Skip to main content

Chinese Service Providers Expanding IPTV

According to Pyramid Research, China�s two fixed network operators indicated that they will expand their IPTV trial areas to six more cities in two other provinces.

China Telecom�s trial cities in the six provinces already have more than 30 million internet subscribers and China Netcom�s current trial area has 3 million users. This provides an initial scope of the addressable market for IPTV subscribers. Pyramid expects IPTV subscribers to take up about 2 percent (700,000) in the first year. It is likely that operators will promote IPTV bundled with ADSL which, in turn, will generate the pull factor to accelerate broadband internet migration. Through this bundle pricing strategy, total household broadband penetration will increase from 7 percent in 2005 to 20 percent in 2010. On the other hand, IPTV is forecast to increase internet average revenue per subscription (ARPS) by around US$6�7.

In March 2006, China Telecom revealed that it had contacted Shanghai Media Group and Alcatel Shanghai Bell in order to expand IPTV trials � beyond its initial plans � to six more cities in the provinces of Sichuan and Fujian. This is important news because it provides a larger addressable market for potential IPTV customers. As of YE2005, the internet subscribers in these six provinces took up more than 40 percent of total internet users in the country, with an estimated population penetration of 14 percent, higher than the national average of 9 percent. These statistics reveal that there remains strong potential for further broadband adoption. By 2010, Pyramid expects total household broadband penetration to grow from 7 percent to 20 percent.

The two fixed operators initially went to the market with the intention of charging all fees for line rental, installation, and set-top box rental. The monthly fee was originally set between US$7.40�12.40, almost 700 percent higher than ordinary pay TV monthly fees. The price differential, coupled with a relative lack of understanding of IPTV services, led to very weak customer reception. China Netcom�s initial launch only attracted 0.004 percent (40,000 subscribers) of Harbin�s population in January 2006. As a result, China Netcom was reported to have accumulated 53,000 new subscribers in two months. On the other hand, China Telecom lures IPTV and/or broadband customers by offering two-for-one packages, where a bundle of IPTV and ADSL costs less than the sum of two standalone packages.

Pyramid believes that bundling will be a strong pull factor for new subscribers to buy new services. The immediate benefit is where a new application, bundled with internet and voice, can increase adoption and limit the cost of acquisition. Another benefit comes from a very stable churn. China Telecom�s imminent challenge lies in gaining a strong market share in the mobile market by YE2006. The strategy to sell services on a bundle is a proven tactic, at least in Asia Pacific. Besides increasing broadband subscribers, IPTV subscribers will achieve relative scale by 2008. Pyramid estimates that IPTV ARPS will increase total ARPS by at least US$6.

Popular posts from this blog

The Subscription Economy Churn Challenge

The subscription business model has been one of the big success stories of the Internet era. From Netflix to Microsoft 365, more and more companies are moving towards recurring revenue streams by having customers pay for access rather than product ownership. The subscription economy cuts across many industries -- such as streaming services, software, media, consumer products, and even transportation with the rise of mobility-as-a-service. A new market study by Juniper Research highlights the central challenge facing subscription businesses -- reducing customer churn to build a loyal subscriber installed base. Subscription Model Market Development The Juniper market study provides an in-depth analysis of the subscription business model market landscape and associated customer retention strategies. A key finding is that impending government regulations will make it easier for customers to cancel subscriptions, likely leading to increased voluntary churn rates. The study report cites the