By Beijing Correspondent Dr. Lin Sun
In early 2011, China Telecom, the country’s largest fixed-line operator, launched its “Broadband Country-Op-Net Cities” initiative. The plan aimed to boost consumer download speeds roughly tenfold—targeting 20 Mbps for most urban households and 100 Mbps for most businesses by 2015.
The targets were ambitious given the reality at the time: most residential access relied on DSL speeds of about 1–2 Mbps, and many older apartment buildings lacked pre-installed fiber-to-the-home (FTTH) wiring. China Unicom, the main rival to China Telecom, pledged to deploy FTTH to all households in major cities by 2015. For example, Beijing declared that 70% of households would be able to receive 20 Mbps service in 2011—a goal that looked difficult to meet with little time left that year.
FTTH is not the only approach being tested. In December 2011, Shanghai rolled out a Next-Generation Broadband Network (NGB) pilot reaching one million households. Operated under the State Administration of Radio, Film and Television (SARFT), NGB directly competes with traditional telcos and offers 100 Mbps bandwidth along with advanced services such as 3D TV, high-definition and interactive features including video-on-demand (VOD), financial applications, online education, gaming and smart home functions.
Interest in FTTH grew rapidly across China despite ongoing questions about real-world speeds and costs. The Ministry of Industry and Information Technology (MIIT) announced plans to invest about RMB 1.6 trillion (around $254 billion) from 2011 to 2015 for broadband infrastructure, with approximately 35% allocated to access networks. That government spending did not include operator investments, which were expected to add several hundred billion yuan more.
MIIT projected that, if plans progressed as intended, FTTH would reach roughly 200 million households by 2015—about 55% of the nation’s households. By comparison, around 23% of households had broadband in 2011, mostly via DSL. International comparisons underscored the gap in performance: in 2010 China’s average downstream speed was roughly 1.8 Mbps versus a global average near 5.6 Mbps.
Barriers
China had about 150 million broadband users by October 2011 (most on DSL) and was adding around 2.6 million fixed broadband subscribers per month, not counting mobile broadband. The large population and weak existing services suggested a big market opportunity for FTTH, but the transition from DSL to fiber encountered numerous practical obstacles.
One hurdle was property and building management. Some developers and homeowners associations required substantial “entry” fees to permit trenching or cable entrance. Many residents resisted drilling or changes to building facades for fear of property damage. In other cases, households showed little interest in upgrading to high-speed service. Reports at the time indicated that only about 10% of households passed by fiber had actually installed an optical network unit (ONU), despite operators’ promotional claims.
Technical and operational issues also complicated FTTH adoption. With fiber, the ONU typically must remain powered to preserve traditional telephony services, so turning it off disables the phone line. In a power outage, both basic broadband and phone service can be lost—raising safety and reliability concerns in emergencies, and creating potential fire risk if devices remain powered while no one is home. Always-on equipment also increases household electricity consumption and costs.
Beyond infrastructure, demand depends on affordability and perceived value. In a developing economy, willingness to pay is a key constraint: many consumers already view DSL as expensive relative to income, and operators attempting to migrate users to FTTH risk pushback if users believe the upgrade primarily benefits providers’ revenues. To reduce resistance, China Telecom and China Unicom offered free FTTH upgrades to many DSL customers and allowed customers to retain existing price plans when bundling with mobile services.
Content availability and competitive dynamics further shaped FTTH’s utility. A faster connection has limited appeal without compelling content—particularly entertainment and video services. Although FTTH supports IPTV and 3D TV, comparable offerings are available via web-based platforms and high-definition cable. Moreover, SARFT controls much of China’s television programming and distribution; limited market competition and censorship constrained content variety and reduced some consumers’ incentives to pay for higher bandwidth.
Market structure and limited competition posed additional challenges. In November 2011 the government opened an investigation into whether China Telecom and China Unicom improperly controlled access to the country’s broadband infrastructure, restricting non-telco participants. Both companies denied wrongdoing and asked for the probe to be closed. Whether or not significant regulatory changes followed, consumers in many areas effectively faced a single broadband provider, reducing choice and slowing competitive price and service pressures. Cable operators and independent providers existed but often lacked the regulatory support, funding or technical capability to expand widely.
Despite these setbacks, FTTH was not without long-term promise. Costs tend to fall as deployment scales and technology improves: per-port costs decline when the number of access lines grows, lowering the average cost per subscriber at a given data rate in a given area. China Telecom pledged to cut broadband prices by about 35% over five years, and China Unicom made similar commitments amid regulatory scrutiny. Ultimately, sustainable price reductions depend on growing FTTH subscriber numbers, so consumer uptake supports lower unit costs. Conversely, operators that focus narrowly on short-term returns rather than subscriber growth risk losing market momentum.
Beijing Correspondent Dr. Lin Sun
Lin Sun, Ph.D., has more than 25 years’ experience in China’s telecommunications sector, covering switching and transmission technologies, wireless, broadband and broadcasting. A former senior executive in China for multiple firms, he now advises on investment, technology and competition issues in the Chinese market.
Dr. Sun has published and spoken widely on telecom topics. He earned a Ph.D. in telecommunications in the United States. Contact him here.