News

NDS Nails Down Major Chinese Contract

6/11/2000 8:00 PM Eastern

Hong Kong-China's state-owned Information Network Center has selected News Corp.-backed NDS Group plc as the main equipment provider for the country's national cable-television network infrastructure.

INC-which operates under the authority of the State Administration of Radio, Film and Television-is the sole organization authorized by China's central government to establish, unify and upgrade the technology used by the country's cable-TV systems. Its work is the country's first attempt to unify its huge cable-TV industry.

According to the SARFT, China has 1.6 million miles of cable within the government-controlled cable-TV network, and counts about 3,000 cable operators. As of February, there were 80 million cable subscribers out of a total of 264 million TV homes in mainland China.

By 2001, when the restructuring is complete, cable subscribers are expected to grow to 120 million, or twice the size of the U.S. cable-TV market. That's according to NDS vice president for the Asia-Pacific region Sue Taylor, citing SARFT projections.

INC operates a fiber network linking 19 provinces and major cities across China, and it expects to provide nationwide coverage within a year. It wants to have its system up and running by September, in time for the Summer Olympic Games from Sydney, Australia.

"INC told us they wanted to see Chinese athletes win gold medals on the latest technology," Taylor said.

INC is also responsible for facilitating the delivery of programming between cable systems within the national network. For example, it is acting as a middleman by selling local TV programs among the different provinces.

While the INC platform will be able to deliver enhanced TV, as well as broadband service, data services are still in a gray area. That's because if it were to provide data, INC would step on the toes of another government entity, the Ministry of Information Industry.

The real strong suit of NDS-which is 80 percent-owned by News Corp.-is its cable-TV middleware. At the cornerstone of the INC system is NDS' conditional-access software, which the company co-developed with Legend Computer Systems Ltd., a leading Chinese PC manufacturer. The conditional-access system will be used for broadcast security throughout the national network.

NDS is also providing the set-top-box middleware-operating system, as well as the subscriber-management system and the Chinese-language electronic program guide it co-developed with state-run broadcaster China Central TV (CCTV).

In the future, INC plans to offer interactive services that may include NDS applications like interactive programming and advertising, along with enhanced viewing applications.

One of the applications in which INC is particularly interested is "Sports Interactive," a service that NDS pioneered with its corporate cousin, U.K. direct-to-home platform and channel provider British Sky Broadcasting Group plc.

NDS director of technology development for China Xiaoyan Ren said INC selected the company because of its experience with large customer-base operations, as well as its ability to work with the Chinese character set and to provide localized products.

"We had to modify the way we do business to adapt to Chinese ways," Taylor said.

Stressing the importance of technology transfer in China, she added that NDS adopted a strategy of partnering with Chinese companies and organizations. In addition to co-developing a Chinese interactive program guide with CCTV, NDS joined with China's Academy of Broadcasting Science to co-develop a Chinese conditional-access system.

And NDS continues to work with Sichuan New Tech Digital Equipment Co. Ltd., Legend and other Chinese manufacturers to advance Chinese digital set-top-box technology.

Ren said NDS selected Legend as the manufacturer of the first set-top box because of its manufacturing facilities and established distribution and sales network. But NDS is looking for additional set-top manufacturers, aiming to cut the price of each unit to $140 from $200.

A total of 17 percent of NDS' sales revenue comes from the Asia-Pacific region, where Hong Kong and Australia are the most profitable markets. Cable & Wireless HKT is NDS' largest customer in Hong Kong, while News Corp.- and Telstra Corp. Ltd.-owned MSO Foxtel is its biggest Australian client.

Taylor said she considered China the company's most important market because of its huge potential. "People who will be successful in China in 10 years are the ones who are investing today," she added.

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