Sina Technology News, afternoon news on March 23rd. This afternoon, during a live broadcast of the CCBN2010 High-Level Forum hosted by Sina Technology, renowned radio and television expert Ziqiang Hou expressed that the state advocates the convergence of the three networks (telecommunication, cable TV, and internet), and the telecommunication system most wants to obtain IPTV services, while the radio and television sector can acquire and most desires to obtain broadband internet access services.
The following is a transcript of this exclusive interview.
Host Kang Zhao: Hello, netizens. We at Sina Technology have invited Mr. Ziqiang Hou from the Chinese Academy of Sciences Research Institute. First, please allow Mr. Hou to greet our netizens.
Hou Ziqiang: Hello, everyone.
Host: Mr. Hou is very well-known in both the telecommunications industry and the broadcasting industry, and has always been highly active. Over the years, I've often listened to many of your opinions, which have provided me with much inspiration in various settings. Now is a crucial moment as the convergence of the three networks is about to enter its pilot phase. At this time, do you think we can truly achieve the convergence of the three networks?
Hou Ziqiang: During the forum earlier, we mentioned that "the convergence of the three networks" is not something foreigners refer to; translating it into English isn't entirely standard. In fact, the convergence of the three networks is absolutely a domestic concept. Why? The fundamental issue is solving the problem of mutual market access. In China, the governance systems for telecommunications and radio and television are managed by two separate institutions, so there exists a dual market access problem. Abroad, these are governed by a single institution, thus eliminating this issue. Therefore, foreigners simply don't understand what "the convergence of the three networks" means.
Host: I feel this might be a historical legacy issue. Actually, when talking about the three networks, it's more like two domains since the internet and telecommunications network are essentially one network, and the radio and television sector involves the internet relatively less. It’s rumored that pilot cities for the convergence of the three networks will be announced in May. Some cities don’t want to participate, while others do. The Ministry of Industry and Information Technology proposed a list of cities, and the State Administration of Radio, Film, and Television also proposed a list. They are now entering the final negotiation stage. Can you speculate which businesses will first be carried out in the pilot cities regarding the convergence of the three networks?
Hou Ziqiang: Not long ago, Minister Yizhong Li mentioned determining the pilot cities and the businesses to be conducted. Personally, I am a retired elder, representing no particular interest, so my remarks may be a bit casual and only reflect my personal views.
Firstly, let's talk about what exactly we are piloting. Technically, there aren't many issues. I believe that what we call a pilot is actually creating a buffer period to resolve the coordination and balance of interests. That's the important part. In fact, Shanghai has been a pilot for the convergence of the three networks for a long time. Decades ago, in 1998, then Premier Zhu Rongji decided at a State Council office meeting that Shanghai would be a pilot city for the convergence of the three networks. Looking at Shanghai, the fastest-growing service has been IPTV, with over a million users in Shanghai alone. As for the radio and television system, Hangzhou Huashu and Shenzhen have done well. I believe the experimental catalogues will likely include projects related to today's digital television and IPTV.
Host: You just mentioned digital television and IPTV services, which are operated separately by the radio and television and telecommunications sectors. Can telecom operators gain the opportunity to enter the IPTV market? Can radio and television operators gain the opportunity to provide telephone services to users?
Hou Ziqiang: Over the past few years, the radio and television sector has done two things: separating the network from the station and separating content production from broadcasting. Separating the network from the station means dividing the television station from the network company, where the network company handles transmission. In fact, the network company can accept private capital, foreign investment, and even go public. Another thing is separating content production from broadcasting, dividing the content creation from the television station. For example, this time Shanghai Media Group separated Oriental Media, with the main body being Shanghai Television Station. Content production, such as continuous dramas, can also open up the market, inviting foreign investment if necessary. However, the only part that remains controlled is the content integration and broadcast control rights, which have never been released. Even without this document, transmission and content production are open, and can be done. So, what does the telecom sector gain this time? Essentially, they gain what is already available. The only thing to clarify is that IPTV as a transmission method should be acceptable, but this matter hasn't been fully relaxed yet, awaiting the pilot. What is the pilot? For telecom, it is trying IPTV; other than that, there isn't much else they want, nor dare to want broadcast control rights. As for radio and television, what they receive are telecom value-added services, some basic services, and internet access services.
