Phoenix Rising.(Phoenix Television in Hong Kong)

In the first hours after the September 11 terrorist attacks, Hong Kong- based Phoenix TV was the only source of news for millions of Chinese. State broadcaster CCTV made only a brief announcement shortly after the attacks, then provided no more information until midnight. Five-year- old Phoenix, on the other hand, reported nothing else for 36 hours. Chinese around the country anxiously looked for friends who had access to the station, while university students pooled their money to rent hotel rooms so they could watch the unfolding coverage.

The company's quick thinking has won the station rave reviews throughout China--just as Beijing begins to open up the country's tightly controlled television market to outside influences. Industry analysts say that as a result, September 11 could be as transforming an event for Phoenix as the gulf war was for CNN. Phoenix CEO Liu Changle says only that "as a result of our coverage, Phoenix's reputation among Chinese increased considerably." But according to David Wolf, a media expert working for Burson Marsteller in Beijing, the station's newfound clout could speed up the process of changing Chinese TV "from a means of distributing propaganda to a genuine industry."

In theory, most Chinese should not have access to outside broadcasts. Phoenix, which is co-owned primarily by Liu and Rupert Murdoch's News Corp., produces three Chinese-language news and entertainment channels from its studios in Hong Kong that reach most of Asia. But like the 21 other foreign broadcasters that send signals into China--including CNN, HBO, Cartoon Network and BBC--it's supposed to be watched only in three-star-and-above hotels and in complexes that house international residences and offices. A fair number of Chinese officials and military compounds have satellite dishes that pull down the Phoenix signal, as do some of the more upmarket local housing complexes that are shooting up in major cities around the country. But the Chinese masses are only able to watch Phoenix on illegal satellite dishes or via cable providers which pipe out the programming illegally. Phoenix charges nothing for the feed, making money only from its advertising revenue.

Yet enough Chinese were able to tune in after September 11 to fill newspaper columns and Internet chat rooms with unflattering comparisons between Phoenix and CCTV. Chinese Netizens blasted the state broadcaster for its lack of coverage, highlighting the need for alternative voices on the air. "It's fortunate that we have Phoenix," Zhang Dandan, vice president of Macau Five Star TV, wrote in the Pinnacle Weekly newspaper. "Otherwise we could only have CCTV to depend on to learn about what's going on in the world."

Chinese viewers may soon have even more channels to choose from. On Oct. 22, AOL Time Warner announced that it had been given the go-ahead for its Chinese-language channel CETV to be broadcast on cable systems in the Pearl River Delta area of Guangdong province next to Hong Hong. (In exchange, AOL will carry CCTV-9, an English-language channel from China, on its cable systems in several cities in the United States.) Phoenix signed a similar deal that also involves carrying CCTV programming in the United States, while News Corp. is expected to announce a separate arrangement soon.

The deals are in fact commercially insignificant. They allow these channels to reach only a fraction of China's 1.26 billion people--in a market that Phoenix already penetrates. Furthermore, the designated area in southern China is already saturated with broadcasts from neighboring Hong Kong and Taiwan; the newcomers will face stiff competition for limited advertising dollars. Estimates for China's total TV-advertising market vary widely, from $2 billion to as high as $12 billion, with the actual figure probably closer to the middle. Goldman Sachs recently estimated the TV-ad market in Guangdong could be worth as little as $200 million.

The move, however, is symbolically significant ...