In less than a year, China will overtake the US to become the world’s biggest broadband market, according to Ovum, the analyst and consulting company.
China’s broadband sector has been growing at a compound annual growth rate (CAGR) of 79%, over the last three years, and Ovum says that the strong growth should continue to boost the broadband market, which will reach 79 million subscribers by 2007.
Ovum says that the growth opportunity in China is still huge though. With a penetration rate of just 3.4% of the population, broadband takeup in China is well behind many countries in the Asia-Pacific region.
Ovum forecasts that China’s broadband will grow by a CAGR of 75% to reach 139 million subscribers by 2010. China Telecom and China Netcom are the largest providers of broadband access services in China, with a combined market share of 87% of subscribers.
DSL is the fastest growing access technology in China. It currently has a steadily growing market share of 71% and 32 million subscribers as of June 2006. It is followed by Ethernet-based LAN access in high-density areas, which has a substantial market share of 26%.
Despite widespread cable coverage and 128 million cable TV service subscribers in China, cable operators have made few inroads into the growing broadband market. Ovum believes that, in contrast to the North American market, regulatory barriers, fragmented ownership structure and a lack of expertise have seriously undermined cable operators’ competitiveness against DSL providers.
As for wireless broadband, Kevin Lee, senior analyst at Ovum, explains that it is still at an immature stage but the emergence of VoIP is giving operators new hope for seeing returns on their wireless local area networks.
Lee said: “We believe China’s broadband development will continue to benefit from a booming economy, growing incomes, expanding PC penetration and new applications such as VoIP and IPTV. The Olympics will provide another boost.”
He added: “DSL technology will be the key driving force for broadband growth. Operators are progressively upgrading the network using higher speed technology such as ADSL2+ and VDSL to meet increasing bandwidth demands.”
Ovum also thinks that growing IPTV deployment is expected to encourage broadband uptake in China. The two DSL operators rolled out extensive IPTV trials over 2005 in collaboration with the IPTV licencees Shanghai Media Group and CCTV. Following Harbin, Shanghai will be the second city to begin commercial service by the end of September 2006.
Speaking about the future of broadband development in China, Lee said: “China needs to restructure the telecoms industry and it needs to reform the regulatory policy for broadband and IPTV. The possible entry of foreign players in line with WTO commitments could also complicate the development of the competitive situation.”
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