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