An independent supervision organization, the State Tele-communications Management Commission, is planned to supervise the country's telecommunications fee system, industry experts say.

"But the commission is unlikely to be unveiled immediately given the complexity of the country's telecom industry," said Chen Jinqiao, director of the China Academy of Telecommunications Research under the Ministry of Information Industry.

"It may take one to two years for the forming of the commission."

"Nevertheless, it is no wonder that reform of the country's telecom industry is now focusing more on supervision," Chen said.

The telecom industry is in need of effective and efficient supervision as the sector is currently exposed to fierce competition and rampant price wars.

As a result, a special working panel has been established to work on a new standard for telecommunications fees, says Chen.

The panel is being jointly established by the Ministry of Information Industry, the State-owned Assets Supervision and Administration Commission and the State Development Reform Commission.

"However, the birth of a new standard is not going to be easy," he said.

On one hand, the adjustment of telecommunications fees should ensure the maintenance and appreciation of State assets.

On the other hand, tele-communications fees have has become an extremely sensitive factor that affects the market performance for the three major listed telecom operators - China Mobile, China Unicom and China Telecom, and non-listed China Netcom.

To consolidate their market shares, each telecom operator has turned to all types of market manoeuvres such as slashing monthly rental fees, lowering telecommunications fees, offering monthly service packages and handset subsidies.

"The excessive competition and weak government supervision are making the telecommunications fees system very creaky," Chen said.

But analysts say they believe that reform on supervision for the telecommunications fees system should be carried out step by step.

Also, a reasonable price for inter-operability between telecom operators should be worked out.

China's telecommunications regulator has set a new interconnection fee for calls between mobile carriers last year in a move expected to help stabilize the highly competitive market while having minimal financial impact on carriers.

The MII set the fee for calls between the country's mobile phone duopoly of China Mobile and China Unicom at 0.06 yuan (0.72 US cents) a minute.

A similar interconnection fee already exists for calls between the mobile carriers' networks and China's two fixed-line phone companies, China Telecom and China Netcom.

"The price is comparatively low and can no longer meet increasing telecoms development," Chen said.

To adjust the interconnection fee in a more reasonable way "could lead to more orderly and fair market competition," he said.

It will help to stabilize a market that has been plagued by cut-throat competition not only between the two mobile carriers but also by a low-end wireless service called "Little Smart" offered by the two fixed-line phone companies.

In addition, such fees are necessary to make the sector more market-oriented, giving phone companies incentives to complete each other's calls and carry more outsider traffic on their networks.

Chen said the MII has already entrusted the Chinese Academy of Social Sciences to study the economic costs of network inter-connections and to work out solutions.

Figures from the MII showed that the telecom and postal industry accomplished revenue of 329.69 billion yuan (US$39.7 billion) by the end of July this year, representing a growth of 12.5 percent from a year earlier.

China has recruited 609.2 million telephone subscribers by the end of July, with 76.5 million newly-recruited in July.

(China Daily September 2, 2004)