Telecommnication Services Industry Open Environment and Access
Policy of China
Xi Yang
1
, Tingjie Lu
2
, Xia Chen
3
, Yang Zhang
4
and Juyong Huang
5
123
School of Economics and Management, Beijing University of Posts and Telecommunications, Beijing, 100876, China
4
China Mobile Communication Company, Beijing, 100876, China
5
Benxi Televison University. Liaoning, 117000, China
Keywords: Access Policy；Access Policy；China Telecom Industry; Telecommunication Services.
Abstract: The telecom industry of China is facing a shortage of innovation and the rapid decline of value-added
services is declining rapidly in a sort of embarrassing situation. In order to ensure the healthy and orderly
development of the Information Communication Technology (ICT) industry of China, liberalization of the
telecommunication industry is imperative. From the development process of telecommunication industry of
countries all over the world, It is apparent that the countries with more mature information and
communication industries have experienced a change from government monopoly to market liberalization,
within their own regulatory policies. This paper find out the problems faced by China's telecommunications
industry, and give some approaches to reform.
1 INTRODUCTION
Currently, the global information and
communication industry is ushering in a new wave
of innovation. The pace of innovation and
technology integration is accelerating rapidly. As
such, the traditional telecom industry is facing a key
transition from IT to DT. The telecom industry of
China is facing a shortage of innovation and the
rapid decline of value-added services is declining
rapidly in a sort of embarrassing situation. In the
development process of China's telecom industry
during the last 20 years, the inherent contradiction
between regulatory policies and industry
development has not been resolved. (Cisco,
2012)This created a situation with limited incentives
and high barriers to entry, causing the industry to be
unable to nurture variety in the telecommunication
ecosystem and resulting in further decrease of
innovation and vitality. At the same time, Internet
companies, such as Baidu, Tencent and Alibaba, are
occupying the traditional value-added telecom
services market quickly and further accelerating the
reconstruction of China's telecom ecosystem. In
order to ensure the healthy and orderly development
of the Information Communication Technology
(ICT) industry of China, liberalization of the
telecommunication industry is imperative.
2 THE PROCESS OF OPENING
THE TELECOMMUNICATIONS
INDUSTRY ABROAD
2.1 The process of opening the
telecommunications industry in
France
The initial stage of the opening (1991-1997)
France Telecom industry realized separation
between government and enterprises in 1991,
Subsequently, in 1993, France Telecom was
introduced joint-stock reform, The new
Telecommunications Act of 1996 provides for the
state-owned France Telecom's capital controls
cannot be less than 51%, This means that France
Telecom opening with state-controlled.
Establishment of an independent
telecommunications regulatory institution in 1997,
At the same time, France Telecom established
‘Atlas’, ‘Global one’ with Germany and the United
States respectively. In November, 23.2% of the
341
Yang X., Huang J., Zhang Y., Chen X. and Lu T.
Telecommnication Services Industry Open Environment and Access Policy of China.
DOI: 10.5220/0006450103410345
In ISME 2016 - Information Science and Management Engineering IV (ISME 2016), pages 341-345
ISBN: 978-989-758-208-0
Copyright
c
 2016 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
341

capital of France Telecom listed in Paris and New
York, the rest is held by French nation.
Completely open stage (1998-2002)
France telecom services market is completely
opened in January 1998. In June, the French have 16
operator companies. France Telecom focused on the
development of overseas business in this period. In
2000, the French telecommunications market growth
is slow. The total debt of the biggest France
Telecom operator reached 69.7 billion euros in 2002.
Government abolished "the state must hold more
than 50% of France Telecom shares" which was
enacted in 1990. France Telecom has taken the pace
of transformation, enacting ‘FT Ambition2005’
strategy at the end of 2002.
Strategic transformation stage（2005-2013）
In 2005, France Telecom began to transform the
Group in the world of mobile, broadband,
convergence services and business services to an
unified brand "Orange", cancelled two well-known
brands -----the original Equant (the global integrated
communications strategy operators) and Wanadoo
(data network operators ) . Next strategy and the
business transformation achieved significant
success, Release Orange 2012 plan to simplify the
customer experience, realize the integration that
"content can be everywhere" (three-screen
integration: television, computers, mobile phones).
By the end of 2005 to 2006, France Telecom offers a
series of new services for home and business users.
New services and network business reassembled
according to user needs, break the characteristics of
the network technology features design by
traditional operators according to the network
telecommunication business.
2.2 The process of opening the
telecommunications industry of
British
Reforming of the British telecommunications
industry can be divided into three stages.the initial
stage of the reforming (1980-1983).
