H.K. lights path for Asia IPTV adoption

Big market share for tiny territory

HONG KONG -- While Internet Protocol Television is still in its infancy in the Asia-Pacific region, Hong Kong is proving itself to be on the cutting edge of its deployment here, according a new report.

While IPTV's development in Asia-Pacific is fledgling when compared with Europe, the Hong Kong SAR (Special Adminstrative Region) has an IPTV household penetration of about 25%, giving it the largest market share in the region, according to the study from telecoms and software consulting firm Ovum.

Hong Kong has seen commercial IPTV deployments from PCCW, Hong Kong Broadband Network and TVB Pay Vision. PCCW has not only been the most successful of the three -- its Now Broadband TV is the world's largest IPTV venture.

"I believe IPTV in Hong Kong will continue a modest growth benefited by its premium contents offerings, a la carte packages (and) generous set-top box subsidies. The growth rate of pay subscribers will likely be somewhat around 10% per year," Ovum's Hong Kong analyst Kevin Lee said.

Although Hong Kong has the highest broadband penetration in Asia-Pacific, this is not, however, the only reason that IPTV has been successful in the territory, according to Lee.

"(The) small size of Hong Kong makes delivery of IPTV over the distance-dependent ADSL network more feasible," Lee said. "Proper positioning, step-by-step approach, service quality and understanding of the competitors and market needs are success factors for PCCW's IPTV service." (ADSL or Asymmetric Digital Subscriber Line is a technology that converts telephone lines into access paths for multimedia and high-speed data communications.)

Since September 2003, when it first rolled out its IPTV services, PCCW has secured a total of 758,000 connections (as of Dec. 31). Both TVB Pay Vision and Hong Kong Broadband have had small market impact, targeting their IPTV services at niche groups.

"My perspective on the future of IPTV in Asia remains positive, but growth will be modest under the entrenched cable and satellite competition," Lee said.

IPTV has been rolled out, or tested, in 11 Asian countries, and has faced significant hurdles including cable TV dominance in Taiwan and Korea and unfavorable regulatory frameworks in Korea and China. The countries in Asia that show the greatest potential are those with the highest broadband penetration.

"In general, IPTV is impeded by either dominating cable and satellite industries or immature pay TV markets in these territories, combined with piracy and regulation gray area," Lee said.

If IPTV is to get a stronger foothold, changes need to be made to the regulatory barriers, particularly in countries like China and Korea, Lee said. "One of the largest hindrances for the regulatory barrier in these countries is the conflicting interests between telecom and TV regulators, as IPTV will involve in both sides," he said.

In China, the regulatory battle is the greatest impediment to IPTV. The State Administration of Radio, Film and Television believes that IPTV is a broadcasting service, whereas the Ministry of Information Industry believes that it should have jurisdiction because IPTV is delivered over telecom networks.

Currently, SARFT has jurisdiction over all IPTV licensing in China, and has not yet issued any licenses to telecom operators, severely limiting the role they are able to play as this industry grows.

"It is thus important for the regulators themselves as well as the government to cooperate amidst the industry convergence to remove gray areas and to set up a more up-to-date regulatory framework," Lee said.
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