China facing broadband digital divide

Slowing broadband growth in China is creating a gap between the country's digital haves and have-nots, analysts have warned.

The rate at which China's citizens are installing broadband internet lines is slowing, despite the fact that the vast majority of the country's population still has no internet connection.

"The slowdown will entrench a digital divide, because broadband is approaching maturity in the big cities while the rural markets remain almost untapped," said Kevin Lee, a Hong Kong-based analyst at research consultancy Ovum. 

The number of broadband subscribers in China more than doubled in 2004, but the pace of growth had slackened to only 38 per cent by last year. The slowdown means that almost 90 per cent of Chinese households do not have broadband.

"Household broadband penetration in China stood at 13 per cent by December 2006," said Lee.

"We forecast that the steady broadband growth will push household penetration to 21 per cent by 2010, equivalent to 106 million subscribers, but this is nowhere near market potential.

"The lack of competition between the main operators is a major factor, because it keeps prices higher than necessary and hinders uptake."

China's fixed line telecoms operators have been looking to broadband expansion to replace revenues lost to new technologies, such as mobile phones. However, weak broadband growth will mean shrinking revenues for these firms.

Ovum advises broadband firms to generate more revenue from content and to continue expanding their infrastructure in smaller cities. 

But disagreements between government regulators handling broadcasting and communications are slowing the growth of IPTV, one of the potential content services that can be offered over broadband.