Hyper-aggressive price competition led by China Mobile has upended China's broadband market, driving out smaller players and probably thwarting the latest reform effort.
Great Wall Broadband, the biggest privately owned broadband operator, has just announced it is exiting the market following several years of shrinking profits.
A year ago, another privately owned operator, Aipu, with a customer base of 2.1 million, shut down because of the financial squeeze.
They are the highest-profile casualties of the price war between the three state-owned giants that has made wireless champion China Mobile the biggest fixed-line broadband player as well.
The world's biggest mobile operator was blocked from fixed-line broadband until 2014, and even three years ago it was still the smallest by customer numbers.
But it has since tripled subscribers to become the number one broadband player.
At the end of February, China Mobile reported 163.5 million subscribers, compared with China Telecom's 147 million and China Unicom's 81.9 million.
A year earlier, China Telecom led the market with 135.5 million, followed by China Mobile on 119.8 million and Unicom on 77.5 million.
The huge shift in numbers hints at what has been one of the world's biggest consumer marketing battles, largely hidden to those outside the country.
The methods are hardly mysterious, however, and certainly not to competition regulators.
In the background is the continual jawboning by the regulator, the Ministry for Industry and Information Technology (MIIT), demanding "higher speeds and lower prices." This has driven the big three to reduce broadband charges, shaving their own profits and driving the smaller players to the wall.
But the game-changer has been China Mobile's bundling.
Last year it was giving away free broadband with new mobile subscribers.
A 38 yuan ($5.64) mobile package came with 50Mbit/s broadband, while a RMB58 ($8.61) subscription came with 100Mbit/s and an RMB88 ($13.07) package provided 200Mbit/s.
With these discounts, it was able to sign up 44 million new broadband customers last year -- more than the combined customer base of Comcast and AT&T.
As a result, China Telecom took a hit on profitability, with broadband average revenue per user (ARPU) declining 11% last year, to RMB44.3 ($6.58).
While China Mobile doesn't break out ARPU for its ISP services, its blended ARPU figure -- which includes smart home services as well as connectivity -- is unsurprisingly well below its rival's, at RMB34.4 ($5.11). But that's 3% higher than it was a year ago, and a clear signal its price cuts are working.
With this kind of price erosion, it's no wonder Great Wall has called it quits.
The existence of the company in such a state-dominated industry is somewhat anomalous. It entered in the early 2000s in an experiment to bring more competition to home Internet.
A handful of small ISPs took part and were grandfathered into the market when the trial ended, even though the sector remains officially closed to non-state operators.
Great Wall's parent, Shanghai-listed Dr Peng Telecom & Media Group, has 40,000 employees and says it has built out infrastructure in 210 cities across China. It also owns a small Californian ISP, Vertex Telecom.
But in the last three years broadband earnings have declined by 50%. Great Wall's latest interim result shows a loss of RMB33 million ($4.9 million), despite a customer base of 13 million home users and 500,000 corporate customers.
In December, ratings agency Moody's downgraded Dr Peng's stock to B2 from Ba3.
In a research note last week, the ratings agency said the company is "constrained by its weak liquidity and high refinancing needs over the next 18 months, pressured operating performance and weakening cash flow generation amid intense competition and ongoing investment needs."
In the last five years, MIIT has returned to the idea of encouraging private broadband operators, reportedly issuing more than 200 trial licenses in more than 70 cities.
But with rules that oblige them to negotiate wholesale access with the state-owned operators, the new players start with their hands tied behind their backs.
MIIT provided no details on the progress of these newcomers and did not say if any of them have started to offer a service.
But as the big players race each other to the bottom, and with zero protection from the regulator, they face the same fate as Great Wall and Aipu.
— Robert Clark, contributing editor, special to Light Reading