Policymakers in China want to promote convergence and competition in the countrys telecoms, broadcast television, and Internet industries. Cable operators have a much weaker financial and market position than telcos, but will receive significant support from SARFT, the broadcasting regulator. In contrast, telcos will struggle to gain access to content resources under Chinas complex regulatory scheme. This has the potential to upset the telcos dominance of the fixed market in China.
A step-by-step approach to convergence
After the 2008 restructure of the telecommunications industry in China, fixed communications was still dominated by China Telecom in the south and China Unicom in the north of the country. Some competition has come from the cable TV operators, which were allowed to offer broadband access in 2008. However, cable operators were not allowed to offer voice services. In contrast, the telcos were allowed to offer voice and broadband access, but were not allowed to offer broadcasting services.
In January 2010, the State Council announced that telcos and cable operators would be allowed to offer triple-play services (for details, see Convergence is on the way in China). The State Administration of Radio, Film, and Television (SARFT) and the Ministry of Industry and Information Technology (MIIT) will jointly implement trials of Chinas new convergence policy in selected cities until 2012. The first 12 trial cities (up from the original ten) include Beijing, Shanghai, and Guangzhou. From 2013 to 2015, the new convergence arrangements will extend nationwide and detailed regulatory arrangements will be established.
The regulators are still considering licensing arrangements for these trials, and no detailed planning has been announced. It is likely that the conditions and timing of the trials will vary between cities, depending on the significance of cable networks and their financial situation.
Cable seen as a potential source of competition
Overall, cable is in a weak competitive position in China. Revenues from the broadcasting industry are only one-tenth of those from the telecoms industry. There is no unified national management company for broadcasting operators; a number of cable networks are spread across various cities in China, and only a few provinces have a unified network. Finally, infrastructure to support voice and broadband services on cable is installed in a limited number of cities. Offering value-added services is still a long way off.
The convergence policy announced this year seeks to turn the cable operators into viable competitors to the dominant telcos. In addition, SARFT has announced an ambitious plan to build a national next-generation broadcasting (NGB) network, which will also increase the competitiveness of broadcasting operators. Details of this capital injection have not been released, but one investment bank in China has predicted that the project will generate RMB600 billion of investment during the next five years.
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