China to open up Internet broadband market with upcoming trials

With China’s Internet growth slowing, the country is opening up the broadband provider market to private enterprises as part of government sponsored trial.

The country on Wednesday released a draft of the upcoming trial rules, which will let private enterprises sell broadband services in 16 cities across the country. China’s Ministry of Industry and Information Technology didn’t mention when the project would begin, but is proposing it last for three years.

The country has the world’s largest Internet population with 632 million users, according to the China Internet Network Information Center. But there still remains a vast swath of Chinese citizens who have yet to go online, especially in rural areas.

At the same time, China lags behind its peers in terms of Internet speeds. In this year’s second quarter, average Internet speeds in the country reached only 3.7 Mbps, far lower than the U.S., which posted average speeds of 11.4 Mbps, according to cloud services provider Akamai Technologies.

In response, China has set out to bring Internet speeds in cities to 50 Mbps by 2020, and promote the adoption of smartphones. The government controls the country’s three mobile carriers, all of which also supply broadband Internet services.

Two of those companies, China Unicom and China Telecom, already provide most of the broadband in the country, collectively holding an 81 percent of the market, according to Internet analytics firm CNZZ.com.

In 2011, China opened an anti-monopoly investigation against the two companies, forcing them to pledge to bring down prices for their Internet services.

According to Wednesday’s draft, China wants to open the broadband market by letting the state-controlled network providers loan Internet services to private enterprises, which can then repackage them under their own brands for sale to customers.

The network providers are prohibited from renting out sub-standard Internet broadband to private enterprises, and must offer fair prices, the draft declares. The Ministry of Industry and Information Technology is taking input on the draft until Dec. 16.

Last year, the regulator started to take similar measures to open up China’s mobile carrier market, by eventually offering mobile virtual network operator licenses to interested private companies. Qualifying parties could essentially buy mobile phone services from the country’s state-controlled carriers, and resell them to customers at competitive prices.