Fixed Broadband China Wang

Fixed Line Broadband in China: 

Fixed Line Broadband in China for GIGA Technology Program Tony Wang, Finpro Guangzhou, China November 10, 2005

Table of Contents: 

Table of Contents 1. Introduction 2. Market Overview 2.1 Broadband Business Volume 2.2 Major Service Providers 2.3 Broadband Usage and Demographics 3. Technology 3.1 Delivery Technologies 3.2 DSL 3.3 Cable Modem 3.4 Satellite 3.5. Other Methods 4. Services 4.1 Main Technologies and Providers 4.2 Consumer Applications and Trends 4.3 Business Applications and Trends 5. Policymaking and the Role of the Public Sector 6. Public Sector R&D Activities 6.1 Research Activities 6.2 Organizations 7. Private Sector R&D Activities 7.1 Research Activities 7.2 Funding 8. Possibilities for Finnish Companies 9. Foreseeable Radical Changes

1. Introduction : 

1. Introduction

Introduction: 

Introduction This report has been compiled for the GIGA program of TEKES, focusing on converging networks. The report provides information on the China fixed broadband market. The report discusses the following issues: Overview of the China fixed broadband Internet market Competitive environment Technology adoption and outlook Available services Government’s role in the development of fixed broadband Public & Private sector R&D activities Opportunities for Finnish companies 1. Introduction

Country information: 

Country information 1. Introduction Source: National Statistics Bureau 2004

Milestones of data communication development in China: 

Milestones of data communication development in China 1988 X.25 based CNPAC established National Computing and Networking Facility of China finished 1993 1995 1996 1998 2000 Cernet launched Chinanet and China public multimedia network launched by China Telecom IPv6 testing network 6bone China International Economy & Trade Net initiated 2003 China Next Generation Internet (CNGI) started Chinese Academic Netowrk established 1986 1988 National Public Economic Information Network launched 2001 China Highspeed Network (NSFCNET) launched Core network of CNGI (Cernet 2) launched Dec-04 Oct-05 China Telecom and Netcom started to build NGN test network 1. Introduction

2. Market Overview: 

2. Market Overview 2.1 Broadband Business Volume 2.2 Major Access Service Providers 2.3 Broadband Usage and Demographics

China Communications Revenues: 

China Communications Revenues 2.1 Broadband Business Volume 2. Market Overview Source: Year Book of China Communications 2005

Total Internet Subscribers: 

Total Internet Subscribers 2.1 Broadband Business Volume 2. Market Overview Source: CNNIC Annual Survey 2005

Total PCs that connected to Internet: 

Total PCs that connected to Internet Source: CNNIC Annual Survey 2005 2.1 Broadband Business Volume 2. Market Overview

Comparison of GDP & Internet Penetration in Different Geographic Areas: 

Comparison of GDP & Internet Penetration in Different Geographic Areas 2.1 Broadband Business Volume 2. Market Overview Source: CNNIC Annual Survey 2005

Milestones of main broadband operators: 

Milestones of main broadband operators Mar-94 China Telecom separated from Bureau of Telecom China Unicom established Apr-94 98 Feb-99 Apr-99 Dec-00 Ministry of Information Industry established China Mobile, Satcom established China Netcom established China Railcom established Feb-02 10 provincial subs of China Telecom merged with China Netcom 2.2 Major Access Service Providers 2. Market Overview

Backbone Bandwidth of Commercial Internet Network connected to foreign Countries: 

Backbone Bandwidth of Commercial Internet Network connected to foreign Countries China Science & Technology Network (CSTNET): 5,275M China Public Computer Network (CHINANET): 44,895M China Education & Research Network (CERNET): 1,599M China Unicom Network (Uninet): 3,450M China Netcom: 26,111M China International Trade Network (CIETNET): 2M China Mobile Network (CMNET): 1,285M China Great wall Network (CGWNET): Under construction China Satellite Network (CSNET): under construction Source: Year Book of China Communications 2005 2.2 Major Access Service Providers 2. Market Overview

