Mobile broadband will dominate broadband connections in China in 2014

MELBOURNE, AUSTRALIA: Ovum estimates that by 2014, China fixed broadband connections will grow to 174 million, while total broadband connections (including mobile broadband) will exceed 551 million. Bundled offers, the emergence of mobile broadband and the increasing entry of cable operators into the broadband market are boosting competitive pressure.

There were 103 million wireline broadband connections in China with 25% year-on-year growth at the end of 2009 according to China’s telecom regulator, MIIT. “With nearly 250 percent growth in broadband subscribers in China between 2010 to 2014, it is no wonder the incumbents regard broadband as a key growth engine and latecomers are aggressively pursuing a share of this huge and growing market”, said Sherrie Huang, Analyst based in Hong Kong.

In a few cases, competition has been too vigorous, involving criminal damage, defamatory statements and attempts to lock up exclusive access to key infrastructure. In response, MIIT has tightened regulation by explicitly banning illicit competition practices, and has also recently issued an internal consultation paper on the promotion of network and infrastructure sharing.Source: Ovum

The current dominant broadband access technology, DSL (the majority of which is ADSL), will reach its peak in 2011 at 86.6 million and decline thereafter. NGA technologies such as FTTB/H will become the main driver for future broadband access growth. We expect the number of FTTH/B subscribers to catch up with the number of DSL subscribers in 2014.

The mobile broadband is developing fast in China. The Chinese operators has been constructing their 3G networks and launching services after they received 3G licenses in January 2009. The 3G investment and network construction in China has been breaking world records. As a result, the mobile broadband in China is developing fast. 3G subscriber numbers grew to 13 million in less than one year according to the regulator.

In China, the fixed-line population penetration rate is only 24.4 percent, with a wide disparity between cities and rural area. This is a hurdle for fixed broadband development, but provides opportunities for mobile broadband. “We forecast that mobile broadband will grow faster than fixed broadband, and will account for almost 70 percent of total broadband connections in 2014”, said Huang.

Although we expect to see fixed-to-mobile broadband substitution in the future, the experience will vary depending on the availability of fixed broadband infrastructure and between customer segments. In rural areas where fixed infrastructure is limited, we expect mobile-only households to be common as 3G networks are rolled out.

In urban areas where fixed infrastructure is available, we expect to see a more complex picture which will vary between customer segments. In much of the enterprise segment, fixed and mobile broadband will both be needed, and bundling will be common. In some consumer segments such as students, fixed and mobile broadband will compete.