China set to accelerate broadband speed and cut prices

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IN A DRIVE to bring the internet to more of the population, China’s State Council has announced plans to increase access to broadband in the country, particularly to more rural areas, and to decrease prices.

Whilst initial plans were announced as part of the “Internet Plus” initiative earlier this year, the announcement for broadband extension will likely come as welcome news to those currently without access to the internet. According to Business Insider, China’s internet penetration rate was 47.9% in 2014 – compared to around 75% in the US.

Perhaps due to low levels of competition in the internet sector, prices are relatively high, with slow speeds often experienced. The official State Information Centre asserted that there is significant opportunity for improvement in the quality of service received by customers. Although the precise amount of investment has yet to be finalised, previous announcements suggest investment in the range of Rmb2tr (US$322bn).

The directive from the State Council, China’s cabinet, also stated that urban broadband speeds should be increased by 40%, and that fibre-optic and 4G should be extended to rural areas.

Given that China currently has 649 million online users, there is significant potential within internet-based markets, particularly within China’s e-commerce market. Assuming that logistical infrastructure is also developed, a greater number of people with access to the internet suggests a greater potential customer base for e-commerce giants such as Alibaba and JD.com. According to International Data Corp, China’s e-commerce turnover is expected to reach US$650bn by 2020. Such levels of e-commerce spending is the equivalent of the combined online shopping markets of the US, UK, Japan, France and Germany.

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