Chinese manufacturers have formed a DTV intellectual property (IP) alliance, with the goal of reducing patent payments to U.S., Japanese and European companies. The alliance brings together 13 top Chinese TV manufacturers, including Haier, Changhong, Hisense, SVA, Shinco and Skyworth. It will be led by the China Video Industry Association (CVIA), according to Hao Yabing, vice secretary of CVIA. Apparently, the new alliance will draft additional digital TV and IPTV standards, and then develop new technologies around the specifications

China is the world’s largest TV market and TV producer, with more than 350 million households consuming 40 million units annually. According to Hao the average royalty fee is $20 per unit, so China could save hundreds of millions of dollars in fees if the alliance succeeds.

Last month, China’s standards body approved a Chinese terrestrial digital TV transmission technology that is believed to avoid many of the patents used in the ATSC, DVB and ISDB systems. With China aggressively pushing the analog-to-digital TV conversion, broadcasts are slated to begin next August. It is said that China wants to convert terrestrial and cable TV viewers to digital signals by 2015.

Writing last year in IEEE Spectrum, authors Philip Qu and Carl Polley noted, "China’s enforcement of standards is as narrowly balanced as a mountaineer on a knife-edged ridge. Without standards that favor its fledgling industries, the country may fall back into the low-tech, low-margin abyss from which it has struggled to ascend. But if it favors Chinese companies too much, it may fall into the other abyss: market failure."

In that article, the authors described the development of Chinese standards as "mirroring" international standards. In recent years, however, there has been growing concern that the apparently lax protection of worldwide IP in China could frustrate the collection of enormous amounts of royalties, with consequential loss of potential revenue. It has now become obvious that business interests will drive any company (or country) to ensure that its own standards best favor its own economics.

While the protection of intellectual property is a key element in the widespread adoption of standards, the offsetting force is competition, either local or global. In this case, market-protection lines are being drawn along political rather than industrial borders. By forming this alliance, the Chinese industry is developing its own monopoly (perhaps "megalopoly" is more appropriate) to ensure market success. And with 350 million potential customers, it may be able to favor its own companies - and avoid "the abyss" - for a very long time.

Follow the money, mate.