Crucially, the cable operators will retain control over content management and distribution. For example, SARFT has recently clarified that only broadcasting licensees can control IPTV platforms and the associated content management.
It is clear that SARFT is reluctant to grant broadcasting licenses and access to SARFT-regulated content. The telecoms operators will not see any new opportunities to invest in broadcast-style services (such as IPTV services) until this changes, and we do not expect this for at least three years. This will buy time for the cable operators to develop their ability to compete with telecoms operators.
The arrangements have the potential to upset the dominance over the fixed market that the fixed telcos have enjoyed for the past three decades. Cable operators currently hold only a few percent of the broadband market, and none of the voice market.
However, there are 177 million cable TV households in China. If a fraction of those can be converted to broadband and voice customers then the impact on the telcos will be significant.
Other threats loom; for example, China Mobile is already bundling mobile voice services with cable operator broadband in some markets. The threat can only grow as the cable operators benefit from government investment.