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Telecom regulators must do more

China Daily

China Mobile began formally implementing its new pricing initiative in Beijing yesterday, providing lower-price charging packages for local users.

The move comes on the heels of rising public scepticism about the global cellular service giant's justification to continue its high-price strategy in the capital city, while its local units have reduced the charging levels by a large margin in most other regions in recent years.

Thanks to fierce competition and less strict price control in local markets, users in many places have enjoyed a de facto one-way charging regime, meaning they hardly pay for calls received. Fees for outgoing calls are also much lower than the rate in Beijing.

The carrier's GoTone service in Beijing typically has a 50 yuan (US$6.25) per month subscription fee and costs 0.4 yuan (5 US cents) per minute for both receiving and making calls. This has been unchanged for more than a decade.

After the recent price adjustment, the cost for making a call could be 0.24 yuan (3 US cents) per minute, down 40 per cent. The fee for receiving a call could be as low as 0.02 yuan (0.25 US cents) per minute.

Many people are not satisfied, however, because they can choose only one of the two pricing packages for making and receiving calls. Many also maintain that the reduction is a promotional gimmick rather than a real price cut; if the carrier is sincere to cut the expensive communications fees, they argue, it is better to adopt a one-way charging regime, instead of the current two-way one.

An online survey by Sina.com.cn, one of the nation's top portals, shows nearly 80 per cent of more than 60,000 respondents were not satisfied with the move, and 96 per cent believe there is still room for further adjustment, as of yesterday morning.

While they are justified to doubt the new initiative by China Mobile, the move will benefit them by reducing their calling costs. The costs for mobile services in general have been going down during the years.

In the early 1990s, for example, initial subscription to a mobile phone carrier could cost more than 20,000 yuan (US$2,500). Now some operators even give the mobile phone to users for free if they subscribe to their service.

It is necessary to dig into the truth of how the price has dropped in from a decade ago and what has made that happen, so that consumers can further benefit in terms of lower prices.

Some cite the role of regulators. Of course, regulators kicked off the launch of China Unicom more than a decade ago as a competitor for China Mobile, the only mobile service provider back then.

It is fair to say the introduction of competition was a good start, but it had a limited effect since China Unicom was too weak to substantially challenge China Mobile at that time. And it is a fact that two market players risk evolving into a duopoly in the long run.

Worse, regulators have adopted a management that imposes a floor, instead of a cap, on the prices of mobile services. In other words, they have discouraged downward pricing initiatives taken by China Mobile and China Unicom branches in local markets.

As protector of State assets, understandably regulators must guard against any possible losses of State assets from price cuts of the State-controlled China Mobile and China Unicom.

Price cuts  erode profits of the operators. However, they will expand consumer base and increase revenues, ultimately leading to larger market scale and more valuable State assets, not less.

Such an initiative will also galvanize corporate managers, goading them to improve corporate governance, which is a fundamental force behind increasing profits.

The telecom carriers are not the prime force of the price changes, either. It is not out of their kindness or willingness that they choose to cut the prices. They are forced to do so to attract consumers.

In the Beijing market, for example, China Unicom has 3 million subscribers, an immense threat to China Mobile.

The Chinese economy, in a sense, is a beneficiary of competition as the monopoly of State-owned enterprises is broken. The number of State enterprises is on the decline, but the competitiveness of key State firms is growing and, more importantly, the overall strength of the Chinese economy has been enhanced enormously.

Industries that have introduced competition and broken up monopolies earlier on have fared well, while those sticking to a monopoly have been bogged down by low efficiency, high product and service charges and severe public criticism.

Regarding mobile service, regulators need to do more to encourage competition and benefit consumers.

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