China Telecom and China Netcom are likely to stop treading on
each other's turf this month.
?
China Telecom and China Netcom, the two fixed-line telephone
operators in the country, have reportedly signed a deal under which
they will stop treading on each other's turf, beginning this
month.
Some media have called it a "gentlemen's agreement" as it could
lead to so-called "rational competition". It is, in fact, a
shameful and woeful deal.
Since May 17, 2002, when the former fixed-line monopoly China
Telecom was formally split geographically into two firms, China
Telecom and China Netcom, the much-hyped restructuring has been
almost doomed to failure.
After the split, China Telecom operates mainly in the southern
part of China, while Netcom operates in the northern region.
Regulators had hoped that China Telecom would head north and Netcom
would expand to the south, which could spur competition.
But for more than four years things have been going in the
opposite direction. Where can you find China Telecom's services if
you are living in north China's Beijing? Consumers realistically do
not have more than one choice when choosing fixed-line
services.
China Telecom and China Netcom are struggling with saturation in
fixed-line services at the same time voice goes mobile. And worse,
given the rising mobile lifestyle in China, fixed-line carriers are
seeing some of their customers switch entirely to cellular
operators China Mobile and China Unicom.
The erosion caused by mobile services is serious. Dominant China
Mobile controlled 70 to 80 percent of new revenue in the entire
telecom industry nationwide last year. As caller-pays mobile
charging is introduced, fixed-line carriers are having an even
tougher time.
Behind the truce between China Telecom and China Netcom is a
rationale that expansion hardly enables an operator to challenge
its rival and investment on the rival's turf could see "losses of
State-owned assets".
The awful truth is that the reshuffle in 2002 truly broke a
national monopoly but created regional monopolies. And when a
cease-fire deal is inked, it seems the national monopoly is coming
back to life. The only difference is that the new national monopoly
is a collaborative act.
Now the best solution to the paradox might be industry
deregulation with the awarding of "full-service" licenses to all
major operators. These companies can choose what to do and what not
to do after the licensing.
(China Daily March 1, 2007)