China overtakes the USA to be World Broadband Number One

China has now overtaken the USA to become the biggest broadband country in the world. From analysis of its latest data, Point Topic believes that both the USA and China had about 78 million broadband lines at the end of August, but with China growing twice as fast.

“This is a major milestone for China,” says Oliver Johnson, Chief Executive of Point Topic. “Launching people into space is spectacular, but having the biggest broadband market down here on earth means a lot more for building a modern, hi-tech economy.”

When broadband first surged ahead in China some observers predicted it would overtake the USA in 2006. But then growth levelled off just when it speeded up in the USA. For 18 months the two countries were running more or less in parallel, with similar numbers of lines added in each quarter (see graphic).

The trends diverged sharply in 2008. In the USA, new broadband lines added fell from 3.4 million in the last quarter of 2007 to barely 1.1 million in Q2 of 2008. In China they rose from 3.5 million to 5.0 million in the same period. By the end of June Point Topic’s data shows the USA had nearly 76.9 million broadband lines but China was less than 900,000 behind on 76.0 million. The gap was less than the number China added in July alone, 1.14 million according to Chinese official figures.

“We expect Q3 to show some improvement in the US,” says Johnson. “It’s usually better than Q2. And growth in China is likely to fall back a bit. Even so, China is almost certainly going to come out ahead when all the figures are in.”

“It’s not so surprising that the US has been overtaken in absolute numbers after all, China has more than three times as many homes and people,” Johnson points out. “But the US has also fallen behind the leading European and Asian countries in percentage take-up of broadband.”

This has serious implications for the competitiveness of the US economy in a high-tech world. The big debate in America today is focused on the immediate economic crisis but the presidential candidates need to take some time to discuss the longer-term issues.

Light-touch regulation is part of the problem with broadband as well as on Wall Street. It has allowed the incumbent operators to keep the broadband market largely to themselves, leading to higher prices and slower growth. In many countries where there is more open competition the broadband market has leapt ahead not just in China.

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