China Telecommunications Law Newsletter
Vol. 1 , No.2 - June 8, 2001
TOPICS THIS ISSUE:
- China Telecom to Split Again
- Mobile Phone Wars Hurt Local Industry
- Heilongjiang Telcos Reach Fee Agreement
- Foreign Companies Triumphant in China Unicom Bid
- IBM and Shanghai Telecom to Build Shanghai Data Center
- Telecommunication Law and Related Regulations on Foreign Investment to be Issued
- "Recipient Not to be Billed" Policy Prohibited
- Telecom Market Hots Up
China Telecom to Split Again
Moves are under way to further divide up China Telecom, the company that holds a near monopoly over the mainland telecommunications market. While the company was split into four entities two years ago, its overwhelmingly dominant market position remained. The company owns eighty percent of the country's network capacity and virtually controls the fixed-line, Internet and data transmissions markets.
While the split is awaiting approval of the State Council, debate continues over what type of split is most appropriate. One option for the split is along geographical north-south lines, while another option is to separate the company's operations into fixed-line, long distance and data transmission units. A massive initial public offering has been postponed due to the current uncertainty.
China is keen on promoting competition in the telecommunications sector ahead of its impending accession to the WTO. To date, the newcomer China Railcom has been the only company able to establish a real presence.
(Source: Beijing Morning)
Mobile Phone Wars Hurt Local Industry
Prices in the Chinese mobile telephone market have plummeted in recent times, as Chinese companies attempt to counter the influx of more trendy foreign brands. Wan Mingjian, President of TCL Communications Equipment, has stated that price reductions are hurting the whole market. Wan believes there is no benefit to local industry in reducing prices, but rather, that greater market share and profits will only flow from improved technology and reduced production costs. He said TCL Communications will not be entering into the price wars.
Reports indicate that the damage inflicted on local brands by the influx of foreign competitors is significant. Wan Minjian stated that the only way through this period of downturn was to promote technological competition within the industry. Wan believes that the domestic market will lead the way in two to three years time, but predicts that the ultimate survivors will be few in number.
(Source: China Online)
Heilongjiang Telcos Reach Fee Agreement
Two Heilongjiang telecom operators, Heilongjian Unicom and Heilongjiang Mobile, have agreed to jointly regulate their fees and rates, and to abandon the former unregulated fee systems. The two operators promise to implement the national standard for mobile phone calls and have agreed not to offer free deals in any disguised form.
The agreement stipulates that promotional sales or new services must be reported to the provincial communications administration before being offered to the public. Both sides are also required to put aside RMB 3 million (roughly US $362,319) in a bank account to cover possible breaches by either company of the Regulations on Telecommunications of the People's Republic of China.
Agreement has also been reached to link up the respective company's mobile networks across the 13 regions and cities of Heilongjiang and to raise the quality of telecommunications services.
(Source: China Online)
Foreign Companies Triumphant in China Unicom Bid
While domestic companies were the most vocal in China Unicom's recent CDMA network bidding invitation, it was foreign companies who won the majority of the work. About 90 percent of the work involved in building the wireless code division multiple access (CDMA) infrastructure has been granted to non-mainland companies. International players, such as Lucent Technologies, Motorola, and Ericsson, were awarded the bulk of the tender work. South Korean Samsung also won US $150 million worth of orders for Unicom's first-phase CDMA network construction, and secured equipment orders valued at US $500 million. Zhongxin Telecom Ltd. was the most successful mainland company in the bidding stakes, winning orders for 1.1 million subscribers.
Those close to the bidding process suggest Chinese companies lost out to their foreign competitors on the grounds of inferior technology and lack of experience. The transmission speed of China's current global system for mobile communications (GSM) is far slower than the planned CDMA. To date, China has only experimented with CDMA networking in the form of the Great Wall network, which has fewer than one million subscribers across four cities.
