China Telecom (NYSE: CHA) has launched a broad array of video services in Sichuan province, including IPTV, 4K, HD-quality video calls between TV and mobile devices, and video-based remote medicine and education. According to Fu Qiang, deputy general manager of China Telecom's Sichuan division, the operators "Big Video" push has generated ¥300 million (US$45m) and resulted in 9.2 million subscribers (at year-end 2015).
Qiang was speaking at Huawei's Big Video event in Shanghai last week, where he described his company's impressive array of video services.
The first step for the division, he said, was to build out a fiber network. This resulted in several efficiencies. Firstly, it was built out in conjunction with the company's rollout of IPTV, thereby creating new ARPU and helping the business case. Then the operator found that its "average cost of network usage" dropped by 30% in the first year itself. The deployment times for new customers also dropped dramatically. And of course, the increased capacity provides a platform for several high-bandwidth video services.
Developing the right video delivery platform was also important: China Telecom has built more than 380 CDN nodes with 450TB of storage for video services across Sichuan.
The IPTV subscriber base has grown from zero in 2011 to 9.2 million in Q2 2016, and 4 million of those subscribers are already getting 4K video today. The service supports more than 5 million simultaneous users, who typically spend seven hours per day using video services. Forty percent of them pay for additional premium services, with the average ARPU for a three-person family now at ¥690 (US$103).
But for the operator, IPTV is just the tip of the iceberg. The video platform also supports a wide variety of other video services, well beyond just pay-TV. These include:
Qiang mentioned that the growth of the Chinese economy is having an impact on families across the country. Approximately 10 million people work away from their homes in China. Often they have to leave their children when they work in other areas, or live far away from their parents. China Telecom's "Missing Home" application allows users to have HD video calls between TVs, smartphones, or between a TV and a smartphone. This is particularly useful for people who are not computer literate, and find TV-based apps far less intimidating and easier to navigate. This service has garnered more than a million TV-based subscribers to date.
China's hospitals are also extremely crowded, and those living in rural areas often have to travel long distances to access medical care. China Telecom offers a video-based service that links doctors to their subscribers for basic check-ups and diagnoses.
The operator also offers a selection of on-demand instructional videos on several topics, to help provide education and training remotely.
Apparently restaurant diners are concerned about the cleanliness of the kitchen at the restaurants they visit. This service allows the restaurants to offer a video feed of the kitchen, to see how clean it is and how hygienic the food preparation is.
Similar to the hospital visit, this service allows for families to connect with prisoners when they are located far from them.
The operator also offers a video surveillance service for security purposes.
Qiang said that these services had picked up 3 million subscribers today, but he expected both the user base and the number of applications to grow.
According to Qiang, the key to the success of this service was to share the platform and offer open API-based integration. The operator took on an aggregator/integrator role, bringing in partners to leverage its network and creating a "Big Video Alliance" to bring together the skill sets and assets it needed.
For example, the operator now has more than 100 content partners, who have helped it amass 200,000 hours of content. Qiang added that it would take more than 22 years to watch his entire library. China Telecom also partnered with TV broadcasters and manufacturers to help push 4K services to 4 million subscribers.
Interestingly, Qiang's description of his company's approach is almost the same as that of Kazuhiro Yoshizawa, NTT DoCoMo's CEO, when he described DoCoMo's (NYSE: DCM) successful "d+" strategy.
Qiang anticipates 2016 revenue will be more than ¥500 million (US$75 million) for the full year 2016, and expects to double that in 2017. But he cites back-office innovation, particularly in the area of unified service management, as being a critical requirement. And he pointed to user insight, recommendation engines and precision marketing as key elements of a successful go-to-market strategy moving forward.
China Telecom offers perhaps the broadest array of video services I am aware of, and while China is a unique market, there may be specific applications that could be replicated by other providers around the world. In particular, building an effective ecosystem of partners to drive the adoption of new applications is an important strategic choice. Given the pace of innovation on the Internet, it seems a lot more practical for operators to leverage their size and network assets, and simply partner with winners rather than try to build the world themselves.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation