China Announces Approval for New Digital Pay-TV Platforms

BEIJING --- With SARFT approval, four new national digital pay-TV platforms were officially established in August. This move ends the de-facto monopoly that CCTV subsidiary China Digital Media (CDM) had on the packaging and transmission of pay-TV channels to cable operators throughout the country. The four companies (all state owned) are:

- China Broadcast Network
- Shanghai TV
- CHC Home Cinemas
- And a consortium of other channels including Beijing All Media Group (BAMC) China National Radio, Tianjin TV, Shandong TV, etc.
 
Although this is a good start in order to help kick start China's pay-TV industry and inject some form of competition, it will still be a tricky issue to manage. A better solution would have been to simply allow the pay-TV channels themselves to sell direct to the cable operators. But after all, this is China and when in doubt, insert another layer.

A serious issue that will plague the platform operators is that the conditional access systems they are using to encrypt the signals for downlink into cable head-ends, in many cases are incompatible with the conditional access the cable networks have deployed.

A hodge-podge of conditional access systems including NDS, Irdeto, NagraVision, Canal+, plus a number of other domestically produced systems are carried on various networks throughout the country (in fact, Shanghai Cable has two).

The platform operators must insure that they have encryption systems compatible with those of the cable operators to insure access.

Another issue is where the decryption will occur. Cable network operators want the decryption to happen at the head-end, while the platform distribution companies want the encryption to happen at the end user.

The issue is one of control and monitoring.

From the standpoint of the platform operator, the cable networks are simply a conduit to their real customers, the end user. If operators are able to decrypt the signal at the head-end, the platform operator will have to rely on the operator to provide it with accurate subscription numbers: always a dicey game in China. From the network operator perspective, it gives up control of its own network if it allows the platform operator unfettered access direct to its users.

This situation has given rise recently to rumors within the industry that the platform operators have begun to lobby government officials to remove the functional ban on private ownership of satellite dishes (TVRO128 states only that private owners of satellite dishes must be licensed, not that they are forbidden) so that they may target users directly and by-pass the cables: a de-facto launch of a commercial DTH service in China.

Of course, it’s very likely outside the realm of possibilities that foreign channels would be made available on this kind of platform, but it’s still a good start towards the continued movement of China's TV industry towards one that encompasses all major modes of transmission.