What China’s $22b Investment in Rural Broadband Means for Us Americans

ch1 The Chinese government pledged more than 140 billion yuan ($22.05 billion) to a series of rural broadband expansion projects. These projects will fill holes in the country’s Swiss cheese-like rural coverage, improve service for rural users who already have coverage, and expand e-commerce.

By 2020, the government estimates that these funds will connect an additional 50,000 villages to the country’s mobile broadband networks. If it accomplishes this, 98% of China’s rural population (or about 650 million rural dwellers) will have Internet access.

Chinese telecoms will also use the funds to improve mobile broadband service in 30 million rural households. While, with an average download speed of 27.6 Mbps [1], China’s mobile networks are faster than those in the United States, rural users far from the local hub currently experience much slower connections.
 

The third part of China’s five-year plan – introducing e-commerce to rural economies – will facilitate exchange between the country’s rural and urban markets. The government predicts that expanding e-commerce will both stimulate consumption in rural areas and create a channel for agricultural products to enter the urban market.

 

ch2 While a $22 billion investment doesn’t exactly shock a country that has, itself, invested over $260 billion in mobile broadband expansion in the last seven years [2], rural users in the United States may still benefit from China’s investment. The reason? Chinese telecoms that gain experience in rural broadband expansion at home are increasingly viable to compete in American markets.

Because there is no economic incentive to developing network infrastructure in sparsely populated areas, the private sector neglects rural areas everywhere. In the United States, rural users often have difficulty accessing a quality connection, but, in developing countries, rural users often have difficulty accessing any connection at all.

In China, the digital divide is more pronounced and more pressing than in any developed country. Rapid industrialization has left a stark difference between Internet access in the country’s bustling cities and in its traditional farming villages. This divide, which excludes rural dwellers from online markets, exacerbates China’s growing income disparity.

As the government attempts to level the playing field with various initiatives, Chinese telecoms have come of age in a very demanding rural market, even just in terms of sheer scale of operation. The expertise that Chinese manufacturers like Huawei and ZTE have developed with each initiative is just as useful in the American market as it is in the Chinese.

Last month, for example, CNBC reported that several west coast carriers had begun sourcing fiber-optic technology from Huawei in order to build efficient (read: fast) and inexpensive rural networks. The small local carriers that CNBC featured had purchased equipment from Huawei for 30-60% less than what its competitors offered for an equivalent product [3].

Since the high cost of building a rural network (particularly when compared to the small return a rural network generates) is the main reason carriers underserve rural areas, the entry of experienced Chinese manufacturers (bolstered by Chinese subsidy) into the American market may benefit rural coverage in the near future.

[1] https://www.techinasia.com/asia-internet-speeds-mobile-broadband/

[2] http://www.usda.gov/wps/portal/usda/usdamediafb?contentid=2015/07/0212.xml&printable=true&contentidonly=true

[3] http://www.cnbc.com/2015/09/09/can-a-chinese-tech-giant-speed-up-us-networks.html

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