Chunghwa Telecom Plans US$4-bil. Network Investment Over Next Five Years

Around NT$61 billion will be spent on upgrading Chunghwa's fixed-line network by replacing the existing copper lines with fibre-optic cables. Chunghwa said it plans to lay fibre-optic lines to provide high-speed internet access of up to 100 megabits per second, compared with the speed of up to eight megabits per second offered to its broadband internet subscribers now.

The company also plans to spend around NT$68 billion in the next five years, partly on its mobile network, including 3G mobile phone base stations. The investment also includes purchasing set-top boxes for the company's internet TV service, the launch of a second communications satellite and the laying of a new undersea cable. Chunghwa has said it plans to decide this year on a joint-venture partner for the satellite launch. The company's ST-1 satellite can be used until 2011. Chunghwa is also working with U.S.-based Verizon Communications and four Asian operators to build a US$500 million trans-Pacific undersea cable system directly linking the United States and China (see World: 19 December 2006: First China-U.S. Undersea Optical Cable to Boost Trans-Pacific Capacity).

The company plans capital expenditure (capex) of NT$29.9 billion in 2007.

Outlook and Implications

• Investment Plans for Fibre-Optic Network: Chunghwa expects the number of customers using its fibre-optic network to reach 500,000 by end-2007 from 150,000 currently, and to grow to 2.4 million households by 2010. The company hopes that within five years the penetration rate of its fibre-optic network will be 25% of Taiwan's total households, said the Chunghwa Senior Vice President, Chang Feng-Hsiung. Taiwan had 7.39 million households as of the end of November 2006, according to the Ministry of the Interior. Chunghwa had 3.87 million broadband internet subscribers at the same time, representing 52.4% of the island's households. The company is investing in fibre-optic networks for several reasons: to bring higher bandwidth to residential and business users; to improve average revenue per user (ARPU)/revenue levels by offering new multimedia and entertainment services, such as VoIP and IP TV; to enable device interoperability over a common IP platform for its fixed and mobile networks; and to cut future capex and operating expenses (see World: 18 December 2006: Next Generation Networks and Disruptive Technologies and 17 October 2006: FTTx Status in Asia, Europe and North America).
• End of Last-Mile Monopoly: The former telecoms monopoly also hopes to regain its lost competitive advantages over its smaller rivals after the island's telecoms regulator ended Chunghwa's near-monopoly over the fixed-line last-mile infrastructure. The National Communications Commission (NCC) on 26 December 2006 approved declaring fixed lines connecting end-users to their nearest relay stations a "bottleneck facility", effectively ending Chunghwa's near-monopoly over the so-called "last mile." This would oblige Chunghwa to lease the lines to other fixed-line operators according to the cost of the lines' construction, which is likely to cut the rates Chunghwa now charges. The NCC said it plans to revise the relevant regulations to make sure Chunghwa leaves at least 15% of capacity at each relay station for renting out. Six years after Taiwan deregulated its fixed-line telecoms market, Chunghwa still controls most of the last-mile infrastructure and the island's three private operators must negotiate with the company to rent them. The NCC had previously said it would declare the last mile a "bottleneck facility" by the end of 2006, but added that the aforementioned rules would not apply to fibre-optic networks (see Taiwan: 31 May 2006: Taiwanese Government Plans to End Chunghwa Telecom's Last-Mile Monopoly).