China has asked telecom operators in the country to stop charging extra fees for sending short messages to users in competing carriers to check the customer base erosion problem faced by smaller operators.

Operators have been asked to do away with the extra fees, which operators charge users for sending text and multimedia messages to subscribers of competing networks, by January 15, according to a joint statement from the Ministry of Industry and Information Technology (MIIT) and the National Development and Reform Commission (NDRC).

The new regulation, which the two ministries said was designed to protect consumers' rights and create a competitive market environment, could benefit smaller operators like China Unicom, who have for long been overshadowed by its bigger rival China Mobile which holds a 70 percent of the market.

To attract subscribers and set up barriers for competitors, Chinese telecom operators used to charge extra service fees for sending text messages. Sending text messages to consumers on a different network was more expensive than for the messages sent within the same network.

China Mobile, for example, charges its GoTone users in Beijing 0.15 yuan for sending a short message to China Unicom's or China Telecom's subscribers, compared with the 0.1 yuan it charges for sending a message to other China Mobile subscribers.

Although China Unicom and China Telecom adopt a similar charging scheme, their users end up paying more as most of their contacts are China Mobile users.

In October, China Mobile had 443 million mobile users, while China Unicom and China Telecom had 132 million and 28.4 million subscribers.

Wang Yuquan, consultant, Frost & Sullivan China, a market research firm, said the new regulation will help encourage competition in China's telecom market as the discriminative charging policy had given big players an unfair advantage.

However, the impact on the operators' revenues following the new regulation could be "negligible" as the extra charges for sending messages to other networks account for only a tiny part of the total turnover.

During the first half of the year, China Mobile generated 53 billion yuan, or 27 percent of its total revenue, from value-added services like ringtones, short messages and mobile games.

(China Daily December 4, 2008)