An analysis of the probable course of connectivity in China. This article suggests that China will opt to go straight to nextgen broadband ASAP. In other words, the aim will be FTTH, augmented by fixed/mobile wireless. In the interim, broadband fixed wireless will provide Last Mile connectivity.
This, of course, would explain the membership in the OFDM Forum, coded OFDM being the wireless transport medium of choice for the near future.
It goes without saying that it is dangerous to make assumptions in the China market.
I have isolated the following paragraph, for reasons that WINners will understand...
Since mid-1999, China Netcom has been planning an all-fibre 17-city backbone network based on ip-over-dwdm, which it calls CNCnet (see map). Now it is also planning to extend fibre to the building as part of a metropolitan network strategy in the four key cities of Beijing, Shanghai, Guangzhou and Shenzhen. From the current 200 miles, the network will stretch out to swamp the cities with 547 miles of fibre. Wireless local loop is also a key component and William So, managing director of international operations for China Netcom, has his sights set on more than 20 cities by the end of 2002.
Edward Tian, the celebrity Taiwan-born chief executive of Netcom has been quoted as saying that there will be a filter-down effect in "netizenship" from the prize target - the 250 million to 300 million people in large cities running along the eastern seaboard who earn at least three times as much as most rural Chinese.
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Cover Story: The China Syndrome
01 April 2001
The Chinese government is going its own way. By inventing a unique standard for 3g mobile, and snubbing dsl and cable modems in favour of ubiquitous fibre, it has devised a strategy to support local suppliers, central planning and national economics. In Beijing, Vineeta Shetty discovers that this is no small market. Some 250 million better-off Chinese are primed for broadband. By Vineeta Shetty.
China now has 3,000 or so companies engaged in the internet in some form or other. There are also 9 million dial-up internet accounts. All the same, the snail-like speeds of access are causing frustration among the China's growing community of "wong chongs" or net worms. Next to the police, the most reviled organisation in internet chat rooms is China Telecom, which controls more than 16 million of the 20 million internet accounts and charges both isps and end users heavily for the privilege.
The clamour for better internet connection has put the spotlight on the last mile. The quality and availability varies widely from province to province, city to city, and point to point across this vast country.
Future-oriented integrated access to meet the need of data, voice, internet, video and multimedia and even mobile roaming services is now consuming the attention at the top of the establishment and particularly at the ministry of information industries. The MII's research and development agenda has historically shaped the choice of nationwide network standards, technologies and architecture. As Xu Shuncheng, director general for the department of science and technology in the ministry, points out the 30 per cent to 40 per cent of network construction costs that used to be in new-generation access build-out has now risen to over 50 per cent.
But crucially the overwhelming majority of the ministry's resources for research and development are concentrated not so much on dsl and cable modems, as one might expect, but fibre to the kerb and wireless local loop.
"The strategies of operators and vendors have to be commensurate with realities of large cities in China," adds Xu who was talking at a recent China Broadband Access Summit organised by the IIR. China's evolving telecoms network has to be seen in the light of its zeal in promoting the construction of digital cities, info-buildings and info-communities. Tied to this is the virtual commoditisation of fibre, which is produced locally in profuse quantities. Another factor is the rampant development of new residential and office complexes.
The Chinese government clearly sees broadband networks as the precursor of the intelligent household, community logistics and citizen information services, incorporating ecommerce, distance learning, telemedicine and entertainment. It is a vision that many countries have but China's political system means that the construction of these networks can be planned with much closer co-operation with city planning, construction and property development companies than is typical elsewhere.
This approach means that any idea of using cable modems, which could be a ready way to bring internet access, is heavily marginalised. Some of the antipathy to cable modems may have to do with the administrative demarcation between the respective authorities controlling cable television content and the public network. Under current regulation, the former falls under the jurisdiction of the State Administration of Radio, Film and Television (Sarft). Uncertain of the shape that a new convergent regulatory body might take, Sarft has barred cable companies from expanding their brief to provide telephony and internet access. Still, local governments and city authorities, like those in Jinan and Dalian, are trying their best to manoeuvre around it.
