After telecoms, who's next?

PUBLISHED : Friday, 11 November, 2011, 12:00am
UPDATED : Friday, 11 November, 2011, 12:00am


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The central government's decision to launch an anti-monopoly investigation into two of the mainland's biggest telecommunication service providers is being welcomed by the public, but analysts say it remains unclear whether Beijing will expand the investigation to more industries.

Xinhua yesterday quoted Li Yi, secretary-general of the China Mobile Internet Industry Alliance, as saying: 'If the National Development and Reform Commission (NDRC) can prompt the reduction of internet fees and help the 150 million broadband users enjoy better services, it will help accelerate growth in the number of users.'

Qiu Baochang, a legal adviser for the China Consumers' Association, was quoted in the same report as saying that authorities should also look at monopolies in other industries and that the investigation would serve as a warning to state-owned enterprises.

Official media reported on Wednesday that the NDRC, the country's main economic regulator, had started investigating two large state-owned fixed-line telecommunication companies for alleged monopolistic practices in the broadband-access sector.

The two companies - China Telecom and China Unicom - account for two-thirds of broadband-access business on the mainland. They could face fines totalling billions of yuan if they are found to have taken actions that were not in the interests of consumers.

The investigation has very positive implications for society, said He Jun, chief economist of Anbound, an independent consulting service in Beijing.

He said the investigation was prompted by 'excessive behaviour' from the two companies, which offended too many clients.

It could set an example and remind large state-owned companies of the dangers associated with trying to expand their monopolies, He said, even though they often find themselves in monopolistic positions because of government policies.

Other mainland telecommunication service providers, such as China TieTong, China Mobile and networks belonging to television networks have in the past paid high prices for the bandwidth they purchased from the two state-owned access providers now under investigation.

At times, such as between August and September of last year, poor service from the two access providers has resulted in service outages affecting up to 10 million users, according to a China National Radio report yesterday. It said that the direct cause of the NDRC's anti-monopoly investigation was complaints from companies that provide second-tier access services.

Crude oil is another industry dominated by a few state-owned giants. But analysts said breaking their monopolies would be difficult.

'In reality, that [crude oil] monopoly may be even stronger than in the telecommunication market,' said Lin Boqiang, director of Xiamen University's China Centre for Energy Economics Research.

But privately owned companies are so small and so weak in the oil industry that even though an investigation has been launched into the two state-owned giants, the smaller companies are not expected to reap much benefit from it.

Much of the mainland's production, trade and refining of crude oil is divided between the China National Petroleum Corporation, whose listed arm is PetroChina, and SinoPec Group, whose listed arm is called SinoPec Corp.

'The structure of the industry is monopolistic by its design,' Lin said. 'If the government thinks the monopoly is unsuitable, then [the government] has to take the lead to change its design.'