China's fourth largest telecommunications operator is here

Chinese people are already familiar with the three major operators in the past decade or so - China Mobile, China Telecom, and China Unicom. They all existed before, and they also left an impression on Netcom and Tietong, which were later merged. Entering the 5G era, the fourth largest operator in China is about to emerge, and that is "China Broadcasting Corporation".

As of mid-2020, the radio and television networks in various provinces and cities are still independent of each other. Users who still watch cable TV need to pay fees, and they pay them to the radio and television business offices in their respective provinces. There is no unified "China Radio and Television CBN" sign hanging in all places.

But with the following three actions, this situation may change fundamentally within this year.

• The integration of the national cable TV network has entered the audit and evaluation stage, and all provincial-level listed radio and television companies have issued announcements to explain the integration matters;
• Radio and television networks in various regions have vacated the 700MHz "golden frequency band" originally used for radio and television signal transmission for mobile communications;
• China Radio and Television has chosen to cooperate with China Mobile to develop 5G services based on the 700MHz frequency band.

These actions mean that the radio and television industry has been transformed from its original stereotype of being a publicity tool and providing a single cable TV service, and has become a comprehensive operator that also operates mobile networks, fixed-line broadband, IPTV and other services, in line with the other three existing operators.

The Origin of “Local Separatism” in Radio and Television

The positioning of contemporary radio and television in China is, first and foremost, a tool for public opinion, a modern communication tool, and a channel for the Party and the government to connect with the people.

The National Radio and Television Work Conference held in March 1983 proposed the policy of "four levels of radio and television management and four levels of mixed coverage" at the central, provincial, municipal and county levels. This policy has greatly promoted the overall development of China's radio and television industry, but also led to the current historical inheritance of radio and television "separatism" in various places.

The background of the "four-level TV" proposal is that China has a vast territory and a large population. Before the popularization of Internet infrastructure in the 1980s and 1990s, it was necessary to effectively improve the coverage of radio and television. As a one-way output, non-interactive media form, radio and television lacked competitors in the early stage and lacked the motivation for full marketization.

The cable TV relay stations in various places that developed in the 1990s existed more as transit stations for broadcasting programs from the central and higher-level stations. They had a wide variety of self-produced programs, filled with Hong Kong and Taiwan movies, Japanese cartoons, and hit songs that could be played on the screen by just making a phone call, long advertisements selling medicines, and "Acorn International", which together constituted the childhood memories of a generation.

At the turn of the century, a family could pay a few dozen dollars a month for cable TV and be guaranteed to receive 30-40 channels. Thanks to the friendly relations with the Chinese government at the time, Murdoch's Phoenix TV, Star Movie Channel, National Geographic and other overseas programs would sometimes quietly enter the homes of ordinary people in unknown parts of the country.

It can be said that this was a peak period in the history of the development of radio and television networks. At that time, some local broadcasting stations would superimpose subtitle advertisements on the TV screen to make profits; while Beijing, Guangdong and other places further developed upgraded wired networks based on coaxial cables or optical fibers, providing value-added services such as graphic television, shopping, and Internet access.

In the early 2000s, the radio and television industry provided a broadband service that was accessed through cable TV. It used a cable modem that looked like an ADSL modem and required a cable to be connected from the back of the TV. Its average speed was comparable to that of ADSL, but it adopted a network layout strategy in which the entire building or even the entire community shared the bandwidth. Therefore, during the evening Internet access peak period, everyone's Internet speed would be unbearably slow.

The aftermath of these radio and television broadband users varies in different provinces and cities. In my hometown, the radio and television broadband was taken over by China Railway Communications Corporation and operated for a few years before being replaced by China Mobile. However, the cable modem that plugs into the coaxial cable has long been abandoned, and the technology used is almost the same as that of China Telecom and China Unicom.

In other places, the radio and television cooperate with China Unicom to build networks. C114 reported that the "Guangdong-United Family Fun" broadband cooperation business was launched in Sichuan, Jiangsu, Zhejiang and other places a few years ago. The amazing thing is that when users choose to dial, they can enter different user names and passwords to choose to use China Unicom or radio and television billing lines.

