By Guo Hongchao (郭宏超), editor of the EO market section
Nation, page 15
Issue No. 544, Nov 14, 2011
Translated by Zhu Na
Original article: [Chinese]

CCTV’s “News 30 Minutes” took people by surprise last week with its recent report that China Unicom and China Telecom were the subjects of an anti-monopoly investigation by the National Development and Reform Commission.

The initial findings of the investigators suggest that the two companies abused their dominant market positions to set prices for internet access. The anti-monopoly office’s spokesman said that both companies could be fined billions of yuan if the claims are confirmed.

NDRC's price supervision office and the anti-monopoly office are finally trying to apply the anti-monopoly law, and this may be a good start, but questions remain about whether it will succeed. Since it was implemented three years ago, anti-monopoly law hasn’t been applied to any of the state’s major centrally-owned enterprises. At least now, this investigation has shown that large state-owned enterprises have no immunity.

By announcing its probe into the two telecoms giants before it is complete, the NDRC might be able to use public opinion to help break the monopoly. If the commission really can take decisive action against the two companies, it will be a major step forward for competition law.

It will also help consumer; there are 70 countries with average broadband speeds faster than China’s, according to a report by the government’s advisory committee for informatization. China’s average speeds are less than a tenth of those in the U.S., U.K., Japan and other developed countries, but consumers here pay at least three times more for their connections.

It’s clear therefore that China Unicom and China Telecom are harming the development of China’s telecom industry.

So far though, we’re still waiting for a response from the other state organs concerned - the State-owned Assets Supervision and Administration Commission (SASAC), the Ministry of Industry and Information Technology.

In fact, if the investigation into centrally-owned enterprises finds the two telecoms firms guilty, then more questions will follow. Shouldn’t the state-controlled giants in oil, electricity, railways, broadcasting, and communications also be investigated?

In the case of strategic resources, of course the country needs control over them, but that’s not a justification for monopolies or an excuse for barring market competition, particularly for consumer services. For example, in the telecommunication industry, where the backbone is already controlled by the state, the government ought to encourage more competition between providers of broadband internet access and better service for customers.

Therefore, anti-monopoly policy shouldn’t deal mainly with punishments, but instead with maintaining competition on the market. This would force companies in dominant positions to reconsider their business practices and bring China’s anti-monopoly closer to other countries. Unless the NDRC's investigation is broadened beyond price fixing and wins the backing of other departments, all this talk of competition will prove to be nothing but hot air.