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$40 IPTV Set Tops, Quantity 3 Million
Monday, 29 August 2011 06:13

With basic IPTV selling for less than $3/month, China Telecom can't afford an expensive set top. To bring prices down, they are requesting bids for 2.83 mln SD STBs and 880,000 HD STBs (Marbridge). They expect prices for simple SD boxes well under $50. Huawei, ZTE, and UTStarcom have been the primary vendors for the first 9M IPTV homes that China Telecom has rolled out. Alcatel-Shanghai Bell and almost a dozen other firms have sent units to China Telecom Labs for testing. 
      "The price is very low," a vendor tells me, "but not impossible. There's almost no margin." Winning bids like this usually requires close cooperation by every step of the supply chain. Not merely does the chip vendor have to agree to a very aggressive price, they often request the chip foundry also make concessions to win the order. It's a dangerous game; if costs aren't well-controlled, large losses are possible. I remember Alcatel bidding so low to win a Chunghwa contract they demanded a re-negotiation midyear from a very unhappy customer.  
      Shanghai is the early leader, with over 1.5M homes connected. Internationally oriented Shanghai Media Group paved the way and UTStarcom provided equipment at a loss for several years to kickstart deployment. As much as possible, China Telecom is using WiFi rather than wiring apartments. Celeno has been supplying the chips in China. As 3x3 and 4x4 MIMO and beam forming become standard technologies, carriers around the world are hoping WiFi is becoming reliable enough to expand beyond trials.
       While the national government up to the level of the Central Committee has been strongly supporting "triple-play" and "convergence," politics until now has slowed IPTV. There's been a huge turf battle between SARFT, the television regulator, and MIIT, the telco regulator. Expect explosive growth as that resolves.
      If politics doesn't interfere, the cablecos will respond with tens of millions of cable modems and pass the U.S. as the largest cable market later this decade.