Ambitious Chinese CATV Goal Unrealistic, says ABI Research.

OYSTER BAY, N.Y. -- The Chinese government aims to sign up 10 million digital CATV subscribers in 2004, and 30 million in 2005. But despite the government's traditional strengths in planning and implementation, these targets are unlikely to be met.

In a new study, "The Chinese Market for Advanced Video and Broadband", ABI Research has found that while digital programming is being broadcast in as many as 46 cities in China, by the end of 2003 the total number of digital television subscribers amounted to fewer than 200,000.

According to analyst Junmei He, the Chinese government will not achieve its goal for several reasons.

"CATV stations were historically set up by individual cities or counties, and they are diverse rather than united," she says. "So the CA and middleware standards are different for every station."

Market demand is also weak. CATV stations in China were originally set up to serve local people, and the basic monthly fee has been as low as US$ 2.00. Yet with that payment, people in most cities receive more than 30 programs. While the pace of life has been accelerating in most cities, 30 programs exceed even the increased demand.

Finally, the Chinese government has strictly controlled the production of TV and radio programs, and without an open market, China's motion picture and video industries are still in their infancy. So far, most pay TV programs are made by television stations, not by professional production studios.

ABI Research also investigated domestic CATV operators, and found that the local CATV monopolies can leverage their power substantially to control the supply of STBs. In cities covered by the research, only a few brands of STB are available, and all STBs are sold to subscribers directly by CATV monopolies. Besides, pressured by the government plan, some CATV stations are trying to attract more subscribers by offering free STB rental with trial program subscriptions.

Founded in 1990 and headquartered in New York, ABI Research maintains global operations that support annual research programs, quarterly intelligence services and market reports in wireless, automotive, semiconductors, broadband, and energy. Their market research products can be found on the Web at www.abiresearch.com, or by calling 516.624.3113.