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Digitization Hobbled by Cable Operators' Monopoly
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The 15th China Content Broadcasting Network (CCBN) exhibition, which concluded on Sunday in Beijing, was a big draw as new technologies and applications such as digital broadcasting and mobile TVs attracted hundreds of thousands of visitors.

But there's little for cable operators to cheer about. Many, especially county-level operators, still rely on government subsidies to stay afloat.

Zhang Haitao, deputy director of the State Administration of Radio, Film and Television (SARFT), complained at the CCBN that cable TV operators generate a much lower ARPU (average revenue per user) compared to telecom service operators.

Mobile operators generate a monthly ARPU of 60-100 yuan while the same for cable operators is usually less than 20 yuan.

This is why the SARFT has been aggressively pushing digital broadcasting service to help operators increase the ARPU.

But digital TV can hardly be a success in China, at least not a commercial success, in the near future given that the digitization here is not a market-driven push.

As almost all cable operators are affiliated to the government, the SARFT has been forcing operators to switch to digital broadcasting. It has been promoting a model under which operators distribute free set-top boxes to boost subscriptions.

That model has been a success in Qingdao, a small coastal city, but has been resisted in bigger cities such as Beijing. The reason is plain: free boxes could be a big spending for Beijing Gehua CATV Network, the dominant cable TV provider in the city which is now a listed firm.

As many users are against a dramatic rise in monthly subscription fees and Gehua has established a monopoly, the Beijing operator would hardly be willing to take risks in a rapid switch to digital TV service since reaping returns on such an investment could take a long time.

Gehua last year received government subsidies of 40 million yuan for free set-top box distribution. But that's still not enough to persuade it to aggressively promote digital TV services.

So far, there are few subscribers of Gehua's pilot digital TV services and it seems the operator will hardly be able to provide digital services to most Beijing residents during the Olympics next year.

There is no competition between cable operators in China, with usually only one operator in every city. Breaking this monopoly would be the most effective solution to boost digital TV subscription.

It's now impossible to deploy a second cable connection in residential areas, but IPTV, which broadcasts TV programs via Internet, could offer a good alternative.

If IPTV services, usually provided by telecom operators, catches on, cable TV operators would be forced to digitize in order to woo consumers. And, that too without subsidies or directives from regulators.

(China Daily April 3, 2007)

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