Telecommunication Infrastructure and Regulation

Source: http://web.syr.edu/~ztan/China-tel.html

Overview

Telecommunication industry in China has experienced immense development in the recent decade.  As the graph above indicates that by 2005, China will surpass Japan to become the second largest telecommunication market in the world.  After China's accession into the WTO, the barriers of all forms on its telecommunications market will be gradually removed. The deregulation and competition will create a better environment for future growth.

General Assessment of Telecom Infrastructure

By 2002, China has 179 million fixed-line telephone subscribers and 145 million mobile telephone users.  The mobile user size is the first in the world and fixed telephone network is the second largest.  The length of optical cable in China is over 1.5 million kilometers.  Long distance transmission, local exchange and mobile communication have been digitized, and data and multimedia communication networks have covered the whole country.  The Internet users are over 30 million.18

China has built up a telecommunications networks centered around 22 optical cable lines and accompanied by multiple means of communications networks such as microwave, satellite, telephone, mobile phone, digital communications, and multi-media communications. The optical cable trunk line including eight horizontal and eight vertical trunk lines totals 1.25 million kilometers and reaches all provincial capitals and 70% of China’s big cities. The digital data communications network reaches 90 percent of the cities and counties throughout the country, and the public computer network covers 239 cities.19

China’s domestic satellite system has 55 earth stations is in place, and for international satellite system, China has 5 Intelsat ( 4 Pacific Ocean and 1 Indian Ocean), 1 Intersputnic (Indian Ocean Region) and 1 Inmarsat (Pacific and Indian Ocean regions); several international fiber-optic links to Japan, South Korea, HongKong, Russia, and Germany. 20

China’s Ministry of Information Industry plans to expand the nationwide broadband network using fiber optic cable, microwave and satellite systems; to build out the nationwide GSM mobile network and explore new service like mobile banking and internet access based on the existing GSM network; prepare for the deployment of third generation technology of mobile communications; improve management and billing systems; and promote internet usage, especially electronic commerce and electronic business.

Market Players

The current major domestic players in China telecommunication market: China Telecom, China Mobile, China Unicom, China Netcom, and Jitong Communications.

China’s telecommunications service sector was closed to direct foreign participation.  However, China’s WTO accession has opened both the basic and value-added services market to international players.21

Regulator

The Ministry of Information Industry (MII), was formed to charge information technology.  All networks and IT manufacturing industries are subject to MII’s regulation. According to the State Council, MII’s main commitments include development strategy stipulation, policy-making and overall regulation of the information industry, including telecommunications, IT product manufacturing and the software sector.

 Telecommunications development and policy in China 22

 Beginning at the 1980s, the reform started with decentralization of administrative power to lower government echelons, the development of market relations, the delegation of responsibility for performance to enterprise managers and the encouragement of incentive systems.

The successful implementation of reform schemes has facilitated the development of telecommunications in China.  The most revolutionary step taken by the MII since its establishment was to split the former China Telecom into four independent groups in mid-1999, namely China Telecom, China Mobile, China Satellite and Guo Xin Paging Company. Instead of following the approach of the United States when it divested AT&T and restructured the local network into seven regional Bell operating companies, the MII adopted a strategy of ‘vertical separation’ - that is to say, China Telecom was split up into four groups according to specific services. China Mobile is specifically dedicated to mobile phone services; China Satellite is specific in satellite communications while Guo Xin Paging Company focuses on radio paging services only. Both China Mobile and China Satellite are financially and operationally independent, and the government is hoping that they can provide other services and compete with other operators in the future. The Guo Xin Paging Company was subsequently merged with China Unicom as a measure to enhance China Unicom’s financial strengths.

China Telecom remains responsible for both long distance services and local fixed network services. In other words, China Telecom still controls the fixed network for both local and long distance services. Hence this organizational restructuring of China Telecom is not a thorough revolution, as China Telecom still enjoys significant dominance in the fixed network, and the barriers to entry remain as high as they were before the restructuring.

Although the MII is still a governmental department, the operational functions of China Telecom have been separated from MII’s regulatory commitments. According to the State Council, China Telecom and other telecom companies are defined as part of the top 100 large-scale state-owned enterprises in China and are directly under the supervision of the Central Enterprise Working Committee.