Just like what you asked earlier about telephones. If I reverse the statement, ten years ago, the radio and television sector was eager to try telephones after achieving two-way communication capabilities. Today, if you give them the chance, they wouldn't invest much effort because telephony is already a sunset industry, with its share continuously declining. So, if you give them that right today, the radio and television sector wouldn't aggressively enter the telephony market. What the radio and television sector gained this time is the internet, broadband access, reaching local SPs at the local level, and national SPs at the national level.
Host: I feel your insights are profound. Traditional telephone services indeed have little meaning anymore, whereas internet access services and SP value-added services hold great potential for the radio and television industry, with significant market potential and high profits. These industries are very attractive to the radio and television sector. According to your view, the telecom sector doesn't gain much. What else can they obtain besides IPTV, which they are already doing?
Hou Ziqiang: I haven't thought of anything else.
Host: In fact, so-called equal openness mainly opens markets towards the radio and television sector.
Hou Ziqiang: In reality, the most valuable aspect is cooperation between telecom and radio and television. This is the most critical.
Host: Currently, at the provincial level, the radio and television system is integrating the cable television networks of provinces and municipalities, and establishing provincial network companies. What are your thoughts on this? Is it feasible? Can local cities smoothly hand over their rights?
Hou Ziqiang: The network integration of radio and television has been ongoing for more than a decade. This integration involves three levels within the radio and television sector. One level is the establishment of China Radio & Television Network (CRTN) years ago, which was the first attempt. Later, China Radio & Television Network (CRTN) was established, whose actual responsibility was to operate the national fiber optic network, but it also integrated Hainan Province.
Another level involves listed companies. There are currently three or four listed companies participating in the acquisition of local radio and television networks. After separating the network from the station, the transmission was divided, but none of these efforts achieved significant success. Now, provincial integration is being promoted. Nationwide, nearly one-third of the provinces have completed the integration, another third are in progress, and the remaining third have not started yet. What needs to be integrated? The characteristic of the radio and television network is that each city's network is self-funded, so its asset base is primarily local. Its operations are also separate. This situation has its historical inevitability, as the radio and television cable network originally had local attributes.
However, due to small scale and weak competitive strength, the question arises whether regional integration is possible. Jiangsu Province has completed provincial integration, using a stock swap method where all ten prefecture-level cities become shareholders, contributing their networks as shares, thereby becoming shareholders. Then, external investors are added, resulting in a total of 17 shareholders, all quite dispersed. In reality, each local cable network still operates independently, so each prefecture-level city has different gradations. Broadcast control is still at the local television stations, merely connected through the provincial network, but actual operations remain independent.
Host: Can a unified provincial cable television network be formed, allowing centralized procurement of equipment and unified transmission facilities?
Hou Ziqiang: These are not complicated, and it's possible, but the business unlike telecom, telecom's business is interactive, while it is broadcasting. So, each place broadcasts its own content, just broadcasting the central and local channels is sufficient, without much interactivity. Therefore, emphasizing a full network is not particularly strong, so now Xinhua News Agency issued a report stating that a national-level cable television company will be established, taking content from each province. As far as I know, provincial companies haven't finished integrating yet, and now they're being integrated again. Various ideas exist, but from a business perspective, there isn't a strong demand, so what is the real need? If it's just for television broadcasting, but when it comes to internet access, it changes, and at that point, there is a nationwide demand. Thus, the internet access obtained by the radio and television sector through the convergence of the three networks doesn't require asset integration.
Host: How can it be integrated?
Hou Ziqiang: Just connect to the internet.
Host: How is settlement handled? Who gets the money?
Hou Ziqiang: Each company connects to the internet.
Host: Isn't that too complex?