On July 18, 2017, China Cable, Chongqing Cable, Gehua Cable, Oriental Cable, Yunnan Broadcasting Interconnection (Hubei), and Shandong Radio and Television jointly initiated the establishment of a national broadband comprehensive business operation company, China Radio and Television Broadband Operation Co., Ltd. Some media have reported that the total number of existing fixed-line household broadband users under the Radio and Television Group exceeds 40 million.

"One Network Nationwide" Integration Accelerates

When China Radio and Television was established in 2014, it was regarded by the outside world as the fourth largest operator. It obtained the "Integrated Telecommunications Business Operation License" as early as 2016, but it has been unable to enter the market to carry out operator business because China Radio and Television has not completed the integration of the "National One Network".

This was once considered an impossible task, because at that time the radio and television networks in each province and city were not only independently operated entities with different structures, but there were also 11 listed companies based on provincial boundaries: China Radio and Television Network, Gehua Cable, Oriental Pearl, Wasu Media, Tianwei Video, China Media Group, Jiangsu Cable, Guizhou Radio and Television Network, Guangxi Radio and Television, Jilin Television Media, and Hubei Radio and Television.

Even in some provinces, some large cities' own cable TV stations do not obey the management of provincial radio and television, which means that the "one network for the whole province" has not been completed. Therefore, the current situation is that China Cable, a subsidiary of China Broadcasting Corporation, only operates interactive cable TV business in Hainan Province; Wasu Media has inherited the interactive cable TV business of 18 cities in Jiangsu, Anhui, Shandong, Heilongjiang, Hebei and other provinces covered by the original "China Cable".

A research report by China Merchants Bank pointed out that the integration of listed company platforms involves the interests of all shareholders and public investors, which may be a difficulty in the early stage of structural integration.

Four years later, in 2020, the radio and television industry can finally substantially promote the "One Network Nationwide", which is due to multiple factors. But the main reason is that the traditional cable TV business is no longer viable.

In the third quarter of 2019, the total number of cable TV users in China dropped to 212 million, a net decrease of 6.644 million households year-on-year, and the share of cable TV in China's household TV viewing market fell to 47.43%. In the previous 2015-2018, the same share figure fell from 66.5% to 51.6%.

In recent years, the radio and television industry has been complaining about China Telecom, China Unicom and China Mobile providing IPTV along with fixed-line broadband, and has also faced many constraints in core resources such as the World Cup. However, it has been unable to prevent user loss and the trend of "disassembling machines and unplugging wires". "Paying cable TV fees" has become a very unfamiliar term for young people.

Although the radio and television industry also agrees that the "three-network integration" of the communications industry is an inevitable trend, it is difficult to accept that the dominant power in this process is not in their hands and the meat in their bowls is almost eaten up by telecom operators.

As the saying goes, "When you are poor, you must think of change." Driven by a common goal, the integration of the "One Network Nationwide" has finally entered the fast lane.

Song Qizhu, who took office as chairman of China Radio and Television Network Co., Ltd. in early January this year, has served as deputy director of the Radio Management Bureau of the Ministry of Industry and Information Technology and director and party secretary of the Hubei Provincial Communications Administration. The selection of people from the communications industry as senior executives of radio and television clearly indicates that they are accelerating integration.

On April 23, the national cable TV network integration audit and evaluation work was officially launched. China Radio and Television requires provincial network companies to speed up arrangements and promote the audit and evaluation work in an orderly manner in accordance with responsibilities and timetables.

From May 27 to 29, all 11 listed companies in the radio and television industry successively announced that they plan to jointly establish China Radio and Television Network Co., Ltd. (tentative name) by using their holdings of company shares and cash and other assets as capital contributions.

On June 3, Gehua Cable announced that the controlling shareholder would be changed from Beijing Broadcasting Media Investment and Development Center to China Broadcasting Network Co., Ltd., and the actual controller would be changed from Beijing Radio and Television to the State Council. Based on this, the original parent companies of provincial cable companies will become minority shareholders of the new operating company according to the asset ratio after injecting the network.

After the establishment of the "One Network for the Whole Country" joint-stock company, the chaos of "local separatism" will be ended, and the provincial network company will become a holding subsidiary of the joint-stock company, establishing a unified operation and management system for cable TV networks and radio and television 5G networks. Some people have optimistically predicted that the "One Network for the Whole Country" joint-stock company can be established and listed as early as June.

