Telecommunications in China

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Telecommunications in

by Faulkner Staff

Docid: 00017383

Publication Date: 2209

Report Type: MARKET


The world’s largest in both
size and revenue, China’s telecommunications market is full of potential.
the ongoing launch of 5G (5th Generation) mobile services, a major
deployment of fiber
optics subscriber lines, and network upgrades, China continues to expand
its traditional, wireless broadband, and fixed line broadband
telecommunication services.

Report Contents:

Executive Summary

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China Telecom Company Profile

China Mobile Company Profile

China Unicom Company Brief

Telecommunications has
been earmarked as one of the pillar industries of China’s economic reform
program, leading the government to undertake a telecom development plan of
unprecedented proportion. Spectacular market growth has created an
insatiable need for investment as infrastructure continues to snake across
this vast country. Although the preference is to find ways to build most
infrastructure components itself, there is still plenty of room for joint
ventures and investment in Chinese telecommunications companies.

Chinese teledensity, once
among the world’s lowest, has advanced dramatically on all fronts, though
notably in the mobile and wireless areas. There is still a very
digital divide, however, with teledensity in cities far surpassing rural
where even reaching some villages can be a problem.

Although the major
telecommunications companies have been largely state-owned, they now have
significant amount of foreign investment. Competition continues to bring
down. Internet usage is also growing, though the government is attempting
maintain control over access to content as well as the development of the
number of Internet cafes, which provide China’s chief form of access.
technology is also becoming available, though mainly limited to urban

Competition continues to
heat up as upgrades are being made to existing 4G and wireless broadband
services, and 5G markets are coming online. China Mobile, a public
company, has acquired the lion’s share of the country’s independent mobile
telephone companies through a series of acquisitions but is facing
mounting competition from within and outside of the country.

Market Dynamics

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The People’s Republic of
China (PRC) is a communist state with a land area slightly smaller than
United States and a population of more than 1.41 billion. It is also the
world’s fastest growing economy. China’s current leader is President Xi
Jinping, who also serves as the general secretary for the Community Party
of China and the chairman of China’s Central Military Commission. He has
been in office since November 2013.

Hong Kong and Macau are special administrative regions of China with a
different government, history, and culture. They are treated separately
under China’s two-system policy, although the mainland government exerts
significant influence.

The Covid-19 pandemic has had a significant impact on China’s
telecommunications sector. Beginning in 2020, mobile device production
experienced a downturn, although manufacturing is resuming. Progress
towards 5G implementation has also resumed, in addition to upgrades to
infrastructure. Consumer spending on telecom services increased during the
pandemic due to a surge in demand for capacity and bandwidth. The nature
of telecom services as a tool for work and schooling from home continues
to be crucial in the country, and the spike in this area has seen growth
opportunities for development of new tools and increased services.

Figure 1 illustrates a map of China.

Figure 1. China

Figure 1. China

Source: CIA World Fact Book

Table 1. Snapshot of China



Country Statistics


3.7 million square miles (world’s third largest nation)


1.41 billion (world’s largest population)

 Per Capita GDP



 Landline density


 Mobile density


4G service Yes
5G service Yes

 Broadband density


 % of population online


State of Competition

 Competitive landscape

Limited competition

 Regulatory agency

Ministry of Information Industry (MII)

 Main Incumbent landline carriers

China Telecom and China Unicom

 Mobile carriers

China Telecom, China Mobile, and China Unicom

History of the Chinese Telecommunications Market

The modern Chinese
telecommunications market was created in the 1950s when the country
infrastructure that was destroyed in World War II. The first networks were
centered around Beijing and later expanded to province capitals and other
metropolitan areas. In the 1970s, the government made the expansion of the
telecommunications system a top priority and the infrastructure was
expanded to
provide service across the country. China continued to invest in the
sector throughout the 1980s and early 1990s. All telecommunications
were provided by China Telecom, which was a division of the Chinese
Ministry of
Posts and Telecommunications.

In 1994, the Chinese
government created a second telecommunications carrier called China
This new company struggled in a regulatory environment that greatly
favored the
incumbent so, in 1999, the government split China Telecom into three
China Telecom, China Mobile, and China Satcom.

China Unicom continued to
have difficulties competing with China Telecom. In 2000, the government
a third carrier called China Railcom (now known as
China Tietong). Despite these changes, China Telecom
still had 99 percent of the fixed-line market. China entered the World
Organization in 2001, and in 2002 it created another company called China
Netcom out of China Telecom’s assets in the northern part of the country.
restructuring was called the “5+1 Solution” because it created the
following carriers: China Telecom, China Netcom, China Unicom, China
China Tietong, plus China Satcom
satellite services.

In 2008, China Unicom and
China Netcom merged under the China Unicom brand name. As part of the
China Unicom sold off part of its wireless assets to China Telecom, giving
incumbent landline provider a foothold in the exploding wireless market.

Regulatory Framework

The Chinese Ministry of
Information Industry (MII; formerly the Ministry of Industry and
Information Technology [MIIT]) has regulatory oversight for the country’s
telecommunications market. MII is subject to
oversight by the State Council. Its varying responsibilities sometimes
lead to conflicting interests that prevent it from operating truly
independently. For example, as
it both regulates and has responsibility to foster ITC development, the
State Council may
apply pressure on MII to force networks to purchase Chinese-manufactured
equipment, whether or not that is the best option.

