China Telecom is reportedly planning to run field trials of domestic codec Audio Video Coding Standard (AVS), which could lead to the company dropping support for H.264. The trials will begin in Shanghai next month.

Huawei Kong, vice director of the Institute of Computing Technology, a state-run research group, confirmed the trials will happen. In addition, Leping Wei, chief engineer of China Telecom, indicated last month that the company was considering AVS after seeing positive results from tests in Dalian by China Netcom, its rival.

China Netcom plans to use AVS-based IPTV in 20 cities by the end of 2007, and hopes for 6 million AVS-based IPTV users in five to seven years, or 40 percent of its current broadband users.

However, in a market dominated by H.264, some observers believe it doesn't make much sense to switch to AVS, which may carry higher costs because of its immaturity. There is also an indication that political pressure rather than business sense is driving the decision, since all of China's telcos are state-controlled.

AVS is among a handful of domestic standards that China is promoting in order to lessen its reliance on foreign intellectual property. If the strategy is successful in the long run, it will shift the flow of royalties and fees into the coffers of local, rather than foreign, companies and help build domestic technology.

In Q1, IPTV users in Shanghai increased to 220,000 according to a report from Analysys International. The research stated that the city's IPTV use shot up 150 percent in Q1. On a larger scale, IPTV users in China increased to 612,000 in Q1, 36 percent higher than the quarter before. Market researcher iSuppli Corp. estimates that by 2008 there will be 3.6 million IPTV users in China and by 2010, the figure will be 17.4 million.