Telecommunications industry in China
The telecommunications industry in China is dominated by three state-run businesses: China Telecom, China Unicom and China Mobile. The three companies were formed by restructuring launched in May 2008, directed by Ministry of Information Industry, Nationals Development and Reform Commissions and Minister of Finance. Since then, all the three companies gained 3G licenses and engaged fixed-line and mobile business in China.
As a result of China’s entry to the World Trade Organization in 2001, a new regulatory regime is being established and foreign operators are being allowed to access the market.
China’s second generation of mobile communications equipment market is dominated by European and North American companies. Because of the unique characteristics of mobile communications, most of China’s mobile communications equipment demands are filled by imports. The quickly rising Chinese manufacturers, however, led by Huawei and ZTE are turning to South American, Southeast Asian and African countries for business opportunities and are increasingly raising their market share in China.
As of 2009, Huawei Technologies is expected to surpass Nokia-Siemens Networks and Alcatel-Lucent to become the second largest manufacturer of telecommunications equipment.
In March 2012, there 284.3 million fixed-line telephone subscribers and 1.01 billion mobile phone subscribers in China.
Introduction
The Chinese telecommunication sector’s growth rate was about 20% between 1997 and 2002. China fixed-line and mobile operators have invested an average of US$ 25 billion on network infrastructure in the last years, which will be more than all western European carriers combined. As a result, with 1.3 billion citizens, China has the world’s largest fixed-line and mobile network in terms of both network capacity and number of subscribers.China’s accession to the World Trade Organization on December 11, 2001 resulted in the gradual opening of the telecom services market to foreign companies.
Historical overview
Before 1994, the Ministry of Posts and Telecommunications provided telecom services through its operational arm, China Telecom. Pressured by other ministries and dissenting customers, the Chinese government officially started the telecom industry reforms in 1994 by introducing a new competitor: China Unicom. China Unicom could hardly compete with the giant China Telecom.In 1998, due to a ministerial reorganization, the MTP was replaced by the new Ministry of Information Industry. The MII took two large scale reshuffling actions targeting the inefficient state-monopoly.
In 1999 the first restructuring split China Telecom’s business into three parts. China Mobile and China Satcom were created to run, respectively, the mobile and satellite sectors but China Telecom continued to be a monopoly of fixed-line services.
The second restructuring in 2002 split China Telecom geographically into north and south: China Telecom - North kept 30% of the network resources and formed China Netcom and 70% of the resources were retained by China Telecom - South or simply the new China Telecom. Parallel to this double fission, the telecommunications division of the Ministry of Railways established a new actor in 2000: China TieTong.
These resources consisted of a 2,200,000 km long nationwide optical network, based on Asynchronous Transfer Mode, Synchronous Digital Hierarchy and Dense Wavelength Division Multiplexing technologies and several submarine cables, in particular with the USA, Japan, Germany and Russia.
To sum up, the Chinese telecom industry has changed from a state-run monopolistic structure to state-run oligopolistic structure.
In May 2008, MII, NDRC and Minister of Finance announced the third restructuring proposal and also launched three 3G licenses. With the rapid development and serious competition, Chinese telecom operators face challenges on shrinking landline users, too rapid growth on mobile business, low profit services and great gaps among the carriers. The third revolution was to combine six main telecom operators into three, aiming of developing 3G business and full telecom services, and avoiding monopolistic and over competition.
Regulatory environment
The MII is responsible, among other duties, for elaborating regulations, allocating resources, granting licenses, supervising the competition, promoting research and development and service quality as well as for developing tariff rates. The MII has built up a nationwide regulatory system composed of Provincial Telecommunications Administrations with regulatory functions within their respective provinces. A number of other significant institutions also influence the industry, such as the State Development and Reform Commission.Following its WTO accession, China is starting to make plans, including adopting western-style telecommunications law and setting up an independent regulatory and arbitration body to deal with the telecom operators.
Since 2014, the Cyberspace Administration of China is responsible for setting policy and the regulatory framework for user content generated in online social activities on Internet portals.