Share of Internet Access Service Providers: 

Share of Internet Access Service Providers 2.2 Major Access Service Providers 2. Market Overview

Total IP addresses available in China: 

Total IP addresses available in China Total IP addresses: Mainland China: 68.3 million Taiwan: 15 million Hong Kong: 6.12 million Macao: 0.13 million 2.2 Major Access Service Providers 2. Market Overview

Revenue structure of three operators in 2004: 

Revenue structure of three operators in 2004 Source: Annual report 2004 of various companies Unit: Billion Euro 2.2 Major Access Service Providers 2. Market Overview

Internet Growth – China’s people online: 

Internet Growth – China’s people online 2.3 Broadband Usage and Demographics 2. Market Overview Source: China Network Information Center

Social & Demographic Characteristics of Internet users: 

Social & Demographic Characteristics of Internet users Source: China Network Information Center Table 1: Internet users by places of access Table 2: Internet users by age Table 3: Internet users by degree of education 2.3 Broadband Usage and Demographics 2. Market Overview

Broadband Availability in Rural Areas: 

Broadband Availability in Rural Areas The broadband services are generally lacking in rural areas, largely due to the huge income gap between people living in the city and in the country side In many rural areas, the basic fixed line telephone service is still not available As commercial entities, the tele-operators are lacking the incentives to offer broadband services in rural area It is now a issue that the Ministry of Information Industry and the National Development Committee are addressing 2.3 Broadband Usage and Demographics 2. Market Overview

3. Technology: 

3. Technology 3.2 Future trends of delivery Technologies 3.1 Delivery Technologies

Slide21: 

3.1 Delivery Technologies 3. Technology Source: China Network Information Center

Delivery Technologies that are currently in use: 

Delivery Technologies that are currently in use 3.1 Delivery Technologies 3. Technology

Evolution of Delivery technologies: 

Evolution of Delivery technologies LMCS Downward speed 10 Mbps 1 Mbps 100 kbps 10 kbps 10 kbps 100 kbps 1Mbps 10 Mbps 100 Mbps xDSL Cable Modem VDSL Direct PC Upward speed 100Mbps Voice Modem MMDS FTTC/ FTTH/PON 3G LMDS ETTH Ethernet 3.5GHz WLAN OFDMA 3.2 Future Trends of Delivery Technologies 3. Technology

Upgrading options for existing customers: 

Upgrading options for existing customers Dial up users & current telephone users: ADSL virtual dial up LAN (depends on the availability) Cable modem (only available in few areas of few cities) FTTX ADSL users ADSL DDN LAN FTTX LAN users: More bandwidth could applied, depends on the availability of operators FTTX 3.2 Future Trends of Delivery Technologies 3. Technology

Situation in remote locations: 

Situation in remote locations The following options have been explored by various tele-operators: Satellite Power cable SCDMA (1900MHZ ) Wimax GPRS CDMA450Mhz 3.2 Future Trends of Delivery Technologies 3. Technology

4. Services: 

4. Services 4.1 Main Technologies and Providers 4.2 Consumer Applications and Trends 4.3 Business Applications and Trends

Data rates and pricing principlesChina Telecom: 

Data rates and pricing principles China Telecom 4. Services 4.1 Main Technologies and Providers

Data rates and pricing principlesChina Netcom: 

Data rates and pricing principles China Netcom 4. Services 4.1 Main Technologies and Providers

Data rates and pricing principlesChina Unicom: 

Data rates and pricing principles China Unicom 4. Services 4.1 Main Technologies and Providers

Data rates and pricing principlesChina Railcom: 

Data rates and pricing principles China Railcom 4. Services 4.1 Main Technologies and Providers

Data rates and pricing principlesCernet: 

Data rates and pricing principles Cernet 4. Services 4.1 Main Technologies and Providers

Value chain of the Internet Services: 

