Far Eastern Economic Review: China -- Television-- Very Remote Control

By David Murphy in Beijing

08/29/2002

[..] In February, the government sought to tighten its grip on what the Chinese people can watch by ordering all foreign television channels to broadcast into China only via Sinosat-1, a state-owned satellite. Since then, the government' s public enemy No. 1 has hijacked its output frequently over a week-long period, the illegal market for pirated satellite television technology is thriving as never before, and both the state regulator and approved foreign broadcasters are losing business.

Launched initially as a way to extend the reach of state television channels into mountainous and other remote regions, Sinosat' s broadcasts weren' t exactly gripping fare. But in recent months as major American, Hong Kong, Japanese and other regional sports, news and entertainment channels signed on in line with government orders, the stodgy satellite has become much more popular. Seeing a golden opportunity, entrepreneurs have provided cheap decoders with pirated technology to unlock Sinosat' s transmissions, boosting the already sizeable market for foreign channels.

The result, for Beijing, is a big mess, which only helps pirate entrepreneurs and ordinary TV viewers -- both foreigners and Chinese who for a small fee can now watch 26 foreign channels and dozens of domestic ones. Already about 45 million people view foreign channels picked up on illegal large satellite dishes, according to James Mitchell, a media analyst with Goldman Sachs in Hong Kong. And that number is growing rapidly as sales of pirated Sinosat decoders take off. There has "definitely been an increased interest in the platform," says Mitchell.

That' s exactly what Beijing didn' t want: ordinary Chinese receiving foreign satellite channels. By law they should be available only to three-star or above hotels catering for foreign guests and apartment blocks or office buildings designed for use by expatriates. Each hotel or building has contracts with foreign broadcasters to receive their channels, which are delivered from Sinosat to a large dish often mounted on the building roof.

But with pirate dishes and decoders readily available, large numbers of Chinese have access to foreign broadcasts in defiance of the government' s aims. Foreign companies such as Home Box Office, Cinemax, Cable News Network and the British Broadcasting Corp. blame a slowdown in recent months in new orders for their broadcasts on the pirates. "We' ve had only a handful of new customers for the last few months because of this," says one salesman.

Already annoyed at having to pay $100,000 annually to be distributed over the Sinosat platform, foreign television companies are bitter. "Inflexible government policy combined with an inability to police and enforce that policy has left the field open to pirates," says an executive with a foreign TV company. "That' s the story of business in China today."

By pushing foreign channels onto its satellite, Beijing could say it got what it wanted: control of the on-off switch. If the Propaganda Department saw anything it didn' t like it could cut off the broadcast. It could even punish a broadcaster and hit its advertising revenues by keeping a channel off the air for a longer period. The BBC was shut down for days from July 1 after it aired film of the Falun Gong spiritual movement, which is illegal on the mainland, on the fifth anniversary of Hong Kong' s handover to Chinese control.

The hitch was that the government system uses outdated encryption technology and so gave the pirates a route of attack. Even before the new rules, Chinese viewers could get some access to foreign television by buying unlicensed satellite dishes. The new system was supposed to bring all transmissions under Sinosat control but, as a manager of a software company says, the technology was already "pirated to pieces."

Installing a satellite dish and set-top box is a simple procedure that takes about two hours. It can easily be adapted to feed into apartment buildings connected to the local cable network and is relatively cheap. "In Beijing it costs under 2,000 renminbi ($240), and in southern China where competition is stiffer the price is down to about 800 renminbi," says another salesman.

In a typical case, a foreign company used to be able to charge $4,000-5,000 a year to supply one channel to a 200-unit apartment complex. "Multiply that by 20 plus channels, it' s a lot of money," says the foreign -television executive. In addition, foreign firms could sell dishes and decoders in China to pick up signals from international satellites with wide Asian footprints.

Now China International Television, a state company, has the official monopoly to sell equipment, including satellite dishes, to receive Sinosat. That was supposed to help the struggling state operation make some money. But instead it is losing revenue to pirates. And the pirates have a sizeable vested interest incountering any moves to upgrade and protect the system.

Piracy, of course, is not confined to mainland China. In Hong Kong, for instance, an estimated 100,000 households are connected illegally to the local I-Cable system. The set-top boxes used in Hong Kong are made in the mainland and a full pirated connection sells for about HK$3,000 ($380). Another 10,000 satellite dishes in the former British colony pick up unlicensed signals from Thai, Taiwanese, Japanese and other regional satellites.

"And that' s in Hong Kong, which should be a flagship for our industry," complains Simon Twiston Davies, chief executive officer of the Cable and Satellite Broadcasting Association of Asia in Hong Kong. Piracy is a problem all over the region and media companies are missing out on millions of dollars in advertising and other revenue as a result, he adds.

Even China' s propaganda masters are embarrassed. To their dismay, the Falun Gong managed in the last week of June to hijack Sinosat and broadcast its own [information] around the country. Exactly how this was done has not been officially revealed but the incident highlighted encryption problems for China' s satellite signals. It may, therefore, signal the start of a much tougher confrontation between regulators and pirates. […]