China’s Internet Protocol Television (IPTV) market is falling short of expectations for 2007, both in terms of subscriber growth and equipment shipments, according to iSuppli Corp. Subscribers on the mainland are expected to total only 846,000 by the end of 2007, compared to Chinese IPTV operators' expectations of 1.3 million. The overall pace and scale of IPTV deployments were disappointing in 2007, according to the market research.

IPTV licenses in China

Four operators now have IPTV licenses in China: Shanghai Media Group (SMG), China Central Television International (CCTV), Nanfang Broadcast Media (NBM), and China Radio International (CRI). SMG was the original IPTV pioneer in China and is the only operator actively pursuing IPTV deployments.

As the first IPTV licensee, SMG partnered with China Telecom (CTC) and China Netcom (CNC) to introduce IPTV services in Shanghai and Harbin respectively in 2006. The final outcome of these deployments has been widely regarded as a key barometer of the IPTV industry’s prospects.

SMG had planned to expand IPTV to multiple cities in 2007. The State Administration of Radio, Film, and Television (SARFT) approved SMG’s launch of IPTV services in 10 cities: Fuzhou and Quanzhou in Fujian Province, Taizhou in Zhejiang Province, Xian in Shannxi Province, Hanzhong in Hubei Province, Shenyang, Dalian and Panjing in Liaoning Province and Mudanjiang and Heihe in Heilongjiang Province. However, local operators experienced difficulties promoting IPTV services. Fujian and Zhejiang Provinces enrolled about 100,000 and 30,000 subscribers respectively, but the other locations did not come close to meeting their assigned targets.

Meanwhile, the other three IPTV licensees chose to pursue a cautious wait-and-see strategy. CCTV has announced plans for IPTV field tests in Baotou in Inner Mongolia, in Changchun in Jilin Province, and in Nanjing in Jiangsu Province.

Seeking a model

“The main reason for the IPTV deployment slowdown is the industry as a whole failed to develop a successful business model -- one capable of being replicated in geographically dispersed urban centers,” said Loren Zhao, industry analyst, China Research for iSuppli. “In China, IPTV services are jointly operated by telecom carriers and IPTV broadcasters. They partner to share their respective advantages. Telecom carriers provide access equipment, the service platform and the broadband network. Broadcast operators have the IPTV licenses and contribute television programs and other video content resources.

The current situation presents telecom carriers with a critical dilemma, Zhao noted. The uncertainty acts as a disincentive against new commitments to significantly expand IPTV investments. Under the strict supervision of the SARFT, both CTC and CNC must cooperate with broadcast operators that have IPTV licenses. Furthermore, it does not help that the control of IPTV services is divided between telecom carriers and broadcast operators.

The fundamental relationship between the telecom carriers and the broadcast operators remains unclear. Both sides must compromise with each other to meet their long-term business goals. How both parties cooperate to reach a win-win situation will be the major determinant of IPTV’s future.

China did not see large-scale IPTV deployments in 2007. Nevertheless, IPTV could still have a promising future with estimated subscribers exceeding 17 million by 2011. Before this optimistic scenario can happen, there must be a win-win strategy shared between telecom carriers and broadcast operators.

About this report

Find more information through iSuppli’s China Research service.

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