Foreign Satellite Channel Fiasco - What is China Doing Now?

BEIJING --- As the excitement over the boundless rewards of China’s accession to WTO subsides, foreign satellite channels have been handed an ultimatum as the face off between politics and business in China again seizes international media attention. For those looking for clues as to how authorities in Beijing view post-WTO China, this is one of the clearest examples of the socialist market economy yet offered.

Until recently, the 27 foreign satellite channels with broadcasting rights in China were granted distribution rights in 3 star and above hotels, foreign compounds as well as selected academic institutions. Although far from being an ideal situation for foreign broadcasters who ultimately aim at reaching the Chinese masses, the system enabled them to have some limited communication with their viewers.

This is about to change. In November last year, the industry watchdog SARFT (State Administration of Radio, Film and TV) requested that all foreign satellite channels re-route their transmissions through a new government controlled platform carried on the state-owned Sinosat-2 satellite. Although no official figure has been quoted, press reports claim that each channel will be charged US$100,000 a year for using the satellite.

The move has increased uncertainty in the industry with some foreign satellite channels complaining that this might only be the tip of the iceberg and that the costs of transferring to the new platform will be prohibitive. In a market where foreign broadcasters are still dreaming of subscription revenues, they argue that this is a hefty price to pay given the lack of clarity about who will actually be permitted to receive the signals.

In addition to providing a comfortable revenue source for SARFT, the platform also offers Beijing total control over the distribution of foreign satellite channels. Viewed in a domestic political context, the new regulation comes at a perfect time. Ahead of the 16th Party Congress in autumn next year, it presents the government with the opportunity to assuage conservative factions in China’s political establishment who fear the repercussions from the country's accession to WTO.

Those factions are still reeling from the possibilities opened up by the hyped deals between CCTV (China Central Television) and the western giants, AOL Time Warner’s CETV and News Corp's Star TV. The deals (see CMM passim), hailed as landmark agreements in the West, sparked hopes that China might finally be lowering its guard and allowing greater foreign involvement in China’s strongly protected broadcast industry. Understandably, the companies were reluctant to speak about the possibility that their new found rights to distribute to southern China are not as direct as they hoped.

Irrespective of how those deals, Phoenix and Phoenix-like initiatives based in Macao may be affected, the new satellite regulation should curb much of this international enthusiasm and warn foreign investors that China’s accession to WTO and the creation of large media groups all signal more rather than less government control over the industry in the medium term.

This feeling is exacerbated by the set of government regulations that emerged in conjunction with the new satellite platform. According to the new regulations, four and five star hotels and luxury compounds will have to prove their clientele is at least 80% foreign to receive permission to broadcast cable and satellite television programs from overseas. Meanwhile, China’s academic world is also facing draconian measures. (Note: Academic and research institutes have long exploited a regulation that allowed them access to satellite programs for professional reasons by wiring their entire compounds)

However, some hopefuls say that, while the new regulation will no doubt at first increase the government’s grip over distribution, it might serve the interest of the foreign broadcasters in the medium to long term. As the government feels it has regained control over the industry - control that was somewhat eroded in recent years due to the multiplication of illegal satellite dishes - it might allow wider distribution. As only a small percentage of the channels clamouring for entry are in the news business, moves to extend distribution would not attract undue attention from the higher powers in the Party.

The new regulation, scheduled to be implemented by January 2002, is currently causing much speculation and upheaval both inside and outside China. While international players generally view it as unfair government tactics to protect the local industry, increase control over distribution and levy monopoly fees, the local regulators argue that the measure is aimed at improving distribution efficiency.
Industry reports also differ as to the pace at which the new regulation is being enforced. Foreign satellite channels such as Phoenix Satellite Television, which is not part of the lobby association CASBAA (Cable & Satellite Broadcasting Association of Asia), reportedly said that due to “administrative reasons” the unified platform would not be in place before the second quarter. On the other hand, CMM-I sources at the state-controlled agency CITV (China International Television Corp.) say that the platform has been operational since January 2002.

These discrepancies highlight the total lack of clarity about the exact situation. Due to the issue’s sensitivity, most industry sources, both foreign and Chinese, are refusing to comment. Too many questions are left unanswered. What will happen to free-to-air satellite channels such as the French-speaking TV5 and Germany’s Deutsche Welle? Why were some channels warned about the new regulations while others weren’t, causing them to miss the application deadline and postponing their entry on the new platform by at least a year? What is the long-term strategy and will the architects of the plan have time to implement the regulation before other events overtake them?

Do not expect answers soon. Analysts warn that, even if an agreement is eventually reached between foreign broadcasters and the Chinese regulators, issues such as the process and timetable of migration, the costs of changing the existing set-top-boxes and how the costs are to be shared remain unanswered. Despite the current anger and chaos in the industry, implementation might still prove to be the toughest hurdle to overcome.