Government Subsidies Missing from Broadband China Plan
Economic Information Daily, 2/06/13
Wu Hequan, director of the Broadband China strategic research expert working group and fellow of the Chinese Academy of Engineering, said recently that work has been completed on a draft of the Broadband China Strategic Plan. The Ministry of Industry and Information Technology (MIIT) and National Development and Reform Commission (NDRC) have reached a consensus on the plan, Wu said, and have sent the draft to nine other Chinese government ministries, including the Ministry of Finance and the Ministry of Science and Technology, for feedback before submitting an updated draft to the State Council. The draft does not mention any specific figure for plan costs; nor does it detail any specific subsidy policies.
In order to meet the MIIT's goal of implementing broadband access for 250 mln households with an average speed of 20 Mbps or higher for urban households and 4 Mbps or higher for rural households by 2015, China's three major telecom operators -- China Mobile (NYSE: CHL; 0941.HK), China Telecom (NYSE: CHA; 0728.HK), and China Unicom (NYSE: CHU; 0762.HK; 600050.SH) -- will have to invest an expected total of more than RMB 600 bln in construction costs.
A senior executive at China Mobile said that the operator's primary task in 2013, as ordered by the MIIT, will be to promote commercial adoption of TD-LTE networks at an expected cost of RMB 200 mln. If China Mobile is required to use its own funds for nationwide broadband development on the same scale, the executive said, it will lead to unacceptable cost pressure for the operator.
Senior executives at China Telecom and China Unicom said that the recovery period for nationwide broadband network development in urban areas would be four to five years, and seven to nine years for rural areas. If operators are required to bear the costs of development themselves, without a certain amount of financial support from the government, it could affect development speeds and lead to problems for operators down the line.
One of the experts who took part in the drafting of the Broadband China plan said that the workgroup had discussed two funding solutions. One called for the Ministry of Finance to allocate funds to be used for operator subsidies; the other called for a portion of the profits paid by operators to the State-owned Assets Supervision and Administration Commission (SASAC) to be returned to operators to subsidize broadband construction and promotion project costs in rural and border areas. Both plans were reportedly rejected after meeting with firm opposition from the Ministry of Finance and SASAC.
Editor's Note: For more background on this topic, please see "Rumor: MIIT Delays Submission of Broadband China Plan" MD 10/30/12 issue.
Keywords: capex Broadband China government initiative government policy Wu Hequan China Telecom China Mobile China Unicom Chinese Academy of Engineering broadband telecom Ministry of Finance MIIT Ministry of Science and Technology SASAC State Council broadband access NDRC CHL TD-LTE 0728.HK 0762.HK 0941.HK 600050.SH CHA CHU government subsidy 4G
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