The China Internet Network Information Center (CNNIC), which has been tracking development since 1997 and in that time has released 19 annual and semi-annual reports, said yesterday that 90.7 million people used a broadband connection by the end of December.

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If that number is combined with the users of dedicated lines, used mainly by commercial enterprises, the total number of broadband Internet users in China reached 104 million out of the total Internet population of 137 million.

"With a broadband penetration rate of 76 percent, China has already become one of the most developed markets in broadband," said Wang Enhai, an official with the CNNIC.

The Ministry of Information Industry yesterday also released the figures from telecom operators and said there were 51.9 million broadband Internet lines, meaning that many people share one line together.

As broadband expanded, the cost of Internet connections fell. The average connection cost dropped by almost 20 percent to 83.5 yuan per month at the end of 2006.

An increase in the number of broadband users generates enthusiasm from dotcoms and one of the direct beneficiaries is video-sharing websites.

Victor Koo, CEO of Yoqoo.com and former chief operating officer of the top Chinese Internet portal Sohu.com, said a better consumer infrastructure will allow companies like Yoqoo to provide better quality content that is more seamless in its delivery .

"If users do not have broadband down to the last mile of their connection, video-sharing websites will not be able to survive," he said.

Koo started his firm in June, 2006 and within less than six months received $12 million in investment from three venture capital firms that anticipate a boom in video sharing.

A $1.65 billion acquisition of the US video-sharing website YouTube by the search giant Google greatly boosted Chinese entrepreneurial interest in building China's YouTube.

Last year, 12 video-sharing startup companies raised almost $100 million in venture capital.

However, Chinese YouTubes face a mounting difficulty lack of business models.

While Google can launch video search services with YouTube's online community and a large number of affluent online consumers, Chinese Internet companies have to think about where to get revenue.

According to the CNNIC, more than 70 percent of China's Internet users are aged under 30 and almost 70 percent of them earn less than 2,000 yuan a month, including 25 percent who make less than 500 yuan.

"The situation of a large, but low-income Internet population requires innovation from Internet companies," said Lu Bowang, president of the professional Internet market research house China IntelliConsulting Co Ltd.

Most successful Chinese companies have made money by managing a user population of tens of millions who only pay a few dollars a month.

Shanghai-based The9 Ltd, which operates the hugely popular online game World of Warcraft from Blizzard Entertainment, had 5.9 million paid accounts in the end of the third quarter, but its revenue was just $29.5 million.

"Technological innovation is good, but it is more important to have business innovation," said Zhu Jin, chairman and CEO of the NASDAQ-listed Chinese game operator.

Different from Western or foreign game operators, Chinese online game operators have to sign up thousands of distributors, whether at newspaper booths or Internet cafes.

Although that is a costly model, it bundles distributors with game operators, which puts the users in their hands.

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