SATELLITE & CABLE: China cable sector remains closed to foreign investors

With the issue of foreign access to China's TV industry getting wide attention in the international press, the State Administration of Radio, Film and Television (SARFT) has denied rumours that foreign broadcasters have been given permission to retransmit via cable TV networks on the mainland. Reports based on wishful thinking and unidentified sources appear on a regular basis and the same seems to be true about the latest reports that certain foreign TV broadcasters have gained landing rights through China's sought after cable TV networks, seen as crucial to increasing advertising revenue. While China, with a population of 1.3 billion people and a television penetration rate of 89 per cent, is of prime interest to media moguls gathered in Hong Kong and Singapore; not much has been achieved so far, despite massive lobbying initiatives. The grey area exceptions in some southern provinces is the result of spill-over of terrestrial signals from Hong Kong and unapproved rebroadcast of signals on cable TV networks. Foreign broadcasters trying to get a foot in the door have to make do with permission to broadcast in hotels (with three or more stars), designated foreign compounds and other relevant institutions for an annual licence fee. When 2,000 licences were issued in late 1999, 18 foreign broadcasters were on the list. But hotels do not deliver the mass penetration broadcasters are after, so they have taken to working together with local TV stations on programming blocks, with the aim of building brand recognition ahead of future entry. One of the exceptions is the Star TV-backed Phoenix Satellite Television. According to its own reports, Phoenix Chinese Channel is widely seen throughout China and has seen double-digit increase in advertising turnover during the first six months of this year. As Phoenix Chinese Channel comes into more direct competition with the mainland TV industry, it will need to find methods of securing advertising dollars while dealing with increasingly frustrated PRC competitors. More than 980 terrestrial TV stations, 1,300 cable TV stations and over 30 satellite TV channels have emerged on the mainland over the last decade. Originally funded through state subsidies, the vast majority of TV stations have been relying solely on advertising revenues and third party investments to fund their expansion for many years. Since 1998, the Chinese cable industry has developed rapidly as China's cable TV operators, known as "secondary infrastructure information networks" have succeeded in attracting investment from new sources. The potential they offer: delivery of telecom, Internet and TV services through one network. Currently, there are 90 million cable TV subscribers in China. According to official estimates, the number will increase to 120 million cable TV subscribers by 2001. The average growth per year since 1995 has been 10 million, while cable TV is mainly available in China's urban centers. While major cities such as Shanghai reach close to 100 per cent cable penetration, the divergence in the level of investment and equipment used in different cities is great. In an attempt to consolidate the sprawling cable industry, and in anticipation of cashing in on the sector, SARFT has established an Information Network Center to handle cable consolidation. The process involves 3,000 cable operators being regrouped into 32 province-based operators. The aim is to create a national China cable TV network. Mr Chen Xiaoning, director of the Information Network Center, again restated the plan to connect local cable operations into one national cable television network at the recent Symposium on Cable TV Technologies in Hangzhou. But, there are many obstacles along the road as cable TV stations have to a large extent been locally financed and managed and are not keen on relinquishing control. According to reports, by June of this year, the majority of trunk networks in the 14 eastern provinces and municipalities were connected. With the cable TV sector's potential to offer broadband solutions to China's problems, the satellite industry has been out of the limelight over the last year. Nevertheless, satellite's role in delivering free-to-air TV channels back and forth across the nation remains strong. CCTV, China Education TV and 35 of China's provincial terrestrial broadcasters utilise satellite to reach consumers in outlying areas either directly or via local cable TV networks. With increasing fragmentation and consumer sophistication, competition is heating up and winners are starting to look for ways to distance themselves from the pack. Ms Zoe Tan, strategic resources director with Zenith Media, said that TV stations are now eager to install ratings software. However, the knowledge and understanding still lags behind the passion to adopt research tools. "If we only follow ratings, programming will become too similar," she said, "a trend which is obvious in many cable and satellite TV channels." One of the success stories of recent years is Hunan Satellite TV, which has revamped its schedules and programming to attract advertising. While CCTVsuffered a 34 per cent drop in income from its prime time auction last year, Hunan Satellite TV has developed a successful business model. The channel staged its own auction that will generate over USdollars 48 million in 2000. While some mainland TV stations are struggling to cope with growing competition and some are attempting to stay ahead of the pack by increasing channel capacity through upgrades of the cable networks and better quality programming. Some predict that China's control of media content will increase rather than decrease and recent statements by senior industry officials underline this sentiment. However, the country's entry into WTO and an increased need for content will result in the opposite occurring. Partial access to cable networks for foreign broadcasters is nothing new and is a matter of definition. Foreign broadcasters have been for years working with Chinese television stations by way of programme sales and programming blocks - and there has long been a list of foreign broadcasters allowed into hotels and foreign compounds. Source: CMM Intelligence.

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