Value chain of the Internet Services Users (Broadband Subscribers) Tele-operator (China Telecom China Unicom China Netcom) Service Provider (Taobao Ebay Yahoo Sina Shanda QQ Alibaba) Contents Provider (ActoZ Time Warner Disney Universal) Technology Vendor (Asia Info) Equipment Vendor (ZTE Huawei UTStarcom Lenovo Dell) 4.2 Consumer Applications and Trends 4. Services

Services and content available: 

Services and content available Source: CNNIC Annual Survey 2005 4.2 Consumer Applications and Trends 4. Services

The average amount that internet subscribers pay for the value added services: 

The average amount that internet subscribers pay for the value added services Table 4: monthly charge paid by subscribers 4. Services 4.1 Main Technologies and Providers Source: China Network Information Center

Typical broadband services: 

Typical broadband services Online game E-commerce Portal/Advertisement VoIP VOD Search 4.2 Consumer Applications and Trends 4. Services

Example - China Telecom: 

Example - China Telecom 4.2 Consumer Applications and Trends 4. Services

Example – China Netcom: 

Example – China Netcom 4.2 Consumer Applications and Trends 4. Services

Key Business Applications: 

Key Business Applications E-government VPN Emergency Services Intelligent Transportation Services (ITS) Online/remote education Online banking Business to Business Sales 4. Services 4.3 Business Applications & Trends

Mass market demand on services: 

Mass market demand on services Convergence of IP network, PSTN network and cable TV network - Triple play VPN on IP network Digital home Industrial vertical applications Government Logistic Transportation E-commerce Video streaming application in various sectors Online education Online video conference Online medical services Online brokerage (realties etc.) Podcast, videocast 4. Services 4.3 Business Applications & Trends

5. Policymaking and the role of the Public Sector: 

5. Policymaking and the role of the Public Sector

Policy making and public sector`s role: 

Policy making and public sector`s role Chinese government is playing a leader’s role in the broadband network development as it realized that “Science & Technology is the first productivity” and “Informationization of the whole society is the only way to narrow the gap between China and the developed countries” The government is mainly achieving its target by: Drafting and issuing standards Providing guidelines for public and private sectors on R&D directions Provide funding for the basic and application R&D programs Coordinating the R&D activities among public and private sector organizations Several projects were initiated by the government to stimulate the development of Informationization of the country Government has put huge investment through several funding schemes to support the universities, research institutes and business organizations to develop backbone network and applications in both public and different industrial verticals. 5. Policy Making and the role of the Public Sector

Government Goals: 

Government Goals To Transform China from a Big telecom country to a Strong telecom country To Stimulate the R&D of in-house developed technologies To utilize the latest IT and Internet technologies to upgrade traditional industries, as well as the efficiency of the government To promote exports of high value added goods and build up the competitive advantage of the country based on technology, rather than low cost of labor To narrow the digital gap between coastal area and inner land, between urban and rural residents To improve the education level by utilizing the network and IT technologies 5. Policy Making and the role of the Public Sector

Government’s policy on Broadband: 

Government’s policy on Broadband China is left behind North America and EU countries in developing the first generation of Internet, even when it already catch up in equipment supply and manufacturing, the core technologies are still owned by foreign vendors Lack of IP addresses is a key problem for further development and application of Internet Therefore, the key policy is to develop next generation Internet (CNGI) based on IPv6 technology with in-house developed IPRs, which are critical to homeland security and sustainable development of the whole industry 5. Policy Making and the role of the Public Sector

China Next Generation Internet - CNGI: 

China Next Generation Internet - CNGI The aim of CNGI is to: To build up information infrastructure for creative capability To provide environment for basic R&D and testing activities To grasp the core and application technology of the next generation of Internet To further promote the commercialization CNGI was launched by National Development and Reform Committee Ministry of Science and Technology China Academy of Science China Academy of Engineering Ministry of Information Technology National Natural Science Foundation 5. Policy Making and the role of the Public Sector

