After Wu Genliang helped found ChinaVnet, the broadband Internet portal under China Telecom, he decided to start his own business.

He believed IPTV, or television over a broadband line, would put his own business on a roll.

"I expect the IPTV (Internet Protocol TV) market will get a jump-start in China at the end of this year," Wu said.

"And, next year, IPTV will develop very rapidly in some regions."

Chinavb, a new portal under Putxintong Technology Co Ltd, an 8-month-old business founded by the former China Telecom official, plans to launch 20 IPTV channels in May.

Chinavb aims to become "the master SP (service provider)" to IPTV users, Wu said.

The portal has been providing value-added services over broadband.

Wu said Chinavb has 9.78 million subscribers. He said he expects that number to reach 12 million by year's end.

Wu expects the expanding subscription base will boost the IPTV business, which could become more lucrative.

IPTV is becoming a buzzword in the telecoms and broadcasting industries. An increasing number of companies are jumping onto the bandwagon.

IPTV enables broadband Internet users to access TV broadcasting services including both live streaming services and video on demand (VOD) via computers.

Subscribers can also use a TV set, via a set-top box, to access IPTV.

Zheng Jie, chief executive officer of Shenyang Dintop Technology Co Ltd, said this year will see IPTV developers and service providers start an "enclosure movement."

"If an IPTV set-top box is already installed in a household, it would be hard to replace with another brand," he said.

That means companies will try all means to sign up customers at the initial up-take of IPTV, even at high costs.

Dintop, both an IPTV equipment maker and service provider, aims to eventually launch 1,000 channels.

That's not hype. Zheng said in the IPTV business, anyone can become a video broadcaster.

"When you turn on the TV in China, you will find all the channels offer similar programmes every night," said Frank Shen, vice-president of US-based venture capital firm WI Harper Group.

Shen said due to the overlapping of programmes, the digital pay-TV service, being promoted by cable TV operators, is unlikely to take off in China in the near future.

In the United States, where more than 500 channels, with vastly different programmes, are available, IPTV may develop much slower than digital TV, he said.

China had 1.2 million pay-TV subscribers last year. Regulators hope that number will rise to 5 million by year's end.

"I'm quite doubtful about the target," Shen said.

The slow development of digital TV in China will create big opportunities for IPTV.

That could result in a revolution within China's broadcasting industry.

"The increasingly popular P2P (peer-to-peer) technology will enable media content distributors to reach the end-users without the traditional TV operators," said Hou Ziqiang, a senior adviser to the State Administration of Film, Radio and Television (SARFT).

"That would provide a big stimulus to IPTV."

Turning on IPTV

Telecoms operators, such as China Telecom, China Netcom and Great Wall Broadband Networks Service Co Ltd, have started testing and promoting IPTV offerings.

China Telecom has partnered with TV maker Sichuan Changhong to produce Internet-ready TV sets.

China Telecom's chairman, Wang Xiaochu, has said the carrier aims to transform itself into a comprehensive information provider.

And the IPTV business is expected to play a major role in that transformation.

Operators' plunge into IPTV underlines the great potential of an emerging profit driver.

IPTV will not only help operators generate revenues from the content offerings, but also boost broadband subscriptions, said Kou Xiaowei, an official with the General Administration of Press and Publication.

Currently, most of China's Internet users are youth.

If the TV services, especially VOD, are offered over broadband, more people, including the elderly, will also log onto the Internet to turn on IPTV, Kou said.

Also, IPTV will spur households' spending on entertainment, he said.

China's ever-expanding online gaming market will prove the largest stimulus to the development of IPTV, the official said.

When the Internet combines traditional TV, online gaming will become a major part of IPTV.

IPTV will make it easier to play games. That's why Shanda Entertainment Interactive, China's largest online gaming operator, has made IPTV its top priority this year.

China had 20.26 million online game players last year. The industry last year was worth 2.47 billion yuan (US$297.5 million).

Kou expects the number of online game players to reach 56.83 million by 2009. Sales are expected to hit 10.9 billion yuan (US$1.313 billion).

Norson Telecom Consulting predicts the number of IPTV subscribers in China will reach 12 million by 2009.

Obstacles

Despite its bright prospects, IPTV is still facing obstacles.

The rapid take-off of IPTV will be thwarted by an immature industry chain, ranging from hardware and software to operations and business models, said Zheng.

"How fast IPTV develops in China rests largely in the formation of the industry chain," he said.

Also, regulatory risks and inter-agency rivalries could affect the prospects of IPTV in China.

So far there is not a well-defined regulatory framework governing IPTV.

Conflicts of interests could intensify between telecoms operators and broadcasters, as well as telecoms regulators and broadcasting regulators, analysts said.

Some industry experts have called for a merger between China's telecoms and broadcasting regulatory bodies to better address the convergence of the industries.

But no progress has been made.

Norson said in a report that broadcasting authorities will be reluctant to fully open IPTV to telecoms operators.

SARFT is the government body in charge of distributing IPTV operating licences.

SARFT reportedly will hand out the first IPTV licences in China by April 11.

But only subsidiaries of CCTV and Shanghai Media Group, which are closely associated with the broadcasting authorities, will get the licences, according to media reports.

Telecoms operators are not on the list.

Zheng said his firm will have to partner with a licensed IPTV operators to offer IPTV services.

VC on hold

Both Wu and Zheng said they are eager to attract venture capital to finance their research and development, and to finance the marketing of their IPTV offerings.

But venture capitalists seem to be cool-headed.

"Cases of venture capital injected into IPTV start-ups in recent years in China are numbered," said Su Shaowen, managing director of Zero2IPO Ltd, an adviser to China's high-growth enterprises and investment companies.

Zero2IPO has been monitoring the venture capital injected into China's start-ups for years.

"IPTV is still in its infancy," Su said.

Li Xiaojun, an official with IDG Technology Venture Investment, said his firm is looking for investment opportunities in China's IPTV business, which, over the long term, could be lucrative.

Now, "it's still at the very beginning, and the whole picture of the industry is not clear," he said.

Shen said traditional broadcasters' monopoly and possible sudden regulatory changes will be the two major factors affecting venture capital in China's IPTV segment.

"In China, the worst thing is always the uncertainty," he said.

Despite the uncertainty, investing in hardware makers should be the best option, Shen said.

Investing in code chip makers should also be lucrative, but risky, due to technical-standard issues, he added.

(China Daily 03/28/2005 page16)