(Ecns.cn) – Though the antitrust probe into China Telecom and China Unicom is on hold after the companies promised to upgrade their networks and cut broadband service prices, the nerves of the country's telecommunications industry are still on edge.
No final conclusion has yet been reached on the issue of monopoly in the broadband industry, but many say the delicate relationship between the parties involved in the case reflect the stark reality of China's broadband market.
Dominant position
China Telecom and China Unicom are two of China's top telecommunications operators, which together hold almost 90 percent of the country's broadband market share and control a large broadband kingdom with a high-speed "backbone" network.
Other small broadband suppliers, such as China Tietong and Beijing Founder, must connect to that backbone network when providing service for their end-users, which results in high Internet charges.
In addition, whenever it is necessary, China Telecom and China Unicom put their own users as top priority, while users of other broadband suppliers must suffer low Internet speeds. In 2010, China Telecom conducted a sweeping inspection of "traffic penetrative connections" ostensibly aimed at China Tietong, which resulted in all of its end-users in Guangdong Province getting disconnected from the Internet.
On Nov. 9, state-run China Central Television (CCTV) reported that the National Development and Reform Commission (NDRC) had been investigating alleged monopolistic policies in the broadband Internet market by the two giant operators, which were suspected of using their domination of the market to charge higher prices.
The two companies could face a combined fine of up to 10 percent of their 2010 operating revenue, or as much as 8 billion yuan ($1.26 billion), if the allegations are proven. Yet, so far, no such punishments have been meted out.
Third party involvement
From the very beginning, the NDRC has said the two companies were using market dominance to set prices, which hindered other companies from entering the broadband market.
After the case was reported on CCTV, China Telecom and China Unicom only made an announcement in which they agreed to cooperate with the investigation. Many said it was a mere formality and were not surprised by the lack of explanation.
The two operators' governing authorities include the state-owned Assets Supervision and Administration Commission (SASAC), the NDRC and the Ministry of Industry and Information Technology (MIIT). The public believes these departments could not hope for a worse situation, so silence is golden.
However, on Nov. 15 the State Administration of Radio, Film and Television (SARFT), China's media watchdog, surprisingly volunteered to cooperate with the antitrust investigation.
The case had nothing to do with SARFT in the first place, but the purpose of its involvement as a third party was clear – the agency longs for a fairer competitive environment in the telecommunications industry.
As of today, the number of SASAC broadband users is only 3% of the market, reflecting the agency's stifled development in the field for over a decade, said Chen Xiaoning, head of the China Radio and Television Association's cable TV commission.
Chen revealed that cable TV operators have been allowed by local authorities to provide Internet services for a very short time, and only a few of them are qualified.
Though China announced a push for convergence between telecoms, broadcasting and Internet service early in 2010 (with plans to complete the "triple play" between 2013 and 2015), the TV sector lacks the advantage, since the proprietary networks controlled by the telecom operators offer more bandwidth. This explains the timing for the SASAC's move.
Rivalry between government departments
The monopoly and other problems in the telecom industry in China have actually been created by the government, not by enterprises, said Shu Huaying, a professor at Beijing University of Posts and Telecommunications. The problems are the legacy of several waves of consolidation in the telecom industry carried out by six government agencies, including the NDRC, Shu added.
Such a theory could also help explain third party involvement. As the MIIT is in charge of the telecom operators, it aims to foster domestic technological innovation, strengthen telecom and IT infrastructure and boost demand for networking equipment and other electronics products.
However, the State Administration for Radio, Film and Television seeks to build a cultural industry and strengthen broadcasters and content producers, while also hoping to maintain censorship rules.
Only by making policies to solve such rivalries can China succeed in the "triple play" and bring about genuine benefits for its citizens.
China's average broadband speed is less than one-tenth that of the United States, Britain and Japan, yet fees are as much as four times higher, according to China Weekly.
