China is now home to over 300 million internet users, 90% of whom use broadband access. China's broadband service providers are adding some 10 million users per year, reaching 89.8 million subs at the end of April, and expect to top 100 million by year-end.
With broadband penetration at seven percentage points below the global average, the market has significant room for growth.
Approximately 80% of Chinese broadband subscribers use ADSL technology while the majority of the remaining use FTTx, mainly FTTB plus LAN or FTTB plus DSL. While ADSL is losing its competitiveness to 3G mobile broadband technologies, wireline operators China Telecom and China Unicom are under pressure to increase their bandwidth using FTTx. The two operators now offer not more than 2 Mbps of bandwidth on average.
According to statistics from the China Association of Communications Enterprises (CACE), China had six million subscribers of Ethernet Passive Optical Network-based FTTx services as of the end of 2008.
Industry sources said that the three telecom operators are likely to deploy 15 million FTTx lines in 2009 and FTTx subscribers are expected to top 50 million in 2012.
In Shanghai, China Telecom has announced it will invest 6 billion yuan ($877.9 million) in the next two years on a 100-Mbps metro optical network. The telco expects to have 750,000 FTTH subscribers by the end of the year and three million by the end of 2011.
FTTx stimulus
China's 3G and FTTx rollouts by state-owned carriers are part of the government's economic stimulus plan. In its Electronics and Information Industry Adjustment and Revitalization Plan, in April China's State Council declared that the country would speed up the "deployment of next-generation internet and broadband fiber access networks" between now and 2011.
FTTx is seen as a technology that helps eliminate the information gap between the rich and the poor, and the urban and the rural.
The continued decrease in the price of FTTx equipment has made it possible to deploy on a large scale in China. Wu Jiang, an official from FiberHome, said at the 2009 China FTTH Development Summit in Beijing last month that the cost of providing FTTB plus LAN for each subscriber is 300 yuan ($43.90) and that of FTTB plus DSL is 400 yuan ($58.50). They are close to the cost of using copper wiring. Even using FTTH, which brings the optical signal all the way to the end user's living or office space, the cost has been reduced to 1,300 yuan ($190.20) per subscriber.
EPON and GPON (Gigabit Passive Optical Network) are the two major technologies now used for FTTx deployment in China.
China Telecom and China Unicom have adopted EPON due to its lower cost but are also following GPON closely and conducting trials. As GPON equipment prices decline, they are likely to adopt GPON in future FTTx projects.
According to ZTE Corp, eight million EPON lines were installed last year, and ZTE supplied about half of them. China Unicom recently issued a tender for EPON equipment to support the rollout of 11 million FTTx lines - quite probably the world's largest EPON tender to date.
Early this year FiberHome, Huawei, ZTE and Alcatel-Lucent were selected to supply 2,300 GPON lines to China Telecom for trials in Beijing, Shanghai, Wuhan and Hangzhou.