SHANGHAI: Thousands of viewers in China's biggest city are expected to tune into Internet TV in the next three months.

Shanghai Media Group (SMG) and its partner Shanghai Telecom Co Ltd are planning to increase the number of Internet TV viewers in the city to between 80,000 and 100,000 by the end of the year.

With a promotion launched this month Shanghai will become the world's first city with a full sized IPTV service using MPEG-4 Advanced Video Coding, a technology that provides superior quality to standard video compression.

The number of users is expected to reach 300,000 by the end of 2007, said company sources yesterday.

IPTV, or Internet Protocol Television, is a combination of Internet and traditional TV, where content is piped to TV sets through a broadband Internet connection.

It not only provides more channels than traditional terrestrial television, but offers more flexible programming and other online material.

Guan Xiaohong, a senior communications official with BesTV, SMG's IPTV subsidiary, told China Daily yesterday that SMG had signed an outline agreement with Shanghai Telecom Co Ltd to develop Shanghai's IPTV service.

According to the agreement, Shanghai Telecom Co Ltd, the largest local carrier, will upgrade the broadband access network while SMG will provide content and marketing.

The two companies are planning to invest around 100 million yuan (US$12.5 million) in TV advertising to promote the service.

Market analysts estimate it will cost the two companies at least 2,000 yuan (US$250) for each new user.

So far, no concrete information about the total investment has been disclosed.

"Shanghai is expected to become China's largest base for IPTV by the end of the year," said Guan. "Promoting the service in Shanghai will pave the way for further expansion across the country."

She said an eight-month trial ahead of the promotion had proved Shanghai citizens recognized the value of IPTV. During the trial 20,000 citizens applied for the new service, giving SMG the confidence for a large-scale promotion in the city.

In March, 2005, SMG got China's first license for IPTV integration and operation from The State Administration of Radio, Film and Television and began promoting the service in Harbin.

Customers can spend between less than 1,200 yuan (US$150) and 1,800 yuan per year (US$225) for access to IPTV, said Li Feng, marketing director with BesTV.

SMG now has around 60,000 IPTV users in Harbin. And the company is also speeding up its expansion in other cities in the Yangtze River Delta region and South China.

"The promotion in Shanghai will be a milestone for both SMG and IPTV in China," said Qian Shujin, an analyst with Shanghai-based Etech Consulting Co Ltd. "If SMG succeeds in Shanghai, it will not only secure an important market for IPTV but also show whether the business model is efficient enough for IPTV's further expansion in China."

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