Foreign participation
Prior to its WTO accession, China’s policy protected the national emerging telecom industry since it was and is a national priority sector. Only foreign equipment vendors were allowed to invest in China. Authorization for the investments was conditioned on technology transfer. International telecom carriers were banned from accessing the market.As part of the WTO commitments, the Chinese government is opening gradually the carriers market to foreign investors. There are some geographical limits to this opening but they will be progressively relaxed. In 2005 foreign investors were authorised to form joint ventures, investing up to 50% in Internet services in the whole country, up to 49% in the mobile sector in 17 major Chinese cities and up to 25% in fixed-line basic services in Beijing, Shanghai and Canton. Finding a Chinese partner to form a joint venture with, preferably a major carrier is mandatory for a foreign company wishing to access the Chinese market.
Foreign investments come, in order of importance, from the United States, Canada, Sweden, Finland, Germany, France, Japan and South Korea. Main companies from these countries already have one or more Joint Ventures, not all of which are ultimately successful.
Market overview
As of March 2012, China has 284.3 million fixed-line subscribers and 1.01 billion mobile customers. Chinese telecom operators focus their effort on voice. Revenues from data only account 5%. New technologies are being deployed to provide differential services. These technologies include ADSL, wireless LAN technology, IP telephony and services associated with mobile communications such as Short Messaging Service, Multimedia Messaging Service, ring tone download etc. Premium SMS connectivity is allowing entrepreneurs and established businesses to profit from revenue taken directly from users' monthly phone bills or pre-paid credit. One of the first companies to offer such Chinese Premium SMS connectivity to the world market and to advise on the regulations and requirements involved are mBILL. Chinese operators are often cautious in purchasing cutting-edge technologies. Mobile communication, especially Global System for Mobile is the most profitable sub sector and reports 46% of all total revenues.Halfway between mobile and fixed, Xiaolingtong is a limited mobility service based on Personal Access System /Personal Handy Phone System technology. It consists of a wireless local loop that provides access to the fixed-line network. With over 50 million users, PAS/PHS competes in big cities head to head with traditional mobile services since prices are typically far cheaper.
Telecom operators
As of 2009, the telecom operators in China are exclusively Chinese: two fixed-line operators with nationwide licenses - China Telecom and China Unicom - three mobile carriers - China Telecom, China Mobile and China Unicom. The State has control and majority ownership of all of them. Most of them are financed in Hong Kong.- China Telecom is one of the largest telecommunication SOE in China, including 31 semi-autonomous provincial enterprises in mainland China. It runs land-line and mobile phone networks, operates PAS system and provides telecom network-based voice, data, multimedia and information services. In 2008, the company acquired CDMA network from China Unicom. A second focus point is broadband based on Ethernet and ADSL. In Jan 2009, China Telcom was one of the three companies having 3G license, CDMA2000.
- China Mobile operates basic GSM services and value-added services such as General Packet Radio Service data transfer, a TD-SCDMA 3G network, IP telephony and multimedia. It ranks the first in the world in terms of network scale and customer base.
- China Unicom merged with China Netcom in October 2008 and obtained WCDMA license in Jan 2009. The company offers mobile phone services, operates domestic and international landline network, and provides broadband multimedia services and IP telephony and value-added services.
- China Netcom was acquired by China Unicom in October 2008.
- China Satcom was licensed to engage in all kind of satellite related services such as transponder lease, domestic television broadcasting, public Very Small Antenna Aperture communications, video conferencing, data broadcasting, IP telephony and satellite based high-speed Internet access. In March 2009, the company announced its basic telephone services were merged with China Telecom. The rest of the assets including the company would be acquired by China Aerospace Science and Technology Corporation.
- China TieTong, formerly affiliated with the national rail network, is a smaller operator that merged with China Mobile in May 2008.
- China Voice Holdings Corp is also licensed to engage in video conferencing, data broadcasting, IP telephony and satellite based high-speed Internet access and is the largest corporation in conjunction with foreign owned corporations which hold many of the state run contracts for the Chinese government.
Network equipment suppliers in China
A large number of Chinese companies compete now with foreign corporations not only in the Chinese market but also in other countries. Datang is the main TD-SCDMA manufacturer, and UTStarcom, the main PAS/PHS manufacturer. Huawei leads the SMS market and Great Wall stands out in the broadband sector. Other recognized Chinese equipment suppliers are Shanghai Bell and Zhongxing Telecommunications Equipment. Furthermore, Amoi, Konka, Ningbo Bird and Kejan are the most representative Chinese mobile phone manufacturers.