An employee at Xiaomi Box, the set-top box that suspended video streaming service one week after its launch, told Yicai Daily that they’d remove unauthorized content sources to meet the SARFT rules. (article in Chinese). In this case, future Xiaomi Box consumers can only, theoretically, access to video content provided by WASU who is one of the seven license-holding video-to-TV service providers. By far only 600 Xiaomi Boxes were sent to selected testers. Xiaomi promised to refund the pre-paid fees.

What’s wrong with Xiaomi is it cannot stream videos directly from online video providers, such as Sohu who has no license for providing TV with content. Xiaomi Box as a device did obtain a serial number from SARFT, but that cannot be used for the content it holds.

In digital TV business, SARFT license holders — currently there are seven — are like carriers in cellphone business. Content or service providers have to use authorized players’ as distribution channels, complying with all rules set by ministry-level authorities and license holders. They have no bargaining power that revenues depend on contracted revenue-sharing ratios. It is expected that SARFT won’t grant too many licenses, for video is a format that is harder for authorities to control — not like text that can be searched or filtered based on key words.

Xiaomi isn’t the first to challenge the state authority for radio and video. Industry people would recall the Shanda Box story back in 2005. To have a large household base in a short time, Shanda was giving away its set-top box in Shanghai. In 2010, Alibaba established a joint venture with WASU, one of the first three that obtained a SARFT license, to set up a digital TV-commerce service. Both Shanda and Alibaba failed thanks to authorities’ interference.

A set-top box sold on Taobao saying it beats Xiaomi Box.

However, after doing a search for set-top box in Taobao, you’d find hundreds of results with products functioning in the same way with Xiaomi Box. Some claim theirs can beat Xiaomi’s in function or price, or both. This Tmall seller claims more than 3100 pieces of better-than-Xiaomi smart TV boxes have been sold within a week. It’s not that SARFT isn’t aware of it, but that they are too many in the grey market to handle. And, they are low-key, unlike Xiaomi that SARFT cannot avoid noticing.

The most skilled engineers in set-top box sector, who used to be in satellite TV industry, created devices that can do everything a Xiaomi Box does but are only sold for 50 Yuan — about 1/8 of Xiaomi Box’s, an unnamed industry insider said(article in Chinese). According to this source there are two legitimate ways to do internet TVs, 1) producing set-top boxes for the seven license holders. There’s possibility that you can add some content sources, without letting SARFT know, if the partner license holder permits; 2) doing social TV apps or web services, helping conventional TV content producers gain users.

Critics don’t think Xiaomi Box is doomed even without those online video services built-in. They think it’s easy to solve: making it easy to jailbreak Xiaomi Box that users can access the same content Duokan users do with a jailbroken Apple TV.