Internet companies yet to tap potential of rural market
By Li Weitao
Updated: 2007-01-24 06:50

The Internet boom is on a roll that's set to continue, according to a biannual report released by the China Internet Network Information Center (CNNIC) yesterday.

But as businesses continue to cash in on the boom, a promising market has been largely ignored.

The CNNIC report indicated rural Internet users accounted for only 18.6 percent of the country's total.

But interestingly, those people spend an average 13.2 hours per week using the Internet, compared to 18 hours in urban areas.

The traditional wisdom is that farmers in China usually have much less spending power, and for telephone operators building rural networks could be costly while getting returns on investment may take time.

But the CNNIC report suggested that if farmers got hooked up to the Internet, most of them would barely walk away from their computers.

That is creating an emerging market for Internet access service providers.

A windfall by cellular operator China Mobile could further illustrate the huge potential of the rural telecom market.

In the first half of 2006, about half of China Mobile's newly added mobile phone subscribers were from rural areas. China Mobile's rural ARPU (average revenue per user) stood at about 50 yuan compared to 88 yuan in cities but the operating costs in rural regions were 20 to 30 percent less, according to investment banks.

In fact, China Mobile was mandated to go rural as part of the government's drive to close the digital divide. China Mobile initially billed its rural push as a CSR (corporate social responsibility) program, but it has since found the rural market to be lucrative.

This rationale could be equally applied to the PC and Internet sectors. In fact, there is demand for PCs and Internet access from farmers, especially those living near towns, and in particular for their children.

PC makers such as Lenovo have begun attacking the rural market with customized models and attractive price tags.

That could offer a good opportunity for telecom operators. Although monthly Internet access fees in rural regions averaged 77.4 yuan, compared to 89.6 yuan in urban areas, accessing the Internet remains expensive for farmers.

The rapid growth of rural mobile phone subscriptions has been largely due to attractive pricing of both mobile call costs and handsets. In many parts of the countryside, mobile charging per minute is less than half of that in cities.

Operators need to offer more attractive pricing to sign up new Internet users. And they could partner with PC makers to offer special packages to increase rural PC and Internet take-up.

For those living in the countryside without much access to newspapers and magazines due to the country's poor postal system, a PC hooked up to the Internet could open a door to the outside world.

And for telecom operators, it's also a door to an untapped gold mine.

(China Daily 01/24/2007 page13)