Broadband costs should follow int'l practices
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China Daily, November 22, 2011
One of China's top telecommunication experts said, in a recent comment on the monopoly held by the country's two broadband access providers, that they need to get their prices in line with international standards and cut them by 30-50 percent annually.
Hou Ziqiang, a professor at the Chinese Academy of Sciences, said that, in view of the National Development and Reform Commission (NDRC)'s recent investigation into China Telecom and China Unicom's practices, the two companies need to get their prices closer to international standards.
The two broadband access providers have made allegedly monopolistic practices in their domestic broadband access.
Hou pointed to the United States where, he said, prices have dropped 10-fold over the past 10 years, while, globally, they have decreased 30-50 percent annually.
"This will benefit consumers a lot and help keep the industry's growth healthy, instead of just letting those State-owned enterprises (SOEs) grab a large part of the profits," he explained.
Originally, the NDRC simply put an upper limit on broadband access prices, 10 years ago, and just decided to let market competition between private companies and SOEs bring the price down.
This was clearly a bit of wishful thinking since, over those 10 years, prices just stayed near the upper end of the scale, at 1 million yuan ($157,500) per gigabyte per month for commercial clients.
There has in fact been no significant drop in process, and most of the early competitors were gobbled up by the two behemoths or just vanished from sight.
If we take Beijing as just one example, the monthly cost of broadband access there is 162 yuan per megabyte for each family client, while in Hong Kong, the price is 150 yuan. That glaring difference is obviously unfair to consumers, said Gao Hongbing, of the Chinese Academy of Social Sciences' Information Research Center.
"Fiber prices shouldn't be as high as the cost of diamonds," Hou noted.
An antitrust lawyer weighed in with the comment that the NDRC enquiry may be a good place for China to start improving its legislation and following international legal practices.
Adrian Emch, an antitrust lawyer at Hogan Lovells, and a lecturer at Peking University's IP School, told China Daily that the telecoms sector, especially broadband, has been a frequent target of antitrust investigations in Europe.
"Rightly or wrongly, European antitrust authorities feel that the regulations are not enough to ensure unrestrained competition in the telecoms business," Emch said.
He went on to explain that many observers believe that the situation in China is similar to that of Europe.
"In the end, antitrust authorities want fair competition to make sure consumers get the highest quality for the lowest price."
Given the importance of broadband access for China's netizens, Emch concluded, "the NDRC investigation may be one way of hitting that target."
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