China, one of the world's largest markets for Internet TV, is failing to realise its full potential owing to regulatory hurdles, observers believe.
Revenues from Internet TV broadcasts in China will grow to US$600 million within four years, according to research from telecoms consultancy Ovum.
While Chinese telecoms operators would like to provide IPTV broadcasts, they are not permitted to under current regulations.
"Due to the government's extensive control over television content, I do not think there will be a great improvement in the regulatory development favouring IPTV in the near term," said Kevin Lee, a Hong Kong-based analyst with Ovum.
"This means that telecoms operators might need to wait to obtain IPTV licences. In the meantime, they will continue to explore different business models to try to secure more service revenues."
Official determination to keep firm control over all aspects of TV broadcasting is behind the regulatory hurdles, according to observers.
China's broadcasting and communications regulators maintain an iron grip on media content on television and radio, in print and on the Internet.
Particular attention is paid to content which appears to challenge government authority in any way, such as political and religious programming, and to a lesser extent so-called 'moral' issues, such as drug use and pornography.
In line with this extremely cautious official approach, regulators are often slow to permit new entrants into the broadcasting business. Some believe that the hurdles will be overcome in the near future, however.
"In the medium-term, we expect more players to be licensed to enter the market, with 'convergence' being mentioned for the first time in the most recent five-year plan for the ICT sector," said analyst Harvey Tomlinson at US-based Pyramid Research.
"We forecast reasonable growth for the next two years, but an upsurge after that."
Assuming that new licences are issued, Pyramid predicts that China will have more than 10 million IPTV subscribers by 2011 generating revenues of US$700 million.
Ovum's forecasts are similar, but suggest a slightly slower subscriber growth rate. By 2010, the research consultancy predicts a Chinese IPTV subscriber base of 5.8 million, generating annual revenues of US$619 million.
Companies aiming to profit from China's IPTV market face a difficult path, according to Lee.
China's TV broadcasting market is already crowded, with viewers offered a choice of new technologies including digital cable, satellite and terrestrial broadcasts.
"At a premium price, IPTV needs to find ways to differentiate the service with other offerings," explained Lee.
"In most cases, IPTV providers push for interactive services to highlight the power of IPTV. Partnering with traditional TV sector does not seem to be viable at this point given the heavy regulatory restriction in broadcasting.
"On the other side, shortage of investment by the four current IPTV media companies over numerous IPTV trials is apparently insufficient to develop a large scale and mature business case."