China Next Generation Internet - CNGI: 

China Next Generation Internet - CNGI Composition of CNGI: Demo network construction Backbone network Municipal network Access network Research & development and commercialization Application testing Main builder of CNGI: China Education and Research Network (CERNET) China Telecom, Netcom, Unicom, Mobile and Railcom Mile Stone and Achievements: December 2003 – CNGI Started December 2004 – CERNET 2 launched December 2004 – Main Tele-operators started to build testing network 5. Policy Making and the role of the Public Sector

Network structure of CNGI: 

Network structure of CNGI 5. Policy Making and the role of the Public Sector

Regulatory Issues: 

Regulatory Issues Basic Telecommunication services (Voice call, internet access) Shanghai, Beijing and Guangzhou are now opened Foreign companies are only allowed to have less than 25% shares of the company providing basic services Value added services (Internet contents and applications) Opened nation wide Foreign companies are allowed to hold up to 50% Convergence of cable TV and IP network Cable TV operators are now allowed to offer Internet access in the cities where they operate, but not nation wide One IPTV license has been issued to Shanghai Media Group, a local cable TV network operator in Shanghai Convergence of wireless and wire line communication Currently mobile and fixed line operators are now allowed to tap each others market segment Wimax is now under testing by both operators, will later on be a trigger point VOIP Still regulated, only six tele-operators are allowed to offer the services More licenses will be issued later on after the testing of tele-operators 5. Policy Making and the role of the Public Sector

6. Public Sector R&D activities: 

6. Public Sector R&D activities 6.1 Funding Scheme 6.2 Research Activities 6.3 Organizations

Subsidies and government funding scheme: 

Subsidies and government funding scheme National Basic Research program of China (973 plan) National High-tech Research & Development Program of China (863 plan) China Torch program IT funds of MII National Natural Science Foundation Various funds set up by provincial & municipal governments 6.1 Funding scheme 6. Public Sector R&D Activities

Investment from Information Science division of National Natural Science Foundation (NNSF): 

Investment from Information Science division of National Natural Science Foundation (NNSF) Note: *small-fund exploratory projects. Average funding intensity does not include such projects. 6.1 Funding Scheme 6. Public Sector R&D Activities

Government sponsored programs in 973 plan: 

Government sponsored programs in 973 plan Research on Future Internet Architecture Basic Research on Photonic Integrated Circuit for High Speed, High Capacity Information Network Research on Theory and Methodology of Agent-based Middleware on Internet Platform Research on the organization and key technologies of the Storage System on the next generation Internet Fundamental Theory, Algorithms of Virtual Reality and Its Implementation Basic Research on Integrated Optoelectronic Devices and Microstructure Optical Fibers with Structure and Technology Innovations for Future Advanced Optical Communications Digital Contents Understanding 6.2 Research activities 6. Public Sector R&D Activities

Government sponsored program in 863 plan: 

Government sponsored program in 863 plan The technology standardization of IP evaluation and design Auto Switch Optical Network and its application 3Tnet research, construction and test operation in Shanghai 3Tnet Technology and scalable testing 3Tnet expand to 80*40 DWDM switching system 3Tnet Network TV operating platform Network TV access system and engineering of terminal Information security on value added service platform Research on standards of beyond broadband MSR city-domain network Integrated Testing & Developing platform for NGN 6.2 Research activities 6. Public Sector R&D Activities

Government sponsored program in China Torch program: 

Government sponsored program in China Torch program Web based interactive multi media communication platform MSwitch IP based switching system Intelligent Ethernet switching system 6.2 Research activities 6. Public Sector R&D Activities

Government sponsored program – IT fund of MII: 

Government sponsored program – IT fund of MII Commercialization of IPv6 based network equipment (high-end router) Auto Switch Optical Network (ASON) products Commercialization of optical network components NGN core services platform IPv6 gateway equipment New city domain optical network equipment IP based VPN 6.2 Research activities 6. Public Sector R&D Activities

