CJ Gets Pole Position in IPTV Race
By Kim Tong-hyung
Staff Reporter
Is Internet protocol television (IPTV) the future of household entertainment or yet another over-hyped ``next-generation'' prospect destined to fizzle out?
The Korea Communications Commission (KCC), the country's telecommunications and broadcasting regulator, claims that IPTV is the real deal and wants the big fishes of the corporate world to prove it.
The KCC recently announced the regulatory framework for the television services delivered over broadband connections.
To encourage more companies to spend their money on IPTV, the KCC made sure larger companies were invited to the party.
The current law prevents firms with more than 3 trillion won (about $2.97 billion) in assets from owning a television news channel over concerns of super-rich companies having too much influence in the shaping of public opinion.
However, the KCC recently decided to lift the cap to 10 trillion won to have more companies spend their money on IPTV. It also decided to adopt the expanded cap limit for terrestrial television, stating the need for ``consistency'' in the regulations for traditional broadcasting and IPTV.
The KCC issued a notice for the proposed revisions on the Broadcasting Law, Tuesday.
Industry insiders wonder whether the 10 trillion won limit was a threshold tailor-made for CJ, the giant of the cable television industry with 19 channels and a company eager to sink its teeth into the Internet television pie.
CJ is worth about 10.03 trillion won, but is currently selling its shares in CJ Investment and Securities, falling under the 10-trillion-won limit.
The company controls many of the country's most popular cable channels such as showbiz channel tvN, movie channel CGV, music channel Mnet and sports channel XTM. Adding news to its content lineup will allow CJ to put up a more convincing challenge against major television stations such as KBS, MBC and SBS.
Besides CJ, 33 other companies are newly permitted to enter the television news business under the new rules, including Taekwang, Hyundai Department Store, Hyundai Construction, Kolon and Hansol.
``There are other players among the cable industry like HCN and Hyundai Home Shopping who might be interested in winning the license as a television news channel, but CJ does look like a big beneficiary of the new rules,'' said an official from KCC's convergence policy department.
``CJ could be a player in both the IPTV sector and the terrestrial broadcaster sector if it wants,'' he said.
IPTV is a technology that delivers digital television services over computer networks running at broadband speed. In addition to providing traditional broadcast television, IPTV can also offer subscribers advanced applications such as video-on-demand, online shopping, video games and other services with much more interactivity.
Hype or Real McCoy?
IPTV has been getting a lot of press in the past months, with most of it regarding the entangling between telecommunications carriers, major television stations and cable television providers who have their traditional boundaries blurred in the new sector.
Telecommunications operators, such as KT, which controls more than 90 percent of the country's fixed-line telephony customers and more than 40 percent of the broadband market, are interested in moving into television, but apprehensive about the cost.
Subscribers need a broadband connection of at least 100 megabytes per second (mbps) to enjoy the high-definition programs of IPTV, but Internet operators can't afford to spend lavishly upgrading their networks when the majority of broadband customers are migrating toward slower and cheaper services around the 10mpbs mark.
KT, currently gathering customers for a prototype service in ``Mega TV,'' which provides video-on-demand but not live broadcasting, is targeting 1 million customers for IPTV. Considering their network, that is just about the number of customers they could afford to have.
``We have yet to fully recover our investment to upgrade our network for the plus-10mpbs services, which we were forced to do with Hanarotelecom introducing its ADSL services ten years ago," said a KT executive.
And although telecom companies believe IPTV could bring a rise in average revenue per user (ARPU), they aren't sure how much of the extra money would be landing in their pockets with content providers expecting a big payday.
The country's three national television stations ― KBS, MBC and SBS ― have been reluctant to embrace IPTV as an industry, with media unionists even suggesting the IPTV scheme as part of the government's ambitions to privatize MBC and KBS 2 by introducing the 10 trillion won cap.
On the other hand, providing their programs to companies like KT may leave them with fat wallets.
KT and other telecom carriers like Hanarotelecom, currently pushing its ``Hana TV'' video-on-demand services, are keeping quiet about their ongoing talks with terrestrials broadcasters to secure live content. However, rumor has it that television stations are asking for 60 to 80 billion won per year.
IPTV operators couldn't afford to start their business without programs from the major television stations _ the most popular content on Mega TV happens to be reruns of KBS and MBC shows.
If the companies fail to secure quality content, IPTV could be destined to a similar fate as satellite-based mobile television services pushed by wireless carrier SK Telecom, which is now hardly relevant.
At least SK Telecom gathered about 1.5 million customers for the services in the opening phase. If KT fails to make their target of 1 million customers, the IPTV industry will likely start with even less.