Holding the “Golden Frequency Band” of the 5G Era

The reason why the integration of the national network of radio and television has accelerated suddenly this year is not only the pressure of the decline of cable TV, but also a "major benefit" for the radio and television system, that is, they have the most suitable communication spectrum for the development of 5G, namely the 700MHz (megahertz) frequency band. This frequency band was originally used for radio and television signal transmission.

In the field of mobile communications, the 700MHz frequency band is regarded as the "golden frequency band" for 5G construction due to its advantages such as low signal propagation loss, wide coverage, strong penetration, and low networking cost. Wang Mingxuan, a television industry observer, wrote:

"This frequency point has a strong diffraction ability, is less obstructed, is less affected by humidity in rainy and snowy weather, and has a long transmission distance, which makes the 5G networking cost of radio and television extremely low. The coverage area of ​​the three major telecom operators building ten or twenty base stations can be achieved by radio and television by building one. The simple math problem is: assuming that China Mobile spends 100 billion to build a network, radio and television only needs less than 10 billion to achieve the same effect. This is especially important for radio and television with limited supplies."

On April 1, the Ministry of Industry and Information Technology issued the "Notice on Adjusting the Frequency Usage Plan of the 700MHz Band", which mentioned that in order to promote the accelerated development of 5G and promote the effective use of radio spectrum resources, the frequency usage plan of the 700MHz band will be adjusted for mobile communication systems.

The day before, the first working meeting of the National Terrestrial Digital Television 700MHz Frequency Migration Leading Group was held, requiring all localities to "draw up a list, clarify time limits, and implement them item by item to ensure that the 700MHz frequency migration goals are achieved as scheduled."

Recently, the radio and television systems in Hebei, Hunan, Fujian, Yunnan, Guangdong, Shanxi and other provinces have held meetings to carry out the 700MHz frequency migration of terrestrial digital television.

This means that all places will stop transmitting analog TV signals transmitted through the 700MHz frequency band. Most older people remember that TV sets in the past had two long antennas. Even if you didn't pay for cable TV, you could tune in to watch a few programs for free, but the clarity was not very good, and there were often problems with snow and ghosting. This is analog TV.

The United States stopped broadcasting analog TV as early as 2009, and Japan stopped broadcasting in 2011 (except in earthquake-stricken areas). Hong Kong changed the deadline for stopping analog TV broadcasting from 2015 to the end of 2020 due to the large number of poor households at the grassroots level. As early as several years ago, my country planned to stop broadcasting terrestrial analog TV signals by 2020, but due to China's vast territory and large population, the progress is still slow.

With the change of audience viewing habits and the unremitting penetration of radio and television, as of the end of June 2019, there were 216 million cable TV users nationwide, of which 203 million were digital TV users, with a digitalization rate of 93.98%. Some regions with better economic levels have set more specific time limits for frequency clearance. For example, Guangdong Province has clearly stated that all analog TV broadcasts will be stopped by the end of October this year.

The gradual withdrawal of old services is not just a problem faced by radio and television. China Mobile now has 2G, 3G, 4G, and 5G "four generations living together". However, the withdrawal of radio and television is not only a business decision, but also requires consideration of how grassroots and rural populations can obtain alternatives to maintain their right to receive television programs.

The fourth largest operator's competitive route

It seems that China Radio and Television is really going to become the fourth largest telecom operator that Chinese people can choose. Apart from a certain cost advantage in spectrum deployment, this new player has absolutely no experience or manpower accumulation in the communications industry. How can it compete with China Mobile, China Unicom, China Telecom and other operators that have been immersed in the market for many years?

(1) Government and enterprises take the lead

At the China Institute of Communications Forum on May 17, World Telecommunication Day this year, Song Qizhu said:

"China Radio and Television will cooperate with key national industries such as public security, emergency response, and electricity to build highly reliable, secure, and industrial-grade 5G campus networks and 5G private networks to provide foundation support for the industry to achieve gigabit-level digital/intelligent connections and enable industry transformation and development and application innovation."

It can be seen that government affairs and enterprise services are a business direction that radio and television can give priority to. Moreover, compared with consumer business, radio and television are not completely inexperienced in government and enterprise services.

