Hangzhou shows cable and internet TV operators can share market and open up 16b yuan industry China Netcom says its new business model based on cable and broadband-capable set-top boxes may be a way out of the turf war between the country's cable and internet protocol television operators, untangling much of the red tape now tying up an estimated 16.7 billion yuan market. Chief technology adviser Hou Ziqiang said cable-television operators in more than 20 cities had noted they would follow the operating model in Hangzhou where dual-mode set-top boxes had been installed in customers' homes. PCCW is poised for the acquisition of China Netcom Broadband Corp, which provides internet television services in Hangzhou and Ningbo. 'The operating model in Hangzhou is led by the State Administration of Radio, Film and Television [Sarft]. PCCW would also participate as a shareholder in its broadband joint venture with China Netcom,' Mr Hou said on the sidelines of a conference yesterday. 'The Hangzhou model could be the solution for the [battle between] cable operators' digitalisation programme versus [internet television] development in China.' Among the 600,000 cable-television users in the city, about 20 per cent have also subscribed to broadband television, which adds interactive services such as video-on-demand and text messaging on top of a digital television service. Mr Hou said Hangzhou customers spent 35 yuan more per month for these services, on top of the 14 yuan they already paid for the cable digital-television channels. Because a dual-mode set-top box is connected to a cable 'downlink' for broadcasting the channels and another broadband network 'uplink' that sends back customer data including text messages and account information, both cable operators and telecommunications firms - in this case China Netcom - could begin to collaborate to offer digital pay-television and interactive broadband services. Since 2001, Sarft has directed the digitalising of cable-television operators' traditional analogue networks. The 2008 Beijing Olympics is due to be aired on digital networks and by 2015 all analogue transmission is scheduled to be shut down. The mainland is expected to have 30 million digital-television users by the end of the year. But with the advance of internet protocol technology that enables telecommunications operators to also offer digital television over broadband, internet television has created a grey area that pits Sarft - the media and broadcasting regulator - and the telecommunications watchdog, the Ministry of Information Industry, into overlapping regulatory turf. 'The dual-mode set-top box means the regulatory grey area is bypassed. It also allows cable and telecommunications operators to join hands and speed up the launch of digital television,' a source said. He expected once PCCW completed its acquisition of China Netcom Broadband, it would continue to partner with China Netcom and replicate the Hangzhou and Ningbo internet television models in other southern provinces. PCCW in August said it would pay about 318 million yuan for a 50 per cent stake in the broadband unit, a deal expected to be completed by the end of the year. Analysys International estimated there would be 16.65 million internet television users in the mainland grossing 16.7 billion yuan revenue by 2009.