The Positioning and Current Situation of China s Digital TV

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1 JDTV 1 (1) pp Intellect Limited 2010 International Journal of Digital Television Volume 1 Number Intellect Ltd Miscellaneous. English language. doi: /jdtv /7 ZHOU YAN Communication University of China The Positioning and Current Situation of China s Digital TV ABSTRACT Digital television research and development started in China in the 1980s. Implementation has been underway over the last decade and the digitalization of the three platforms (cable, terrestrial and satellite) is in progress. Focusing on the strategic positioning of these three digital TV platforms, this article outlines the current situation, including take-up, coverage, service pattern, government support, and the main techniques and then expounds the two problems confronting digital TV in China. KEYWORDS China Digital TV (DTV) China DTV positioning China DTV current situation Digital television research started in China in the middle of the 1980s. In line with a policy decision under the Media Digitalization strategy, it came into market operation in Through the last eight years digital TV has developed in China, as the digitalization of the three platforms (cable, terrestrial and satellite) has progressed. 1. COMPREHENSIVE DEVELOPMENT OF THE THREE PLATFORMS As transmission platforms, cable, terrestrial and satellite all possess their own advantages. China is a huge country with diversified features and there are great disparities in natural, regional and economic characteristics. Therefore, 95 JDTV 1.1_2_comm_Yan_ indd 95 10/23/09 10:41:48 AM

2 Zhou Yan it is impossible to use one platform to solve the problem of TV and radio broadcasting digitalization (Zhou Yan, Wang Wei and Liu Shan 2009). It is an inevitable trend that a multi-platform solution should be found. At present, China has a large population of 1.33 billion, of whom 163 million are digital TV users. In the current situation, cable mainly offers a service to city households, and families with relatively high economic levels were early subscribers to digital cable television. By the first quarter of 2009, the number of digital cable TV households in China exceeded 45 million. In addition to the city users of cable TV, there are more than 200 million households who are not served by cable and live in rural and often remote districts. They use terrestrial and satellite reception to receive TV signals. After the process of digitalization, they will have access to digital terrestrial and digital satellite TV. Digital terrestrial TV and digital satellite TV are best positioned to serve rural areas. Terrestrial reception is the basic way to watch TV and a fundamental service to guarantee coverage in both cities and rural areas. It will offer great support during the lengthy period of a coexistence of analogue and digital signals, but the variety of service it provides is much smaller than that of digital cable TV. In the light of the characteristics and services of these three digital platforms, the highest administration of broadcasting in China the State Administration of Radio, Film and Television (SARFT) has made a comprehensive plan. Digital cable TV provides a subscription-based public service. For relatively low charges, it offers programmes and information regarding public service; it also supplies numerous value-added services for users who have high spending power according to individual demand. However, to guarantee the broad coverage of great masses, the state government will give financial support to terrestrial and satellite digital TV and it is compulsory for operators to offer free public services. Area Classification Business Take-up Position City Digital Cable TV Hundreds of TV and radio services, plus Regional Information Service, plus Interactive Business By the first quarter of 2009, there were million users (24 million served by a two-way network and 2.5 million with the two-way service) Subscriptionbased public service City+ Rural Area Digital terrestrial TV About ten TV and radio channels, plus Regional Information Service Now given 2.5 billion RMB state financial support for development, to cover capital cities, other cities designated in the State Plan and municipalities. Compulsory and basic service. Free Rural Area Direct Broadcast Satellite (DBS) TV 49 TV channels plus 43 radio services, plus video-ondemand and a Push service of public information In the first quarter of 2009, given 1.3 billion RMB state financial support to provide 3.66 million reception units (with further initiatives to follow) Compulsory and basic service. Free Summary table: Positioning and current situation of Chinese digital TV. 96 JDTV 1.1_2_comm_Yan_ indd 96 10/23/09 10:41:48 AM

