Communications & Networks

CCID Consulting forecasts the number of China's IPTV users will reach 5.229 million in 2012. CCID's data shows that IPTV users have reached 1.545 million in 1H 2008, as China's telecom operators have still tried to promote IPTV and equipment vendors have provided application support. For example, in June 2008, China Telecom centralized its purchases of 574 thousand IPTV set-top boxes.

However, 2008 is expected to be inflection point. With the telecom restructuring and advent and potential of TD, IPTV will be seeking new areas of development.

Source: CCID Consulting, July 2008

Governmental policy encourages broadcast and telecom convergence, but lacks concrete direction for IPTV in the short term.

In January 2008, China's State Council issued the following "… to encourage broadcast organizations to provide digital TV and value added telecommunication services through national public communications and broadcast TV networks" and "… to support state-owned telecom enterprises and state-owned capital to participate in digital TV network construction and digital TV reception conversion within national investment and financing policies."

This latest issuance is intended to open both broadcast and telecom TV markets, and promote cross-competition. However, IPTV development has had unclear direction for some time. There have been few increases in IPTV areas in 1H08. Where available, user growth has been slow in areas such as Heilongjiang and Henan. Only Shanghai has had rapid growth.

IPTV equipment vendors are turning to other related opportunities.

The most two active participants in China's IPTV value chain are telecom operators and equipment vendors. For vendors such as UTStarcom, ZTE, Huawei, their initial investments have not provided profitable returns due IPTV's slower growth. Therefore, many vendors are turning to other products in 1H08.

For example, UTStarcom is turning towards the video monitoring market. UTStarcom's IPVS technology enables interactive, easy-to-manage video monitoring systems, and has been applied at the city level, in Benxi and Liaoning.

ZTE also launched its “Network Video System”, where video monitoring, video conferencing, visual communications and other services are integrated into a comprehensive package for consumers, SMEs, and commercial users. ZTE's solution has been adopted by enterprise users in Jiangsu, party member education in Hubei, and comprehensive video applications in Chongqing.

Telecom operators are still finding their way in IPTV; CNC and China Telecom adopt different strategies.

CNC (China Netcom Group) has adopted a more cautious strategy in 1H08, while Shanghai Telecom (one of the main subsidiaries of China Telecom) adopted a more aggressive strategy of growing its user base.

After its initial February commercial launch of AVS-IPTV in Dalian, CNC has had fewer IPTV activities since then. Despite AVS-IPTV's relatively complete value chain, including its own intellectual property rights, CNC's investment has been limited due to China's telecom restructuring and commitment to the Beijing Olympics. However, in April, CNC announced its “video network plan,” based on a broadband video platform, in the hopes of attracting content providers to provide content.

On the other hand, Shanghai Telecom strengthened its IPTV promotion in 1H08. Together with SMG, Shanghai Telecom pushed towards high definition, interactive information, and other services. Shanghai Telecom also authorized the Nine City to operate its gaming channel to further enrich content. By the end of June, Shanghai Telecom's IPTV users approached 500 thousand. Whether Shanghai Telecom will find IPTV profitable is yet to be seen.

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Unless otherwise specified, all information provided is sourced from CCID Consulting.

Ó 2008 CCID Consulting Co., Ltd.