The early 1980s, the British postal and
telecommunications unified by the British Post
Office monopoly, Cable & Wireless (C & W)
operate overseas telecommunications services
generally. In 1981, the British government adopted
the "British Telecommunications Act" which will
separate the postal services and telecommunications
services, established British Telecom (BT) and the
Royal Mail Company (Royal Mail) respectively. In
November 1981, C & W began to be privatized
remould by the British Government, Mercury
Communications was established by C & W of
shares control. In 1982, Mercury Communications
was given telecom licenses by the government, was
allowed to set up a second fixed telecommunications
network. Mercury Communications began to
compete with BT in the UK. (Wheatley, 1986).
Duopoly competition period (1983-1991)
In 1983, officially, the British government allows
only BT and Mercury Communications to build and
operate rigid network and basic telecommunications
services. Since then, the British telecommunications
industry began a "duopoly" period of the
telecommunications industry. In 1985, Cellnet and
Racal-Vodafone was given a cellular mobile
network operating license. The British
telecommunications industry began a "duopoly"
period of the mobile telecommunications industry.
In 1987, the value-added data services (VADS) and
international leased circuits resale business is open.
Simple Resale voice services has been approved in
1989.
Perfect Competition Period (1991-present)
In 1991, the British government enacted the
"Competition and Choice. "Duopoly" situation is
officially over. Since then, the British domestic
telecommunications market has been opened aborad.
1992-1995, 75 among 86 regional cable television
network with the right to operate independently,
began to operate telephone services. Since 2001,
telecommunications companies are allowed to
operate radio and television service all across the
country. In 1993, the government began issuing
public telecommunications company operating
license (PTO) (More than 16 companies have issued
to the national or regional license) (Tang Shoulian,
2001). The United Kingdom achieved separation of
network and service through the establishment of
Openreach to manage the local access lines of its
parent company British Telecom (BT), which marks
the end of BT’s monopoly over local lines.
2.3 The process of opening the
telecommunications industry of
Singapore
Opening of the Singapore telecommunications
industry can be divided into three stages:
Stage One：
• former Telecommunications Authority
Singapore (TAS) was split into TAS, SingTel and
Singapore Post.
• SingTel was privatized as an independent listed
company
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Stage two：
• In 2000, telecommunications liberalization was
completed 15 years ahead of time.
• Singapore's telecommunications market has
formed operating pattern with a three major
operators as well as dozens of new service operators.
Stage three:
• Singapore Telecommunications was completely
open to receiving direct or indirect assets of foreign
companies to reach the stage of full liberalization.
• The common feature of open foreign
telecommunications
From the development process of
telecommunication industry of countries all over the
world, It is apparent that the countries with more
mature information and communication industries
have experienced a change from government
monopoly to market liberalization, within their own
regulatory policies. For example, while reducing
entry requirements, the US utilizes its governance
structure advantages to establish an effective
supervision system. On one hand, the United States
amended the Telecommunications Act in 1996 and
2003, which marks the beginning of full competition
and liberalization.On the other hand, the regulatory
system trinity of the US Federal Communications
Commission (FCC), state Public Utilities
Commissions and the judicial system makes
regulatory matters and responsibility clear,
strengthening regulatory power effectively.
(Chen,1985) The UK telecommunication industry
realized the liberalization "soft landing" through a
two-stage reform strategy. In the first stage, the
United Kingdom realizes the privatization of the
telecommunication industry business through
shareholding system reform, easing regulation,
concession bidding, contracting, removing some
telecommunication services license requirements
and other measures. In the second stage, the United
Kingdom achieved separation of network and
service through the establishment of Openreach to
manage the local access lines of its parent company
British Telecom (BT), which marks the end of BT’s
monopoly over local lines. In 1991 France
implemented the separation of government and
industry, then issued the new Telecommunication
Act, established independent regulatory agencies,
and accelerated the privatization process of state-
owned telecommunication companies to achieve the
full liberalization of the French telecommunication
industry in 1998. Singapore liberalized the
telecommunication industry at an accelerated pace
by splitting up telecommunication regulatory
agencies, and lifting regulations banning private and
foreign capital. However, after liberalization, while
enjoying healthy development, most countries have
continually faced vicious competition, new
monopolies, national information security risks and
other issues(Fink, 2002).
3 CHINA'S TELECOM REFORM
PROCESS
Unlike other countries, the liberalization of China's
telecom industry has gone through three stages. The
first stage was complete monopoly. During 1984 to
1992, China's telecom industry was under a planned
economy, financial resource allocation was of
secondary importance, and the Ministry of Posts and
Telecommunications was both the service operator
and the regulatory agency, resulting in strict entry
requirements and high consumer costs. Second was
the limited competition stage (Lam, 2008). Since
1993, China has taken a series of measures in
industry management. Firstly, China’s telecom
industry realized separation between government
and enterprises, and the Ministry of Information
Industry (later the Ministry of Industry and
Information Technology) was set up to manage the
telecommunication industry. Secondly, in order to
strengthen regulations, China amended
Telecommunication Management Regulations and
Telecommunication Business Classifications
multiple times, streamlining the approval process,
reducing the entry threshold gradually(Yu, 2004).
