China is set to become the world's biggest broadband market in less than a year, according to telecoms research and consultancy firm Ovum.
But despite the escalation in subscriber numbers - with a 79% compound annual growth rate in the last three years - China still has a lot more room for growth as its broadband penetration rate lags behind other Asia-Pacific countries at 3.4%.
Growth is expected to come from a booming economy, rising incomes, expanding PC penetration as well as new technologies such as VoIP and IPTV and events such as the Olympic Games.
Ovum predicts that broadband subscribers will reach 139 million by 2010 with a CAGR of 75%, rising from an anticipated 79 million subscribers in 2007.
Currently, DSL services dominate with a market share of 71% and 32 million subscribers as of June 2006.
Ethernet-based LAN services, which are popular in high-density areas, account for 26% of the market. Cable modem and wireless technologies contribute a lot less.
'Operators are progressively upgrading the network using higher speed technology such as ADSL2+ and VDSL to meet increasing bandwidth demands,' said Kevin Lee, senior analyst at Ovum in Hong Kong.
The emergence of VoIP in the market will boost wireless broadband, enabling operators to see returns on their wireless local area networks.
But growth could be stymied by the need for restructuring in the Chinese market.
Up until now, cable operators have had little effect on the broadband market due to regulatory barriers.
At present, there are 128 million cable TV service subscribers.
However, issues such as a fragmented ownership structure and lack of expertise has prevented operators competing against DSL providers.
'China needs to restructure the telecoms industry and it needs to reform the regulatory policy for broadband and IPTV,' said Lee.
'The possible entry of foreign players in line with WTO commitments could complicate the development of the competitive situation,' he added.
The deployment of IPTV services is also expected to boost broadband penetration.
China Telecom and China Netcom are working with Shanghai Media Group (SMG), the only IPTV licence holder. SMG launched IPTV services in the city of Harbin in May 2005 and in Shanghai later in the year. The company plans to add four more cities in the Heilongjiang province this year.
China Telecom and China Netcom are the dominant providers of broadband access in China . They currently have an 87% market share. Other operators include China Tietong, China Unicom and other miscellaneous operators.
China poised to become one the world's largest broadband markets
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