Beijing battles with unauthorized TV
By Peter J Brown

Like the personal computer and the Internet, the satellite television dish represents both a significant threat and an important tool to the Chinese government. Last June, the new Zhongxing-9 (Chinasat-9) satellite was launched. It will allow the government to provide government-sponsored satellite TV services to millions of households for the first time, broadcasting dozens of standard-definition and high-definition TV channels to otherwise unserved areas throughout rural China.

According to Brendan Murray, market analyst in Space and Telecommunications at Maryland-based Futron Corp, Chinasat-9 distributes China Central Television (CCTV) channels as well as local/provincial channels as part of China's "Cuncuntong" project, which aims to deliver state-run radio and TV to as many as 60 million families who do not now enjoy high-quality terrestrial TV services.

"The Zhongxing-9 satellite can provide 150-200 standard definition TV channels - 48 are currently in use - and the service is free to users. The government covers the cost of the satellite and part of the cost of set-top boxes," said Kevin Li, director of telecom research at In-Stat China. "[As for the remaining and currently unused satellite capacity], there are two possible scenarios. Satellite operators will either charge content integrators, who will then provide customized programming to people in rural areas, or consumers will have to buy another set-top box with encryption and authentication capabilities [if they want to view channels from an expanded menu of new premium services provided for a monthly fee]."

China Direct Broadcast Satellite Co Ltd (China DBSAT) operates Zhongxing-9. This company began operations last year as China's lone state-owned provider of satellite TV services following its creation in late 2007 via the merger of certain assets belonging to China Satellite Communications Corp, Sino Satellite Communications Co Ltd and China Orient Telecommunications Satellite Co Ltd.

According to a report prepared by Lisa Hulme-Jones, senior analyst for North Asia at BuddeComm, an Australia-based independent global telecommunications research and consultancy company, China DBSAT is now the second-largest satellite fleet operator in Asia with total assets of 7 billion yuan (US$1 billion).

While the company's main business consists of satellite TV services including those broadcast direct to individual homes, it also provides satellite Internet access and telecommunications services. China DBSAT transmits programs for 169 TV and 40 radio stations. The company's total revenue was expected to reach 800 million yuan last year with about 10% contributed by overseas clients.

There are more than 140 million Chinese cable TV subscribers. In contrast, more than 300 million households in China - and perhaps as many as 350 million - are located in relatively underserved or unserved regions, according to a report from China's State Administration of Radio Film and Television (SARFT), which Hulme-Jones has examined.

"The majority of the population still lives outside the coastal crescent where cable TV is dominant. There are around 350 million people there, so by implication this leaves around 900 million people outside that area. If the Cuncuntong project is a success, it could lead to further demand for TV services. The question is whether the Chinese government will go to the next stage and create a national [fee-based] satellite TV

platform, which would satisfy the increasing demands from households in China for more advanced digital TV services," said Hulme-Jones.

China's introduction of its own state-sponsored satellite TV services was delayed considerably by the loss of the Sinosat-2 satellite in 2006. It failed shortly after its launch due to a problem with its solar panels. The plan was for Sinosat-2 and Zhongxing-9 to be operating together in tandem in order to maximize satellite TV coverage for the 2008 Olympic Summer Games in China. Zhongxing-9 is also capable of transmitting radio and TV channels to Hong Kong, Macao and Taiwan.

"A pay model for [satellite TV] in China with additional programming or value-added services may have to wait until the launch of Sinosat-4, which will replace Sinosat-2, provided that the government officially relaxes regulations regarding the use of satellite dishes by the general population, not just the underserved. Sinosat-4's launch has now been delayed from 2008 to 2011," said Murray.

Apparently, the Chinese government is prepared to spend over 3 billion yuan to provide satellite TV and radio services by the end of 2010 to approximately 700,000 villages. Each village will be required to have electricity and at least 20 households, according to the National Human Rights Action Plan of China (2009-2010), which was released in early April by the Information Office of the State Council.

While all of this activity suggests, among other things, that the evolution of satellite TV services will remain under strict governmental control, and that satellite TV installations and subscriber growth will remain closely supervised by the Chinese government, the reality of the situation is quite different.

Indeed, a satellite TV infestation has been well underway in China for a decade or more. Casual viewing of unauthorized satellite TV services is a routine and popular activity.

"To my knowledge, there are no 'legal' satellite TV subscribers in China, but the illegal market is huge - the number often thrown about is around 20 million. There are 1 to 2 million legal satellite TV dishes used for various platforms in China, but these are technically limited to hotels that serve foreigners and expatriates in China, foreign-owned buildings, embassies, etc. But not for Chinese citizens," said Patrick French, senior analyst and head of the Singapore Office at NSR LLC, an international telecom consulting firm based in Massachusetts. "China has launched Chinasat-9 for satellite TV services and it is broadcasting content, but to my knowledge, China has yet to rewrite its laws to allow people to legally buy a satellite TV dish to get programming off of this satellite."

