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Research Reports

China Telecom, China Netcom: China's Broadband Backbone

August 30, 2004 / Eric Lin

21 Page, Topical Report

US$1,090 (Single User License)

Abstract

The Chinese broadband internet access service market is divided into three segments: DSL, cable modem, and FTTx+LAN. FTTx+LAN was the predominant technology until 2003, when DSL overtook it as the mainstream technology. The steep increase of DSL subscribers in 2003 was mainly due to China Telecom's and China Netcom's aggressive promotion of DSL service through rate reductions and service expansions. In 2004, their new broadband service development strategies have been further boosting DSL subscriber scale, and the growth momentum is anticipated to continue into 2005.

List of Topics
Chinese broadband subscriber scale and operator competition; China Telecom and China Netcom development background, subscriber base, service offerings and content, and equipment suppliers; China Telecom and China Netcom broadband strategy comparison and examination of territorial overlap

21CN Cinemas, Beijing International Switching System, Bluewave Broadband, Capital E-Store, CATV.NET, China Game Center, China Netcom, China Telecom, Cisco, CNC International, Digibook.com, Digital China, Enlight Broadband, Enlight Stream TV, Ericsson, Fibrlink Networks, Flashempire, Founder Broadband, Founder Broadband Digital Library, Gehua CATV Network, Great Wall Broadband, HBOL, HIT MUSIC, HongEn.com, Huawei, IBM, IDG, Intel, Jiuzhou Cinemas, Kingsoft, Kun Peng Wang Jing Technology, KuroMP3, Lucent, Microsoft, Moli Shorts, Moli.tv, Nanda Yixue, Netcom North, Netcom South, Neworienta, Nokia, Nortel, OurGame.com, Phoenix, Pkuschool.com, Rising, Samsung, Shanghai Bell, Shanghai EFO, Shanghai Telecom, Sina, Souhu Broadband, Tencent, TOM, UT Starcom, Wanguo Credit Appraisal, Wanwa.com, WAYI, Wuzhou Broadband, Xingguang Wangshi, Yortong Digital Media, ZTE

List of Figures
Figure 1　 Chinese Broadband Subscribers Base by Access Technology, 2000 - 2005

Figure 2　 China Telecom's Revenue by Service, 2001 - 2003

Figure 3　 China Telecom's Subscriber Base by Access Technology, 2000 - 2005

Figure 4　 China Telecom's Subscriber Increase by Access Technology, 1Q 2003 - 2Q 2004

Figure 5　 China Netcom Broadband Subscriber Base, 2001 - 2005

List of Tables
Table 1　 China Telecom's Revenue from Broadband Service, 2002 ?2004

Table 2　 Shanghai Telecom's Broadband Rates, 2004

Table 3　 China Telecom's Vnet Platform
                    Collaborative Ties

Table 4　 China Telecom's Broadband
                     Equipment Suppliers

Table 5　 China Netcom's ADSL Service Offerings

Table 6　 China Netcom's ADSL FTTB+LAN
                      Service Offerings

Table 7　 Shanghai Netcom's FTTB+LAN
                      Service Offerings

Table 8　 China Netcom's Monthly Broadband Charge Rates for Corporate Customers

Table 9　 China Netcom's "Mobile Office" WLAN
                      Service Charge Rates

Table 10　 China Netcom's Online Portal Content

Table 11　 China Netcom's Broadband Alliance Members

Table 12　 China Netcom's Broadband
                      Equipment Suppliers

Table 13　 China Telecom, China Netcom Broadband Strategy Comparison

The rapid growth in DSL subscriber scale is likely to continue into 2004. Despite the Chinese government's macroeconomic control policy to dampen the overheating economy in mid-2004, the number of DSL subscribers in China is still anticipated to rise by nine million to reach 18.3 million in 2004, and climb further to 28.8 million in 2005. China thus ranks alongside Europe as one of the fastest-growing DSL markets in the world.

