CCID Consulting has issued a report today covering the development of IPTV in China in 2006 and forecasts outlook of the industry.

In 2006, the development of IPTV in China was encouraging: Despite various guesses, the issuance of license gradually became clearer. In addition to SMG, CCTV International, Southern Media Corporation and CRI also got their licenses. The number of pilot cities gradually increased. Branches of China Telecom and China Netcom carried out equipment tests, invited bids for network building and engaged in business cooperation negotiations. Number of users were growing in a considerable pace in Hangzhou, Harbin and Shanghai. In Fuzhou, Heihe, Mudanjiang and Changchun, IPTV started to enter commercial use. In Hangzhou, Shanghai and Harbin, various business models were developed for IPTV. Many innovative measures accumulated rich experiences for the success of the business models. Thanks to its network interconnectivity and content compatibility, IPTV now enjoys a growing reputation and is also more appealing to consumers. Though IPTV still faced policy, network, standard and contents problems in its development in 2006, the current situation for IPTV nevertheless remains positive in its future prospects.

CCID Consulting's statistics show that by December 31, 2006, the number of IPTV users in China reached 550,000, and was still growing fast.

Table 1 Distribution of IPTV User Numbers in China (Unit: 10,000)

Operators	2003	2004	2005	2006
Total	1.8	4.6	26.7	55.0

Source: CCID Consulting, Jan. 07



Source: CCID Consulting

In 2006, there were many flashing points in the IPTV industry. However, the two things most worth mentioning are cooperation and innovation.

Firstly, cooperation has increasingly become the consensus view and action in the industry. IPTV is still in a preliminary stage at present and faces many problems and difficulties: There are differences in the definition of IPTV between the radio and TV community and the telecom community. Local radio and TV institutions generally adopt a hostile attitude towards IPTV. There is still a long way to unifying the technical standards for coding and decoding, networking and transmission. Moreover, few contents and applications suitable for IPTV. Consumer cognition is still rather low. There are also big pressures on consumers to change their TV consumption habit. There are many localities where IPTV is being piloted or is about to be piloted, but few have reached a scale. However, these problems can be eased or even solved through cooperation. Cooperation between content integrators, fixed network operators and network equipment suppliers temporarily puts aside the dispute between the radio and TV community and the telecom community. It also provides an organizational foundation for creating and promoting contents and applications. Cooperation also gives all parties more resources for marketing and promotion. The constraint on business development exerted by conflicting technical standards has also been greatly eased. In 2006, the development of IPTV mainly relied on the cooperation between content integrators, telecom operators and network equipment suppliers. Cooperation is also the precondition and foundation for IPTV innovations.

Secondly, innovation provides a strong impetus for business development. On the basis of cooperation, all stakeholders in IPTV have carried out lots of constructive and forward-looking innovations. Based on their cooperation, equipment suppliers, network operators and content integrators and content providers have explored ways of enterprise cooperation, business development, content creation and standard integration. These include the one-line-three- network technology introduced by Shanghai Daning, the full-member marketing of business promotion adopted in Harbin and the interactive functions introduced by Hangzhou Culture Radio Television Group. These innovative measures enable IPTV well avoid network, consumer cognition and content creation obstacles. Cooperation between all IPTV stakeholders and innovations on the basis of such cooperation have become the natural development road for IPTV.

Based on the current situation of IPTV development in China, CCID Consulting believes that IPTV has the following trends:

1. Cooperation rather than competition will be the main link between the radio and TV community and the telecom community.
   
   Thanks to their network and fund strengths, telecom operators may have certain advantages nationwide. In regions where local governments attach importance and offer greater support, overall migration is smooth and cable operators have a strong ability of market-oriented operations, radio and TV operators may dominate the IPTV market. However, IPTV involves many links. No enterprise or department can satisfactorily prop up IPTV services. The telecom community and the radio and TV community also have complementary rather competing resources. To turn IPTV's interactive advantages into market and economic advantages, the key lies in the two sides carrying out continuous innovations based on close cooperation.
2. IPTV still has a long exploratory period to go through.
   
   IPTV has yet to form its own mature business models. Currently, telecom operators, radio and TV units and content providers in China all engage in certain cooperative work. However, the specific cooperation model is not very clear. Much work is to be done to further explore IPTV business models, and this will take time. Also, there will be a rather long policy exploration period for IPTV. There are two uncertainties in IPTV policies, namely two major risks: Market access and industry standard. IPTV needs policies to protect its development, but different policies get different priorities in their introduction. The access policy for IPTV is a problem in urgent need of solution at present. Though 4 IPTV licenses have been issued, benign market competitions are far from being formed. An effective market access system is needed to coordinate the interests between the radio and TV camp and the telecom camp and avoid fierce confrontation. Considerable experiences need to be accumulated to establish industry standards. While the improvement and unification of industry standards and the development and maturity of the IPTV industry mutually promote and develop, it is neither realistic nor necessary to unify IPTV-related industry standards at present.
3. Personalized, diversified and interactive IPTV contents and application innovations will become the trend.
   
   IPTV can provide personalized, diversified and interactive contents and applications and make the provisions of contents and services interactive on demand, flexible and rich. These are the features of IPTV and also its tremendous inherent advantages. Given that the steaming media flow carried in IP networks is bigger and its percentage is growing, we think that there will be more consumer demand for personalized, diversified and interactive contents and applications.

One key to the success of IPTV services is to integrate and control rich contents, while the other is to offer diversified application services. However, the biggest problem now facing IPTV services at present is lack of content and monolithic applications. CCID Consulting believes that the development of IPTV in China is centered around contents and applications, while personalization, diversification and interaction are the development directions. To achieve this goal and given that digital TV contents already enjoy a solid foundation, future IPTV contents and applications will take the currently rather rich digital TV contents as the main body and foundation to mainly solve the time restriction of traditional TV on consumers, and truly achieve VOD. When users experience are proved to be positive, operators will gradually introduce attractive applications based on their grasping of consumers' interactive demand.

Based on the above analysis, CCID Consulting is optimistic about the development of IPTV. In combination with expert views and CCID Consulting's research findings, we have made a forecast for IPTV user numbers. In the next 5 years, IPTV will continue to be in an early stage of development. But, there will be a big growth room for user numbers.

Based on the understanding of the current status, characteristics and trend of IPTV development, the author thinks that there is a need to run cooperation and innovation throughout the various stages of IPTV development in China. The radio and TV sector and the telecom sector need to cooperate with each other. Equipment suppliers, content integrators and network operators also need to cooperate in content creation, equipment supply and network operations. They need to continue to innovate their technologies, business models, contents and applications.