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China’s FttX Boom

China’s broadband subscriber base continues to rise. Massive FttX deployments are underway, spurred on by competition between the three full-service operators all aiming to increase ‘stickiness’ for subscribers. While fixed line subscribers are expected to decline into 2011, broadband subscribers are still rising, driven by cheaper rates and the higher bandwidth on offer compared to mobile Internet.

The construction of FttH currently stands at around RMB2,000 (US$290) per household, while for FttB it costs around RMB1,000 (US$145) per household. As costs decline due to an improved value chain, the use of FttH will grow more substantially from 2011. The trend towards FttX is being driven by the increasing requirements for bandwidth by new applications and services such as IPTV and High Definition TV (HDTV). The cost of the optical components used for FttX has also fallen dramatically in the past few years making large-scale deployment more economically viable.

On the whole, China is not constrained by needing to make use of massive copper infrastructure investments. Due to the continued pace of construction activity in greenfield sites, fibre is a cost effective means to provide broadband services.

FttX is very popular in Asia. China had the largest FttX market in the world with over 23.2 million by end March 2010, representing 37% of the global FttX market. Japan reported the second largest FttX market with 17.7 million subscribers or 28.3% of the total market. South Korea was third with 8.3 million subscribers at 13.3% of the market.

The Chinese government plans to invest more than RMB 150 billion (US$22.0 billion) in 2010-2011 to establish fibre-optic networks around the country, with aims to increase the number of FttX subscribers by over 50 million to more than 80 million by the end of 2011, according to the MIIT. The average FttX download speed is expected to be 8Mb/s and 2Mb/s for home subscribers in cities and rural areas respectively as well as 100Mb/s for business users. This is a high target from an end 2009 base of around 15 million subscribers and quite possibly rather optimistic.

The MIIT has had grand visions in the past too. The planned numbers for 3G subscribers was around 150 million by end 2011 but actual operator deployments are falling well short of that and looking to reach only 75 million by that time. As a result, BuddeComm has forecast a lower value for FttH subscribers by 2011.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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