China commits to private broadband, with limits

China is making good on its promise to introduce private investment into broadband, with the announcement of pilot services in 16 cities.

Approval of a trial usually serves as a de facto green light for a new service in Chinese telecoms. The announcement last Thursday underlines the government's intention to spark up the sector, following the introduction of MVNOs and the planned spin-off of mobile towers over the past 12 months.

However, the trial rules, issued by the Ministry of Industry and IT (MIIT), provide little protection against incumbent operators and ban newcomers from running their own trunk networks.

The ministry did not announce a start date for the pilots, but said they would continue for up to three years. Tier 1 cities Shanghai, Guangzhou, Shenzhen and Chengdu are among those that will host the trials.

As with the introduction of MVNOs, the ministry did not set a wholesale interconnection price. Instead it calls on incumbents to cooperate with the newcomers “on the basis of fair, rational and equal consultation” in determining prices.

Another limitation is on scale. The new operators are banned from building or leasing their own backbone infrastructure and “cannot connect directly between different service nodes in different cities.” Instead they must connect through one of the existing local access nodes, presumably to ensure that content can be filtered.

While the rules allow companies with just 20m yuan ($3.3m) in capital to build a broadband access network, they also require new entrants to have at least three years in “telecom industry experience.”

It is not clear if this refers to telecom operations, which would cover just the small ISPs, or the kinds of large telecom and electronics retailers who have also entered the MVNO business.

According to Akamai’s Q1 State of the Internet index, China ranked tenth in Asia and 54^th worldwide on average broadband speeds, with just 1.2% of connections above 10Mbps.