Planners must take their hands off the phones

PUBLISHED : Thursday, 24 January, 2008, 12:00am
UPDATED : Thursday, 24 January, 2008, 12:00am

Modern telecommunications are a powerful force that can greatly reduce business costs and increase convenience for people. Yet, as a key strategic industry, on the mainland they are still effectively controlled by state planners. Fees and tariffs are dictated by regulators rather than commercial principles. A glaring example is the excessive roaming charge that domestic mobile-phone users have to pay when they make or receive calls in provinces or cities outside the areas in which their services are registered. Telecoms officials have announced a plan to lower roaming charges substantially. This is a welcome move, but it is not enough. Other charges and fees should be open to market forces as well.

Two state-owned telecoms giants, China Mobile and China Unicom, monopolise the roaming service, which accounts for a staggering 12 per cent and 8 per cent respectively of their total revenues. Consumer groups argue that mobile-phone companies do not provide an extra service for roaming because no additional hardware or equipment is used to connect the calls. Even the companies and state officials admit the costs incurred are minimal.

The growing trend worldwide is for roaming charges to be reduced or scrapped. For example, callers in the European Union do not pay a roaming charge for domestic calls and a regulation has been passed to drastically reduce roaming charges for calls made between EU member states. Mainland officials are aware of this trend, but they need to do more.

The Hong Kong government threw open the market for international phone calls when, after the handover, it negotiated a compensation package with the then Hongkong Telecom - since taken over and renamed PCCW - to end its monopoly. New players were let in. Charges quickly dropped to highly competitive levels, to the benefit of consumers and businesses. Today, the city enjoys some of the lowest international call rates in the world.

The mainland needs to open its telecoms market to achieve similar benefits. Costs and charges are more efficiently determined by the market than state planning.