China Set for DSL, FTTH Boom

Broadband penetration in China is to double in the next five years, according to a report from Pyramid Research , "Communications Markets in China."

The report predicts that broadband penetration levels will reach 14.5 percent in 2014, up from 7.6 percent at the end of 2008, on the back of aggressive xDSL and FTTx (fiber-to-the-something/anything) rollouts by the country's three giant carriers.

DSL is currently the technology of choice, accounting for 80 percent of all fixed broadband subscribers at the end of 2008. Pyramid's analysts predict that DSL connections will rise from 67 million at the end of 2008, to more than 126 million by the end of 2014.

However, during the same period, the number of FTTH (fiber-to-the-home) subscribers will grow from about 500,000 at the end of 2008 to more than 50 million in 2014.

China Telecom Corp. Ltd. (NYSE: CHA) dominates the fixed broadband market, and is set to hold 46 percent of all broadband accounts by the end of 2009, according to Pyramid's predictions.

As the leading fixed provider in the country, China Telecom is investing in FTTH and is running a series of trials throughout 2009. It has got the vendors buzzing with orders for GPON as well as the more prevalent EPON. (See Ericsson Scores GPON Wins in China.)

China Telecom's major challenge will come from China Unicom Ltd. (NYSE: CHU), which is reported to have issued a tender for 11 million EPON lines (See World's Largest EPON Tender?)

Such network upgrade investments are part of the company's growth strategy as it seeks to defend its business in the north of the country, where the assets it gained from the China Netcom acquisition make it strong, and extend its presence in the south, suggests the report's author Daniel Yu, Pyramid Research analyst for Greater China and India.

Both carriers are also building new services to take advantage of their growing broadband bases. They both offer IPTV services and have built Internet TV portals, Vnet (China Telecom), and 165TV (China Netcom). These allow users to watch movies, cartoons, TV programs, and sports, with monthly subscription fees ranging from $0.70 for a single channel to $5 for bundled packages.

For once, China Mobile Ltd. (NYSE: CHL) does not feature as a front-runner. However, the report suggests that its broadband potential will improve once it is more fully integrated with China TieTong Telecommunications Corp. in 2010. In the meantime, China Mobile remains the overriding force in the Chinese telecom market, courtesy of its mobile business. (See China Mobile to Retain Revenues Crown.)

— Catherine Haslam, Asia Editor, Light Reading