This year, a somewhat startling experiment in digital television transmission has been unfolding in Qingdao, the seaside town in northeastern China best known to outsiders as the place where Tsingtao beer is brewed. The town is completing a government-supported project to convert 600 000 of its downtown households to digital cable television, making it one of the first areas in China to cease delivering cable television in analog format.

With the Beijing Olympics coming up in 2008, Beijing has made it a priority for digital television to be available nationwide by then [see "Digital TV's 100-Meter Dash," IEEE Spectrum, June]. The Qingdao trial is a significant stepping-stone. Partly because the digital transition is easier to execute in cable systems than in over-the-air systems, the government has given some priority to pushing ahead with cable conversion.

About 120 million Chinese households, mostly urban, have cable television, and perhaps 200 million households, predominantly rural, obtain television reception via terrestrial broadcasting.

Most Chinese television viewers have been resistant to the idea of digital television because of the cost involved. They must either buy new digital TV sets, which cost at least US $300 and as much as $1000, or purchase set-top boxes that retail for about $60 and allow analog sets to receive digital cable signals.

For its residents, Qingdao has lowered the cost barrier by giving cable-subscribing households free digital set-top boxes. Cable TV users see a significant rise in their cable bills, from $1.50 to $2.70 per month, but evidently they can handle it [see photograph, "Going to the Next Level"].

"No one is really opposed to this, because the cost is pretty low," says Zhang Shuyu, a middle-aged chef who has been receiving digital television at home for more than a year.

The cost of Qingdao's distributing free set-top boxes was covered by a loan of $37 million from the government-controlled China Development Bank, in Beijing. The bank provides long-term financing for infrastructure projects and programs considered vital to the economy's future. In this case, the digital conversion program is sponsored by China's State Administration of Radio, Film, and Television.

The additional $1.20 that households pay each month ultimately will defray the cost of the set-top boxes and the cable infrastructure needed for digital television transmission. In return, Qingdao's digital TV viewers receive about 20 additional channels—50 rather than 30—as well as stock quotes, weather reports, and radio broadcasts. Picture quality is also somewhat improved, viewers say. A standard remote control and an on-screen program menu make the system "very easy to use, and it's easier to figure out what you're watching," says Roy Qu, a 28-year-old hotel manager.

Once a German trading port, Qingdao features Bavarian architecture and the famous brewery established a century ago. The city was picked to be one of the first to launch digital television for several reasons, experts say.

An important one is its emergence in recent years as a high-tech center. Companies like the appliance and electronics giant Haier and the digital television maker Qingdao Hisense Electric Co. are headquartered there. Residents also use television a lot: there are three TV sets for every two families in Qingdao, and a quarter of the households own computers as well—very high by Chinese standards. The city's relatively modest size also make it ideal for the deployment of digital television.

The central government's ambition is to have all of eastern China viewing digital television by 2008 and the rest of the country by 2015. With Qingdao going completely digital in some areas, the Chinese government is calling the "Qingdao model" a success that should be copied in other cities. Cities in southern Guangdong province and eastern coastal cities like Hangzhou are also aggressively rolling out digital television, but often without as much help as Qingdao has received, including its unique bank loan. In some places, cable operators and set-top­box vendors are investing together to bring digital television to households, says Fong Meijin, a senior consultant with BDA China Ltd., in Beijing.

While Qingdao residents are indeed viewing digital television, it may be a while before they're willing to pay additional fees for more content. A salesperson at a Qingdao appliance shop summed up how most people feel about the boon in channel choices: "As long as there's one channel with something interesting on, it's good enough for me."