Duopoly probe nears solution

PUBLISHED : Tuesday, 22 November, 2011, 12:00am
UPDATED : Tuesday, 22 November, 2011, 12:00am

The central government's investigation of two state-owned telecommunications giants at the centre of a duopoly scandal in internet broadband services may be headed for a settlement.

China Unicom and China Telecom, which are the targets of an anti-monopoly probe by the National Development and Reform Commission (NDRC), are expected to admit their mistakes and promise to rectify their monopolistic practices to get the investigation suspended, according to a report yesterday by Caixin Media which cited a person with knowledge of the situation.

The NDRC, the mainland's top economic planning agency, issued anti-monopoly notices to both China Unicom and China Telecom in April and decided in June the two carriers had breached the country's anti-monopoly law. It is the first case against central state-owned enterprises since the law was introduced in 2008.

The telecoms giants account for more than two-thirds of the mainland's total broadband market and allegedly used their dominant position to fix broadband prices. If convicted, they face combined fines of 8 billion yuan (HK$9.8 billion).

But the NDRC's announcement of the investigation through a China Central Television (CCTV) afternoon news programme on November 9 apparently opened up its investigation to more controversy. According to Xinhua, the announcement was made without consulting the other relevant government agencies and the companies under investigation.

The NDRC met in October with officials from the State Council Office of Legislative Affairs, the Supreme People's Court and the Ministry of Industry and Information Technology (MIIT) to discuss the probe. Officials were divided on how best to proceed and urging caution, Xinhua said.

After the NDRC went public with its anti-monopoly investigation, the MIIT-controlled People's Posts and Telecommunications News denounced the CCTV report, stirred a public outcry and shed light on a rivalry between the two agencies.

Before that situation heated up further, Chinese Economic Association chairman Yang Peifang told Caixin Media that a settlement was in order that would suspend the NDRC probe. Yang said the order of suspension would have to state the facts about two carriers' monopolistic practices, the concrete measures they would take to correct their actions, the duration of these measures and the consequences of not fully complying with their commitments, which included the continuation of the NDRC investigation.

The MIIT would need to co-ordinate specific policies and pricing.

'Beijing says these enterprises make huge profits and hails that as an achievement,' said Kevin Li Shanyou, a professor at the China Europe International Business School. 'But the more profitable they are, the worse it is for the industry because they strangle the vitality of small and medium-sized enterprises.'



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