China to Top U.S. in Broadband Subscribers

Online staff -- Electronic News, 5/4/2005

If the competitiveness of nations can be measured by their broadband subscriber rolls, then the United States is on the verge of losing its leadership to China, market researchers at iSuppli Corp. suggest.

China already is rapidly approaching the United States as the country with the largest number of broadband subscribers, according to the El Segundo, Calif.-based firm, and by the end of the year, China is expected to have 34 million subscribers, compared to 39 million in the United States.

By the end of 2007, China is expected to have 57 million broadband subscribers, compared to 54 million in the United States, with an even wider lead in the years to follow.

As nations jockey for economic advantage, broadband access is emerging as a key competitive differentiator, iSuppli noted.

“In the networked economy of today and tomorrow, national broadband subscriber rolls represent a key metric determining a country’s competitiveness,” said Steve Rago, principal analyst for networking and optical communications, and head of iSuppli’s broadband and digital home service in a statement.

“Broadband is now driving the growth of the global telecommunications business and indeed represents the future of communications itself,” he continued.

“Beyond communications, in areas including entertainment and electronic commerce, everything is moving to broadband,” he added.

“To stay competitive both technologically and economically, nations must remain at the cutting edge of broadband deployment,” Rago concluded.

The United States in 2004 remained the world leader in terms of the number of broadband residential subscribers. However, the U.S. broadband market over the past few years has been plagued with regulatory issues that have stifled the growth of high-speed Internet-access technologies.

Largely because of this, the nation has fallen behind in the percentage of its Internet households that have broadband connections.

iSuppli estimates that at the end of 2004, the United States ranked 15th worldwide for broadband penetration of Internet homes.

If nothing dramatic occurs, iSuppli expects America’s ranking to continue to decline in the coming years.

However, some developments indicate the United States is regaining its broadband footing including a ruling last year by a federal court that ruled against the Unbundled Network Element-Platform (UNE-P) requirements as put into service by the U.S. Federal Communications Commission (FCC).

UNE-P mandated that Independent Local Exchange Carriers (ILECs) share their network facilities with their competitors, the Competitive Local Exchange Carriers (CLECs), at wholesale rates determined by the states, which stifled ILEC spending on new broadband deployment.

Meanwhile, President George W. Bush recommended that Congress not tax access to broadband technology in order to promote proliferation.

With UNE-P removed and tax relief in place, the U.S. broadband industry has been rejuvenated, and iSuppli has increased its forecasts for carrier capital spending and for penetration of high-speed data access in North America.

For the United States to retain its leadership, it must do more, including minimizing regulations on Voice Over Internet Protocol and delivery of video, iSuppli advised.

Further, the government should consider tax incentives or other measures to encourage service providers to upgrade their networks, which may help to stave off China in the broadband battle, and increase its penetration level, the firm concluded.