The other reality of the market is that paradoxically, it is the septuagenarian State Council that is seen as more progressive in the opening up of the market often butting heads with the hardliners at the ministry which still owns a stake in the incumbent, China Telecom.
Not least because premier Zhang Zemin, the former mayor of Shanghai, has particular interest in the industry through his son, Mian Heng Jiang's venture capital firm, Shanghai Alliance Investment. This often means that there are relaxations to the rules, such as the fact that the Shanghai city council can run adsl on its own cable network, albeit on an experimental basis. Fibre married to ethernet has received official blessing as the means to deliver integrated broadband services to business communities.
The ministry has developed ambitious roll-out targets for fibre to the kerb, fibre to the community and in some cases to the building.
Given that fibre can be manufactured 20 times cheaper in China than in the west, newly-built residential areas are also being equipped right from the start, the philosophy being based on bringing fibre nodes as close as possible to users.
The ministry expects that its targets for fibre deployment will be fulfilled within the next one to two years for the cities of eastern and central China, as well as some well-developed areas in western China and within three to five years for other cities in China.
For highly developed rural areas, where geography permits, fibre may be extended to towns and some villages of dense population and better economic conditions. In fact the technological policy of the ministry dictates that for newly-built access networks, copper should not be used in principle.
Perhaps suprisingly then dsl does not feature at all prominently in the ministry plans. Some argue that this is because of the democratising potential of dsl given the implications of internet access percolating down from the academics and intelligentsia to the ordinary citizen. At the end of last year Chinese dsl users numbered 100,000, in comparison to South Korea's 2.5 million.
However others insist it has more to do with the techno-centric approach to network planning. "Reflecting an engineering mentality, China has often come close to being an ideal telecoms infrastructure world," says Peter Lovelock, a consultant with Made For China. Another hard reality is that the vintage of China's copper loop is a couple of decades behind Korea's and loop lengths tend to be longer, not an ideal scenario for dsl.
Hence wireless internet access is emerging as a bigger priority than dsl and the ministry's scientists have already lined up a unique Chinese standard, Td-scdma, for consideration as a third generation mobile standard, while in the fixed domain, fixed wireless has emerged as a crucial supplement to fibre in the plans of many new operators.
The ministry's vision is, of course, faithfully reflected in the plans of its protege, the incumbent China Telecom which has a broad-based plan over the next three to five years to build a unified access platform on which it can provide different bit rates, service types and service quality.
While isdn is seen as being useful for mid-speed internet connection, ethernet access also figures high on China Telecom's agenda. Given a current base of 140 million fixed users, 570,000 isdn users and 16 million internet users, China Telecom aims to hit 20 million broadband users by 2005. As an indicator of its priorities, China Telecom expects to add some 600,000 isdn users, only 300,000 adsl users but 1.5 million ethernet users.
Competitors to China Telecom have predominantly focussed on ambitious nationwide data-oriented backbones. However, in anticipation of the foreign investment and licensing rules being relaxed, they are developing their own ideas for expanding access. Ip has been openly welcomed as a way to unify the diverse technologies that characterise China's access networks.
Like its peers around the world, China Telecom, is perceived as intransigent in sharing its infrastructure. But because of the lengthy protection it can expect to enjoy from the Chinese government, competitors wanting to provide managed dsl access let alone unbundling of the copper loop are already seeing it as a lost cause for companies seeking to provide local access off their national backbones.
This is driving the competition to seek alternative means of access.
>From the viewpoint of new operators the interest in wireless, both mobile and fixed, has to be viewed in the context of the lack of availability of terrestrial resources - pipelines, optical cable, copper from the incumbent and the difficulty of obtaining building licenses.
For new carriers, the corporate and institutional market is the primary focus of interest, as is giving these customers the ability to manage and configure their own networks and the convenience of one-stop shopping.
According to Made for China's Lovelock, between 50 per cent to 80 per cent of service revenues for the likes of Jitong and China Netcom are coming from voice-over-ip services, in the form of calling card services.
However in the longer term they are all looking to build proprietary broadband networks and wholesale and host capacity on them.
