Television digitalization is an important part of national information infrastructures, and several developed countries such as the United States, United Kingdom. and Japan have already started the process of television digitalization. Taiwan's five terrestrial television stations, including one public broadcasting station, started their process of digital conversion in 1998, and the government has mandated that the five stations complete their digital conversion in 2006. More than 80% of Taiwan's television households subscribe to cable television and thus it is necessary that cable television becomes digitalized so that the digital television signals can be received by most people in Taiwan. At the present time, most of Taiwan's cable television system operators have converted part of their channels into digital ones and have provided various interactive services to their subscribers. However, recent studies show that most people in Taiwan do not feel the need to have digital cable, and such reluctance to adopt these interactive services slows down the diffusion process (Li, 2001; Liu, Li, & Chen, 2003). By using Rogers' (1995) diffusion of innovations model, this study attempts to understand the factors that influence the adoption of interactive cable television services and to help policy makers and system operators know how to market these services and accelerate the diffusion of digital television in Taiwan.
The development of cable television in Taiwan has been very similar to that in the United States. Cable television, originally used as a community antenna, is now becoming an extremely strong competitor to Taiwan's five terrestrial television stations. However, Taiwan's cable television differs from that in the United States because only basic cable is available in Taiwan and system operators put all channels (more than 70 channels), including HBO, Cinemax, and other major networks, into the basic cable tier. Although cable television was legalized only in 1993, the penetration level has jumped rapidly from 20% in 1993 to more than 80% in 2000 (Chen, 2002; Liu & Chen, 2000). As cable television has reached a saturation point, cable system operators have tried to reorganize their channels into basic cable, pay cable, and pay-per-view tiers to create new revenues. Nevertheless, subscribers are accustomed to having all channels in their basic cable, so they generally oppose paying extra money for the same channels (Liu & Chen, 2001).
However, the situation in Taiwan has recently been changing, which makes channel reorganization necessary for cable television system operators to survive. First of all, a revision of Taiwan's Cable Television Law in 1999 placed a cap on the monthly cable fee, thereby preventing the monthly fee for basic cable television from exceeding 600 NT dollars (about 18 U.S. dollars). System operators incur a great deal of programming cost when putting more than 70 channels into basic cable. Secondly, cable television system operators have been facing more competitors in recent years. In addition to DBS operators, several Internet service providers have been offering video services to their subscribers. Therefore, digitalization has become necessary for cable television system operators because it allows them to strengthen their competitiveness (GIO Report, 2003; Li, 2001; Liu & Chen, 2001).
The diffusion of digital cable in most countries is still in its initial stage and is critical for the completion of television digital conversion. Therefore, the findings of this study will allow policy makers in other countries to obtain a better understanding regarding how to accelerate the adoption of digital cable. In particular, these results will be a valuable reference for those countries in which cable television has a high penetration rate. Digital cable is a newly emerging innovation that offers more powerful functions than other innovations. Hence, the findings of this study allow us to examine the applicability of the predictions derived from Rogers' diffusion of innovations model for digital cable. …