Chinese telcos face probe

11 November 2011

BEIJING: China Telecom and China Unicom are to be probed by the government over claims they are reducing competitiveness in the nation's broadband market.

Announcing the investigation, the National Development and Reform Commission (NDRC) indicated possible "price discrimination" on the part of the firms.

This involved China Telecom and China Unicom "raising prices for companies that are competing with them, while giving discounted prices to non-competitors," Li Qing, a deputy director at the NDRC, said.

Between them, China Telecom and China Unicom share over two-thirds of the nation's broadband market, according to Qing.

Under current Chinese law, if the state investigation reveals monopolistic practices, the firms could face fines of up to 10% of their revenues from broadband services. Between the two, these revenues total 80bn yuan, or $12.6bn, annually.

A lack of competition in the Chinese broadband market could be an obstacle to faster connection speeds.

According to a report from the Advisory Committee for State Informatization, cited by the Xinhua news agency, China is in 71st place in the world in terms of broadband speed, while costs are up to four times higher than those in mature markets in Europe and North America.

Speaking to the Financial Times, Duncan Clark, the Beijing chairman of insights firm BDA, said the probe could represent "an attempt by the NDRC to assert their authority in pricing issues".

Meanwhile, Liu Zheng at Analysys International, a market research firm, said the investigation would serve as a "warning" for the two firms but would not lead to any "market reshuffle".

Data sourced from Financial Times/Xinhua/Wall Street Journal; additional content by Warc staff