(Source: People's Post and Telecom)
IBM and Shanghai Telecom to Build Shanghai Data Center
IBM Corp. and Shanghai Telecom have recently signed an agreement to construct the Shanghai Huamu Internet Data Center. The agreement is seen by industry insiders as a further step towards foreign input into an area that is technically prohibited to foreigners. The Chinese government forbids foreign input into basic telecom and Internet services. While several mainland hi-tech companies have foreign investments, the IDC project is a much more obvious attempt by a foreign entity to side-step State regulations.
Shanghai Telecom's role in the project will be to operate and provide storage space for IBM's facilities. IDC is seen by many as the third Internet manifestation, along with ISPs and dot coms. The role of IDC is to provide users with standardized data storage services and other related services, especially useful for companies without the resources to establish a full web presence. The CCID Consulting Co. has estimated that China's IDC market will be worth RMB 4 billion (US $483.09 million) within three years. Zhou Weikun, IBM China Chairman and CEO, recently revealed that IBM would invest RMB 33 billion (US $4 billion) in the IDC sector over the next three years.
(Source: China Economic Times)
Telecommunication Law and Related Regulations on Foreign Investment to be Issued
In a recent interview, Wu Jichuan, Minister of the Ministry of Information Industry, said that China would speed up the promulgation of the proposed Telecommunication Law and the issuance of other telecom-related regulations with respect to foreign investment, e-commerce and Internet safety.
China will keep its promises made in the negotiations on WTO entry and will encourage both foreign and domestic investors to participate in the development of China's telecom industry, Wu said.
He stressed that in order to create a competitive environment, the government is going to strengthen the supervision over the telecom market, ameliorate the rules of market access and set up an efficient system for pricing, service compensation and usage of telecom resources.
Through several years of reorganization of the telecom industry, monopolies have been eliminated in the fields of basic telecom business, value-added telecom business and information service. At present, there are seven companies engaged in basic telecom business and more than 3,000 companies doing Internet business and other value-added business.
(Source: Ministry of Information Industry)
"Recipient Not to be Billed" Policy Prohibited
The "Recipient Not to be Billed" policy, initiated by Gansu Unicom and Gansu Telecom for mobile telephone users, has finally been aborted at the behest of the Ministry of Information Industry (MII).
Under the mobile telephone pricing rules issued by MII, the governmental authority in charge of the administration of telecommunication market nationwide, along with the caller, a mobile telephone recipient should pay for the telephone call as well. Due to the intensive competition between Gansu Unicom and Gansu Telecom in Gansu province, however, Gansu Unicom initiated a promotional policy whereby the recipient of calls would not be billed. Under this policy, mobile telephone users can receive unlimited telephone calls without having to pay more than a very small monthly fee. Gansu Telecom adopted the same policy shortly afterwards.
MII intervened in this price war immediately, alleging both players had violated the pricing regulations issued by MII. Under the existing Rules of Telecommunication Administration, only MII is authorized to adjust the pricing methods of telecom businesses.
The two companies have ceased fighting. However, according to a telecom expert, this price war illustrates that the high price of mobile telephone calls has become one of the elements hindering the development of the mobile telephone market in China.
(Source: Beijing Youth Daily)
Telecom Market Hots Up
Lu Xiangdong, director of China's largest mobile telecom service provider, China Mobile, has stated that the company will soon commence 2.5 generation mobile telecom services in competition with its rival, China Unicom.
Mr Lu was speaking at the fifth annual conference for global systems for mobile communications (GSM) held recently in Beijing. The GSM market in China has become the largest in the world, with over 100 million mobile telephone owners using the technology.
China Mobile is reported to service 80 million GSM users in mainland China. The current system used by China Mobile, however, is still in the second generation, which involves the transmission of voice signals. The transitional generation between 2G and 3G, the so-called 2.5G, utilizes "general packet radio service" technology (GPRS) that supports much higher speed data transfer. A change to the new technology by China Telecom will mean a boom for the mobile communications market, as customers will need to purchase new GPRS telephones to receive the service. Market giants, such as Ericsson, Motorola, Nokia and Siemens, have all launched products compatible with the new 2.5G technology.
China is currently the second largest market for mobile communications in the world.
(Source: Xinhuanet)
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