Photo: AVS Working Group

Intellectual property experts discuss patent policies for China's new digital video standard at the first meeting of the AVS Patent Pool Administration Committee in 2004.

Picture this: customs officials at a major European seaport impound a shipload of DVD machines made in China. “You did not pay to license technologies used in the standards that you implemented in these machines,” a European official explains. The Chinese manufacturer’s representative scratches his head. He doesn’t know anything about license fees. Later, he finds out that licensing for a single machine will cost about US $9, nearly half the cost of manufacturing it.

Such scenes, in fact, took place some five years ago. Chinese manufacturers, including Amoisonic (now Amoi Electronics), Malata, and Shinco insisted that paying such high license fees would destroy their DVD businesses.

Something had to be done, so in March of 2002 video and audio coding experts from the Chinese Academy of Sciences and from a number of Chinese universities and manufacturers met with officials of the National Information Industry Ministry in Beijing to set up a Chinese national standard for audio and video coding. The standard was to be used in digital disc players, digital TV, Internet Protocol television (IPTV), satellite TV, mobile video phones, and other applications.

Some of the experts suggested that China develop a standard independent of all foreign technologies, but it became clear that this was not practical. Researchers around the world have been working on audio and video coding for a long time, and their legacy technologies are associated with intellectual property that China could not do without.

That left the group, officially named the Audio and Video Coding Standard Working Group of China, with a dilemma. How could it develop a national standard that was technically competitive yet affordable—that is, with low license fees?

Five years later, the group unveiled its answer: AVS, the Audio Video Coding Standard of China. For the first time in creating an audio or video compression format, a standards body did not consider just quality and bit rate but also considered the cost of the intellectual property. The group set a price goal of 1 yuan, or 13 cents, for the audio and video compression technology in each video player; this far undercuts the typical $2.50 license fees for the MPEG-2 compression technology used in standard DVD players today.

Last February, the Standardization Administration of China approved the video standard as a Chinese National Standard. The standards for audio, systems, and digital rights management are circulating in the final draft form. Meanwhile, the International Telecommunication Union (ITU), in Geneva, is considering the full AVS standard for approval as a video-coding standard for worldwide for IPTV.

Besides being cheaper, AVS is better than many of today’s video standards. The AVS working group currently has 158 members, including some 28 percent from organizations headquartered outside China. The group is diverse and encompasses computer hardware and software manufacturers, telecommunications manufacturers, consumer electronics companies, semiconductor chip design firms, and universities and research organizations. Most of these member organizations put some intellectual property into the pool either for sharing or licensing at a low cost. With so much intellectual property to draw on, the AVS working group was able to use technologies with higher coding efficiency, that is, providing higher quality at a lower bit rate, than older standards, like the MPEG-2 standard used for DVD. AVS performs comparably to contemporary standards, such as H.264, a variation of the MPEG-4 standard noted for its high quality and high efficiency.

While the AVS standard wends its way through the approval process, it is already being used on a trial basis for IPTV, mobile TV, and terrestrial broadcasting in China. In November, China Netcom Group Corporation (Hong Kong), one of the largest telecommunication companies in China, officially announced that it will use AVS as the only video-coding standard for its full Internet Protocol television service. China’s State Administration of Radio, Film, and Television has announced that AVS will be used for the Chinese mobile multimedia broadcasting. A group of Chinese organizations, including the Optical Memory National Engineering Research Center and China Electronics Technology Group Corp., proposed AVS as one of the video formats for a China-only high-definition DVD format. By the beginning of 2008, China will likely complete trials of AVS terrestrial and satellite broadcasting and begin full service, and roll it out to the world’s visitors at the 2008 Beijing Olympic Games.

AVS will certainly be the dominant standard for video and audio coding in China for the near future. It will likely be used outside of China, too, although it may not become a dominant world standard, because existing standards are too entrenched.

By providing a low-cost alternative to other standards, it will, however, force owners of the intellectual property in other standards to charge more reasonable fees, meaning consumers worldwide will pay less for DVD players and IPTV programs and receivers. And they’ll have China’s AVS to thank for it.