Broadband Blueprint Could Give China an Edge

China appears about to give the United States -- if not the rest of the western world -- another thing to worry about.

On Aug. 17, the state-owned news agency Xinhua announced an extensive "Broadband China" strategy to expand broadband coverage to at least half of the country by 2015 and to almost all the rest by 2020, reaching speeds of 20 megabytes per second (mbps) in urban areas and 4 mbps in rural areas. The plan is designed to foster business development and provide an important aid to households.

China's fastest broadband speeds are designed to reach 100 mbps, according to the Xinhua release, in marked contrast to China today, in which average broadband speeds reach 1.8 mbps, far below international standards. The country has the fastest-growing number of Internet users on the planet, now numbering 591 million according to official figures and expected to hit 718 million by the end of the year.

Broadband in the US today reaches an average of 7.4 mbps, according to a survey by Forbes Magazine. That puts the US behind nine other countries, including, for instance, the Czech Republic, the Netherlands, Latvia and Hong Kong. South Korea boasts the fastest broadband in the world today, at 14.2 mbps.

In the US, average prices, run through commercial communications companies like ATT, cost US$25-40 per month. It is unclear what China will charge.To a Hong Kong resident visiting the US, service is frustratingly uneven, with dead spots and regular delays in transmission.

The decision to provide public broadband to the entire country is yet another indication of China's willingness to use its considerable public funds to pay for dramatic modernization of its infrastructure, in contrast especially to the US, where a hostile Congress in thrall to extreme conservatives has demonstrated the intent to cut investment to the bone, raising concerns that the US will fall out of competition with its biggest rivals -- and of course the biggest of those is China.

A 2013 survey by Ernst & Young of global business found that the US ranks a lowly 17th in quality of infrastructure, just ahead of Turkey, Switzerland, Singapore, Finland and Hong Kong rank at the top.

For all the money China has spent -- RMB4 trillion in its 2008-2009 stimulus package to combat the effects of the global financial crisis, it still ranks only 23rd, just ahead of Italy and India. It still has a lot of catching up to do.

"Concerned about maintaining its economic growth, China is pouring money into an already unprecedented infrastructure building spree? constructing high-speed rail and urban mass transit systems throughout the country," the Ernst & Young report said. "The high-speed rail program, which faced serious safety and corruption issues in 2012, appears to be getting back on track. These investments have supported dramatic economic expansion, but are adding to the country's large debt burdens and creating long-term liabilities for operating subsidies and ongoing maintenance."

China has built a vast system of high speed rail while the US has dithered. "Due to fiscal constraints at the federal level and fractured jurisdiction over rail and other key infrastructure assets, the United States lacks a national infrastructure investment plan," the Ernst & Young report says. "State, regional, and local agencies are filling the void, addressing mounting issues to stretch underfunded budgets for fix-it-first initiatives and find ways to build big-ticket projects like new roads, light-rail lines, transport terminals, and levees. Increasingly, public leaders at all levels are embracing PPPs while advocating various tax and user fee hikes."

This doesn't seem to bother the Chinese. In its Aug. 17 release, the government outlined targets and timetables for broadband development in order to boost information consumption and facilitate economic restructuring. China's state-owned telecoms companies are expected to spend US$11.2 billion in 2014 on 4G telephony as well.

To give an idea of the magnitude of the project, fewer than 14 percent of the population has access to broadband today, meaning thousands of miles of fiber-optic cable must be laid to service the country.

"The development of information technology and infrastructure not only improves broadband speed, but also means more economic opportunities," said Yu Xiaohui, senior engineer with the Ministry of Industry and Information Technology (MIIT), who led the drafting of the strategy.

Internet-based consumption should grow by at least 30 percent annually to 2.4 trillion yuan (US392 million), according to the guidelines, increasing the value of industries supported by information consumption by 1.2 trillion yuan by the end of 2015.

Small and medium-sized enterprises (SMEs) will benefit from the strategy, according to Xinhua, due to increased online business as the government will support third-party e-commerce platforms to facilitate SMEs in online sales, purchasing and other operations, said MIIT Minister Miao Wei.

"The blueprint will change people's consumption habits and stimulate innovation in information products and services, thus facilitating China's economic restructuring," Yu said.