China edges closer to landmark telecommunications law

PUBLISHED : Thursday, 10 June, 2004, 12:00am
UPDATED : Thursday, 10 June, 2004, 12:00am

After 20 years of wrangling, the final draft will clarify regulatory policy ahead of foreign competition

China is edging closer to enacting its first Telecommunication Law, which industry players hope will clarify regulatory policy and relax the government's grip on the sector.

A final draft of the law - 20 years in the making - is set for submission to the State Council this month. It will then go to the National People's Congress and could come into effect as early as the second half of next year, according to a report on an industry website associated with the Ministry of Information Industry.

The law has taken so long due to the growing complexity of the sector, shifting official views on regulation and protracted bickering by China's powerful telecoms carriers.

Several factors have combined to push the government to speed up the enactment process. For one, World Trade Organisation rules compel China to liberalise the sector for foreign investment and competition. Structural inefficiencies in the market may make it difficult for Chinese telecoms companies to compete for global capital.

Three of the country's four principal telecoms operators are now listed on the stock market - the fourth, China Netcom, may list this year - making them answerable to shareholders.

Moreover, Chinese consumers are demanding better services as technology and living standards improve.

The law will remove state pricing prerogatives. Most tariffs are set by the government at present but fierce competition among the country's four leading carriers has led to blatant tariff violations and an ongoing price war.

Other reforms will include lowering barriers of entry into value-added telecom services, and the introduction of strict interoperability rules that would allow regulators to penalise carriers if they failed to co-operate with competitors.

Another provision of the new law would create a universal services fund, to which each operator would have to contribute, that would pay for development of basic telecom services in remote areas.