3 The Positioning and Current Situation of China s Digital TV Taking into account the wide diversity of consumers financial positions, the state of economic development, and geographical environment, as well as policy decisions, cable, terrestrial and satellite digital television providers have positioned themselves and generated different business models (Zhou Yan, Wang Wei, Liu Shan 2009). Having complementary advantages, the three digital TV platforms will cooperate with each other to achieve TV broadcasting digitalization. 2. DIGITAL CABLE TELEVISION As the earliest form of digital television operated in China, digital cable TV now has the largest number of users and the greatest variety of services. 2.1 Positioning: Subscription-based public service Digital cable TV has been developed mainly in cities and regional markets with a higher level of consumer spending, where there is a good economic foundation and where some cable operators were already developing business practices linked to digital techniques. So the digitalization of TV began with cable, positioned as offering a subscription-based public service. For the basic analogue cable service, the charge per household has been 12 RMB per month. Now, for digital cable, families in cities may pay 8 10 more RMB for the enhanced basic service, although some cities have not increased this fee. In the market in certain cities, consumers could have access to more advanced two-way services, paying additional charges for packages of higher-subscription services or for video-on-demand (VOD) and a range of other interactive services. 2.2 Funding the set-top box (STB): full transition In practical terms in the implementation of digital cable TV, the toughest difficulty is how to increase take-up rapidly. Facing this bottleneck, the former market-oriented business model (which involved selling the set-top box to users) has given way to a government-oriented full transition model. Under this approach, with the support of government, cable TV operators can get low-interest or interest-free loans from the bank which they use for the centralized purchasing of digital set-top boxes (whether for basic one-way service or the more advanced two-way interactivity) and they then supply the set-top boxes to users for free. The cable operators derive income from the increased consumer charge for the basic service and from additional subscription and interactive services, which they can use to repay the loans. Under this model, digital switchover is taking place rapidly. By the first quarter of 2009, more than 200 cities had embarked on full transition and 100 cities had finished the transition. The full transition model has given digitalization a vigorous push. 2.3 Take-up: boom of the one-way service, start of the two-way network By the first quarter of 2009, Chinese digital TV cable homes had grown to million. More than 24 million households have access to a two-way network and 2.5 million are actual users of two-way services. Take-up of digital cable TV is booming now. 97 JDTV 1.1_2_comm_Yan_ indd 97 10/23/09 10:41:48 AM

4 Zhou Yan (State Administration of Radio, Film and Television data) The increase of digital cable TV users from 2002 to January Multiple channels, information, VOD and other interactive services The basic service of digital cable TV comprises standard definition channels with government and other public information services. These channels have a social and public value that enables operators to get a modest increase in the basic television viewing charge from users. Following a hearing about price levels, the original television viewing charge of 12 RMB per month has now increased in many cases to 22 RMB per month in cities providing a digital service. Form of service Broadcast channels Features relating to individual programmes Information Service Specific service Broadcast TV and radio channels Specialized subscription channels High definition channels EPG; VOD; PUSH; time-shift function Public information services: Property for sale or rent Travel and transportation Weather Restaurants, hotels and shopping Recruitment Medical Treatment Education continued 98 JDTV 1.1_2_comm_Yan_ indd 98 10/23/09 10:41:48 AM

5 The Positioning and Current Situation of China s Digital TV Government Affairs: current policy proposals administrative guides Interactive value-added services Communication services Online payment; interactive games; transactions; karaoke; picture and ringtone downloads; TV SMS; TV greeting cards etc. Broadband network; telephone; private networks for rent, etc. Pattern of service of digital cable TV in China. 2.5 Consumer satisfaction and usage After years of development, digital cable TV has become more and more familiar to consumers. In order to know what influence digital TV has had on users viewing habits and satisfaction, the Media Research Institute of the Advertising College in the Communication University of China has cooperated with CSM Media Research since 2003 and carried out research concerning digital cable TV users in 2003, 2005, 2007 and From data in the Development Report on China s Digital TV, 2007, we can see that most users have a high degree of satisfaction with digital TV (56% of users express satisfaction with digital TV, compared with only 35.5% for (Data from Development Report on Digital TV in China 2007) Viewers ways of navigating programmes before and after using digital TV. 99 JDTV 1.1_2_comm_Yan_ indd 99 10/23/09 1:32:29 PM

