1. The Government’s plan involves giving telecoms firms the right to carry video services, and encouraging cable TV companies to expand into voice and internet.
So far, the convergence of telecoms services has been slow in China. The cable TV market is made up of thousands of local operators. The fixed-line telecoms sector, however, is more consolidated, with China Telecom the dominant player.Jessica Lo, managing director at China Market Research Group, argues that both sides need to find new revenues. Fixed-line giants are losing income to mobile operators like China Mobile and China Unicom - many Chinese, she says, are not even signing up for fixed-line services as they find mobile contracts more convenient. “The problem is the fixed-line operators have not been as market-oriented as the mobile players - bureaucracy is the problem,” she explains. “Similarly, younger consumers are moving online rather than watching TV, which is causing media groups to try to offer more digital services. But they have not been as consumer market-oriented as online video providers such as Youku.”
2. Triple play does already exist in China in the form of certain IPTV (television delivered by internet connection) services.In March 2005, Shanghai Media Group was issued the first national IPTV operation licence. It set up a deal with China Telecom and China Netcom and now runs BesTV in the city plus a few other markets. According to consultancy BDA, at the end of 2009 there were 4.1 million IPTV users in China.
Shanghai has very much been the test-bed for these services, according to William Bao Bean, partner, Softbank China and India. He says that telecoms firms from across the country have been studying developments in the city closely. “If they develop a model that works in Shanghai, it will be replicated quickly around the country.”
3. IPTV will be the focus for fixed-line voice and data carriers.
Given the scale of operators such as China Telecom, growth could be rapid once the regulatory environment is sorted. “We estimated 6.6 million IPTV users by 2010 and 30 million by 2015. However, we are going to raise the numbers as the favourable policy was released earlier than we expected,” says Meiqin Fang, associate director at BDA.
Chen Haofei, analyst at CICC, estimates that the market for telecoms firms could expand threefold as a result of triple play. The cable TV industry, however, could grow by a factor of eight by adding voice and broadband to their services. Cable TV firms do not generate high revenues - monthly fees are low and, according to BDA, just four per cent of cable TV households subscribe to a full pay-TV package. However, Chen adds that the Government will have to re-organise the cable TV sector and consolidate it into a few powerful groups. “Sarft [the sector regulator] will not be strong enough to do this. It will need to come from above - the State Council.”
4. There are several ways for operators to make money out of triple play.One is advertising, especially interactive ads around IPTV platforms. Yet in the short term, the most likely source of revenue will be value-added services (VAS) such as selling content via video on demand. “The opportunity is putting VAS around a platform to drive consumer usage,” says Bao Bean. “In Shanghai, the carriers are being very creative in this sense.”
5. The rise of triple play does produce opportunities for content owners to secure distribution deals with new platforms.There are already signs of this happening - in October the NBA signed a deal with SMG to launch a subscription service on BesTV, offering viewers high-definition coverage of the games.
Chen argues that the development of triple play will “open up” the content market in China. He believes that operators will buy in more entertainment content from overseas, and that the Government might soon allow more content from non-state-owned enterprises.