Growing competition in mainland China’s fixed-line broadband market could see the “Big Three” telecommunications network operators overtake the mainland cable companies in the red-hot online video distribution segment, according to analysts.
“Unlike North America and Europe, we believe the telecommunications network operators in China will continue to dominate in fixed-line broadband on the back of their significant investments in fibre [optic infrastructure],” said Bernstein senior analyst Chris Lane, lead author of a report on the broadband and pay-television wars in China.
“The window of opportunity for Chinese cable operators to win in the fixed-line broadband market has passed.”
While the central government last year opened the way for domestic telecommunications network operators and television broadcast service providers to directly compete in each other’s turf, the cable companies have only made small inroads in the low end of the fixed-line broadband market.
At the end of last year, domestic cable operators only had 18 million fixed-line broadband subscribers, or 8.6 per cent, of the total market, according to government data. There were 258 million total fixed-line broadband subscribers, most of which are customers of either China Telecom, China Unicom or China Mobile.
That advantage by the country’s three main telecommunications is expected to result in increased gains for them in the so-called internet protocol television (IPTV) market segment, where subscribers view online video streamed through a set-top box.
“We believe the Chinese cable operators face an increasing threat from the major telecommunications network operators in TV content distribution,” Lane said.
Bernstein estimates show China Telecom, Unicom and China Mobile could generate a combined 37 billion yuan in IPTV revenue by 2025 on 85 per cent penetration of their fixed-line broadband customer base.
“Cable operators are relatively small and highly fragmented. Many still operate at the city level, while others have consolidated into provincial-level operations,” he added.
Their infrastructure spending also pales in comparison with the huge annual capital expenditure of the three major telecommunications carriers, which continue to build up their advanced mobile and fixed-line broadband services.
“China Telecom has now more IPTV subscribers than any of the cable operators,” Lane said.
China Telecom, the country’s largest fixed-line network operator, had 40 million IPTV subscribers as of October. That is more than the total 20 million IPTV subscribers of Hangzhou-based Wasu Digital TV Media Group, the country’s largest cable operator.
In a filing with the Hong Kong stock exchange last month, China Telecom chief operating officer Yang Jie said the firm’s 100-megabits per second IPTV operation called e-Surfing HD “has entered into rapid growth period and has become a strategic fundamental business”.
China Mobile chairman Shang Bing said in a separate announcement last month that the company’s acquisition last year of China TieTong Telecommunications Corp would drive its fixed-line broadband services expansion.