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Voice-over-broadband: Is China up for it?

Posted: 01 Jan 2004 ?? ?Print Version ?Bookmark and Share

Keywords:broadband? dsl? internet? telecom? network?

Stephen Lin is Asia-Pacific VP for Legerity Inc.

Forecast has it that the broadband investment in China would reach $543 million in 2003, representing a 67 percent growth over 2002, according to a Reuters news report quoting Norson Telecom Consulting figures. From the same report, the estimated number of broadband users in China would reach nearly 21 million by 2005, doubling nearly what was expected by the end of 2003. Then the question becomes "Will Chinese broadband pay off?" The answer is, quite clearly, "yes!"

With the advent of technology, further deregulation and aggressive push from operators, broadband subscriber numbers have surged to about 4.6 million at the end of 2002, according to the China Centre of Information Industry Development. An Economist Intelligence Unit article also pointed out that of these broadband subscribers, 2.22 million are connected over conventional phone lines using DSL technology.

One of the major drivers for DSL in China is the coming down of costs. Compared to other countries in Asia, China's pricing strategy for DSL is even more aggressive due to the lower affordability of the users, yet huge untapped market size. Mainland's DSL installation cost is as low as $50 and monthly access at around $10. This is a replica of the trend of broadband availability and subscription surge after the price-cut in South Korea, Japan and Taiwan.

One example of how DSL takes off is Yahoo!'s Japan joint venture, which has started to offer IP telephony services together with Internet access over DSL. The cost of making phone calls is now dramatically reduced as voice-over-broadband (or voice-over-DSL) costs much lower than the normal phone calls.

DSL in China is also quietly, but quickly, developing. After the disintegration of the former China Telecom, the market has become more competitive. Major players are also shifting their focus on the next-generation network (NGN), which allows the offering of IP telephony. Major telecom operators have locked NGN as their next target for profit generation given its vast potential. China Telecom has completed the trial of commercial NGN in four cities, and has finished rounds of internetworking tests in Guangdong and Zhejiang provinces. With the success of these pilot trials, China Telecom has also made public its plan to set up the country's first commercial NGN in Shanghai by the end of 2003. At the same time, China Unicom has plans to test its NGN in Sichuan province, while reports said that China Netcom had lined up nine companies to evaluate their NGN equipment.

With NGN, which is the current trend of PSTN, telecom operators could provide not only voice-over-broadband telephony but also a slew of other value-added services including video telephony, video conferencing, personal communication assistant, IP Centrex, voice-VPN and unified messaging. Especially at a time when international businesses are rushing into China to set up their operations - thanks to the WTO accession - these telecom services are experiencing unprecedented surge in demand, which presents a gigantic market for the telcos to chase after.

On the technical front, many technologies are reaching their maturity stage. ADSL is taking off in China as about 6 million users are hooked up to it. With the advantage of being highly cost-effective, ADSL has become the mainstream access technology. The number of ADSL users in China is expected to reach 15 million this year.

Meanwhile, another advanced technology, VHDSL, is also taking off to become the next-generation DSL service. VHDSL allows users to access at speeds of up to 52Mbps, while providing users real-time, full-screen video and voice services in addition to Internet connection. In China, where populations are packed together in large residential blocks, VHDSL's advantage of high bandwidth can be well leveraged.

Looking ahead, the DSL market in China shows a rosy picture. With the increasing deployment of NGN, DSL-enabled applications are making DSL an increasingly important technology in China's telecom market. Voice-over-broadband application will soon pick up in China and that will mean business opportunities for telecom operators, as well as enhanced user experience in telecom services. According to a Gartner report, DSL will be a 46.6 billion industry globally by 2007. The burgeoning telecom market in China looks certain to be one of the key countries driving the global DSL market in a few years' time. China is ready for it.

- Stephen Lin

VP, Asia-Pacific

Legerity Inc.

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