Selected Organizations: 

Selected Organizations Ministry of Information Industry www.mii.gov.cn Telecommunication Technology Committee of MII China Academy of Telecommunication Research of MII www.cttl.com.cn China Internet Association www.cnnic.org.cn Beijing University of Post & Telecommunication www.bupt.edu.cn China education Science & Technology Network www.edu.cn 6.3 Organizations 6. Public Sector R&D Activities

7. Private Sector R&D Activities: 

7. Private Sector R&D Activities 7.1 Research Activities 7.2 Funding

Huawei technologies: 

Huawei technologies Company brief A private company established in 1988 in Shenzhen One of the leading telecom & network equipment vendor in the world Products cover PSTN, 3G, broadband Router and switches Business covers 90 countries, 22 operators worldwide of the top 50s. Main R&D areas Nine R&D centers in North American, European, India and China Base station architecture and system design, RF core arithmetic – Stockholm, SW ASIC technology and CDMA arithmetic – Dallas, US IP switch technology and platform – Bangalore, India RF technology – Moscow, Russia Core network of NGN, 3G – China   Involvement in national standards NGN framework architectural IP switch equipment technical requirements Media gateway control protocol IP-VPN framework IP broadcasting protocol standards 7. Private Sector R&D Activities 7.1. Research Activities

Tsinghua Bitway: 

Tsinghua Bitway Company brief The company was established in 2000, based on Tsinghua University, one of the leading technology university in China Its core business is network equipment research, production and sales Main R&D areas NGN core routers and access network equipments IPv6 & IPv4 interconnection system NGN security equipments IP-switch between wireless network and wire network based on IPv6 architecture Involvement in national standards NGN framework architectural IP switch equipment technical requirements Media gateway control protocol IP-VPN framework 7. Private Sector R&D Activities 7.1. Research Activities

ZTE Technologies: 

ZTE Technologies Company brief The company was established in 1985. It is now the largest telecommunication equipment vendor in China with annual sales revenue of Euro 3.4 billion in 2004 The company was listed in both Shenzhen Stock Exchange and Hong Kong Stock Exchange Its products portfolio includes NGN, 3G, Optical network, wireless access and mobile terminals Its products have been deployed in more than 60 countries worldwide 14 R&D centers in China, North America and Sweden Main R&D areas Soft-switch Core routers for NGN OADM Involvement in national standards Soft-switch based application server equipments requirements Media server technology requirements SDH multi-business transmission platform testing SDH network protection testing 7. Private Sector R&D Activities 7.1. Research Activities

Datang Telecom: 

Datang Telecom Company brief The company was established in 1998 and listed in Shanghai Stock Exchange It is owned by National Telecom Research Institute Its business area covers 3G (TD-SCDMA), Switching, access, optical communication, software and IC design Main R&D areas VoIP based on NGN Virtual operator systems Security system on IP network Broadband access Open Service Platform based on IP switch 7. Private Sector R&D Activities 7.1. Research Activities

Fiberhome Technologies: 

Fiberhome Technologies Company brief The company was established in 1999 and listed in Shanghai Stock Exchange Its business area covers solutions of access level to core level of communication network and optical communication It is one of the main optical fiber network equipment supplier for all the main tele-operators Main R&D areas FTTH Optical components ASON IP switch based on NGN 32*10Gb/s DWDM ATM-PON full services access network system Involvement in national standards IP switch access standards Integrated access network standards FTTH network standards 7. Private Sector R&D Activities 7.1. Research Activities

BII Group: 

BII Group Company brief The company was established in 1999 It was originally Beijing Internet Institute set up by R&D center of State Council and a group of scientists. Its business focus on R&D and commercialization of IPv6 network technology It is one of the main builder and system vendor of IPv6 testing network Main R&D areas NGN general services platform Network monitoring system IPv4/IPv6 integrated video terminal IPv6 network TV Intelligent control system based on IPv6 Involvement in national standards IPv6 ready IPv6 testing standards IPv6 certification standards 7. Private Sector R&D Activities 7.1. Research Activities

