e-magazine
Securing a New Concept
China presents a fresh vision of regional security at Asian cooperation summit
Current Issue
· Table of Contents
· Editor's Desk
· Previous Issues
· Subscribe to Mag
Subscribe Now >>
Expert's View
World
Nation
Business
Finance
Market Watch
Legal-Ease
North American Report
Forum
Government Documents
Expat's Eye
Health
Science/Technology
Lifestyle
Books
Movies
Backgrounders
Special
Photo Gallery
Blogs
Reader's Service
Learning with
'Beijing Review'
E-mail us
RSS Feeds
PDF Edition
Web-magazine
Reader's Letters
Make Beijing Review your homepage
Business
Print Edition> Business
UPDATED: May 26, 2014 NO. 22 MAY 29, 2014
Full-Pricing Autonomy
Fair competition among all types of operators will be the future of China's telecom industry
By Lan Xinzhen
Share

As for the basic telecom services including land-line phones, mobile phones, short messages and broadband services, the MIIT and NDRC only require that telecom companies offer separate options for individual services besides service packages. Their document also encourages telecom companies to provide packages with lower prices to low-income groups.

Kuang Xianming, Director of the Center for Economic Transition of the China Institute for Reform and Development, wrote in his blog that from this time of market-oriented reform of telecom charges and the recent medicine price reform, it can be seen that China has entered another round of price reform.

Kuang said that at present, product prices in most of China's manufacturing industries have been decided by the market, and industrial production is facing challenges owing to market competition. In contrast, prices in many sectors in the service industry are still controlled by the government, such as telecom, education and healthcare. Service price controls block effective transmission of service demand to the market and also curb reasonable investment returns in the service sector. The ultimate result is that the shortage of service supplies continues to intensify.

Kuang continued that making service prices more reasonable is the focal point for the market-oriented reform. The reform of telecom prices will be conducive to stimulating competition among telecom operators.

Greater access

China now only has three major telecom operators. Since there are few competitors in the market, even freeing up telecom prices will bring limited real benefits to consumers. Therefore, it would be unrealistic for consumers to expect a dramatic decline in telecom charges.

China has adopted an open attitude to relaxing market access to the telecom industry, and the MIIT has granted virtual telecom licenses to 19 private companies. However, virtual telecom operators have no network resources and infrastructure and have to purchase telecom services from the three major state-owned operators.

"It is clear that competition in the telecom market will thrive only when the telecom charges are decided by the market, the telecom industry is further opened and the number of operators is increased," said Wang.

Kuang said that when encouraging and supporting price competition in the telecom industry, the government must also recognize that price reform is only part of the market decision process and far from all of it. Although the prices are freed up, all of the three major telecom operators are state-owned, and it would be easy for them to organize a price-fixing conspiracy. Should that situation occur, telecom prices might go up even if they are freed up.

To prevent such "pseudo competition", the key is to introduce more competitors and effectively break through the threshold for private capital to enter the market, said Kuang. For example, 4G service is an emerging market and could potentially be made fully open to private investors.

Wen Zongyu, Director of the State-Owned Economy Office of Research Institute for Fiscal Sciences of the Ministry of Finance, said fully opening up the telecom industry is the current trend, and in the future, China's telecom market will be an arena where both domestic and foreign companies compete. Negotiations for the Trans-Pacific Partnership Agreement (TPP), Transatlantic Trade and Investment Partnership (TTIP) and the Trade in Service Agreement (TISA) are accelerating. If and when they are signed, telecom companies from the United States and Japan will be able to enter the Chinese market. Therefore the recent market-oriented reform of telecom prices can be regarded as a preparatory measure for future opening up to private and foreign telecom companies.

Wen said that TPP, TTIP and TISA will bring significant changes to China's industrial structure, because these agreements require all countries participating in international trade to open up their markets. This means that in the future, China must open all its industries except those involving national security or are related to the lifelines of the national economy, and that state-owned, privately owned and foreign-invested companies will thus compete fairly. It is almost inconceivable that the telecom industry would be listed in either exempt category, hence it will be fully opened up in the future.

"After freeing up the pricing power, we should accelerate opening up the telecom market to all domestic private companies. Otherwise, after U.S. or Japanese companies enter the Chinese market in the future, Chinese companies will be unable to compete with them," said Wen.

Email us at: lanxinzhen@bjreview.com

   Previous   1   2  



 
Top Story
-Do as the Asians Do
-Special Reports: Fourth Summit of CICA
-New Media
-Part of the Family
-Special Coverage: China-Russia Relations
Most Popular
在线翻译
About BEIJINGREVIEW | About beijingreview.com | Rss Feeds | Contact us | Advertising | Subscribe & Service | Make Beijing Review your homepage
Copyright Beijing Review All right reserved