China Cable & Satellite Television Overview

BEIJING---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 rumors that foreign broadcasters have been given permission to re-transmit 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 revenues.

While China with a population of 1.3 billion people and a television penetration rate of 89% is of prime interest to media moguls gathered in Hong Kong and Singapore, so far not much has been achieved, despite massive lobbying initiatives.

The grey-area exceptions in some southern provinces (revealed by CMM in 1997) results from the spill-over of terrestrial signals from Hongkong and unapproved re-broadcast of signals on cable TV networks.

Foreign broadcasters trying to get a fully clothed foot in the door have to make do with permission to broadcast in hotels (with three of more stars), designated foreign compounds and other relevant institutions for an annual license fee.

Spot checks may be meant to ensure that only approved channels are relayed but, more often than not, non-licensed feeds are simply turned off for the duration of the check. When 2000 licenses were issued in late 1999, 18 foreign broadcasters were on the list copies available to CMM subscribers on request).

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 that proves the rule is 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. But, the technically foreign channel needs to tread carefully as it is legally exposed in many aspects of its business.

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.

Over 980 terrestrial TV stations, 1300 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 70 – 90 million cable TV subscribers in China. According to official estimates, the number will increase to 120 million cable TV subscribers by year 2001. The average growth per year since 1995 has been 10 million. So far approximately 2.25 million km of cable have been laid and connected.

Cable TV is mainly available in China’s urban centers. But while major cities such as Shanghai reach close to 100% cable penetration, the divergence in the level of investment and equipment used in different cities is great. Vast economic disparities, dispersed populations and geographical obstacles between regions are just some reasons for the uneven development to date.

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.

Chen Xiaoning, director of the Information Network Center again reinstated 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 2000 the majority of trunk networks in the 14 eastern provinces and municipalities were connected. New networks use fiber connections with 750 megahertz of bandwidth. Add to this digital technology and the same lines should be able to transmit several hundreds of programs at a time.

Currently Shanghai is the only city in China officially allowed to offer telephony, Internet and TV services jointly through one conduit. Shanghai Cable TV Network Co. has nearly completed its upgrade from 450 MHz to 750 MHz with two-way interactivity, including Internet access. Last year, cable internet subscribers reached 300,000 of the network's 2.8 million subscribers. The total number of subscribers will increase to 3.1 million with 1 million connected to the Internet network.

With the cable TV sector's potential to offer the broadband solution 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 utilize satellite to reach outlying areas direct and for relay to urban consumers 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. Zoe Tan, previously with ACNielsen and now Strategic Resources Director with Zenith Media in Beijing, says 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 says, "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 re-vamped its schedules and is translating popular programming into advertising dollars. While CCTV’s November 1999 auction (for 2000 slots) suffered a 34% drop in bids from 1998, Hunan Satellite TV has been developing successful program formats. The channel staged its own auction that will generate over US$ 48 million in 2000.

However, while some mainland TV stations are groping to cope with growing competition and some are moving with the times, an increase in channel capacity through upgrades of the cable networks will again increase the need for quality – niche – programming.

While some predict that China’s control of media content will increase rather than decrease – and recent statements by senior industry officials underline that theory – others believe that WTO and the increased need for content will achieve the opposite.

There should be no prizes for guessing that, if there is no relaxation on direct broadcasts, the only option for foreign broadcasters is to have their signals fed via the central cable network from Beijing.

As for now - 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 and there has long been a list of foreign broadcasters allowed into hotels and foreign compounds. Anything else might work – but is by no means official yet.