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China Loosens Grip on Telecom Prices

Robert Clark
News Analysis
Robert Clark
5/13/2014
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In yet another attempt to shake up China's stodgy, over-priced telecom services market, authorities have deregulated retail prices.

From now on, the three state-owned operators -- China Mobile Ltd., China Telecom Corp. Ltd., and China Unicom Ltd. -- are free to set their own prices without first requiring government approval.

The two key agencies, the Ministry of Industry and IT (MIIT) and economic planning body the National Development and Reform Commission (NDRC), announced the deregulation on Friday. Wen Ku, MIIT's director of telecom development, said the move was aimed at increasing competition and improving efficiency.

It also coincides with the other major liberalization this year, the imminent debut of some 20 or more nimble mobile virtual network operators (MVNOs). (See Year of the Horse: Can China Telecoms Break Into a Gallop?)

The new ruling has prompted a good deal of speculation about a possible fall in prices, with more than 29,000 people commenting on a single story on the popular Sina news site. However, as a headline in the China Business News puts it, "Short-term room for price cuts not great."

Many online comments recall a recent flap over the massive differential between China Mobile's prices offered in the mainland and Hong Kong. For just HK$68 (US$8.77), the operator's Hong Kong unit offers 1,700 minutes airtime, 10,000 texts and unlimited data. Across the border, 58 yuan ($9.30) gets a mere 350 minutes in voice, 10MB of data and no texts.

Analysts have welcomed the policy change. Independent analyst Fu Liang described the shift as a "significant change," but said it was unlikely to have any direct impact on prices in the short-term.

For the next two years, the biggest influences on price would be the move to 4G and the replacement of copper with fiber, Fu said.

Zhang Yi, the CEO of iiMedia Research, has hailed new rules that also take aim at false and misleading advertising of telecom services. He said his researchers occasionally came across false advertising by service providers, and told the People's Daily that the new policy should solve such potential problems and fully protect consumers' rights.

— Robert Clark, contributing editor, special to Light Reading

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
5/14/2014 | 3:50:38 PM
Re: Why little impact?
Yes, three operators make it possible for companies to collude without actually conspiring. Company A lowers prices by a tiny fraction; if its competitors don't follow suit, Company A jacks prices back up again. 
R Clark
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R Clark,
User Rank: Blogger
5/13/2014 | 10:10:44 PM
Re: Why little impact?
There's just not the level of competition - three operators for 1.3bn customers. The MVNOs might have an impact, but the wholesale rate is too high.  The main significance of this decision is it's another recognition that the current structure isn't working. They really need a Son or Legere to shake things up but there's no chance of any private let alone foreign company being allowed to build and operate a network.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
5/13/2014 | 2:17:43 PM
Why little impact?
Why are the experts expecting to see little impact from this decision? Seems to me that the first thing that will happen is that companies will lower prices if they seen an opportunity to gain market share. 
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