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

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