6 Zhou Yan Most used services Percentage Most important value-added service Percentage Most attractive value-added service Percentage Programme selection 27.4% Public information 19.9% VOD 7.6% Advanced programme information 22.4% VOD 15.4% Payment of telephone/gas/water and electricity 4.3% Public information 15.0% Advanced programme information 15.3% Distance learning 4.2% VOD 14.7% Programme selection 15.0% Transaction 4.0% Radio programme 8.7% Payment of telephone/gas/water and electricity 11.8% Public information 3.5% (Data from Development Report on Digital TV in China, 2007) Demand and consumption of value-added services of digital TV (the top five). analogue). Moreover, viewing habits have changed due to digital TV. First, there has been an increase. The data for 2007 shows that digital TV users average viewing time is 10% greater than that of non-digital TV users. The wide-ranging and useful content is attractive. Second, viewing behaviour has become more proactive, as viewers make use of the programme booking, channel list editing, and search functions that analogue viewers lack. Moreover, viewers are more and more inclined to use the value-added services of digital TV. Although watching TV is and will continue to be the basic function for digital TV, the public information services, VOD, distance learning and transactions are highly recognized by users. Digital cable TV in China has come of age. 3. DIGITAL TERRESTRIAL TV Terrestrial transmission and reception are widely used at present. Given the scale of its coverage across very diverse areas, the process of digitalization here will take relatively longer. China has spent nearly ten years developing digital terrestrial TV, which is to be positioned as a free public service supported by state finance. 3.1 Position: Free public service There are more than 200 million families in China that cannot receive cable TV, especially in rural areas and remote regions. These areas have to use terrestrial or satellite reception to receive television and they too need to be able to enjoy the benefits of digital television. The scale of the challenge is great. China now has more than 2500 TV broadcasting stations, 18,000 television transmitters and relays, and 500 million TV sets. China accounts for one-third of the world s total television users. 100 JDTV 1.1_2_comm_Yan_ indd /23/09 1:32:30 PM

7 The Positioning and Current Situation of China s Digital TV In view of all of these factors, it will take a long time to undertake the transition from analogue to digital TV in China. Thus, a long period of coexistence of analogue and digital signals is definitely necessary (Zhou Yan: 2009a). In order to ensure that people can receive the basic television and radio services free, terrestrial broadcasting organisations cannot encrypt or charge for their broadcasts. Digital terrestrial television will be provided as a free public service. 3.2 Public Financial Support Recently, the central government and local financial sources have invested 3.4 billion RMB in the Digital Terrestrial Coverage project. In addition, the state government has invested 2.5 billion RMB in the development of digital terrestrial TV (Wang Xiaojie: 2009). This support should ensure the fast and sustained development of digital terrestrial television, enabling people in rural areas to watch digital TV and adding features to the public service. 3.3 Spread of coverage and co-existence of analogue and digital signals China began to broadcast digital terrestrial TV in 2008, especially during the Olympic Games. Eight Olympic cities have broadcast digital terrestrial TV. Beijing has broadcast two high definition channels and one standard definition channel and other cities have broadcast one high definition channel and one standard definition channel. In 2008, with the state financial support of 2.5 billion RMB, the development plan of terrestrial digital TV is to cover 100 cities including capital cities and municipalities specifically designated in the State Plan, and furthermore to launch two new digital terrestrial TV channels. One is to broadcast highdefinition programs while the other one broadcasts standard definition programs that are simulcasts of the analogue services provided by central and local TV stations. 4. DIGITAL SATELLITE TELEVISION Satellite TV can cover much wider areas, including remote districts and mountainous areas that cannot be covered by cable and terrestrial transmissions. With the goal of bringing broadcasting to remote and mountainous areas, in 1998 the state government has initiated the Cable TV to Every Village project, with 3 billion RMB investment, to bring broadcasting services to these areas. The initial role of digital satellite is to support this project. 4.1 Position: Free and Public Service In 2008 the Chinasat-9 satellite was successfully launched and put into service. It is the first Direct Broadcast Satellite for TV broadcasting in China. Because it uses independent technical standards, ensuring that viewers can only watch programmes from this culminant satellite, it is the best choice to help users receive their TV programmes at the lowest cost. The digitalization of satellite project covers the establishment, production, launch and operation of a direct broadcast satellite, through which people in areas where cable and terrestrial reception is impossible can receive public broadcasting services. The central finance underpins the construction and operational costs of the platform and enables the public service channels to be broadcast without any subscription. In addition state funding provides a 101 JDTV 1.1_2_comm_Yan_ indd /23/09 10:41:50 AM