Hou Ziqiang: Not at all complex. Now, places where radio and television are doing well, like Hangzhou, Shanghai, and Shenzhen, are examples of two-way broadband. The internet is doing well. There are nearly 100 million broadband users nationwide, with radio and television having only 2 million, or 2%. Among these 2 million users, they need to connect to the internet, either through telecom or Unicom, and the connection cost is very high. In large cities, each G bandwidth per month costs 1 million yuan. If there are hundreds of thousands of users, 10G definitely won't be enough, requiring dozens of G. This results in annual access fees amounting to hundreds of millions, with half going to telecom. So now, giving radio and television an SP license allows them to do access, making it difficult to earn much money, with most going to telecom. Therefore, radio and television needs to build its own national backbone network, connecting various places and contents, forming a unified company to negotiate connections with telecom.
Host: Does that mean there's no need to establish a national cable television network company, but rather to separate the internet business?
Hou Ziqiang: No need to separate. Just connect each station's internet exit here.
Host: But the equipment isn't uniform.
Hou Ziqiang: The routers are the same.
Host: This is an interesting viewpoint, suggesting that the national network company doesn't need to be established.
Hou Ziqiang: China Radio & Television Network owns the backbone network but lacks a national SP license. If this time the national SP license is given to China Radio & Television Network, although the bandwidth isn't wide, the optical fibers are present. By increasing equipment, once enhanced, now each provincial company wanting to access the internet can connect. CCTV is building a national online TV station, and each province has an internet video website. Their server hosting costs are extremely high, leading to substantial payments. Now, all these can be connected to this network, which then connects with telecom.
Host: Your thinking is indeed very reasonable. What about the rest? Besides internet access, can the rest be left to each province and local city to handle?
Hou Ziqiang: As long as the central channel programs are connected, the rest is their own affair, with nothing else needed. Is there any need for cross-provincial interaction? Yes, that is through the internet, so doing well with the internet makes everything else easier.
Host: I have one more question. The State Administration of Radio, Film, and Television proposed constructing the next-generation broadcast television network, aiming to reach 100 Mbps bandwidth within a few years. How do you view this? First, can it be built at the national level and conduct NGB trials? Second, how much will the NGB cost, and after construction, can it effectively compete with the telecom network?
Hou Ziqiang: NGB is a broad concept. Last year, at a conference held by the radio and television sector, someone told me a tongue twister: "NGB is a basket, anything can be put inside." Everyone claims they are doing NGB, but what exactly is NGB? The origin of NGB stems from an agreement between the State Administration of Radio, Film, and Television and the Ministry of Science and Technology. The State Administration of Radio, Film, and Television localized the concept, incorporating the results of the Ministry of Science and Technology's 863 Program, combining them as the basis for developing the next-generation broadcast network. However, now this concept includes several aspects: digitization, analog to digital conversion, unidirectional to bidirectional transformation, and small networks transforming into large ones. Analog to digital conversion has already reached tens of millions. The second step is unidirectional to bidirectional transformation, and the third is small networks transforming into large ones, which is network integration. But the core of NGB, like 3Tnet, is building a dedicated network. The technology of 3Tnet enables large-scale multicast and broadcast on IP networks, utilizing flat routers for live broadcasts. In fact, broadcast networks themselves can perform broadcasting, presenting no major technical challenges for radio and television.
3Tnet achieves remote on-demand viewing through optical switching, enabling movie broadcasts from Shanghai to Shenzhen. The idea of NGB building a dedicated network conflicts with the operational mindset of new media on the internet. For over a year, I've consistently said that radio and television shouldn't build dedicated networks but return to the internet. In fact, today, a portion of people in the radio and television sector, including CCTV, have moved television stations onto the network, transforming them into online television stations on the internet, not on dedicated networks. What are we doing today with the convergence of the three networks? We are breaking through barriers to reach the internet, moving broadcast television and new media onto the internet, which is the direction of future development. Building your own dedicated network will result in no one wanting it, as users won't buy into it.
Host: Understood. After chatting with Mr. Hou today, I've learned a lot. Due to time constraints, the interview will end here. Finally, please allow Mr. Hou to say a few words to our netizens and bid farewell.
Hou Ziqiang: Thank you, netizens, for your attention to this issue. The convergence of the three networks is currently a focus of concern for everyone. However, from different perspectives, everyone will have different understandings. But I believe that the convergence of the three networks will break industry barriers and develop new media in a good direction. Thank you all.
Host: Thank you very much, Mr. Hou, and thank you to all the netizens for your active participation. This concludes our interview. Thank you, goodbye.