Skepticism Greets Chinas Cable-System Vision

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Commercial factors, and not government-led initiatives, are
likely to lead the modernization of China's cable-TV industry, according to a
Beijing-based analyst.

At the same time, indications that China's increasing
willingness to accommodate foreign broadcasters will lead to the rollout of direct-to-home
satellite channels is premature, according to other sources in Beijing and Singapore.

Reports from state-run Chinese media quoting government
officials suggested that the State Administration for Radio Film & TV, together with
local cable operators, will form the Cable Television Network.

This would supposedly link the 756 cable operators that are
officially listed by the government into a national system run by the SARFT and reaching
an estimated 100 million homes.

Kristian Kender, a media analyst for Beijing-based Claydon
Gescher Associates, disputed the reports.

"The creation of a national cable network under SARFT
control is unlikely to happen in the near term for commercial reasons," he said.
"Cable operators are beginning to roll out premium tiers, pay-per-view systems and
other value-added services on their own, without the need for SARFT intervention."

Kender added that commercial factors will lead to the de
facto creation of larger cable operators through the emergence of MSOs.

"The eventual separation of the regulators from
commercial entities in China's broadcast sector and the subsequent lowering of
subsidies will put many of China's weaker cable operators into financial
distress," he said.

Larger cable operators will expand their businesses through
alliances and acquisitions of smaller, less financially viable systems, Kender added.

Another China-based observer said the SARFT lacked the
muscle to push through a national cable system. "This is something that they have
been talking about for years, without any concrete results," the observer said.

He also believes that MSOs could be functioning in China
within two years, but he warned foreign channel providers not to expect DTH distribution
to be permitted in the near future.

"This is a highly sensitive year for China, with the
10th anniversary of Tianamen Square and the 15th anniversary of the People's Republic
of China in October. If anything, I would expect to see a crackdown on the reception of
foreign-based channels," the observer said.

However, a Singapore-based programmer said it is
"getting positive signals from the Chinese about this -- a lot more than we did two
years ago. But you have to remember, this is China that we're talking about -- no
matter what they tell you, it can always rain tomorrow."

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