During the epidemic, China Radio and Television provided services to many media outlets across the country and live broadcast the Hubei Provincial Anti-epidemic Press Conference. Some schools used 5G to collect and edit educational videos and transmit them back to the cable TV network.

On May 17th, during the World Telecommunication Day, China Radio and Television Corporation, together with local radio and television companies, realized live broadcast in Beijing, Hangzhou, Shanghai and other places based on radio and television 5G+8K technology. This is the first application of 8K ultra-high-definition live broadcast in the medium and low frequency bands of 5G.

At the same time, the migration of 4G users brought about by 5G services has brought a problem to the existing three major operators, that is, the reduction in the scale of mobile phone users. The operating reports of China Mobile and China Telecom in February showed that the user scale of both companies has been greatly reduced.

At present, the number of mobile users in China exceeds 180 million, which means that many domestic users hold two or more SIM cards for different purposes such as making calls and using data. The high traffic of 5G will prompt these users to discard the redundant data cards.

Based on this, some communications industry experts believe that the application prospects of 5G are mainly in the government and enterprise market, rather than the personal market, and even directly define the proportion of individual and government and enterprise 5G customers as the "80/20 rule."

(2) Collaborative consumer business

On May 20, China Mobile and China Broadcasting Corporation launched 5G cooperation. The two parties jointly determined the network construction plan, jointly invested in the construction of 700MHz 5G wireless network in a 1:1 ratio, and jointly owned and had the right to use 700MHz 5G wireless network assets.

Specifically, China Mobile will provide China Radio and Television with a paid transmission network from 700MHz 5G base stations to China Radio and Television's connection points in cities or provincial centers, and will also open up a shared 2.6GHz 5G network. China Mobile will be responsible for the operation and maintenance of the 700MHz wireless network, and China Radio and Television will pay China Mobile for network operation and maintenance fees.

Before the 5G network in the 700MHz frequency band is ready for commercial use, China Radio and Television will share China Mobile's 2G/4G/5G network for a fee to provide services to its customers. China Mobile will provide China Radio and Television with international business transfer services for a fee.

In terms of 5G cooperation, both parties will maintain their own brand and operation independence. But overall, the depth of this cooperation agreement is quite thorough. The mutual assistance between central enterprises, which is like “flesh on the palm and back of the hand”, has played an important role.

China Radio and Television Corporation obtained a license to use the 4.9GHz frequency band in early January this year, which is consistent with the frequency band that China Mobile is allowed to operate, laying the foundation for cooperation between the two parties.

In addition, China Radio and Television received a 30% discount on backbone network settlement. In February this year, the Ministry of Industry and Information Technology adjusted the Internet backbone network inter-network settlement policy, and the inter-network settlement fees between the three major operators and China Radio and Television and CITIC Network will also be reduced, and the reduction ratio will not be less than 30% of the current standard settlement price (80,000 yuan/G/month).

In May, China Radio and Television conducted technical indicator testing and verification on medium and low frequency band mobile phone terminals developed by some terminal equipment manufacturers such as Huawei and ZTE, which means that China Radio and Television's 5G mobile terminals will soon be released to the communications market.

At present, China Radio and Television owns the "192" number segment, which can be used to develop personal mobile communication services. In conjunction with cable TV and broadband users who are still online, it can roughly achieve full coverage of home communication services on par with other operators.

The radio and television network outlets are spread all over the country and are more dispersed. Compared with China Telecom and China Unicom, at least they are not at a disadvantage. It can be said that the key to whether radio and television can carry out consumer business normally lies in whether the "one network across the country" can be realized smoothly and quickly.

In the past few years, due to its own structural problems, the radio and television system was unable to form a joint force to compete with communication operators, and handed over the initiative of "three-network integration" to others. Now, the integrated China Radio and Television can generously acknowledge the reality of operator IPTV and promote the comprehensive transformation of major domestic operators into full-scenario services of fixed network + mobile + TV.

As for the radio and television itself, it can not only cover broadband and 5G services to remote and rural areas and achieve more social benefits, but also provide a new choice for people living in cities - after all, the previous experience of speeding up and reducing fees has fully proved that more competition is never a bad thing.