Regulation is key hurdle to offering converged services in China

MELBOURNE, AUSTRALIA: Despite industry players' eagerness to offer converged services in China such as IPTV and mobile TV, the development of converged services between telecoms and media was a long time coming, primarily because of the significant regulatory barriers in China according to Ovum.

In a new report, the independent telecoms analyst reveals that the biggest barrier is from diverse regulation and the long-standing conflict between the two regulators governing the sectors (telecoms and media) as a result of the lack of a Telecommunications Act, and also the lack of a new regulatory framework designed by the State Council.

The two key regulators – the Ministry of Industry and Information Technology (MIIT) and the State Administration of Radio, Film and Television (SARFT) – have hindered the uptake of these converged services. In addition, all the key players in the telecoms and media markets, hundreds of regional broadcasters (cable operators), and three telcos (China Telecom, China Mobile, and China Unicom) are state-owned companies. Due to insufficient liberalization and privatization, this is another barrier to achieving fair competition between broadcasters and telcos in the convergence market.

“The State Council should impose further regulation such as interconnection and anti-monopoly regulation, and remove regulatory barriers between telecoms and media such as the current complex license grant and management mechanism on converged services”, advices Charice Wang, Analyst based in London. “Moreover, it should do so soon, in order to avoid missing its target. The first Telecommunications Act also needs to become effective immediately, as this is an essential move to promote convergence in China.”

Based on current trials, we expect forthcoming convergence to have significant impacts on next-generation network investment by both telecoms operators and broadcasters, promoting market competition. First, telcos and broadcasters will enhance their investment in next-generation core and access networks. Part of this investment will come from public funds.

The Chinese government focuses on developing telecoms infrastructure, with total investments reaching CNY2,000bn ($308.7 billion), in which broadband development would account for 80 percent according to the twelfth Five-Year Plan (2011–15).

China’s Five-Year Plans are a series of economic development initiatives which set growth targets for economic development for each period of five years. The broadcasters are expanding their next-generation broadcasting (NGB) networks, over which a wide range of converged services such as fixed telephony, broadband, and media will be provided.

Second, competition will be intense, particularly in the broadband and VAS markets. The NGB networks will help broadcasters to enter the fixed and mobile broadband markets and compete head-on with the three major telecoms operators. Telcos are developing their own strategies and responses to the converged environment.

In some Asian countries, the converged regulators such as the National Communications Commission in Taiwan (which came into operation in early 2006) and the Korea Communications Commission (established in February 2008) were set up to concentrate their efforts on regulatory convergence. The move of setting up the converged regulators helped to promote converged telecoms and media services.

“A new regulator integrating the current MIIT and SARFT should be launched in the near future, possibly in 2013 when next China’s government restructuring happens,” concludes Wang.