China IPTV update

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 |  Includes: CHA, CN-OLD, CTRP, OBAS, PCW, SINA, SNDA, UTSI
by: Ezra Marbach

Details:


Background on IPTV

  • See here for a March 2005 piece from The China Stock Blog entitled "IPTV: China's next big Internet growth opportunity".

Recent Developments

  • The State Administration of Radio, Film and Television (SARFT) announced
    that the first Internet television (OTC:IPTV) license was granted to
    Shanghai TV Station, a subsidiary of the Shanghai Media Group, the
    mainland's second largest media organization.

Shanda Interactive (ticker: SNDA) and IPTV

  • According to Forbes, Shanda Interactive (ticker: SNDA) wants to be a major media
    company. In order to reach that goal it is attempting to reach the mass
    audience of 330 million people who own and watch televisions. Shanda will soon unveil
    a new interactive entertainment box called the Shanda Station that will
    allow TV viewers to go online, play Shanda's games and buy music and,
    eventually, films. The product connects to the Internet over high-speed
    DSL phone lines. While Shanda's interactive box saves Chinese consumers
    from buying personal computers, they may balk at the $18 monthly cost
    of a broadband connection and fees for music clips and game
    subscriptions.
  • Shanda (ticker: SNDA) CEO Chen Tianqiao is reportedly in negotiations with Stockstar, Taobao and Ctrip (ticker: CTRP) regarding IPTV services. Discussions with Stockstar, an online stock and financial information
    website, are focused on allowing users to trade
    stocks through IPTV; discussions with Alibaba's online auction subsidiary Taobao are focused on enabling its electronic shopping platform through IPTV; and discussions with Ctrip (ticker: CTRP) are focused on offering ticket booking services through IPTV. Shanda will
    also integrate its IPTV service through cooperation with Intel and Changhong
    on hardware, and China Telecom (ticker: CHA) and SARFT (see above) on infrastructure. Shanda
    believes IPTV can be profitable from the start.

Other Public Companies Competing in the IPTV Space

  • Optibase (ticker: OBAS), a provider of encoders that enable IPTV discussed IPTV in China during its Q1 2005 earnings results conference call. Optibase already has an
    agreement with China Netcom (ticker: CN) allowing it to offer IPTV services.
  • Tut Systems (ticker: TUTS) has a distribution deal with Chinese equipment giant Huawei Technologies.
  • China Cable and Communications (ticker: CCCI.ob), a Chinese cable TV company recently announced an IPTV joint venture agreement.
  • IPTV middleware provider, Orca Interactive has forged a partnership
    with Hewlett-Packard's (ticker: HPQ) HP China Consulting &
    Integration Services to target China's service providers.
  • Orca is seeing competition in China from some small local players,
    in-house development teams at the large telecom carriers, Huawei, and
    UTStarcom (ticker: UTSI).
  • See below for the latest activities of China Telecom (ticker: CHA), China Netcom (ticker: CN) and PCCW (ticker: PCW)

From an Article Entitled "China Shapes Up for IPTV"

IPTV Expected to Grow

  • IPTV market is still young.
  • Increasing signs that IPTV is quickly spreading in China.
  • Broadband penetration increasing rapidly - 25.8 million subscribers, including 17 million DSL users at the end of 2004.

According to IDC

  • Fewer than 300,000 IPTV subscribers in China by the end of 2005, but 9 million in 2008.
  • IPTV provides tremendous opportunities to broadband service providers.
  • Content providers are the keys for the success in providing IPTV service (Think: Sina, Ctrip and Taobao in discussions with Shanda mentioned above).

Telecom Companies Forging Ahead

  • There is a major disagreement between Ministry of Information Industry (MII) and SARFT as to which administration should be issuing IPTV licenses.
  • With high-ranking government officials focused on issues relating to the release of 3G licenses, little attention will likely be given to IPTV for the foreseeable future.
  • In the meantime, the major operators and broadcast players are pushing ahead.
  • China Netcom has regulatory clearance from SARFT and has formed an IPTV joint venture, Tiantian Online, with a number of overseas investors.
  • China Netcom is offering IPTV to 50,000 broadband customers in the Tangshan metropolitan area, and is believed to be developing further expansion with the help of Hong Kong operator PCCW (ticker: PCW).
  • PCCW had signed up 416,000 subscribers to its IPTV service by the end of 2004.
  • China Telecom is already offering IPTV services and plans to launch broadcast TV
    over broadband in every major city in southern China by the end of
    2005.
  • China Telecom believes that its IPTV service is just
    one of its many broadband services and thus falls under its license from telecom regulator MII.
  • It feels it has no need to wait for a license from SARFT.

From an Article in the China Daily entitled "China tuning into IPTV biz"

IPTV Development

  • China's online gaming market will be the greatest catalyst for the development of IPTV.
  • Shanda (ticker: SNDA) has made IPTV its
    top priority this year. (See above)
  • IPTV will generate revenue from content offerings.
  • IPTV will increase broadband subscriptions.
  • IPTV will grow entertainment spending.
  • IPTV will spur Internet user growth. Once TV services are offered over broadband Internet users are expected to increase and could well include the elderly.

IPTV Prediction

  • Norson Telecom Consulting predicts that IPTV subscribers in China will reach 12 million by 2009.

Obstacles to IPTV Development

  • Regulatory risks and inter-agency rivalries could affect the prospects of IPTV in China.
  • There is not a well-defined regulatory framework governing IPTV.
  • Conflicts of interests could intensify between telecoms operators and broadcasters, as well as telecoms regulators and broadcasting regulators.