China:The History of Telecom Reform and the Future of the Telecom regulation

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ChinaThe History of Telecom Reform and the
Future of the Telecom regulation
Doctor Jinqiao Chen China Academy of
Telecommunication Research of MII
ASIA PACIFIC FORUM THE 3RD TELECOMMUNICAITON
POLICY REGULATION
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Contents

• ? The progress of Chinas telecom reform
• ? The future trend of telecom regulation
• ? The broadband regulation issue

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The progress of Chinas telecom reform

• ? The four phases of Chinas telecom reform
• ? Motivity and direction of Telecom reform
• ? Telecom competitionthe touchstone of success
  or failure

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The four phases of Chinas telecom reform

• 1950-1994the introduction of China Unicom in
  1994
• 1995-1998 the internal regroup of MPT
• 1998-2002separate government functions from
  enterprise management, post from telecom,paging
  sector coming-off,China Mobile separated from
  China Telecom and the restructuring of China
  Telecom
• 2003New reform is under deliberation in MII

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The four phases of Chinas telecom reform
General bureau of telecom State Post Office
MEI
MPT
China Unicom,1994
China Paging Group1999
China Telecom 1999
MII,1998
China Mobile Group 2000
China Telecom Group 2000
New Telecom Regulatory Authority(2003-?)
China Netcom Group 2002
China Telecom Group 2002
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The motivity of telecom reform

• ?Three motivations of telecom reform in China
• Market efficiency
• Enterprise performance
• Consumer welfare
• ? The driving engine of telecom reform in China
• Government initiative
• Exterior driving

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The direction of telecom reform

• The basic trail and direction
• Foster reform outside the telecom system
• Adjust stock with increment
• Combined with operators involved in capital
  market
• Persistent reform of state-owned telecom
  companies
• In-depth adjustment of telecom regulation system

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Telecom competitionthe touchstone of success or
failure

• ?The reason for telecom competition
• ?What is effective competition?
• ? How to achieve effective competition?
• ? Telecom reform is the footstone of telecom
  competition.
• ?The stage of the telecom market competition in
  China is in the middle term of the target.

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The market share valuation of the six basic
telecom operators, 2002
5,695

32.8

558

19.3

84

25.1

China Netcom

China Unicom

3,406

19.6

1,025

35.5

77

23.0








China
Railcom







China satellite

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The analysis of China mobile market competition
status,2002
China mobile market

Effective competition standard

low market convergence

excessive concentration,two enterprises hold
100 share


market structural standard
market easy to access

strict market access restriction,high market
access barrier

no long-term demand exceeding supply situation
exists

no, but according to the demand in 2005, two
operators can hardly meet the market demand



no extreme service discrimination

product diversification, service content more or
less the same, so no extreme service
discrimination


no price collusion

government uniform pricing and no price
collusion,and 10 floating for Unicom

market behavior standard



no service collusion

service content based on market demand and no
service collusion

no suppression policy towards competitor

China Mobile has 86 market share, no suppression
on China Unicom

pressure of improvement of service and
production process
mobile technologies develop rapidly and heavy
pressure on updating technology




market performance standard
price reduction along with a big cost reduction

price reduction mainly due to technology
updating and market competition, somewhat to do
with cost




Industry scale fails to meet market demand and
needs expansion n/a


enterprise and industry with an appropriate
scale no too high proportion of sale expense to
total expense






no long-term over productivity

no


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The future trend of telecom regulation

• ?Foster legal environment
• ?Perfect regulation system
• ? Adjust regulation policy

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Fostering legal environment

• ?Speed up the legislation progress of Telecom Act
  and striving to complete the draft by the end of
  2003.
• ? Enact the special legislation of telecom
  industry,such as E-commerce Act and Network and
  Information Security Law.
• ? Prepare the Radio Communication Act and the
  Regulatory Body Law
• ? Enact the special legislation to maintain
  market competition
• ? Enacting legislation to protect the rights and
  interests of telecom consumers

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Perfecting regulation system

• ? Use the mature regulation mode adopted by the
  countries in European Union,North America and
  AsiaPacific regions for reference
• ? Build up telecom regulatory system with the
  combination of government regulation and industry
  self-regulation and social supervision with
  Chinese characteristics
• ? Enhance the governance hierarchy taking central
  government as kernel in the domain of government
  regulation and consolidate the regulatory
  framework of uniform management and each level
  responsibility.
• ? Transform the regulatory functions stepwise and
  perfect the functions of regional regulatory
  bodies

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Adjusting regulation policy

• ? Market accessstep-by-step deregulation of the
  market access of basic telecom services to
  quickly form effective competition
• ? Interconnectionfurther perfect rules and
  regulations, and promote scientific regulation
• ? Tariff regulationlegalized and market-oriented
  regulation step by step, give enterprises more
  pricing right and gradual price-cap regulation
• ? Resource managementpaid utilization and full
  common sharing

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Adjust regulation policy

• ?Universal serviceset up the mechanism of
  government subsidy and universal service fund
• ? Network and information securitystart the
  construction of legal system and strengthen
  technological guarantee
• ? Service qualitysupervision consumers
  interests regarded as the supreme and ensure
  equity and efficiency

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Broadband Regulation

• ? Chinas high-speed internet has been built up,
  and broadband users estimated to 20
  million(Wireless broadband users included) in the
  mid of 2003.
• ? The infrastructure building is the main point
  of broadband regulation.
• ? The service convergence and alternative
  competition are the difficult points of
  regulation in the future.

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Chinas broadband industry

• ? The broadband penetration is lower than Japan
  and Korea, and the number of broadband
  subscribers is less than 10 of Internet
  subscribers.
• ? The broadband network service content is
  insufficient and lack of attractive applications.
• ? The broadband consumption practice hasnt come
  into being and the service providers are short of
  value sources
• ? There isnt uniform strategic development for
  the broadband industry development,and the
  industry value chain has not yet fully been
  formed.

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Current policy for broadband services

• ? Open up the CPN construction market so as to
  break through the last one mile
• ? Permit basic telecom operators to build up back
  bone transmission network and broadband MAN
• ? Deregulate the broadband content service and
  service tariff,without direct intervention
• ? The main regulation points are laid on the
  accessibility of users and the broadband
  infrastructure sharing.

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The difficulties of the broadband regulation in
the future

• ? How to fully share broadband infrastructure?
• ? Whether the subscribers have enough options and
  equal service quality.
• ? Whether the broadband service content will be
  brought into the realm of regulation policies.
• ? Information and network security issues will
  become the basic precondition of the broadband
  service application
• ? Whether the substitution of broadband services
  for traditional telecom service will lead to
  convergent regulation of infrastructures and
  service contents.

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