China's Cable Operators Eyeing Broadband Last Mile

China's broadband market is still growing rapidly, despite the recent deacceleration of growth rate. In June 2007, the MII reported more than 59 million broadband users in China. XDSL has more than 75% of the market and the two major telecom operators, China Telecom and China Netcom, has 95% of the market share. Cable operators have not been a competitive force due to various reasons including regulatory issues. This might change in the near future.

According to officials at SARFT (State Administration of Radio, Film, and Television), they are exploring two-way interactive cable technologies, which definitely would include cable broadband. China's cable TV penetration is now at 35%, with 130 million subscribers. This large installed base can potentially become a gold mine if cable operators are allowed to offer broadband services. As telecom operators in China deploy their IPTV services (currently with more than 600,000 subscribers), cable operators will need to find a way to become more competitive.

China's two regulatory bodies, SARFT and MII (Ministry of Information Industry), have been fighting against each other for years. When telecom operators started their IPTV deployments, SARFT strongly opposed their entry. Since China does not have one agency in charge of communications and entertainment industries, like the FCC in the U.S., such conflicts will continue in the near future. In addition, the government has investment in both TV and telecom operators and officials need to constantly balance the need for competition and the possible repetititve infrastructure construction (considered wasted resources). Because of these factors, it may take years for cable broadband technology companies to benefit from a potentially large market.