By Alex Swan

The following column, one of a series of international columns, will express the authors’ opinions and not necessarily those of CableLabs

China and India: A Tale of Two Markets

With about 90 million subscribers, China’s cable TV industry is one of the most promising, if frustrating, markets in the world. Promising, because it has both the support of the Chinese government, which is determined to construct a world-class cable TV infrastructure, and the promise implicit in membership within the World Trade Organization. Frustrating, because it’s been so promising so many times before. While few believe a Communist nation could ever fully liberalize its mass media, even a partial liberalization could attract billions of dollars in infrastructure investment, followed by programming and advertising revenues.

Due to cable television’s popularity—it has a 26% annual subscriber growth rate since 1990—the country’s cable networks are the logical choice for multimedia service deployment in China. There are more than 200 cable TV stations at the central, provincial, and municipal levels, and thousands of county stations. In 1999, this cable sector earned just over $3 billion in revenue.

What has been hindering cable networks from dominating the multimedia services market thus far, is that only 10% of the network is bi-directional and capable of interactivity. However, therein also lies the attraction. According to market analysts, upgrading the entire networks in major provinces and cities would cost about $48.5 billion, not including county stations.

In the plan outlined by the State Administration of Radio, Film and TV (SARFT), there is a mandate that the central, provincial, and municipal cable TV stations upgrade their networks within the next five years.

Policy Relaxation

Historically, SARFT and the former Ministry of Post and Telecommunications were separate government entities, each operating their own businesses. The emergence of network convergence convinced the State Council to house these two divisions under one roof, as the Ministry of Information Industry (MII). This merger, however, did not succeed in bringing the two groups together; instead each continued to represent and defend its own market. So, the State Council issued “Document #82” in 1999, forbidding broadcasters and telecom operators to enter each other’s businesses.

One telling oversight in Document #82 is that it does not deal with the Internet or other types of data communications. As a result, Jiaxing Cable Station upgraded its HFC network to provide virtual local area network services to the China Industrial and Commercial Bank, using cable modems from Com21.

Under these circumstances, MII had no choice but to change its policy. Its new plan allows terrestrial and cable TV stations to merge and become content providers, and it plans to establish a number of corporations to run data communications services, including Internet, video-on-demand, distance-learning and T-commerce over cable TV networks.

Foreign Operators

Foreign companies are currently prohibited from investing directly, but there are a number of Hong Kong-listed companies that have been able to sneak into the market. Sino-i.com and CITIC Pacific target cable TV networks in 12 cities; TCL and DVN have projects in Shanghai; Shum Yip Investment has projects in Shenzhen; China Aerospace has projects in Changzhou; China Broadband Corp. has projects in the Yunnan province; Asia Tele-Net Tech has projects in the Henan province; and Prosper eVision and Global China Technology have projects in the Sichuan province. These companies all claim to have government permission to buy shares of local cable systems or establish joint ventures to run network services.

According to L. M. Jiang, director of Anshan Cable TV Station, foreign investors should be patient and wait for a clear policy relaxation. “If we are liberalized, we will choose to partner with foreign companies to launch multimedia services and cable telephony. In some cities, local telephony between subscribers already exists, so what we need now is just a link outside for overseas calls services,” says Jiang.

Platform Standards

China has chosen digital video broadcast via cable (DVB-C) as the standard for its digital cable TV networks, and one, the Chengdu Cable TV Station, has performed a DVB-C trial. Future network upgrades will be developed in this DVB environment, making DOCSIS™-based cable modems less viable.

In addition to HFC network upgrades, each cable TV station and municipal broadcasting authority will establish data platforms, mostly using Internet protocol technologies. Multiprotocol label switching, as a technology emerging from the convergence of ATM and IP technologies, will be in the spotlight.

SARFT expects optical equipment demand to double this year and DWDM technology to be widely deployed as the backbone technology.

Over the next four years, insiders expect a semi-liberalized market with two platforms, one being cable TV stations responsible for controlled programming, and the other a gradually opening IP-based telecom network. This limited structural reform should provide enormous business opportunities for service operators, equipment vendors and content providers.

India

Slightly less promising but just as frustrating is the Indian cable marketplace. “People have stopped cutting each other’s throats, but they’re still cutting each other’s wires,” quips ex-Discovery Managing Director Kiran Karnik.

India has about 30,000 systems, 10,000 of which are “serious,” with 6 majors accounting for 40% of all homes. They are: Hathaway, in which STAR TV has a 49% stake; Siticable, part of the ZEE TV group, and the biggest in sheer numbers; InCable, owned by the Hindujas Group; WinCable, a breakaway from InCable, with ties to Hathaway; RPG Netcom, a large but Calcutta-only based MSO; and the fast-growing Sumangli Group, owned by the politically-connected Sun TV channels.

The Sorry Last Mile

While upgrade efforts have been initiated by most, the recent economy and horrendous state of last mile connectivity, have hampered progress. Siti, for example, had ambitious plans: telephony, convergent services on fiber, and a scheduled IPO, but India’s media valuations tumbled in tandem with the Nasdaq and today, its market price is 10% of what it was a year ago.

Other MSOs lay fiber to the curb but then must go the last mile through their local franchises, whose strong suit is signal degradation, with leaky amps, cable strung over trees and the need to ally with local “dadas” or Mafia, who protect or cut wires, as desired, while enforcing cash collections without any accounting or taxes.

Encryption Challenge

Another obstacle is the lack of conditional access, making value-added services non-existent. Homes get 70-80 channels via a cable jammed into the back of their set. Cable costs 100 rupees ($2-3) a month, but a set-top box costs 5000 rupees. “The operators realize they must all do it together, or it’ll never work,” says Karnik.

The only real push for set-top boxes comes from pay channels and the companies laying fiber—bandwidth providers like Spectranet in Delhi and Reliant, a big petrochemical group, now pursuing fixed and mobile licenses.

Despite all these challenges, the market’s density, growing middle class, and love of television keep enticing investors and conglomerates. As long as there are wires to be laid (or cut), there are revenues to be made (and lost), and with a new Broadcast Bill in Parliament and the likelihood of outside DTH services once again being allowed to enter the market, the lure of India, like the aroma of a good curry and lager, is impossible to resist.

Alex Swan is the former editor of International Cable (now Communications Technology International) and current international correspondent for CableFax Daily. CTI’s Asian bureau contributed to this article.