China has arguably grabbed the global spotlight when it comes to IPTV deployment, but the unique circumstances of a market in which all players are government-owned and content is scarce make it hard to determine if the Chinese are an example from which the rest of the world can learn or benefit.

Three of the world's largest IPTV deployments are currently on Chinese soil. The largest is in Hong Kong, where PCCW deployed its own technology (since licensed to Huawei) and now has more than 800,000 customers. On the mainland, Shanghai Media Group (SMG) has deployed IPTV over China Telecom's infrastructure in Shanghai and hit 150,000 subscribers since launching in September 2006. In the north, in Harbin, China Netcom and SMG have partnered to deploy IPTV since the summer of 2005 and are nearing system capacity with 112,000 customers.

Ying Wu, a Bell Labs veteran who co-founded UTStarcom, the company providing most of the IPTV infrastructure to the two China telcos, is predicting as many as 1 million mainland Chinese IPTV subscribers by year's end. One reason for that optimism is that UTSI and ZTE, which provides half of the set-top boxes SMG is using in Shanghai, have been able to deliver IPTV technology that uses low-cost set-top boxes and is viable at a very low average revenue per user (ARPU).

These deployments are unlike anything that is happening in the U.S., in large part because the Chinese market is totally unlike the U.S. market. For one thing, Shanghai Media Group, a government-owned entity, was granted the first of what are now four IPTV licenses in China and has partnered with the two major incumbent government-owned telcos, China Netcom and China Telecom, because the telcos themselves are forbidden from owning content or content licenses.

The services SMG has delivered use UTStarcom's Rolling Stream broadband TV and video-on-demand infrastructure, which is designed for rapid scalability and uses MediaStation streaming and storage servers to keep content and network intelligence within the network, not distributed to individual set-top boxes.

UTStarcom built its IPTV technology on the next-generation architecture it began to design seven years ago for its Personal Access System and includes both the Mswitch softswitch already serving 55 million subscribers in China and the IP-DSLAM it has sold in China, India and Japan.

“This is a mature platform, and we have 100% confidence in its scalabilty,” said Brian Caskey, vice president of worldwide marketing for UTSI.

Both China Netcom and China Telecom are delivering the service over 3 Mb/s copper lines and currently are limited to standard-definition TV. The government maintains tight controls over content, which is limited. There are services such as 48-hour playback of any show, network-based personal video recording (PVR) capabilities and interactive features. This approach enables the Chinese to use very low-cost set-top boxes and to offer services for as little as $5 per month.

“The low ARPU needed for this market necessitates ultra-low-price service models-which can work if the services are fairly basic and the infrastructure costs are low,” said Steven Hawley, senior IPTV analyst for Multimedia Research Group. He sees major opportunities for other Chinese cities, with populations of 1 million or more, to also gain access to IPTV. But Hawley cautions that the pace of growth of Chinese IPTV in existing cities is likely to slow and that what works in China won't play well in the U.S.

“The slope of the curve is going to start to taper off,” he said. “In Hong Kong, they are already seeing the end of that tunnel-the low-hanging fruit is gone. That will happen elsewhere.”

In the U.S., where courts recently ruled in a case against Cablevision that network PVR services aren't legal, much of what makes the China service attractive, including low-cost set-top boxes, won't work, Hawley pointed out. In addition, a U.S. market already addicted to hundreds of cable channels and Internet video wouldn't find the Chinese offering all that attractive.

ONLINE

Editor-at-Large Carol Wilson this week delivers a three-part series on IPTV in China based on her recent trip to that country.
www.telephonyonline.com/china_iptv