They could be wrong. Whether the potential ultimately materializes depends entirely on whether viewers are willing to pay. The lesson of digital broadcasting is that audiences may turn it down without new content.

The operators see Internet protocol TV, or IPTV, as a potential bonanza because it can include two-way capability, which traditional TV distribution technology lacks, as well the ability to allow each viewer to in effect make up his or her own television programming, allowing for individual broadcasts that can be paused, wound or rewound.

IPTV also offers the potential for a huge selection of free programming, as the Internet does itself. But the question is whether the government will allow such information freedom.

In an announcement on its Web site Tuesday, the State Administration of Radio, Film and Television said the first license had been granted to Shanghai TV Station, a subsidiary of the Shanghai Media Group, the mainland's second largest media organization.

SARFT also issued the first license for mobile phone TV programs, which again went to Shanghai TV Station.

But the SARFT dashed the hopes of firms such as China Telecom and China Netcom for their own IPTV services. That is because in the same statement it clearly reasserted its authority over content provision, saying it will only license TV or radio stations at the provincial level or higher to run audio-video programs on the Internet.

All telecoms networks are regulated by the Ministry of Information Industry while the SARFT exercises tight control over TV, radio and film content.

Broadcasting over the Internet is not new to the mainland. Last May, China Central Television began broadcasting programs on Web sites. Beijing IPTV began trial broadcasts in December.

Therefore, the SARFT move means it is getting serious about the business. It also serves as a warning that from now on it will outlaw non-licensed IPTV broadcasting.

The move is understandable. In addition to defending Beijing's ideological control over the media, huge business interests are also involved, analysts say. ``If telecom operators are able to run IPTV programs themselves, they would monopolize the market because they own all the transmission networks,'' said a Shanghai TV management official.

By reserving the licenses for the radio and TV stations to provide content, SARFT can ensure they have a share in the growing market. After all, ``TV and radio stations are children of SARFT,'' he added.

According to official statistics, mainland broadband users hit 42.8 million by year-end and is estimated to grow up to 100 million by 2010.

If they all subscribed to IPTV, spending on average just 100 yuan a month each, the current market would already be worth 4.28 billion yuan (HK$4 billion) and be expected to hit 10 billion yuan by 2010.

If all related businesses such as program production were taken into account, it could be worth 100 billion yuan in five years.

As well, one third of the more than 300 million mainland TV households are cable-TV subscribers, who need only decoders for IPTV broadcasts.

But such calculations are simply one-sided. It is entirely based on the assumption that all potential clients would rush to subscribe to the new services.

They may just not do so. As with consumers elsewhere, Chinese consumer psychology is difficult to predict, as with the sorry story of promoting digital TV broadcasting.

At the turn of the century, Beijing unveiled an ambitious plan to replace the analogue TV system with digital broadcasting nationwide by 2015.

For a couple of years, optimistic projections abounded, saying the market could be worth hundreds of billions of yuan in 15 years as stations upgraded their equipment, forcing households to buy large-screen high-definition TV sets to watch the programming.

According to the plan, digital TV subscribers should have soared to 10 million last year and 30 million this year. But according to a report by the Ministry of Information Industry-run China Electronics News, they totaled just 1.2 million by November.

``Why should I pay more for digital TV broadcast? They say the picture quality is better. But the quality of cable TV I am using is quite good. Who cares how the TV signals are transmitted? I am willing to pay more only if they offer more and better programs,'' said Shenzhen businessman Zhou Hahua.

It thus appears that for all of its promise, the name of the game is not transmission but programming. If IPTV only provides a new way of signal transmission without more and better programs, the mainland audience is likely to treat the new medium the same way it has treated HDTV so far.