 Talking
of telecom charges, many think of China Mobile and the China Unicom
competing in the charge reduction. Many consumers hold that in the
market economy, enterprises are entitled to set the charge level and
the reduction is good for consumers, so why does the government interfere?
Therefore, some think that the reform of China Telecom is not complete,
and the Ministry of the Information Industry is meddlesome and reluctant
to transfer their rights.
Regarding this question, a correspondent from "Computer World" interviewed
Mr. Zhang Chunjiang, vice minister of the Ministry of the Information
Industry.
Why does the Chinese Government Control the Telecom Charges?
Mr. Zhang Chunjiang explained, in the monopoly and competition transforming
process, the most effective and even the only medium for a government
to control the market is the price. Especially with full competition
not working on China's telecom market, the government's control and
guidance is of crucial importance.
According to Zhang Chunjiang, far from the establishment of the full
competition system, the setup of China's telecom market is only at
the initial stage. In the past, the market share owning rate of monopoly
enterprises exceeded 80%, even if prices were cut by a fairly large
margin, these powerful enterprises would not suffer losses, but newly-established
enterprises would be forced to close down. In order to help the competitive
setup and support new enterprises in this special transition period,
the government must control the price, especially the price set by
monopoly enterprises. In this way, the low prices of newly-established
enterprises will promote their development.
Zhang Chunjiang added, as long as the competitive mechanism is set
up and the market share of old enterprises is reduced to a certain
level, 60% for instance, the government will deregulate the price,
and the market will make adjustments accordingly. Though for a time,
it's unfair for the old enterprises, it's only a temporary measure
aiming at the final fair.
Improper Accounting Structure is the Main Problem
Many adjustments of China's Telecom accounting system since 1995,
especially in March and October, 1993, have lowered the general level
of telecom charges by a wide margin.
China is sober-minded in every adjustment. The main problem is the
improper structure of the telecom accounting system.
 The
cross subsidy policy has worked for many years, that is long distance
calls subsidizing local calls, international calls subsidizing domestic
calls, cities subsidizing rural areas and office calls subsidizing
resident calls. This is not unique to China.
Taking the interest of domestic consumers, especially people on medium
and low incomes, into full consideration is the biggest advantage
of the cross subsidy policy. According to statistics, in 1998, eastern
regions subsidized to the west by RMB 11.23 billion, other telecom
services subsidized by RMB 10.58 billion to local calls and telegram
businesses, and cities also subsidized rural areas considerably.
Taking the interest of domestic consumers, especially people on medium
and low incomes, into full consideration is the biggest advantage
of the cross subsidy policy. According to statistics, in 1998, eastern
regions subsidized to the west by RMB 11.23 billion, other telecom
services subsidized by RMB 10.58 billion to local calls and telegram
businesses, and cities also subsidized rural areas considerably.
Accounting Structure Problem is a Worldwide Issue
but also a difficulty for the world's open telecom market. The most
serious result is the consumption reduction. For example, high charges
for international calls in China, produce many reverse calls, i.e.
more calls are from the outside to inside, which should have been
made "inside to outside", and this in fact reduces earnings.
Consumers' final decision for any product or service depends on the
price. Not only the charges for international calls, after favorable
charges for calls made in special periods provided by the telecom
authorities, long distance calls also face a "rush hour" after 21:00
every day. Therefore, the reduction of improperly high telecom charges
will absolutely enlarge the consumption.
Telecom enterprises can afford the reduction. In the past, high charges
for international and long distance calls were caused not only by
the cross subsidy policy alone, but also by the high cost induced
from the backward technology. Nowadays, we have advanced technology,
telecom costs have been reduced considerably, and moreover, the farther
the distance, the higher the reduction rate is. Therefore, even if
there is no competition problem, charges should also be reduced. This
is the case in most countries. International charges will be cut by
the largest margin, followed by the long distance call. This is aimed
at establishing a more reasonable telecom accounting structure.
After the reduction, no subsidies will be offered for local calls,
if charges in this sector were not raised, telecom enterprises would
suffer losses. The local call business is the basic task of telecom,
and if losses last long, enterprises will have great difficulties
in developing, and besides, the popularization rate of China's local
calls is far below the world average level. |