One executive who sells satellite TV equipment and services in China - who did not wish to be identified - described a dynamic satellite TV market which is growing at a brisk pace despite not being granted official approval.

"This is complicated. Times have changed. The latest government regulations on satellite TV dishes date back to 1993, and they have not been revised for a long time," he said. "In terms of international TV channels, there are some permitted, only via the Sinosat-1 overseas TV channel platform for hotels and resorts etc. Any re-broadcast to Chinese citizens is not allowed."

Despite this rigid government policy, this executive points to Suzhou, for example, where for a monthly fee of 295 yuan, people can view roughly 15 overseas channels including CNN and BBC using a digital decoder.

"This is obviously against the central government's laws, but it is happening on a large scale," he said. His company offers programming packages from Taiwan, Hong Kong and elsewhere.

"However, the number one headache to the business is piracy because there are too many pirated systems on the market, which are very cheap. Most people who actually watch satellite TV here in China are doing so using pirated receivers. My guess is over 90%, although nobody has the precise number. It may be higher."

The fact that satellite TV represents a potentially disruptive phenomenon in China is something that is openly discussed in the Chinese media. In January, for example, the State Administration of Traditional Chinese Medicine (SATCM) declared that TCM was under attack from "from illegal ads" and Vice Health Minister Wang Guoqiang revealed that Chinese authorities had terminated 2,274 illegal TCM advertisements in 2008, according to Xinhua.

"Satellite TV stations" along with newspapers were identified as the major sources of these ads, and according to the SATCM, "some profit-driven media advertising departments open the doors to illegal TCM ads". This reference to "satellite TV stations" leaps out as a clear indicator that legal or not, domestic satellite TV is well established in China.

Xinhua's reporters have documented what other governments are doing in response to the flood of foreign satellite TV channels. For example, Xinhua recently reported that Iran's Minister of Culture and Islamic Guidance Mohammad-Hossein Safar-Harandi had branded the British Broadcasting Corporation's (BBC) Persian TV channel in Iran as "illegal" after the BBC launched its Farsi-language TV channel on January 14. Iran's Intelligence Minister Gholam-Hossein Mohseni Ejeie described the new TV channel to Xinhua as "detrimental to Iranian national security".

Xinhua simply reported that, "most of the Iranians from different ethnic groups, either Persian or others, have access to satellite dishes country-wide and are following global events through diverse domestic and foreign satellite channels".

Obviously, the same trend is unfolding in China today. Satellite TV programming beamed into Chinese households from other countries in Asia via foreign satellites is abundant and varied. More often than not, this entails the use of so-called Free-To-Air (FTA) satellite TV reception equipment installed cheaply and easily in Chinese households. FTA often means that after the user has purchased the satellite TV receiver and dish, the user pays no monthly fee - ever. The increasing popularity of FTA hardware is driven by online advertising, and - like most satellite TV

products worldwide - by word of mouth. FTA's availability has been deemed by some as a major contributor to the above-mentioned problem of rampant satellite piracy. It has been alleged that FTA users are able to avoid making payments for monthly subscriptions to premium satellite TV services

in particular by using specially prepared smart cards, downloadable software and other techniques. FTA manufacturers have denied these allegations. Nevertheless, this technology has been the subject of at least one lawsuit in the US.
Because the global satellite TV boom is entirely consumer-driven and knows no boundaries, its blossoming in China is no doubt a matter of great sensitivity and concern at the highest levels of the Chinese government. When Chinese President Hu Jintao pledged to open China up during his speech at the 30th anniversary of China's reform on December 18, you can be sure that there was no satellite TV dish

visible behind the podium.

"The growing Chinese demand for information resulted in the increase of foreign TV channels distributed in China although only a few are distributed in foreign language. Foreign channels and blocks of programs may largely be reserved for certain designated test areas for distribution over cable," said Pacome Revillon, CEO of Paris-based Euroconsult, an international research and consulting firm specializing in digital broadcasting, IT and satellite technology.

"His speech did not seem to hint that any goal of 'opening up' or 'enriching people's cultural life' depended on importing content from the West," said Murray. "Topical news programming still cannot be legally imported. And SARFT provisions regarding the import and broadcast of overseas programming still prohibit anything seen as opposing the basic principles of the Chinese constitution, or endangering the nation's 'social morality' or the national culture and tradition. There is no indication that SARFT will abdicate this role."

