Sarft, Ministry of Information set to square off over revs

BEIJING — Alameda Calif.-based network gear maker UTStarcom is supplying China Telecom with an Internet protocol TV system, allowing the country’s largest telco to roll out pay IPTV channels by the end of the year in Shanghai.

This sets the scene for a power struggle over the revenue stream between China’s State Administration of Radio, Film and Television (Sarft), which overseas broadcast and cable TV, and the Ministry of Information Industry, which oversees telcos.

China Telecom will partner with local heavyweight Shanghai Media Group (SMG) to provide live events and video-on-demand programming.

No financial details were disclosed, although UTStarcom CEO Ying Wu says: “We don’t expect revenue … to be meaningful in the near term,” seeing it more as a long-term proposition.

Although China Telecom claims the launch follows a successful test in five provinces, pay cable tryouts in Shanghai this year were a dismal failure, attracting only 15,000 subscribers out of approximately 15 million inhabitants.

The year-end launch will reach an initial audience of just 5,000 viewers, according to UTStarcom.

The deployment of IPTV opens a regulatory can of worms for China Telecom.

If IPTV proves lucrative, Sarft and MII could drop the gloves in a battle over control of that new revenue stream.

However, content will fall under the same censorship as free-to-air television and legitimate home video sales, raising questions about its viability as a pay service in a country where piracy is rampant.

“One of the things that China Telecom is going to learn quickly is there is a big difference between building a network and offering a bouquet of content and services that people want to buy,” regardless of the partnership with SMG, according to David Wolf, prexy of Wolf Group Asia, a Beijing-based media and technology consultancy.

UTStarcom hit the jackpot in China by providing handsets and networking gear for Little Smart wireless local loop telephony, which offers unlimited, flat-rate calling within one’s own city. The service has between 40 million to 60 million subscribers.

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