China Unicom, the early contender to China Telecom, needs an access network that can connect its gsm and cdma switches, its traditional long-distance network as well as its voice over ip service to a variety of corporate, isp, service provider, or residential and institutional customers and its own base stations.
Li Xiaoming, deputy general manager at China Unicom, intends to build metropolitan access networks - the mainstay being fibre to the building and community - with in-building cabling and wireless local loop being a complement.
If history is any guide to its future promise, Unicom's evolution to an access carrier will not be a smooth one. It was given the go-ahead in May 1997 to build fixed networks in Tianjin, Chongqing and throughout Sichuan province. But lacking the backing of an independent regulator, Unicom was left to battle China Telecom by itself. Its first wireless local loop opened in Tianjin in July 1997, but did not go commercial until 1999 because of interconnection delays.
As late entrants to network construction, new carriers like China Netcom benefit from advances in optical transport, high-speed route switching, soft switching and high-speed ethernet, which have blurred the traditional boundaries between metropolitan area core networks and the edges and access points.
Somewhat less focussed is the approach of Jitong Communications, which was established in 1994. It is planning a nationwide high-speed broadband backbone and access network covering 30 cities.
One other entrant to the game is China Railcom which has a network based on atm, frame relay and even x.25 backbones. It touches more than 500 medium to large-sized cities and 700 counties around the country and incorporates some 1,184 exchanges, from which Railcom hopes to build 15 million subscriber lines.
The Railway Communication and Information Corporation, which administers China Railcom, has tried hard to sell this network to other operators as a backbone. But the age and type of network technology on offer has caused operators to shy away from it, despite the fact that the railways own a stake in both Unicom and Netcom.
But in the immediate to short term, the biggest challenge for catering to the boom in internet access is falling on local telcos like Shanghai Telecom, which have had to devise ways to rapidly upgrade their creaking dial-up networks to cater to the growing base of internet users.
At the end of last year there were 700,000 internet users in Shanghai, amounting to around 13 per cent or so of the telephone subscribers. But call failure rates are running at about 5 per cent, which as Li Anmin, director of new service development at Shanghai Telecom, points out adds up to lost revenues of more than $5 million per month. And it adds to the risk that isps will build their own facilities.
As multiple operators surface and begin competing with each other in China, the race is on for market share. With China due to join the World Trade Organisation, and a wider opening of the market to foreign investors only a few months away, the ability of networks to filter down to China's masses has acquired particular urgency.
"The era of broadband access has arrived in advance," says Professor Xue Chen, at the Beijing University of Posts and Telecommunications. "In the coastal and developed urban areas, the competition between different operators in constructing access networks has become heated. It is those who complete the construction of digitised, broadband and intelligent, full-service access networks for millions of households who will win in future competition"
THE UPSTART
Although it is a later entrant than Unicom and Jitong, the centre of attention is China Netcom which is making strides in the market with backing from the powers that be. Officially, it is part-owned by the Chinese Academy of Sciences, the ministry of railways, the Sarft and the Shanghai municipal government, which kick-started the company with a mere $50 million. However, months after Unicom was forced to disband its China-China-Foreign investments, China Netcom was allowed to sell a 12 per cent stake to a consortium of Goldman Sachs, Newscorp, Bank of China and China Construction Bank for $325 million.
Since mid-1999, China Netcom has been planning an all-fibre 17-city backbone network based on ip-over-dwdm, which it calls CNCnet (see map). Now it is also planning to extend fibre to the building as part of a metropolitan network strategy in the four key cities of Beijing, Shanghai, Guangzhou and Shenzhen. From the current 200 miles, the network will stretch out to swamp the cities with 547 miles of fibre. Wireless local loop is also a key component and William So, managing director of international operations for China Netcom, has his sights set on more than 20 cities by the end of 2002.
Edward Tian, the celebrity Taiwan-born chief executive of Netcom has been quoted as saying that there will be a filter-down effect in "netizenship" from the prize target - the 250 million to 300 million people in large cities running along the eastern seaboard who earn at least three times as much as most rural Chinese.
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