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NewsGlobe: Financial
PTC ’08: Roll on the Olympics
China continues to impress and intrigue
by Stephen McClelland (Special to Telecommunications)
If you want to book satellite airtime in China for the Olympic
Games in Beijing this year, you are probably out of luck. All
the available slots extending over a two-month period of the
Games themselves where taken long ago although, according
to satellite executives, there are plenty of takers still running
around to get hold of some.
The peak demand is itself causing a major ripple, even in the massive capacity of global
communications, as operators seek to balance their loads. It’s
a sign that these Games in particular will see the biggest
global attention and technology showcase since Japan
showed a new emerging powerhouse of an economy in the
Tokyo Games of 1964. China will see a second global telecom
gasp by hosting the World Expo in 2010.
Pundits are fully expecting the YouTube generation to be fully
switched on during the Games, taking pictures, uploading and
file sharing, in a national and global P2P video streaming
extravaganza in what will certainly be the most techno-centric event
ever conceived. But China probably does not need the Games
if enhancement to its telecom sector are in question: the
prodigious subscriber numbers continue to stack up — around
500 million on mobile (mainly 2G GSM) and fast-reaching 200
million on the Internet, making it just about to pass the U.S.
in terms of online headcount.
Duncan Clark of BDA China, a China-based telecoms and new
media watcher, reckons that China is ahead of the U.S. in
wireless value-added services, with “non-voice revenues
already over 25 percent of the total.” ARPUs are in the reasonable
range of US$11 to $12 per month. Clark asserts that
China “should be ready for 3G because they need more data
capacity” to service these data applications, such as the
phenomenal success of mobile music.
Whilst the Beijing Olympics should be the 3G showcase, Clark
now says he expects a “cosmetic launch” just prior to the
event, although “in the fine print” this will undoubtedly be a
TD-SCDMA technology, developed at home. The 3G story —
and its delays — say much about Chinese policymaking.
China’s path in this direction is complicated, suffering as it
does from the need for government control (and a permanent
turf war between MII and SARFT, the two ministries
responsible for telecom and broadcasting, respectively). But it
also suffers from the conundrum of the government seeing —
as a stakeholder in major fixed line operators — diminishing
value of fixed-line operators, which are experiencing very rapid
erosion both to mobile substitution and the VoIP business
emergence. It’s a delay, says Clark, that has seen China
Mobile benefit, as it has gained market share from the
remaining operators; the market itself, suggests Clark, has
become unbalanced with China Mobile “too dominant” as a
result. It has also led to policy fragmentation and confusion.
Nowhere is the fragmentation and technology policy issue
more pronounced, it seems, than in those very expensive and
very advanced mobile platforms and services; in particular,
mobile TV, which is expected to be a major showcase at the
Beijing Games. Currently there are nine mobile phone TV
standards in the Chinese markets, says Professor Xiang Jian
Liang from the Beijing University of Posts and
Telecommunications. These include SARFT’s CMMB, MII’s
TDBM, DMB-TH from university laboratories, as well as
offerings from Huawei and another domestic offering of
CDMB. Even these don’t include the foreign rivals: DVB-H and
Qualcomm’s MediaFLO, as well as South Korean mobile TV
technology. Liang counsels pragmatic analysis of the benefits
and drawbacks of all the technologies, and says that the list
will probably come down to “around three deployed,”
although “one would be best.”
But the major political pathway that the strong urge for China
to develop its own key technologies in what is
called “indigenous innovation” involving native standards. The
sudden arrival — in the last two years — of the new media cut
through by broadband and mobile on the scene has
complicated an already difficult regulatory situation in the
country. Standards and policy makers are involved in an
intense tug of war with commercial interests and the draw of a
more open market.
Watchers suggest that homegrown technology — as good as it can get — may well handicap China, however, because of the absence of a global market which is
what the major Chinese vendors will require on the one hand,
and as a consequence, see domestic handset prices higher
than they would otherwise have been. Nevertheless, there are
counter-arguments to this, notably, the fact that China would
be able to reduce or even eliminate its outbound IPR
payments for technology licensing. Informed observers
suggest these may be running into billions of dollars.
Already however, China’s telecom and media plays seem to
have proved themselves in the creation of giant operators
and significant applications providers; Clark says he expects
the online search business to be a billion-dollar one in two
years whilst multiplayer online games have hit the figure
already. And it has sucked in a astonishing amount of foreign
venture capital and the ability to generate homegrown me-toos in a remarkably short time: “Everything you see in
Silicon Valley can be in China within hours now,” says Clark.
Around 100 million people are thought to engage in regular
P2P streaming.
But there are threats of a crackdown on the burgeoning media
sector partly because of the wish to bring the revenues back
into the state-controlled bodies and probably because of a
worry about what uncontrolled online media could do in the
country. And the flow of venture capital funding for new media
enterprises has suddenly chilled (Clark says new media and
TMT funding has dropped to below 50 percent of the total inbound
venture capital as investors look to less risky options).
Moreover, practically every sub-sector of emergent telecoms
and new media constellation looks like booming; IPTV for
example was introduced in 2005 and 2006, says Nir Kshetri, a
Professor in Business Administration at the University of North
Carolina and expert on the subject, and estimates it will be
the largest in the world in five years. In its short life it has
already exceeded penetration of direct-to-home satellite
broadcasting. This success is partly a result of broadband
rollout across the country — there are probably 79 million
broadband households in China — as well as new service
attractions. Kshetri notes that the Chinese market is likely to
view IPTV in a different light to its western counterparts
because Chinese subscribers and providers are looking to
IPTV as an Internet vehicle to begin with, rather than a
straight TV vehicle. Kshetri says providers have placed IPTV
deployment at the top of their list.
But again, policy making may cause problems. Clearly, China
wants indigenous IPTV technology to be developed. At the
same time, government preferences says Kshetri are to
transform provincial TV stations from propaganda conduits
into cash-rich conglomerates, a move which may be
circumvented by the emergence of a multiplicity of Internet
start-ups. And there is the problem both of a lack of local
content on the one hand, and rampant piracy on the other.
Kshetri, however, says he sees encouraging signs in content
hijacking: a Beijing court ordered an illegal provider to pay
US$140,000 recently to Hollywood studios after a landmark
case was filed by the MPAA (Motion Picture Association of America). These studios are
currently negotiating with Chinese distributors to create a
video-on-demand model in China.
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