Government regulation is strangling China’s smart TVs and set-top boxes

“Why should the government adapt to the internet, rather than the internet adapting to the government?” That was the question a Chinese State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) reportedly snapped at representatives of the country’s online video industry last month. It reflects a growing disconnect between the way government regulators want to run the internet industry and the way that China’s tech companies want the market to operate.

Tensions between China’s streaming video tech companies and regulators have been high for since June, and as SAPPRFT tightens its grip on the industry, some companies feel they’re being squeezed out. The Chinese regulatory agency has been cracking down with the apparent intention of consolidating the industry, and making sure that set-top boxes and smart TVs are using the Chinese-developed and government-funded TVOS operating system. Just a few of the industry’s complaints, via Caijing magazine:

• On June 23, SAPPRFT released a document naming internet video license holders Huashu and Baishitong and demanding that they shut down of their all apps, video collection software, and browsers for internet TV products (like set-top boxes).


• On July 9, SAPPRFT encouraged cable TV companies to strengthen their development of the TVOS experience, and ordered them not to install operating systems other than TVOS.


• On July 14, SAPPRFT demanded all internet TV set-top box makers cease including Tivo-like pause and rewind functions.


• On July 15, SAPPRFT placed additional restrictions on set-top box content and decreed that new set-top box-like products could not be promoted before receiving government approval.


• On August 20, SAPPRFT criticized CNTV subsidiary Future TV for violating regulations on set-top box UIs via its partnerships with LeTV and Xiaomi.

The tension in the streaming video industry reflects a broader problem that Chinese tech companies and the Chinese government have been fighting about for the past decade: should the internet be an open market where privately-owned companies can vie for dominance, or should it be controlled by the government? In the case of the online video market, it seems SAPPRFT is looking for a broad level of control, where it defines which videos can be streamed, which software and hardware can be used to stream them, and what features that software can include.

And unsurprisingly, the agency has apparently chosen to push TVOS as China’s universal standard for video streaming on televisions. The software, which was developed by the state-owned electronics company Changhong, was funded thanks to government R&D grants and includes only domestic proprietary technologies. It is a smart TV OS that is truly by China, and SAPPRFT appears to be trying to ensure that it is also the only smart TV OS for China.

(See: China forces video sites to hire government-approved censors)

But this approach is restricting what many of China’s privately-owned tech companies can do, and many are arguing that it destroys competition and harms end-users by limiting their choices. And by limiting content and OS choices, SAPPRFT is also running the risk that Chinese users will just bypass the TV screen altogether, and instead choose to consume all of their video content via websites and mobile apps (which is an increasingly popular option already anyway).

The restrictions and regulations could also harm Chinese companies looking to do business abroad. In the best case scenario, they could be forced to simultaneously develop multiple products: one for the Chinese market and another for the global one. Alternatively, they may be pushed by SAPPRFT into including Chinese government proprietary technologies like TVOS on their global products, regardless of what the global market wants. China’s tech companies have shown that they can compete in the global marketplace. But Chinese smart TVs and set-top boxes are saddled with software restrictions and an operating system users may not want. SAPPRFT may be unintentionally crippling the Chinese companies best-equipped to develop China as a global powerhouse in the smart TV industry.

Government regulation is strangling China’s smart TVs and set-top boxes