UT Starcom: 

UT Starcom Company brief A global telecom system vendor established in 1995 by two Chinese overseas students in Silicon Valley. The company was listed in NASDAQ Its business area covers wireless access (PAS), Broadband access, and terminal manufacturing It is now serving more than 300 tele-operators in more than 300 countries and regions. In 2004, its sales revenue reached Euro 2.5 billion More than 10 R&D centers in North American, China, India and Korea Main R&D areas IP switches IP DSLAM GEPON Net ring optical fiber network IPTV solutions NGN network terminals 7. Private Sector R&D Activities 7.1. Research Activities

Slide64: 

7. Private Sector R&D Activities 7.2 Funding Source: Year Book of China Communications 2005

Slide65: 

7. Private Sector R&D Activities 7.2 Funding Source: Year Book of China Communications 2005

Slide66: 

7. Private Sector R&D Activities 7.2 Funding Source: Year Book of China Communications 2005

8. Possibilities for Finnish Companies: 

8. Possibilities for Finnish Companies

Opportunities for Finnish companies: 

Opportunities for Finnish companies The domestic market used to be dominated by foreign technologies until recent years when domestic firms growing up with in-house R&D capabilities On the component side, especially the chips design and development are still lacking behind Government continue to finance heavily on in-house development of technologies and standards as it sees the telecommunication network is vital to homeland security and social economical development It is better for Finnish companies to tap into the market in R&D and standard drafting phase, in order to show commitment to the market and gain a foothold Technology and equipment are free to enter the market, all the other services should team up with local firms 8. Possibilities for Finnish Companies

Opportunities for Finnish companies: 

Opportunities for Finnish companies IPv6 Access network systems Switching between IPv4 and IPv6 Applications based on IPv6 IP based VPN IP switch for telecommunication system Integrated switching system of PSTN, broadband, wireless network (3G) IPTV and video streaming Convergence of networks Enterprise solutions Billing and network monitoring for NGN VOIP solutions 8. Possibilities for Finnish Companies

9. Foreseeable Radical Changes: 

9. Foreseeable Radical Changes

Foreseeable Radical Change: 

Foreseeable Radical Change Further split/merge of tele-operators All the wireline and wireless line operators are chasing hardly the 3G license as they all see bright future of mobile communication, however, to whom it will issue is still a wide guess. The initial split of operators was aiming at create competition, but the current rumors are that these six operators will be merged into three or four with each one get a 3G license. Once the wireline operator granted a mobile license, it may need to relocate resources rather dramatically. Open up of basic telecommunication sector to foreign investors As China entering to WTO, the basic telecommunication services, e.t access services and voice services will eventually open to foreign companies step by step. Once more foreign operators penetrating the market, they may bring new business model and technologies and change the competition landscape rather dramatically. 9. Foreseeable Radical Changes

Foreseeable Radical Change: 

Foreseeable Radical Change Progress of IPv6 testing network of the main tele-operators As the successful launch of Cernet 2, the first national NGN network, more operators are following. Once the test going through smoothly, it is likely that the whole network will be upgraded to IPv6 based NGN, which will stimulate the innovative services and applications Adoption of Wimax The attitude of Chinese government used to be against Wimax as none of the domestic companies are having the core technology. However, things seem changing as one of the officer from MII stated recently that China is going to deploy Wimax in 2007 Convergence of Cable and Telecommunication Operators As IP network is now ready to transmit videos thanks to the expanding bandwidth, the boundary of cable TV and telecommunication services are blurred. China has issued one IPTV license for testing purpose, it is believed that more will be issued later on. On the contrary, the digital TV service that initiated by cable TV operators seems developing very slow partly because of sources of HD programs. By the time, IPTV may go beyond digital TV 9. Foreseeable Radical Changes