Access to fixed-line network resources has enabled China Telecom and China Netcom to establish themselves as the two dominant players in the Chinese DSL service market. Their generous rate reductions and diversification of broadband offerings in 2003 have also helped to stimulate demand, leading to subscriber growth in China.

Both China Telecom and China Netcom have now built up a sizeable DSL subscriber base in their respective regional markets. In 2004, besides keeping prices low and implementing special promotions, both operators have been seeking to expand into the other's territory by undercutting each other's rates. However, problems related to network interconnection, private line rental, and pricing, have limited the extent to which competition has been able to freely develop.

China Telecom's offerings include "Wanglu Kuaiche" ADSL service, "Kuanpin Tong" FTTX+LAN service and "Tianyi Tong" PWLAN service. China Netcom has launched "Kuanpin e-xian" ADSL and FTTX+LAN service, "Mobile Office" for PWLAN service, and "Broadband China" for traditional dial-up service. Little difference thus exists between the two operators' product lines. However, whereas China Telecom has focused on collaborating with application service providers, China Netcom has formed strategic alliances with broadband equipment makers.

In 2005, the Chinese government will be promulgating revisions to the telecommunications law, providing clearer legal framework for network interconnection and circuit rental, and make it easier for China Netcom and China Telecom to expand into each other's territory. In addition, new methods of classifying operators and business areas will bring more service providers to enter into the broadband service field, thereby helping to boost subscriber numbers.

	Table 13	China Telecom, China Netcom Broadband Strategy Comparison
			China Telecom	China Netcom
Brands			ADSL Wanglu Kuaiche, FTTB+LAN Kuanpin Tong, WLAN Tianyi Tong, Vnet	ADSL Kuanpin e-xian, Mobile Office, Broadband China, CNC Connected, Daily Online
Market Positioning			North: focuses on corporate market. South: focuses on residential and corporate markets	North: residential and corporate markets. South: focuses on corporate market
Sales Promotion Activities			"Broadband Journey-Ultimate Speed," etc.	"Broadband e-Life," etc.
Source: MIC, November 2004

Appendix

Products

DSL

DSL is a collection of technologies that provide high bandwidth over existing copper phone lines. DSL is available in a number of variations, such as ADSL, SDSL (Symmetric Digital Subscriber Line), HDSL (High Bit-rate Digital Subscriber Line), G.shdsl, and VDSL. At present, ADSL is the mainstream DSL technology, which supports both voice and data services. ADSL provides server approximately 50 times fast than analog or ISDN dial up access.

DSLAM

A DSLAM (DSL Access Multiplexer) is a central office device for ADSL service that intermixes voice traffic and DSL traffic onto a customer's DSL line. The device also separates incoming phone and data signals and directs them onto the appropriate carrier's network.

Glossary of Terms

ADSL		Asymmetric Digital Subscriber Line
ARPU		Average Revenue Per User
ASAM		Advanced Services Access Manager
ASP		Application Service Provider
CO		Central Office
CPE		Customer Premises Equipment
DSL		Digital Subscriber Line
DSLAM		Digital Subscriber Line Access Multiplexer
DWDM		Dense Wavelength Division Multiplexing
FTTx		Fiber to the Home/Curb/Building
IAD		Integrated Access Device
ICP		Internet Content Provider
IP		Internet Protocol
ISDN		Integrated Service Digital Network
ISP		Internet Service Provider
LAN		Local Area Network
MPLS		Multiprotocol Label Switching
NIC		Network Interface Card
OEM		Original Equipment Manufacturing
PAS		Personal Access Phone System
PDA		Personal Digital Assistant
PWLAN		Public Wireless Local Area Network
SDH		Synchronous Digital Hierarchy
SMS		Short Message Service
VDSL		Very High Bit-rate Digital Subscriber Line
VLAN		Virtual Local Area Network
VPN		Virtual Private Network
WAN		Wide Area Network
WLAN		Wireless Local Area Network

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