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China Offers Hope to Foreign Telcos

Robert Clark
News Analysis
Robert Clark
9/25/2013

The Chinese authorities look set to use the planned Shanghai free trade zone (FTZ) to introduce global social media services and invite foreign telcos to compete with the local incumbents, according to local media reports.

Hong Kong's South China Morning Post reported Tuesday that the current national ban on Facebook, Twitter, and YouTube would be lifted within the Shanghai FTZ, the first in mainland China, and that bids from overseas service providers would be welcomed for Internet services licenses.

The three domestic operators, China Mobile Ltd., China Telecom Corp. Ltd., and China Unicom Ltd., have all accepted the arrival of foreign competition, according to the report.

Given the role of FTZ as a business zone, it will surely offer a lot more to telcos than just ISP licenses.

The 29 sq. km. zone, located next to the Pudong business district and covering the airport and the Yangshan deep port, is intended to attract foreign investment and to trial some liberalized financial services. It is being hailed within China as a move as significant as the establishment of special economic zones 30 years ago.

In that optimistic vein, we might see the FTZ, along with the opening of the MVNO market and the continuing talk of economic reform as signs of cracks in the wall around China's telecom services sector.

Indeed, this Reuters story on the campaign against monopoly abuses by economic reform outfit NDRC, points out that the auto, banking, and telecom sectors might come under pricing scrutiny once a probe into the pharmaceutical sector is complete.

However, telecom executives with longish memories may recall that similar excitement accompanied the joint venture announcement between AT&T Inc. (NYSE: T), China Telecom, and the Shanghai city government back in 2000. At the time, the People's Daily noted: "Analysts said the deal will serve as a role model for foreign investors in the State-gripped market and other foreign firms are expected to follow the AT&T example when China enters the World Trade Organization."

That hasn't happened. The resulting venture, Shanghai Symphony, is still the only foreign-invested telco joint venture in China, and by all accounts has been a source of frustration for AT&T.

China's WTO promise to open up the telecom services sector has been a hollow one. Direct control over telecom is a non-negotiable part of Communist Party rule. It offers the means to influence the wider economy and better control Internet access. China ranks 173rd of 179 countries in the World Press Freedom Index and is on that organization's list of Enemies of the Internet.

None of this has changed. Rather, the current intense Internet crackdown, which has witnessed the use of language not heard since the Cultural Revolution, tells us that, even if foreign operators are admitted to the FTZ, they will go no further.

— Robert Clark, contributing editor, special to Light Reading

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grande.arche
grande.arche
9/26/2013 | 6:20:10 AM
Re: Will anyone have the patience and resources?
Xavier is the person with right means but he needs local talent to tackle together. Call me if he is interested!

 

Haha..
gfinnie
gfinnie
9/25/2013 | 2:27:51 PM
Re: Will anyone have the patience and resources?
This is a clearly a job for Xavier Niel and France's Free-- he's probably on a plane to Shanghai as we speak. If anyone can undercut the Chinese, he can. 
mendyk
mendyk
9/25/2013 | 11:23:49 AM
Re: Will anyone have the patience and resources?
The most likely scenario is that this "opportunity" becomes a fool's errand that lasts for a decade or more. What company in its right mind would sign on for something like this?
DOShea
DOShea
9/25/2013 | 10:52:48 AM
Re: Will anyone have the patience and resources?
A generation ago, a number of foreign telecom companies jumped headlong into China at the slightest hint of looosening restrictions, and even though most of them probably regretted it, the potential to break into the China market in even a small way probably will prove too enticing once again for anyone to think about the business case in common sense terms.
Ray@LR
[email protected]
9/25/2013 | 7:25:04 AM
Will anyone have the patience and resources?
I'd love to see the business case for competing with the Chinese incumbents in one small area, even if it is in Shanghai.... that's going to be a tough sell, if indeed the authorities are actually going to encourage anyone to participate.

 

As Robert has mentioned previously, China needs tro REALLY start loosening control otherwise the country will fall behind others in terms of innovation...

 

China Faces Innovation Crunch

http://www.lightreading.com/author.asp?section_id=252&doc_id=705742
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