China Expands IPTV Coverage

China's IPTV market is on fire, with mainland carriers lining up further service trials as Hong Kong's PCCW Ltd. (NYSE: PCW; Hong Kong: 0008) reaches a customer milestone and plans its next generation of services.

Joining UTStarcom Inc. (Nasdaq: UTSI) in serving up IPTV to China Telecommunications Corp.'s (NYSE: CHA) Shanghai branch, ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) has been chosen by the incumbent operator to provide telco TV equipment for a Jiangsu-province trial involving up to 100,000 subscribers. (See ZTE Wins IPTV Deal and UTStarcom Sells IPTV to China.)

ZTE, which says it previously won a similar deal with China Telecom in the Shannxi province, provided no commercial details, and no one from the vendor was immediately available to explain details about the technology it is providing. ZTE says it beat off competition from "most of the major international IPTV system providers" and has an exclusive relationship with China Telecom's Jiangsu branch for IPTV systems and equipment.

According to the Shanghai Daily newspaper, those "international IPTV system providers" were Alcatel (NYSE: ALA; Paris: CGEP:PA) and Siemens Communications Group, both of which are very active globally in the IPTV market. (See Siemens Boasts IPTV Success, Scaling IPTV: Progress at SBC , and Telecom Italia Trials IPTV.)

That's not where the deals end, though. The Chinese newspaper also reports that UTStarcom has landed itself an IPTV systems deal with China Netcom Corp. Ltd. (NYSE: CN; Hong Kong: 0906) for a trial in the city of Harbin, and that it's in line to share the spoils with Huawei Technologies Co. Ltd. for IPTV trials at China Telecom's Guangdong branch, another 100,000-home trial.

The newspaper estimates UTStarcom's IPTV revenues from these engagements to be between $45 million and $100 million. It adds that China Telecom has yet to decide on its vendor partners for Beijing, its biggest planned deployment.

The three Chinese vendors have been working hard to target one of the telecom sector's hottest markets, and are keen to prove themselves worthy of mass deployments at this early stage in China's IPTV development, as the potential for subscribers is enormous. The latest Light Reading Insider report, IPTV: Where the Money Is, says China is on course to have 16 million IPTV subscribers by 2010, nearly 25 percent of the global total of 65 million. (See China's 'Big Three' Eye IPTV, Broadband Subs Approaching 200M, and IPTV's Economic Realities.)

It won't be plain sailing, though. So far only one company, Shanghai Media Group, has been awarded an official IPTV license. As a result, all service providers have to conduct their trials in partnership with the group, which has a development deal with Alcatel. (See Alcatel's Chinese IPTV Coup .)

In addition, there are some doubts about how lucrative IPTV services can be in China, where the cable companies offer TV and video services for as little as $2 per month. (See Alcatel's Chinese IPTV Coup again.)

HK Gets HD


Meanwhile, IPTV pioneer PCCW says it's reached 500,000 subscribers for its "Now" IPTV service, a target it had set for the end of the year. That's good news not only for PCCW, but also for China Netcom, which earlier this year invested in the Hong Kong carrier and can benefit from its operational and commercial experience in the telco TV market. (See China Netcom Eyes PCCW Stake and China Netcom Invests in PCCW.)

No doubt Netcom will be keen on feedback from PCCW's next groundbreaking leap, which involves super-sharp pictures and the latest compression technology. PCCW is forging ahead with the commercial launch of high definition TV (HDTV) services to its DSL subscriber base before the end of this year, using MPEG-4 encoding technology from Tandberg Television. (See PCCW Plans HDTV Over DSL.)

Most IPTV services today are delivered to customers using the MPEG-2 compression standard. MPEG-4 can send a video stream across a network using half the bandwidth of MPEG-2, making it particularly attractive to telecom operators looking to conserve access network capacity as customers sign up for triple play services.

Vendors have been clamoring to show off their MPEG-4 capabilities and a number of service trials have been announced, but Tandberg TV (which has previously boasted of an MPEG-4 system order from a U.S. service provider) and PCCW claim the Hong Kong launch will be the world's first commercial launch using the technology. (See Tandberg TV Wins MPEG-4 Order, Skystream Wins Deal, Tut Lands Star Deal, and Terayon Tackles Ads, for example.)

— Ray Le Maistre, International News Editor, Light Reading

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