SW CHINA BROADBAND: GROWING RAPIDLY IN A LARGE POTENTIAL

UNCLAS SECTION 01 OF 02 CHENGDU 000082

SENSITIVE
SIPDIS

DEPT FOR EAP/CM

E.O. 12958: N/A
TAGS: ECPS ECON CH SOCI
SUBJECT: SW CHINA BROADBAND: GROWING RAPIDLY IN A LARGE POTENTIAL
MARKET

REF: STATE 027310

CHENGDU 00000082 001.2 OF 002



1. (U) This cable contains sensitive but unclassified
information - not for distribution on the Internet.




2. (SBU) Summary: The number of Internet users in Southwest
China doubled to 27 million people between 2005 and 2008. The
region's population of 200 million people leaves room for
substantial growth based on the penetration rates reported in
Beijing and Shanghai. Broadband Internet connections in both
urban and rural areas offer the potential for high-speed
Internet surfing, but network congestion often leaves users with
only a fraction of the advertised bandwidth. Recently
introduced third generation (3G) wireless networks offer another
potential path to high-speed Web browsing, although speeds still
appear too slow to access some content hosted outside of China.
End Summary.



Broadband Use Surging in Southwest China

--------------




3. (SBU) Wired broadband Internet service, already available in
major Southwest China cities and many rural areas, continues to
expand. The China Internet Network Information Center (CINIC)
reported that by the end of 2008, Southwest China had 27.3
million Internet users, roughly 14 percent of the population.
The number of users represents a roughly 135 percent increase
since 2005, although growth is somewhat uneven across the
Southwest. Sichuan saw the region's lowest average growth over
the three year period ending in 2008, but still boasted the
highest number of Internet users in the region at just over 11
million out of a population of 80 million. Internet use in
Tibet grew more than 400 percent over the same period, yet still
had only 470,000 Internet users out of a population of about 3
million; this is lowest of any region in China. The Southwest's
14 percent Internet penetration rate is less than half of the
CINIC's calculated national average of 24 percent.




4. (SBU) More than one million users in Chengdu connect to the
Net using an ADSL (asymmetrical digital subscriber line)
provided by China Telecom. Chengdu News reported in mid-2008
that number of users is growing at a rate of 1,000 customers per
day. Broadband service levels vary, and users pay higher
monthly access fees to obtain greater bandwidth. In Chengdu,
subscribers at the lowest monthly rate, around $14 USD per
month, have their download speeds capped at 512 kilobits per
second (kbps). For roughly double the price, a user can get
four times the speed. Even at higher service levels, downloads
are still often very slow. China Telecom announced in March
that they would raise bandwidth caps free of charge for any
customer with a 1,500 kbps or slower connection who called in to
request an upgrade. Posts on a popular Chinese website, Baidu,
indicate that broadband service in southern Sichuan city of
Panzhihua and the heavily Tibetan prefecture Ganzi is cheaper
than in Chengdu.



Connections Fast Within Chengdu But Then Decline Markedly

-------------- --------------




5. (SBU) Despite claims of high speed access, users experience
much slower speeds. Sometimes broadband download speeds are
lower than speeds a user might obtain using a dial-up modem.
Congenoff recently used web-based software (www.linkwan.com) to
measure download speeds at a local Internet cafe. The recently
remodeled cafe has computers purchased in March and caters
heavily to online video gaming clients, who demand fast
connections. Congenoff found at the cafe that download speeds
for sites based in Chengdu averaged over 4,000 kbps. Average
download speeds for sites outside the city declined by
two-thirds or more. The second fastest downloads were seen for
some sites in Hong Kong averaging 1,200 kbps. Speeds to sites
hosted in Mianyang, a city northwest of Chengdu, averaged just
704 kbps. Downloads from Beijing were 339 kbps, while speeds
from Seattle, Los Angeles, and Washington DC averaged under 100

CHENGDU 00000082 002.2 OF 002


kbps. During separate tests from a different location,
downloads averaged around 150 kbps from U.S. sites.




6. (SBU) Excessive numbers of user sharing bandwidth on the
ADSL likely contributes to the slow download speeds. Congenoff
was told by China Telecom in March that slow speeds for even the
fastest service level were the result of high numbers of users
during peak usage periods in the early evening hours. User
reports that connection speeds are better in the morning hours
before eight o'clock seem to confirm the peak usage explanation,
but the large and expanding ADSL customer base probably accounts
for sluggish speeds during non-peak hour.



A False Dawn For Fast 3G Wireless Networks?

--------------




7. (SBU) Chengdu officials earlier this year announced the
arrival of third generation (3G) wireless networks, which may
enable wireless data rates similar to broadband. The deputy
chief of the Telecommunications Administration Bureau, Chen
Jiachun, projected that China would have 150 million 3G users
within three years. 3G networks are already deployed in 13
cities in Sichuan, and China Telecom plans to have networks
running in every county and major township by early July,
according to the Chengdu Evening News. Wireless 3G cards for
laptop and desktop computers are widely available in Chengdu
stores from about USD 60. Congenoff recently had a chance to
use the Zhongxing Telecommunication Company (ZTE) AC8710 EV-DO,
a USB-type 3G card retails for about $70 USD. 3G card users
must also purchase a cellular phone SIM card to access the
network, which cost roughly $15 USD per month.




8. (SBU) During a stationary test in downtown Chengdu using the
ZTE card, download speeds from websites hosted in the city were
approximately 490 kbps. As with the ADSL network, accessing
sites hosted in the U.S. was much slower than sites hosted in
Chengdu. Speeds to the U.S. during one test were too slow for
Congenoff to access the broadband speed metering software on
SpeakEasy.net. Websites like ESPN loaded, but connection speeds
did not permit continuous streaming of video clips. Two
employees at a local electronics market said that they thought
speeds would improve over time. Another vendor said that the
network was not "stabilized yet," suggesting that she also
thought speeds might improve. None of the three suggested
specific expansion plans or reasons why they thought speeds
would increase.
BOUGHNER