8 Zhou Yan subsidy to users who buy and install satellite television receiving equipment in poor and western areas. (Zhou Yan: 2009b) 4.2 Setting up national companies The DBS operation comprises two crucial segments, one is the space operation and the other one is the earth segment. The earth segment is responsible for satellite reception, receiver promotion, content and services, which is relatively complicated. Because broadcasting organizations play a part in the earth segment and there is no single operator, it would be possible to set up several national operational companies or to allocate earth segment responsibilities to different broadcasting and TV institutions. However, for the space segment, a national operational company named China Direct Broadcast Satellite Corporation (CHINA DBSAT) has already been set up. Founded in December 2006, this company is a state-owned satellite company whose investors are the China Satellite Communication Corporation and the Xin Nuo Satellite Communication Limited Company. In 2007, these two biggest shareholders of CHINA DBSAT have put all the resources for civil broadcasting and telecommunication by DBS into CHINA DBSAT, making it the only state-owned satellite operator in China. 4.3 First reception equipment financial bid In 2009, with the support of central finance, China DBS acquired receivers through which users could receive DBS. After inviting public bidding and centralized purchasing, CHINA DBSAT secured 3.66 million sets of DBS reception equipment comprising a 40-centimetre dish, a set-top box, radio-frequency head-end, and 20-metre long cables. Including an installation charge and two-year upkeep charges, the cost of each set of this equipment ranges from 320 RMB to 370 RMB. In all the company has paid 1.3 billion RMB (Zhang Haitao 2009). Employees in CHINA DBSAT predict that in the second half of 2009, the company will invite public bids for 6 million DBS sets of reception equipment and that, by the end of 2009, DBS users will exceed 10 million. 4.4 Multiple channels and a Push service Since the successful launch of DBS, the DBS operator has started to build up an image of a public service platform which is free-to-view and offers 48 standard definition channels, 48 stereophonic digital radio channels and data broadcasting services. At present, Chinasat-9 is only using four of the 22 transponders. As an exclusive satellite for TV and radio, Chinasat-9 s other eighteen transponders will be put into use and then it could provide standard definition and high definition channels. However, in the future, whether satellite digital TV could offer subscription services and become a business operation still needs to be decided. A public information Push channel forms part of the basic service of digital satellite TV, in order to deliver information to people in rural areas ( informationization ). At an earlier time, other government departments promoted the Internet as the solution to the problem of informationization of rural families, but Internet penetration is obviously lower than TV penetration. Thus, with the Push technology, the satellite operator could push all sorts of applied information and entertainment content to rural users and, using VOD, people there could order and receive programmes. At present, 102 JDTV 1.1_2_comm_Yan_ indd /23/09 10:41:50 AM

