TAIPEI, Taiwan (TheStreet) -- China's plan to raise Internet speeds this year is expected to be a bonanza for Chinese e-commerce companies such as Alibaba (BABA). But the move is also likely to lower the rates charged by major Internet service providers, hurting companies like China Telecom (CHA).
The Ministry of Industry and Information Technology said earlier in the week that China would raise broadband speeds while reducing rates for the already widespread utility, the official Xinhua News Agency reported. Increases would apply to fixed lines as well as Wi-Fi, both known now for sloth and disruptions. The effort would take place nationwide, affecting households with broadband as well as Wi-Fi hotspots, both common connection sources in China.
As of last year, China had 642 million Internet users -- less than half the overall population -- and about 4 million Web sites.
By the end of the year, users in major cities will find broadband speed more than doubling to 20 megabits per second, Xinhua said, quoting a deputy minister. Analysts expect the telecom providers to upgrade existing technology, bringing China closer to the world average of 26.9 megabits per second. Speeds in other urban areas would increase from seven to 10 megabits per second, it added. At the same time, average broadband prices would drop 30% this year over 2014.
Companies with income that depends on Web traffic should get more attention, leading to more business. When speeds are too slow, complex Web sites may stop loading, leading users to abandon them for easier ones.