs) have annual revenues of NT$37.2 billion and gross profits of NT$15.6 billion, for a gross margin of roughly 42 percent.

In the case of the Fubon Tsais, for example, their 1.66 million subscribers generate an estimated NT$830 million in cash for the conglomerate every month, based on average monthly cable fees of NT$500.

Assuming a 30-40 percent gross margin, the group earns over NT$300 million a month or more than NT$3.6 billion a year from subscriber fees alone, not including other sources of income such as "slotting fees" (where channels pay to appear on a cable TV network), and advertising.

"This is simply a high profit industry," says Lih-Yu Lin, another professor in NTU's Graduate School of Journalism.

More worrying to Shih has been the "constant resale" of subscribers as part of mergers and acquisitions in the industry. Over 10 years ago the cost per household subscriber was NT$15,000, but it rose to NT$35,000 six years ago when the Carlyle Group bought Kbro from Gary Wang, and has now been driven up to NT$60,000 per household as the two Tsai clans vie for market share.

In fact, the cable TV speculation game seems to rear its ugly head once every five to six years.

Eastern Multimedia Co. is a typical example. Wang sold it to the Carlyle Group in 2006 for NT$46 billion, and five years later, the global asset management firm unloaded the company, renamed Kbro, for NT$64 billion, turning a net profit of NT$18 billion.

In this industry of high margins and high resale values, the operators "are simply using a high degree of financial leverage to earn huge profits," says Shih, who predicts that another major consolidation wave will hit the domestic cable market in 2016 or 2017.

Chen Ching-ho, dean of the College of Journalism and Communications at Shih Hsin University, says that today, many small cable TV operators are waiting for suitors.

Veteran actor Wei-Chiang Wang, who is also a TV channel operator, laments the changes the clashes of the tycoons are bringing to the industry.

"Nowadays, it's all businessmen, entrepreneurs and conglomerates who are running media companies and treating media as a profit ‘tool.' Nobody is thinking about how to make program content better," Wang says. The situation is the same everywhere, he contends, from television stations to system distributors.

Seated in his office on Ruiguang Rd., not far from the headquarters of Kbro, Wei-Chiang Wang, the president of a union of radio and television producers, recall  that Taiwan was once known as the "Kingdom of the Drama." But now, Wang says, he cannot think of any good productions that have come out recently.

Competing to Be the Media King

Though Taiwan may be in a creative slump at the moment, 2012 still stands out as a critical year for media and related sectors.

In July, Taiwan will shut down all of its terrestrial analog TV signals, and its terrestrial stations will go digital. This initiative has also set targets of 50 percent of cable stations being digitized by 2015 and 75 percent by 2017, with the aim of bringing high-definition television to the country's 5.08 million cable subscribers.

The potential opportunities created by the digitization push have prompted accelerated corporate maneuvering within the industry. The war between the Tsai families will likely intensify and turn fiercer after Taiwan's presidential election on Jan. 14.

"In 2011, we invested NT$3 billion in fiber optic cables for our cable TV system. This year, we will produce a high-definition drama series," says proudly Kbro chairman Jeng, who once studied the most advanced telecommunications technology at Bell Laboratories in the United States.

Aside from focusing on "distribution," the Fubon Tsais are clearly planning to enter the "content" arena. Their ultimate goal is to build a digital convergence ecosystem that would consolidate the entire chain, from content production and platform development to distribution channels, in their hands.

The Want Want Tsais, who already have a major media presence, envision gaining greater control over distribution by pledging to invest more than NT$7 billion in installing digital set-top TV boxes for subscribers.

Yu-pei Chao, the special assistant to Want Want China Broadband's chairman, admits that the company's real target is businesses that can be created outside traditional television services. "Among them, the telecommunications pie is the biggest," Chao says. The next step for the Want Want Tsais is to search for a partner in the video phone business.

The Victims of the War of the Tsais

To Taiwan's biggest telecom operator, Chunghwa Telecom, the expansion of the two Tsai-family conglomerates must seem like the approach of powerful armies invading its territory.

But in the past two years, the telecom giant's own MOD (media on demand) system has added more than 200,000 subscribers a year thanks to the efforts of Huang Zih-han, head of the company's operations in northern Taiwan, and should surpass 1.06 million subscribers this year. Squeezed between the two large cable TV conglomerates, Chunghwa Telecom is patiently carving out its own path to survival.

In the future, the company intends to bring MOD content and services "to not only televisions but also smartphones, tablet computers and notebook computers and provide "cross-platform services," Huang stresses.

The problem with these initiatives, however, is that companies are moving faster in this new world of digital convergence than the government.

While the two Tsai conglomerates plot strategies to emerge as the "telecommunications and media king," the regulatory NCC faces an unprecedented challenge in trying to promote the industry while balancing many interests, and NCC chairperson Su Herng is feeling the pressure.

"We have seen that the industry's development is irreversible  and we've also seen the bright side of the industry's development ," Su says. According to statistics from the International Telecommunication Union, the United Nations agency for specialized information and communication technologies, 10 percent growth in digital platforms can generate additional GDP growth of 0.75-1.38  percent and increase national income by about NT$129.1 billion.

But laws meant to regulate the industry have been unable to keep up with rapid changes in technology. From Da-Fu Media Technology's acquisition of Kbro to Want Want China Broadband's pending purchase of China Network Systems, the entry of ever larger conglomerates into the telecommunications and media realm and their cross-sector operations have made it nearly impossible for the NCC to fulfill its regulatory responsibilities.

Critical Decisions in a Big Year for Digitization

"Right now, you have old laws trying to control new technologies," observes the Chinese Communication Society's Weber Lai

The most obvious example of the problem spawned by incomplete laws was the decision to approve Da-Fu Media Technology's acquisition of Kbro but bar it from operating a news channel for three years. The problem is that if the NCC approves the purchase of China Network Systems by Want Wang China Broadband, which already operates a news channel, its restriction on Da-Fu Media Technology will be unfair.

Lai, who has been busy recently participating in seminars on the issue, laments that the laws everybody from academics to industry insiders want amended have not been touched. "The progress the Legislature is making in revising laws is really too slow,"Lai complains.

That's partly because of the many vested interests that need to be balanced, including within political parties and the commercial interests supporting them behind the scenes.

Another problem is that Taiwan, as it rushes to catch up with others in the digital convergence arena, faces increasing demands for cross-media ownership.

Su Herng, who heads the agency responsible for regulating this new media age, says government policy encourages cross-media ownership, but the regulatory environment to deal with it "is not yet ready."

Many questions remain unanswered. Who will be the target of cross-media services? What kind of influence will it have? Will cross-media ownership limit the diversity of opinion?

"Existing law is obviously inadequate," Su says.

As a consequence, one scholar says, "when (the NCC) reviews a proposed merger, it can only focus on the case itself. There are no general principles or rules to fall back on." Without a long-term strategic direction, every merger becomes a messy fight, the scholar says.

Ultimately, it's up to the government to find a happy medium between the sector's development and the public interest. The government needs to decide in the near future whether it will follow Japan and Korea in promoting a system where big conglomerates manage the production of high- quality programming, or opt instead for the anti-trust systems found in Britain and the United States and strengthen the role of public media.

"The government must play a role. It cannot be led around by the nose by operators," says Cliff Lai, co-president of Taiwan Mobile, expressing most people's concern over the messy battlefield that exists in Taiwan today.

Translated from the Chinese by Luke Sabatier