(By You Yunting) According to media reports, the officer in charge of the China National Development and Reform Commission (the “NDRC”) in a recent statement was quoted as saying that the NDRC had always, and would continue to supervise the monopoly issues in relation to broadband access provided by China Telecom and China Unicom, and that the NDRC suffered from various reactions when it announced its investigation into China Telecom and China Unicom at the end of 2011. He also said that currently the 10G of bandwidth provided by China Telecom and China Unicom had been extended to 100G, and that it would still urge China Telecom and China Unicom to rectify this issue within a period of three to five years.
His speeches revealed the difficulties of the NDRC’s work. When compared with the milk powder enterprises instantly dropping the price of milk upon punishment by the NDRC, the difference in regard to investigation into the monopoly over Internet broadband is that the NDRC’s investigation suffered from various rebounds and necessary rectification, culminating in the need for a period of three to five years before China Telecom and China Unicom are able to address the broadband monopoly issue.
Legally, for the NDRC it is hard to investigate the monopoly of broadband access services. Broadband access services are divided into 3 parts: broadband access service for residents and companies, webpage broadband access service and service of telecommunication operators’ interconnection. In each individual market of the above-mentioned services, at least one provider has a dominant role in the market, i.e., a single provider or operator controls more than fifty percent of market shares.
Article 17 of the Anti-Monopoly Law stipulates detailed practices of abuse of said position where an operator who holds a dominant market position and is therefore prohibited from engaging in. This provision primarily includes the excessively high price of broadband Internet service for residents and companies, as well as of Internet Data Centers’ (the “IDC”) broadband access fees, unreasonable network balancing payments, and, huge obstacles caused by telecommunication operators’ interconnection and other practices of abuse of their dominant market position.
Therefore, where the broadband internet access price, webpage broadband access service price and network balancing price in any place exceeds the market price and cannot make interconnections, if the NDRC investigates local operators who hold a dominant market position, such investigations could primarily prohibit the practices of abuse of a dominant market position.
However, there is a wide gap between theory and practice. It should be noted that the NDRC has some difficulty in voicing its opinions and duties, primarily due to national telecommunications policy being a sensitive point for the NDRC. Due to the natural monopoly position of telecommunication companies and protections from the responsible department of industry, undoubtedly supervisors familiar with the Anti-Monopoly Law (as an imperial carte blanche) will be provided excuses by the supervised.
On one hand, according to national industrial policy, basic telecommunication services, such as network broadband access services, shall be under the operation of state-owned companies. Those telecommunication companies have two relevant departments: the Ministry of Industry and Information Technology (the “MIIT”) and the State-owned Assets Supervision and Administration Commission. These two departments are, at least in terms of administrative power and clout, equally ranked with that of the NDRC. This may be the “rebound” described by the NDRC officer.
On the other hand, the State Council, the superior department of the NDRC, established a policy concerning China’s telecommunications reforms: vertical territorial allocation of the telecommunication market. This policy makes a natural monopolist in each segment market for the telecommunication industry. Thus far, in the relevant market of network broadband access services, China Union and China Telecom hold a dominant market position in northern China and southern China, respectively.
China’s policy is to build up a natural dominant market position for China Union and China Telecom. Under these circumstances, how can the NDRC use market economy’ principles of openness, fairness and impartiality to defend the general companies and residents who need telecommunication services?
We believe, the thought of vertical territorial allocation of telecommunication market controlled by the state-owned companies comes from the theory that the telecommunication industry, concerned with state sovereignty, shall be under state control. However, such a monopoly is a double-edged sword. On one hand, it makes it very convenient for the government to heavily regulate the telecommunications industry; on the other hand, it is a disservice to consumers and Chinese citizens and residents, as well as to telecommunications-related businesses. Due to this monopoly, service is comparatively poor, the quality of service provided is at a relatively low standard, and to add insult to injury, the price for these services is rather high. No competition exists within this market, because the government’s policy has assured that the northern and southern markets would be dominated by one of two key monopolists. This in turn deals a heavy blow to the healthy development of China’s Internet industry, and arguably the entire telecommunications industry.
It can be argued that there is not an inherent contradiction between state control and competition. The key point is to introduce an appropriate competitor. If the responsible department of industry could keep the entry open to allow China’s Mobile’s Tietong Telecom and broadcast network of the TV and Radio industrial system to enter the broadband access services market, and, at the same time, if the NDRC and Administration for Industry and Commerce can positively utilize the Anti-Monopoly Law to crack down on abusive practices of the dominant market position caused by broadband access operators in telecommunication field who hold said position, previous actions in the broadband access field could not only maintain state control but also introduce competition so as to invigorate the market. But solving this problem needs the promotion and support of the highest levels of government and eradicates the sectarianism against some responsible department of industry.
Lawyer Contacts
You Yunting：86-21-52134918 youyunting@debund.com/yytbest@gmail.com
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