Phone trouble ties ministry in knot

WITH Beijing residents having to wait up to a year for a telephone and then having to pay a 5,000 yuan (about HK$6,700) installation fee, it might seem that a little competition in the telecommunications industry would be good for business.

The Ministry of Posts and Telecommunications agrees - but when it says ''a little competition'' that is exactly what it means.

The ministry is adamant that it will not give up its monopoly on basic telephone services, but is willing to consider farming out subsidiary services such as paging, electronic mail and data networking.

Greater competition will also be allowed in the manufacturing of telecommunications equipment, it says, but that is as far as it is willing to go.

The Ministry of Posts and Telecommunications has been under enormous pressure to liberalise its monopoly, both from other ministries wanting to get into the lucrative telecoms market and from an increasing number of senior government leaders, such as Vice-premier Zhu Rongji, who are pushing hard for greater competition and the deregulation of government business.

The ministry, known in government circles as ''little brother'', has so far put up a valiant fight as David against the Goliath of a consortium of powerful ministries that wants to establish a second public network.

However, many observers believe it is only a matter of time before the telecoms monopoly is broken.

The odds may be stacked against little brother, but the ministry does have a strong case for maintaining its monopoly.

The ministry argues that only countries with a highly developed telephone network, such as the United States and Japan, have attempted to break their monopolies, and even they have encountered numerous problems.

China's network is still in the early stages of development, with only 1.63 phones for every 100 people, and the ministry argues that to break up the system now or allow outside competition would cause chaos.

''Investors would simply concentrate on the economically developed areas and this would cause harm to the overall development of telecommunications,'' said Mr Xu Shanyan, director of the ministry's general office.

''The telecoms industry needs overall government planning,'' he added. China did not have a telecommunications law which could regulate competition, so any attempt to introduce more competition now would be a recipe for anarchy, Mr Xu said.

Work on drafting such a law has been under way for about a year, but the issue is so complex and so many vested interests are involved that little progress has been made.

Many independent analysts do not expect to see a telecoms law on the statute book for at least a couple of years.

The ministry also says national security has to be considered. Telecommunications are a vital national interest and no country would allow a foreign country to gain control of its telephone network.

Mr Xu also makes the point that greater competition at present is simply impractical.

Unless the second-network consortium digs up half the cities in China and installs its own domestic lines, it will have to find a way of connecting to the existing public network.

But why should the owner of that network - the ministry - consider granting a rival access to its lines? Many analysts say an option better than a second network would be to maintain the monopoly but force the ministry to operate a more efficient service.

Corporatising the ministry's telecommunications arm is one answer, but it remains to be seen how autonomous the new corporation will be.

The longer the situation continues, the greater the pressure will be to open the industry up. It is clearly in the ministry's interests to reform itself before someone else does it.