China’s Investment in Fibre Opens Huge Opportunities for IT Vendors – Reaching 200 Million Homes by 2014

China is fast positioning itself as the future global centre for e-commerce, and for the myriad of services which depend on fibre-based IP connectivity. In the same way that China now dominates global manufacturing – based on productive and economic labour married to an efficiently managed supply chain, excellent transport hubs and a relentless ‘can-do’ attitude among the political and managerial leaders – the country is becoming the global centre for businesses which require state-of-the-art broadband networks. The economic ramifications are staggering.

“The Five-Year Plan calls for 50 million fibre subscribers and 200 million homes passed by 2014.”

China has had a co-ordinated national strategy for fibre which predates those in the US and most of Europe. Its FttH Forum, formed in 2003, aims to align players’ interests and solve FttH implementation problems. By implementing measures adopted by the Forum, FttH roll-out costs halved within four years just as the price of copper rose dramatically. This advantaged the business case for delivering fibre rather than copper to the myriad of new high-rise buildings – entire city zones – which have been constructed during the last few years. As early as 2008 China Telecom managed to reduce the cost of fibre access rollout to less than €200. As a result, FttX has long emerged as the primary broadband access technology in urban areas.
The market is dominated by three principal players – China Telecom, China Unicom and China Mobile (the last freshly provided with a full-service licence). Both China Unicom and China Telecom are migrating from the cheaper EPON technology to GPON. The scale of their collective rollouts is impressive.
China Unicom has adopted GPON on a large scale since 2010. The company recently rolled out 25 million GPON and EPON lines in a project costing about RNB4 billion (about €430 million), and is in the running for a separate project involving an additional 16 million lines.
China Telecom, which trialled FttX using EPON as early as 2004, moved to large-scale rollouts in 2007 and began migrating to GPON in 2009. It has connected over three million residences with GPON. Its subsidiary Shanghai Telecom will switch on a 1Gb/s service during 2012. Its investments in Shanghai alone have reached some €2.8 billion, mainly connecting the city’s industrial zones and creating digitised areas (such as the Zhangjiang High-tech Park) capable of attracting business from around the globe.
China Telecom plans to extend fibre to some 30 million users by the end of this year and to 100 million by the end of 2015. This coincides with the end of the Twelfth Five-Year Plan (2011–2015) approved by the government in mid-2011, and to which the company’s policies adhere as it co-ordinates its infrastructure upgrades with local authorities, integrating telecoms, TV, and both fixed and mobile internet networks. The Five-Year Plan calls for 50 million fibre subscribers and 200 million homes passed by 2014. Complementing these goals, China Telecom’s ‘Broadband China Optical Network City’ project will see fibre delivered to every city by 2013. In addition, the replacement of copper lines for fibre will bring the deployment costs down further given the high scrap value of redundant copper infrastructure.  For its part, China Mobile has deployed GPON in over 20 provinces, deploying six million lines by early 2011.
In regions where there is competing DSL infrastructure take-up of FttH has been slow initially but the migration from DSL is speeding up rapidly, the result of consumer and business awareness of the potential of fibre as also the attractive incentives from operator such as similar priced offerings between DSL and fibre and free upgrades to fibre.
The result of these efforts will mean that within a few years FttX penetration in China will be triple that in the US and Europe. The implications are clear – as the future global economy relies more heavily on connectivity, companies around the world will look to China’s high-tech business parks as the first port of call.
This report compares China Telecom with its closest competitors on various parameters such as business segments, product offerings & their USPs (unique selling points), geographical coverage, financial performance, M&A developments and business strategies. Besides a comparative analysis on these metrics, this Competitive Benchmarking Report has two USPs, which distinguishes this report from any other available competitive benchmarking report on this company:
1. Industry Analysis Section: This section covers an analytical overview on the respective industry segment, size, forecast, segmentation, trends, issues, challenges, opportunities and ranking of top players in the industry.
2. Comparative SWOT analysis on the company and its competitors.
The Telecom Industry in China is one of the largest in Asia-Pacific. The recent industry deregulation and the issuance of 3G license have attracted huge foreign investments in the Chinese Telecom Industry. This has prompted the telecom operators to upgrade their existing network and IT infrastructure, which has opened up huge opportunities for the IT vendors.

“The Chinese Telecom industry are exploring new and efficient IT Solutions based on green technology”

The growing concern regarding environmental compliance and system energy consumption is encouraging the IT vendors in China to come up with products and solutions that are scalable and energy efficient. This is helping the Chinese Telecom industry to explore new and efficient IT solutions, which are based on green technology. These eco-friendly technologies are helping the telecom players improve their profitability by reducing the energy consumption, operational and maintenance costs.
The report forecasts the size of the IT market in telecom Industry in China over the period 2008-2012 and segments the market by technologies. Further, it discusses the key market trends, drivers and challenges of the IT market in telecom Industry in China and profiles some of the key vendors of this industry.
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One comment

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