The Ministry of Information Industry (MII) is to relax its control over telecommunications fees this year in an effort to further boost the development of the sector, sources close to the MII said.

"Along with enhanced supervision on telecommunications fees, the ministry is likely to gradually reduce its control over prices," said the source who refused to be named.

"For those telecom businesses which have already formed effective competition, the enterprises may have more say to set the price based on the market," he said.

This is likely to have a great impact on the domestic telecom market, which has already witnessed fierce competition partly triggered by price wars, analysts say.

All the major telecom operators are involved in competition, including China Mobile, China Unicom, China Telecom and China Netcom.

Currently, there are no clear policies on the adjustment on the current telecommunications fees from the MII, the country's telecom watchdog.

Further cutting prices is likely to be one of the most competitive ways for telecom operators to attract more customers, according to analysts.

"There is room for mobile telecommunications firms to cut down their prices," said Yang Zemin, director of the Telecommunications Research Institute of the MII.

The MII indicated that by the end of last year, China had recruited more than 269 million mobile phone subscribers, making the nation the largest mobile telecommunications market in the world.

But there have been almost no changes to telecommunications fees over the past few years.

The source also pointed out that relaxed controls over telecommunications fees are no indications that the country is likely to adopt one-way charge mobile telecommunications.

"That is quite a complicated issue and needs more time to be put on the agenda," he said.

Insiders believe that in the short term, the one-way charge mobile service is unlikely to roll out as investors are very sensitive about this.

"I don't think one-way charging will start this year," said Chen Jinqiao, director of the China Academy of Telecommunications Research under the MII.

"However, relaxed controls over telecommunications prices will offer great benefits to the industry,'' he said.

MII minister Wang Xudong sent out a strong message early last month at the ministry's working conference that the country will develop a more optimized, market-oriented telecommunications pricing policy.

"We will continue to strengthen our supervision of the price to standardize the market," he said.

"Supervision of the telecommunications fees will be based on different kinds of telecommunications and give enterprises more independent rights to set prices," he said.

Wang also pledged to further enhance and improve the ministry's supervision on telecom inter-operability, a big headache for telecommunications where prices are also a major concern.

According to Zhang Xinzhu, director of the Centre for Planning and Competition Studies under the Chinese Academy of Social Sciences, the major problem concerning inter-operability lies in linking mobile and fixed-line networks.

Currently, inter-connections between mobile networks are free.

But transferring a mobile phone call to a fixed-line costs 0.06 yuan (US$0.007) a minute.

However, China Telecom and China Netcom calculate that it should cost 0.16 yuan (US$0.019).

"The disagreement on pricing is the main reason behind the unsatisfactory development of inter-connections and rampant violations," Zhang said.

Zhang is also a member of the expert panel founded by the MII early last year to work out inter-connection problems.

To solve the problem, the MII reaffirmed early last year that it will straighten out the telecom market by introducing a new interconnection policy later last year so as to further standardize the country's telecom industry.

The new interconnection policy will be based on the cost incurred by telecom operators to connect calls between networks.

He said the expert panel is also trying to figure out new universal service and tariff policies for the sector.

"However, it will take more time to set up network inter-connections among all the major telecom operators, given the complexity of inter-connection policy," he said.

(China Daily February 3, 2004)