Market Studies
1394 Market and Technology Study
China’s New Broadband Requirements:
"Putting Trillions of Megabits of Information To Work"

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Published By: The MacLellan Group, Inc. September 2001

Imagine a world with three underdeveloped Taiwans aggressively seeking economic growth and trade on a global scale, with all the immutable tenacity and caution of China. This is the reality of China’s current economic expansion with GDP anticipated to be over US$1 trillion in 2001. One of the requirements to sustaining this immense growth is significant advances in China’s telecommunications industry. Yet, industry regulators have been cautious in their licensing policy related to new technologies and foreign investment.

China’s rules on foreign investment in its telecommunications industry have been submitted to the country’s State Council for approval and will be released prior to China’s entry into the World Trade Organization. China stands at the brink of becoming a market of tens of millions of wired and wireless broadband subscribers in the next three to five years. Three key wireless broadband technologies have entered China’s broadband connection race: Local Multipoint Distribution Service ("LMDS"), Multichannel Multipoint Distribution Service ("MMDS") and Very Small Aperture Terminal ("VSAT"). It is anticipated that China’s State Radio Regulation Bureau will release to multiple operators the frequency of 3.5 GHz for MMDS by perhaps the fourth quarter of 2001, followed by 26 GHz LMDS in mid-to-late 2002. Currently, there are at least 15 various VSAT operators with over 100,000 existing VSAT customers and additional operators anticipated to enter the VSAT market in 2001. These wireless broadband services have the ability to provide China with key tools required for it to reach it’s national goals in a cost effective manner that keeps pace with North American and European social and economic developments.

2001 is also anticipated to be a significant licensing year for Chinese broadband wireless operators. The later half of 2001 these new license holders will focus on technology selection, construction, financing and initial system build out. It is recommended that strategic investors interested in this segment of the Chinese telecom industry should consider the following investment opportunities:
  • Invest in publicly traded broadband telecommunications equipment suppliers;
  • Invest in small emerging telecommunications operators;
  • Seek cooperative relationships with prospective license winners prior to the granting of any licenses;
  • Create strategic or corporate partnerships with one or more prospective license holders.


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