China's three State-owned telecom carriers announced plans Friday to cut mobile data prices and increase data speeds, following Premier Li Keqiang's call for cheaper and faster Internet services.
China Mobile, the country's largest wireless carrier by subscribers, announced it would reduce mobile data prices by 35 percent or more by the end of 2015. China Unicom intends to reduce prices by at least 20 percent per megabyte of data. China Telecom, the smallest of the three, plans to cut mobile data prices by 30 percent.
However, the announcements caused a stir in the media and among the public.
"It's like a word game. In particular, there is no real reduction for mobile users who spend less than 150 yuan ($24.18) per month," Zhang Dan, a telecom industry analyst at research firm iResearch, told the Global Times Wednesday.
The carriers' prefecture-level subsidiaries will implement the plan as soon as possible, Zhang said. The subsidiaries hope to use as many promotions as possible to attract consumers.
Specifically, users heaped scorn on a "night traffic" plan put forward by China Mobile.
"Residents who live in remote areas have less demand for mobile data services than urban residents. I don't think the 'night traffic' plan will be popular with rural residents," Zhang said.
"I don't need a plan when I am already at home with Wi-Fi access," Liu Fan, a 34-year-old man working at a Shanghai-based private company, told the Global Times Wednesday.
According to a Monday story by the Beijing Morning Post, nearly 80 percent of Internet users are unsatisfied with the plan, based on a survey of 90,000 users.
The official Xinhua News Agency published an article late Friday asking whether the carriers still have room to further cut prices.
"It's understandable that users are not satisfied with the reduction plan. Users want the carriers to lower charges - the more the better," said Ren Leyi, associate professor at School of Digital Media & Design Arts of Beijing University of Posts and Telecommunications. "In fact, in recent years, mobile data prices have been falling."
The charge challenge
"Charges are based on many factors, including market principles, network construction costs and company earnings. It's difficult for the carriers to simply reduce charges," said Xiang Ligang, CEO of industry information portal cctime.com.
As State-owned enterprises (SOEs), they need to meet assessment criteria from the authorities, Xiang said. If the authorities can reduce the profit requirements for the carriers, then the carriers can lower prices.
"There is still room for the carriers to reduce charges further," Xiang told the Global Times Monday.
Meanwhile, SOEs have an obligation to provide faster Internet access to their customers, especially those in remote areas. The cost of building infrastructure in big cities is lower than it is in remote areas, Ren told the Global Times Tuesday.
China's Ministry of Industry and Information Technology (MIIT) vowed Friday to improve the country's broadband speed and coverage, as well as reducing prices.
The MIIT's pledge came after Premier Li's urge on May 13 to cut fees and improve the speed of broadband networks.
The average broadband speed for users in major cities will be raised to 20 megabits per second (Mbps) from the current 9 Mbps, Shang Bing, a MIIT vice minister, said at a press conference Friday.
On Wednesday, the State Council, China's cabinet, issued guidelines to facilitate lower mobile data prices and higher data speeds. Investment in network infrastructure construction will reach 1.13 trillion yuan within three years.
"Carriers need to reduce cost based on upgrading technology and expanding subscribers," Xiang said.
Ren agreed. "Indeed, only with advanced technology and more users can carriers reduce their costs," he said.
Slow growth
The three carriers currently face problems such as declining sales revenue, falling profitability and slowing growth of new users.
China Mobile's net profit fell 10 percent year-on-year to 109.3 billion yuan in 2014, its biggest drop since 1999, as it increased investment in its 4G network and spent more on related marketing, the company announced in March.
China Unicom's net profit grew 15.8 percent year-on-year to 12.06 billion yuan, though its revenue was down 3.5 percent year-on-year. China Telecom reported a lower-than-expected profit of 17.68 billion yuan in 2014, an increase of 0.8 percent year-on-year.
There are many factors weighing on the carriers' profitability. Since June 2014, they have had to pay a value-added tax (VAT) of 6 percent to 11 percent for various services, up from a 3 percent flat business tax.
China Telecom Chairman Wang Xiaochu said at a press conference on March 18 that the VAT had reduced the company's revenue by nearly 3 percent.
Transparent and fair
It's quite common for the public to be skeptical about companies with a monopoly position in the market, Ren said. When this happens, the companies need to provide better services to win their customers' trust.
"More private capital has been invested in the industry, which is beneficial for the sound development of the industry," Ren said.
The MIIT issued the first batch of licenses for mobile virtual network operators in December 2013, allowing 11 Chinese companies to offer repackaged mobile services to users.
The MIIT announced in 2014 that it would create a pilot program to encourage private capital to enter the broadband access market.
Since March 1, 16 cities, including Taiyuan, capital of North China's Shanxi Province, Harbin, capital of Northeast China's Heilongjiang Province, and Shanghai, have joined the program.
More than 100 cities are expected to join it by the end of the year.
"The telecom market is opening gradually. Other companies have also been focusing on providing users with a better experience and other value-added services. The three carriers could be the network providers in the future," Ren said.
The reduction plans were met with a lot of criticism online, which could be a good thing, Ren said. The authorities need to rethink how they supervise the SOEs, while the carriers need to rethink how they can develop and improve services for their customers as they face more competition from private companies.
Once it becomes a positive cycle, users will be the ones who ultimately benefit, he said.
