China: Forget running water, bumpkins. Have some lovely broadband

Ha ha, try tapping all of that web traffic, NSA!

The Chinese government has pledged to provide nationwide broadband coverage by 2020, an ambitious goal which should see significant extra investment in all kinds of networks, both wired and wireless, in order to reach the country’s vast rural areas.

This will almost certainly change the global supply ecosystem for all types of broadband. China is already the dominant figure in fixed line broadband installations, if it doubles this rate and also becomes aggressive in 4G wireless as well, then it would likely be the largest infrastructure project of all time.

The US spent billions on stimulus funding on its broadband infrastructure at the beginning of the current recession, and this new move can be seen partly as a way of making China more competitive, and also of preventing the rural regions becoming demoralised, but also as another form of stimulus for an economy slowly losing its momentum.

China already has a few $100bn “infrastructure projects” in the works, including gathering all of its cable players into a single company with 200 million connections – easily making it the largest cable company in the world and about 10 times the size of any other. This project was followed by two more related schemes, first to digitalise it and then to run IP over it. This is all a part of China's Tri Network convergence project. If you add this broadband infrastructure upgrade, it would dwarf all international projects of this type around the rest of the world.

The chances are that Huawei and ZTE will be at the head of the queue to get this work and almost certainly will leave behind their counterparts outside China in terms of scale, making them capable of being even more competitive in overseas markets. In fact it is only the suspicion that these two providers are involved in cybercrime and espionage that has prevented them achieving global dominance.

But if Alcatel can gain some of its pre-eminence in China in fixed line broadband, especially on the back of its lead in Vectoring in Europe, it may well pick up enough momentum to get it out of its current financial plight and other western companies, for instance Nokia Siemens Networks, may get a significant financial fillip from winning more contracts in China, as it has already done recently in Japan as well as with China Mobile.

China has laid down an eight-year timeline to complete broadband coverage in both urban and rural areas, according to its ruling State Council. The cabinet says it has raised the priority of national broadband in its overall agenda and published the first firm implementation schedule.

50 per cent of all households by 2015

This is the most important pronouncement on high-speed access since China’s change of government. There will be heavy reliance on Wi-Fi and mobile networks to meet the goals, and there is the potential for a national Wi-Fi cloud crossing all of the major cities.

The strategy includes rollout of Wi-Fi coverage in key public urban areas by 2013 and fixed broadband coverage for 50 per cent of all households by 2015. Homes in some major cities will receive speeds up to 1Gbps by 2020, says the plan.

The programme will develop in three separate stages, with fibre optic networks and 3G mobile coverage to be accelerated in 2013 to deliver broad coverage and the objective of 4Mbps speeds for 75 per cent of the population in a single year.

Then, higher speed broadband will be expanded in 2014 to 2015. After this, fixed and mobile network and technology updates will take place from 2016 to 2020 to fill in coverage gaps and to upgrade speed and capacity in urban districts.

Previous government statements said fixed-line connections and Wi-Fi hotspots would be the key focus in 2013.

The telcos will be expected to increase their already significant capital expenditure budgets to support the plans, but can also hope for additional revenue streams and government handouts. Second operator China Unicom has already responded to the new programme, saying it will start to raise broadband speeds in the capital of Beijing and phase out lower speed offerings.

Just as we have seen the United States slowly go from being a backwater in cellular networks to having some of the best networks in the world, the impact this will have on its local suppliers will be enormous.

The dominance of Apple's iPhone began because it came to the fore just as AT&T was looking for a weapon to prevent its cellular network becoming a joke. Now companies local to China – both inside the country and in neighbouring Korean and Taiwan – will be in pole position to start installing technology inside China which is in advance of anything else in the world, rather than running year behind the rest of the world.

Copyright © 2013, Faultline

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