|
Carrier Services
China’s Broadband Explosion
But IPTV Market Held Back by Regulatory Restrictions
by Ken Wieland
Kevin Lee, an analyst with Ovum and based in Hong Kong, is
seeing a broadband revolution taking place in China. “All the
major cities are being upgraded to ADSL2+,” he says. “Telcos
are managing to provision DSL connections in just a matter of
days.”
According to Lee’s latest report on the state of China’s broadband market,
published last month, the country is on course to be the
largest broadband market in the world – in terms of
subscribers – before the end of the year.
Buoyed by higher income levels in China’s main cities, there
were 45 million broadband subscribers in China by the end of
June 2006, which represents a CAGR (compound annual
growth rate) of 79 percent over the last three years.
The US, currently the world’s largest broadband market with
46 million subscribers, is now within touching distance and will
soon be toppled from top spot.
With a broadband penetration of only 3.4 percent of the
population, fast-paced growth is set to continue in China.
Ovum calculates that China’s broadband market will grow by a
CAGR of 75 percent through to 2010 to reach 139 million
subscribers (93 million using DSL connections).
A number of factors have combined to boost China’s
broadband standing, says Lee, including the fact that Beijing
will host the Olympics in 2008. China’s second largest fixed-
line operator, China Netcom, is dedicated to rolling out
a ‘broadband Olympic Society’ in cooperation with the National
Olympic Sports Centre.
Other broadband stimulants include increased PC
penetration. With PC shipments growing at three percent a
year, around 20 percent of households in China – according
to Ovum – now possess their own computer. New applications,
such as VoIP and online gaming, have further boosted the
appeal of broadband.
As for IPTV, although it has the potential to be a broadband
stimulant, Lee says that the market has been stifled by
regulatory conflict between the telecom and TV
sectors. “There is no formal process place for telcos to apply
for the right to offer TV services,” says Lee.
The Chinese telecom/media regulatory framework comprises
the MII (Ministry of Information Industry) on the one side
and SARFT (State Administration of Radio, Film and TV) on
the other. MII protects the interests of the telecom industry
(it is the largest shareholder in China Telcom) and has been
known to stop cable TV companies from offering Internet and
telecom services.
SARFT, on the other hand, does not allow telecom providers
to offer video content without its approval. As such, IPTV has
largely been restricted to trials, although commercial service
is available in Harbin and Shanghai Telecom (a subsidiary of
China Telecom) is scheduled to launch a service in parts of
Shanghai this month. Ovum calculates there were around
350,000 IPTV subscribers in China as of May 2006.
While the regulatory situation is currently a hindrance to China
telcos’ IPTV aspirations, Lee believes that cable operators will
not pose much of a threat to future broadband
expansion. “The cable operator infrastructure is limited to a
maximum 2 Mbps, which does not match DSL technology,” he
says.
The dominant broadband technology in China is DSL,
accounting for 70 percent of the connections. FTTx + LAN (26
percent) and then cable (nearly 4 percent) make up the rest.
China’s broadband growth has come about despite the fact
that China Telecom and China Netcom enjoy a de facto
monopoly of broadband access services. They have
combined market share of around 87 percent but, with the
exceptions of the Shanghai and Guangdong provinces,
operate in different regions.
This has led to ‘excessive broadband prices’ in ‘Tier One’
cities compared with other developed markets, says Lee. In
the Guangdong province, for example, a 2 Mbps ADSL
connection is priced at RmB200 (US$25.00) per month.
Greater competition should be introduced into China’s
telecom markets as part of its entry into the WTO.
Restrictions on direct foreign investment are scheduled to be
relaxed in 2007, which will allow up to 49 percent foreign
equity in Chinese companies.
Lee anticipates that the start of the restructuring of China’s
telecom sector will happen next year with the award of at least
one 3G license, which he believes will most likely be based on
China’s homegrown 3G standard, TD-SCDMA.
|
