Marketization of telecom tariff is accelerating

The price war of telecom tariffs in China becomes increasingly intense. Taking Shanghai as an example, based on four-tier “GoTone 50″ tariff packages (12.5 cents per minute within the package), Shanghai Mobile has cut roaming tariff for calls to Hong Kong considerably with a highest discount of 70% since September. Shanghai Telecom also reduced phone bar tariff to 20 cents per minute for domestic long distance calls recently. Before this, Guangdong Mobile squeezed GoTone tariff and Guangdong Unicom was immersed in the tempest of “taking the lead in unilateral charge”, which aroused the expectation of consumers in this regard. Beijing Mobile, Beijing Unicom and Beijing Netcom started to downgrade tariff by way of tariff packages successively.

Tariff cut is the general trend and it represents the beginning of a new round competition in domestic telecom market, experts said, “in the near future, telecom operators will have a more drastic move.”

With the deepening of telecom tariff reform and marketization in China, domestic telecom tariff dropped markedly. Compared with the year of 2001, many options were open to domestic telecom subscribers for telecom business and tariff schemes and tariffs is increasingly falling. According to the estimates of Ministry of Information Industry, average tariffs in 2005 declined by 45% compared to that of 2001.

This is especially obvious in mobile communication tariff. Taking the brand GoTone of China Mobile as an example, domestic subscribers gained substantial benefits from tariff adjustment from bilateral charge f 40 cents per minute at the very beginning to 10 cents per minute in such regions as Shanghai and virtually unilateral charge with lower monthly price.

According to forecasts by Analysys International, with further tariff competition among mobile operators, future tariff for mobile communication will develop into a basic form of monthly tariff package (rental plus local and roaming charges). Basic voice communication tariff will become standardized and lower. As domestic 3G system (the third generation mobile communication) is to be launched, mere tariff competition among operators will evolve into all-round competition of service, content and brand.

A better understanding of the future trends of domestic telecom tariff requires acquainting with the history of telecom reform in China. Since the establishment of China Unicom in 1994, the competition has been introduced to China, resulting in structural adjustment of telecom tariff. After 1998, a series of significant reforms have been made in domestic telecom sector, including the establishment of Ministry of Information Industry, systematic realization of separating government functions from enterprise management, divesture and establishment of China Mobile as well as north-south division of China Telecom.

So far, the pattern of mutual competition, complementary advantages and mutual development on telecom business has been formed between the six large operators, including China Telecom, China Netcom, China Unicom, China Mobile, China Satcom and China TieTong that are running basic and value-added telecom businesses, and over 10,000 value-added telecom business operators.

During the structural adjustment, marketization of telecom tariffs is further accelerated. As for the long term objective of China’s telecom tariff reform, relevant officer from Ministry of Information Industry expressed that on one hand, perfect marketization formation mechanism of telecom tariff is to be established, “perfect market-driven price mechanism is to be established under the government’s macro control; government is to fix an upper limit to basic business with insufficient competition and close relationship to subscribers’ interests”. On the other hand, regulatory mechanism of efficient and fair telecom tariff is to be established, thus to “strengthen supervision on telecom tariff to protect consumers’ legal rights and maintain a fair and equitable, efficient and orderly market competition.”

Although marketization trend is the trend, Kan Kaili, a member of Expert Advisory Committee of Drafting Telecom Law, and Yi Mingyu, an analyst from CCID Consulting Company Limited, pointed out that inefficient competition posed a challenge to China’s current telecom market. Operators who were expected to be competitors have not given their full play, therefore the icebreaking of tariffs in some regions is constrained.

Xia Xueluan, Professor of Sociology from Beijing University, suggested that public participation should be strengthened so as to effectively promote competition. An officer from Ministry of Information Industry expressed that both telecom operators and subscribers can give their opinions to the competent authority on tariff standard including the “upper limit of basic telecom service tariff”. The competent authority will reinforce the supervision on behaviors that damage competition and consumers’ legal rights, assure consumers’ legal rights and maintain sound and orderly development of the industry.

With further deepening of telecom reform in China, marketization of telecom has been further improved. Domestic telecom subscribers are expected to gain more benefits. Only with the support from 700 million domestic telecom subscribers can Chinese telecom sector make the dream of being larger and stronger come true.

Source- http://en.ce.cn/Insight

Technorati : China, China Mobile, China Netcom, China Telecom, China Unicom, Mobile
Ice Rocket : China, China Mobile, China Netcom, China Telecom, China Unicom, Mobile