Abstract

As a fixed line operator, China Telecom is faced with a situation in which revenue growth from traditional fixed-line voice service is slowing, but where the company has not yet been able to secure a license to provide mobile communications service. China Telecom is therefore focusing on leveraging its existing subscriber base and network resources to develop new types of service. As part of its new strategy, in which it is seeking to transform itself from a traditional fixed line telecommunications operator into an integrated information service provider, China Telecom has already introduced a number of new services.

After an extended period of testing and trial operation, in 2006 China Telecom finally rolled out large-scale, commercial IPTV service in Shanghai. China Telecom expects to achieve a 30 RMB to 60 RMB (US$3.8 to US$7.7) increase in ARPU (Average Revenue per User) from those subscribers who opt for IPTV service. IPTV will thus provide an important new source of revenue from China Telecom's broadband network other than the basic monthly charge for broadband access. With consumers demanding a wider range of content, Chinese telecoms need to introduce new types of service to meet demand, underling the bright outlook for the development of China Telecom's IPTV service. With IPTV, China Telecom is able to provide services to consumers through their TVs rather than through a PC, as is the case with conventional broadband service. In the future, China Telecom will be able to use the IPTV platform to provide a wide range of different services, including voice communications, Internet access, and various types of information service; the potential is enormous. However, there are several obstacles that need to be overcome. IPTV will be competing with the digital TV services that China's broadcasters are beginning to introduce. As a result, local broadcasters are likely to hinder the development of IPTV, although the issuing of local IPTV licenses by SARFT that began in August 2006 will go some way towards reducing this obstruction. In addition, local broadcasters' aggressive efforts to provide digital TV services will still constitute a serious competitive threat to IPTV. Another problem that China Telecom will face in the development of IPTV service is the need to upgrade its networks. Outside the major metropolitan areas, China Telecom's networks currently do not have the bandwidth and network capacity needed to support large-scale IPTV service provision. It also remains to be seen whether consumers in these areas will be willing to pay the high charges for IPTV service.

Appendix

List of Companies