The abrupt intervention by Chinese censors during the live satellite TV broadcast in January of the inaugural address given by President Obama certainly stands out in this regard. President Obama's specific mention of communism caused censors to suddenly pull the plug on his speech. However, while the live transmission was interrupted for viewers watching the official Chinese government-approved satellite TV feed that day, thousands if not millions of other viewers watching the live telecast being beamed into China via unauthorized satellite TV services encountered no reception problems whatsoever.

According to Murray, a strong emphasis will continue to be placed on the "co-production" of approved content as opposed to unfiltered access to Chinese audiences. The message conveyed by the Chinese delegation at the April 2009 MIPTV trade show in Cannes, France was clear and to the point - acquiring new foreign content is not on the list.

"They emphasized the need for program 'exchanges' and 'cooperation with other countries', but did not seem to define 'exchanges' as indicating a desire to seek out new foreign content - they seemed more interested in exporting Chinese dramas and cartoon programs," said Murray. "In fact, SARFT recently increased restrictions on foreign-produced cartoons such as Japanese manga or shows like The Simpsons during prime time in China. This would appear to be more of an attempt to stimulate the Chinese cartoon production industry rather than restrict access to foreign producers for content reasons."

As for the already substantial outbound flow of TV content from China, it was given a significant boost in mid-April when California-based DirecTV Inc - the world's largest satellite TV provider serving more than 17 million US homes - announced that it is now offering CCTV-4 services to Chinese-speaking households throughout the US. DirecTV's already offers MandarinDirect III and Jadeworld satellite TV programming

packages for Mandarin or Cantonese-speaking audiences.

"Although we cannot disclose specific subscriber numbers, the entire Chinese community residing within our coverage area [which includes the entire US] is estimated at over 1 million households," said Naomi Rodriguez, a member of DirecTV's public relations staff. "We are determined to build the strongest and most appealing Chinese satellite platform for the US market. We are focused on providing the best quality entertainment channels to our viewers. The intention is to provide quality, not quantity. We combine programming and channels from Hong Kong, Taiwan and China."

According to Revillon, the availability of Chinese TV content outside of China has been steadily increasing over the past decade.

"From approximately 100 TV channels in 2000, the number of satellite TV channels broadcast outside of China was over 230 in 2008. However, half of them are broadcast in the Asian and Oceanic area," said Revillon. "With nearly 100 Chinese satellite TV channels in early 2008, North America is clearly a core market. CCTV has been at the forefront of the Chinese channels expansion in recent years."

The distribution of Chinese TV content outside China reflects a change in the communication policy of the Chinese government following the 2008 Beijing Summer Olympic Games.

"Since the 2008 Games, TV content has greater diversity and reflects more than ever the current Chinese society. It is considered as a promotion and commercialization of Chinese values and dynamics rather than propaganda," said Revillon. "The content of these international channels is adapted compared to their national counterparts. The fact that the content is still strictly controlled is certainly a reality."

Samuel Zhou, senior vice president of New York City-based New Tang Dynasty TV (NTDTV), wants everyone to understand that the Chinese Communist Party (CCP) is firmly in control of all CCTV content seen abroad, and that this TV programming from China deserves very close scrutiny.

"CCTV-4 is CCTV for the overseas Chinese audience, and it serves as the mouthpiece for the CCP aimed directly at all overseas Chinese," said Zhou, who added that CCTV-9 is for English-speaking audiences. "CCTV-4's content has long been present on almost all local Chinese TV's around the world."

Zhou points to the Chinese government's very aggressive campaign to launch 24/7 CCTV-4 broadcasts on various US cable and satellite TV carriers besides DirecTV including DISH Network, Time Warner, RCN, Charter, and Verizon Fios, to name a few. "Since 2004, they have combined CCTV-4 with about a dozen other channels such as Phoenix TV to form a 'Great Wall Platform'," said Zhou. "At the same time, they exert political and commercial pressure on various US pay TV service operators so that they will not carry independent Chinese language TV channels such as NTDTV."

Back in China, Chinasat-9 will now provide the Chinese government with a powerful satellite TV platform which can be used to lure Chinese consumers away from the unauthorized satellite TV services that dominate China's satellite TV scene. This will not be an easy task nor a rapid transition, and yet at last the Chinese government will have its own toolset to promote and distribute satellite TV - and it will be available for free.

Otherwise, if outright competition fails, the government might be compelled to travel down an uncertain path by aggressively enforcing a ban on unauthorized satellite TV dishes

. It has happened in Iran, and it seems as if it is about to happen in Myanmar. However, the dishes almost always reappear in short order. So while turning the tide on satellite piracy might appeal to some government officials, this seems like an unlikely possibility, at least for now. One thing is certain. In bad economic times, taking away someone's satellite TV is not a good idea.

Peter J Brown is a satellite journalist from Maine USA