13 March 2006

China cable television operators are stepping up their move to a digital platform by offering a bundled broadband internet and cable television service as they seek to attract subscribers willing to pay more despite a lack of premium content.

The government initiated a shift to digital broadcasting from analogue transmission for cable operators last year with the completion of migration set for no later than 2015. By December last year, there were 4.13 million digital cable television subscribers, of whom 1.39 million paid for premium content, according to Media Partners Asia research estimates.

A digital platform enables operators to offer more premium channels and value-added services on top of the basic television service.

"The government's strict control of content sources has limited growth of premium services," said Vivek Couto, executive director of research firm Media Partner Asia.

Mainland cable television users pay 15 yuan per month for a basic analogue package, including the state-owned Chinese Central Television channels and other local government-run satellite channels.

Digital users pay 10 yuan more each month for a service from a free digital set-top box that gives them broadband internet, television and voice services in one box.

The operators, hoping to cover the huge investment on digitisation, bet on premium services giving higher returns. They can source extra content or channels from stated-owned broadcasters such as CCTV or Shanghai Media. Foreign media cannot be sold under the existing regulatory framework.

"As the so-called premium content comes mainly from existing channel operators, viewers lack the incentive to pay more," Mr Couto said. However, in Shenzhen and Guangdong, the penetration rate for premium content is higher than in Beijing and Shanghai.

Shenzhen sees 99 per cent penetration and subscribers pay about 40 yuan a month. Shenzhen and Guangdong operators offer foreign channels to boost subscriptions.

Beijing has just made the move to digital. The city's only cable operator, Beijing Gehua CATV Network, is upgrading its fibre-optic network, increasing its voice and broadband internet capabilities.

"The operator wants all 2.65 million cable users to have gone digital before the Beijing Olympics in 2008," said an industry source