9 The Positioning and Current Situation of China s Digital TV trials are taking place in Liaoning province and, if successful, implementation in the national market will follow. 5. REFLECTIONS ON THE DEVELOPMENT OF DIGITAL TV IN CHINA Digital TV in China has already attained some achievement. However, due to the influence of history, the development environment and competition, it is confronted with many problems. In order to develop smoothly, China s digital TV has to tackle many difficulties, including competitive relationships and cooperation between content providers and transmission and distribution networks. 5.1 Competitive Relationships Digital TV in China now faces two issues of competition internal and external. Internally, there is competition between the cable, satellite and terrestrial platforms, while, externally, there is direct competition between the TV and film industry and the telecommunication industry. Regarding internal competition, although the state government has segregated the strategic positioning of the three digital TV platforms, all three digital TV platforms could potentially exist within cities from a technical standpoint. Under the present circumstances, cable, terrestrial and satellite operators are prepared to consider how to win the competition in future, and they are developing their own competitive application services as fast as possible. And some operators, whose businesses are determined by their economic benefits, have ignored the policy and plan. For example, in 2009, operators in some areas of Heilongjiang province carried out terrestrial digital TV operations on a commercial basis, not as a free public service, in rural market without authorization. So it can be seen that there will be some problems of internal competition in the digital broadcasting industry if the management is poor. Turning to external competition, the telecommunications industry has already become a direct competitor with the digital broadcasting industry. In the past only broadcasters could offer TV and radio services but now new technology has broken the broadcasters control. Through Internet Protocol TV (IPTV) and mobile TV, the telecommunications industry could become a powerful competitor. 5.2 Cooperation between content providers and networks The relationship between content providers and transmission and distribution networks is a serious problem in China. Content providers and transmission and distribution networks are separate. The 82 nd official document has put forward a policy about the separation between network and TV stations. TV stations are in charge of content, while different network companies are responsible for transmission and distribution. With digitalization, the service development needs a close relationship between TV stations and network companies. However, due to the separation between them, TV stations feel that digitalization is creating more and more channels, weakening audience ratings and reducing their advertising income. For example, in the cities which have introduced on-demand services, users are more willing to watch movies, TV series and other contents when they wish. So their time for watching traditional TV channels has decreased significantly. Although the only viewing rate data system can not reflect these changes, advertisers and 103 JDTV 1.1_2_comm_Yan_ indd /23/09 10:41:50 AM

10 Zhou Yan advertising agencies know that the ratings need to be adjusted in cities with many new digital services and they take this factor into account in their business dealings. Therefore, the advertising income of traditional TV channels is affected, and they are not willing to promote digital TV s development actively. To strengthen their position, most TV stations have started subscription channels, but many of them do not operate well and are unable to make ends meet. These facts further smother the TV stations passion for digitalization. However, digitalization cannot advance without the support of content. Insufficient content impedes the progress of digitalization. Based on the above perspectives, we can see that content providers are in conflict with the platforms. In fact, content providers and networks are interdependent in serving the consumer. Thus the two should cooperate with each other, since neither can build a healthy industry by itself (just like P&G and Wal Mart rely on each other). How to coordinate the relationship between content providers and networks requires hard thinking. At present, the State Administration of Radio, Film and Television (SARFT) has focused great attention on this problem and some local broadcasting organizations have promoted better coordination through equity holdings in network companies. Therefore, we hope content providers and networks will have a harmonious future. REFERENCES Wang Xiaojie (2009), Media chief editor symposium, the State Administration of Radio, Film and Television, 8 April. Zhou Yan (2009a), The positioning and development project of terrestrial digital TV, Journal of Media, 6: 3, pp Zhou Yan (2009b), When DBS meets Cable TV to Every Village, Journal of Media, 6: 4, pp Zhou Yan, Wang Wei and Liu Shan (2009), Digitalization of TV and Broadcasting: comprehensive upgrade and innovative development, an interview of Wang Xiaojie, director general of technology department of the State Administration of Radio, Film and Television, Journal of Media, 6: 1, pp Zhang Haitao (2009), CCBN theme lecture, CCBN2009: Beijing exhibition hall, 20 March. SUGGESTED CITATION Zhou Yan (2010), The Positioning and Current Situation of China s Digital TV, International Journal of Digital Television 1: 1, pp , doi: /jdtv /7 CONTRIBUTOR DETAILS Dr Zhou Yan is an Associate Professor of the Communication University of China and Chief Editor of Media Magazine, which covers research into management reform and industrialization of traditional media. Her publications include: Great Changes in China s Media Market; New Theory of Radio and TV Industrial Operation; A Study on Formation of the Industrial Policy of Digital TV in China; 20 years operation of China s Satellite TV industry; China Digital New Media Development Strategy Research JDTV 1.1_2_comm_Yan_ indd /23/09 10:41:50 AM

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