Business entities have been split and merged
multiple times, maintaining the telecommunication
industry in a competitive state. The last stage is an
increased degree of liberalization. With the release
of the 2015 version of the Telecommunication
Business Classification, China’s telecommunication
industry will be further liberalized, and virtual
operators and other emerging companies will grow
rapidly.
4 PROBLEMS FACED BY CHINA
4.1 Policy issues
4.1.1 The main investment failed to diversify
Telecommunications services related to national
sovereignty and security. It must be controlled by the
State-owned. This not only limit the liberalization of
the telecommunications services market, but also
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lead to the problem of incentive incompatibility
among layers of shareholders, management and
employees.
4.1.2 The evaluation of telecommunications
services
In DT era, the evaluation of telecommunications
services by the Government consider the business
benefits of the industry rather than social benefits. Li
Keqiang mentioned Internet plus for 8 times in his
Report on the Work of the Government 2016. which
indicates that China's economic development need
the Internet's role in the real economy to improve
social productivity, during a long period of time
from the Thirteenth Five-Year Plan till the future.
However, China's telecommunications services have
not met the needs of the times DT, The specific
performance is to evaluate the business benefits,
ignoring the multiplier effect that the
communications industry as a national economic
infrastructure sectors. It has not been recognized
generally by society that Basic telecommunications
industry service has brought social benefits,
accelerated development of the Internet and
increased in employment, The social consequences
of managing defects make the corporate execution
layer to pursue short-term benefits. In the meantime,
it leads to the problems of capacity decline in
enterprise innovation and the outflow of talent.
Besides, communications enterprise cause the
destruction of industrial ecology through reverse
auction during equipment procurement which get
profits from the upstream equipment manufacturers
only for the sake of short-term enterprises benefits.
4.2 Business issues
4.2.1 Incentive incompatibility
Incentive incompatibility between the client
(SASAC and the user) and agents. Lack of effective
incentive and restraint mechanisms. There is a
contradiction in the principal target, not only
requires operators to keep state-owned assets growth
but also required to reduce prices as well as to speed
up. This is a paradox for agents.
The principal assess agents based on KPI. By
consider KPI evaluation indicators and their
promotion, In the final product market, agents prefer
to use the method which are more familiar, simple,
and effective, and which can maximize short-term
benefits of enterprises with competitive prices,
rather than to meet the long-term needs of wider
industry market. Agents as a rational man, in this
situation, is likely to choose inaction or finding
another job. This means that operators will face a
serious brain drain, which directly affects the
development of operators
4.2.2 Competitive capacity
Although external competition between operators is
highly competitive, mechanism of competition does
not transfer to the enterprise to form effective
competitive capacity. Superficially , Competition is
fierce between operator. Operators did not create an
effective Encouragement and Restriction mechanism
of competition inside.operators enterprise's internal
incentives have a series of problems, such as Salary
system leads to a serious brain drain, Constraint
mechanisms leading employees’ rent-seeking or
inaction,Internal processes complex and fixed
mechanism which is difficult to respond quickly to
customer needs and market changes. Operators can
not deal with the impact from Internet companies
effectively.
5. APPROACHES TO REFORM
5.1 Networks and services are
separated as soon as possible
With the application and development of the Internet
Web1.0 and Web2.0 technology, Network Services
is showing features as ‘decentralized, autonomous,
platform’. This feature results directly in tendency
that telecommunications business and network
services are to be separated. Solve the problem of
information security and network development,
access and deregulation, state-owned enterprises
benefit the public benefits, which has been exist on
the Chinese telecommunications industry reform and
opening up the strategic issues
5.2 Three network integration
Accelerate the process of three network integration,
To break the limit between telecommunications
networks, computer networks and cable television
networks, these three categories of companies were
allowed to enter each other's market mutually.
Conversion of funds between the three networks, the
industrial structure is adjusted. Development of the
telecommunications industry has been further
promoted.
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5.3 Policy Adjustment
Not too much government intervention in the
market.Government's assessment of economic
performance combined with assessment of both KPI
assessment and social performance; Design a new
system makes the government, consumers,
businesses incentive compatibility.
ACKNOWLEDGEMENT
This Paper was supported by Major Program of the
National Social Science Foundation of China under
Grant No.15ZDB154.
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