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Introduction to the Operation Model of CRTV

1. The Ownership Structure of CRTV

CRTVis a state-level radio and television network limited established under theguidance of SARFT. It integrates radio and television network companies in eachprovince (For instance, Oriental Cable Network and Hunan CATV Network Group Co,LTD.), but runs them as separate entities. Its shareholders come from differentsections, including government institutions, public companies and privatecompanies.

Theradio and television network companies in each province are often closelyrelated to their local TV stations. For instance, the main administers of HunanRadio and Television Network Company such as a major shareholder or thepresident is likely from its local television station.

2. Major Services of CRTV

CRTVare mainly concentrated on two services:

2.1 Services for Family Users

Servicesfor family users fall into two categories: TV service and Internet service. TVservice includes live-TV service and video-on-demand service.

Live-TVservice and video-on-demand TV service: Live-TV and video-on-demand TV areoften provided by local TV stations and broadcasting companies. For instance,TV programs of OCN come from SMG and SMG is responsible for negotiating aboutTV licenses with other TV stations or program owners. Live-TV service charges users22RMB/month and video-on-demand TV charges 20 to 30 RMB per month. All chargesare paid to OCN and OCN spares a small part of the charges to SMG.

Internetservice: OCN's Internet network is only confined to Shanghai. It leases opticalcables from Telecom or Unicom. Put it another way, Telecom or Unicom laysoptical cables for OCN. For instance, OCN has Telecom lay optical cables foronly two of its machine rooms and then establish a trunk Ethernet ring with 38machine rooms which all it has.

OCNcharges 60 to 80 RMB per month for its Internet service, which is much cheaperthan China Telecom. However, its Internet speed is rather low. Though OCNclaims that each household can access to 20M bandwidths, the 20M is merely thebandwidth connecting to the machine room of OCN. The truth is there may be onlyseveral gigabyte bandwidths in the uplink from the machine room to Telecom. Soin such condition the user is hard to get a good experience on the Internet. Bythe way, OCN cannot hold all revenues from the Internet service in its ownhand, as it has to pay a huge cable leasing fee —almost half of its revenues toTelecom.

ExceptTV service and Internet service, OCN also offers mobile phone service. But theservice is actually provided by Unicom and China Tietong. OCN only acts as amediator who charges users for the Internet-mobile phone package and splits therevenue with Unicom and China Tietong.

2.2 Private Broadband Service

Privatebroadband service is a LAN established between different offices within aprovince.

OCNhas a good performance in private broadband service. Its market share ranksonly second to China Telecom, leaving Unicom far behind. Many governmentorganizations and financial institutions subscribe private broadband servicesfrom OCN.

Comparedwith TV service and Internet service, this service is much more profitable. Forinstance, subscribing a 10M private broadband service in OCN will cost itsusers 1000+ RMB per month. Agricultural bank of Shanghai pays 10000+ RMB everyyear for its private broadband service in OCN. Shanghai Post Office pays700-800 RMB per month for its 2M private broadband service in OCN. Moreover,the annual fee for the network center is up to millions of RMB per year.

OCNhas established the VIP Customer Department where technicians and maintainersoffer specialized service for the client. It also offers private service forthe super-client. For instance, a dozen of OCN staffs are specificallyresponsible for www.shanghai.gov.cn. The cost for the network leasing and maintenance is 60 million every year.

OCNhas its own engineering department who are responsible for laying cables andthe operation and maintenance department who are responsible for maintainingthe network.

Sometimes,OCN outsource its network construction and maintenance to other companies.

3. Major Services of Telecom

Telecomalso offers TV service and Internet service, but the latter is its primary.Telecom charges 1400-1800 RMB per year for its 20-50M Internet service, whichis more expensive than OCN but with a faster network speed.

Asthe IPTV of Telecom is connecting to ONU, Telecom can only providevideo-on-demand TV service but no live-TV service. Its TV programs also comefrom SMG or SMEG.

4. Network Construction

BothCRTV and Telecom's network covers 80-90% residential areas. They lay opticalcables in each corridor of the residential buildings, and connect them to aresident's home when he or she subscribes the Internet service.

CRTVand Telecom usually lay their cables outside the office building. They have tonegotiate with the property department if they want to lay cables in the officebuilding.  More often than not, theproperty department chooses one network but denies the other.

Acronyms

CRTV:China Radio and Television Network Limited

SARFT:The State Administration of Radio Film and Television

OCN:Oriental Cable Network

SMG:Shanghai Media Group Limited

SMEG: Shanghai Media & EntertainmentGroup

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