Another regulatory body,
the State Council Information Office (SCITO) was set up in August 2001 as
inter-agency body to oversee development in the IT and telecommunications
sectors and implement central government policies in these area.

The MII outlines specific
goals for the sector through a series of five year plans. The current one
includes plans for the development of 23 IT sectors as well as a series of
ongoing reforms, including:

  • Introduce full competition in the value-added telecom and information
    services sectors.
  • Introduce order in the satellite communications and wireless mobile
    communications sectors.
  • Introduce appropriate competition into the basic telecom sector. The
    state will continue to accelerate the construction of a national network
    while fostering competition in a planned manner.

The plan expects the
overall market to grow by a compound annual growth rate of 10 percent over
five year period, but in reality, certain parts of the market have grown
than expected while others only increased slightly.

Even with its tremendous growth
over the past decade, China has a considerable digital divide and there
also vast rural sectors without adequate phone service. Increasing rural
teledensity is a key government objective, and it is now largely being met
through wireless services. China Telecom has practiced east-west
cross-subsidization to accelerate development in sparsely populated areas.
Consequently, the western areas continue to develop at a rapid rate. Even
now has access to optical fiber, satellite, program-controlled switching,
cellular phones.

The three fixed-line
carriers – China Telecom, China Mobile Tietong, and China
Unicom – are all state-owned companies, but they are permitted to compete
each other across a broad range of services. China defends its
control of the telecom sector based on its need to centralize
expansion in order to achieve goals that will benefit all sectors of

Investment in Chinese telecommunications has been subject to a shifting
landscape of
regulation and real risks of significant loss due to sudden changes in the
political environment. This was compounded by restrictions on the transfer
most telecommunications technology to China
European, Japanese, and North American producers.

Foreign Ownership Laws. With accession to the WTO on
December 11, 2001, China agreed to open segments of the telecom market to
foreign investment. The government agreed to increase both the amount that
foreign entities could invest in joint ventures and the regions in which
they might invest over a period of six years. The market has been divided
into fixed-line services, mobile voice and data services, paging services,
and value-added services, which includes e-mail, voice mail, and online
information. By December 11, 2004, foreign investors were permitted to own
up to 49 percent of joint ventures offering mobile voice and data services
in 17 Chinese cities. By December 11, 2006, joint ventures were permitted
to offer mobile voice and data services without geographic restrictions.


China’s domestic and
international telephone services have become increasingly available for
use with a network that serves all of the cities and industrial centers
most of the townships. Chinese subscribers are served by inter-provincial
fiber-optic trunk lines and cellular telephone systems as well as a
satellite system with 55 earth stations in place. International service is
provided by satellite earth stations, five of which are provided by
one by Intersputnik, and one by Inmarsat, as well as
several international fiber-optic links to Japan,
Korea, Hong Kong, Russia, and Germany.

In the area of fixed-line carriers, telecom capabilities have grown
substantially in the past 20 years with an
extremely high annual growth rate at times exceeding 20 percent, though
this trend has tapered off in recent years as many new installations have
opted to skip over landlines entirely in favor of wireless communications.

coverage is based primarily on fiber optics and is supplemented by digital
microwave and satellite communications for a high-capacity, high-speed
distance transmission network. The fiber-optic backbone connects all
capitals. China has long distance connections with Japan, Korea, and Russia
and has invested in the construction of the Asia-Europe fiber-optic
cable and
the opening of the FLAG ocean floor cable.

State of the Marketplace

Fixed Line. China has been investing heavily in its
telecommunications infrastructure over the last 20 years as the number of
fixed lines that are in service grew exponentially until 2006. Since 2006
the advent and convenience of wireless access has caused the fixed-line
teledensity rate to exponentially decrease. As of 2020, China had
approximately 181 million local access lines in service, which puts the
density rate at 13 percent. In 2008, by comparison, the country had 350
million lines and the density rate was 27 percent.

Wireless. Like many countries with limited
fixed-line infrastructure, wireless technologies have become a popular way
citizens to get basic telephone service. China is now home to the world’s
largest wireless market and mobile phones outnumber landlines by a margin
of nearly 10 to 1. According to the most recent data published by the
International Telecommunications Union, China has 1.72 billion wireless
subscribers, which is a 99 percent density rate.

Fourth-generation services were introduced in 2013 and, after a few years
of explosive growth, China Daily estimated there were over 800 million 4G
subscribers in the country. Customers have been quick to sign up for these
services because China’s 3G service is much slower than similar services
offered elsewhere in the world. All three of the country’s wireless
carriers offer some sort of 4G service.

In November 2019, China’s telecom operators launched their joint 5G
network in a total of 50 cities across the country. Due to the state-run
nature of the network, customers of China Mobile, China Telecom, and China
Unicom can all access the same network for a starting fee of around $18
per month for 30GB of data. The initial installation was estimated to have
included about 12,000 base stations.

Internet. China continues to make great
strides in building out its Internet infrastructure. According to the
International Telecommunications Union, China had 825 million Internet
users as of January 2019 meaning a 62 percent penetration rate. The
density rate in rural parts of the country is less than half of what it is
in cities.

Access to China’s cable networks are being upgraded, and DSL services are
provided through the fixed line network. ADSL, FTTH, and Ethernet are
for broadband Internet access. The average Internet connection speed in
has been rated as low as 2.4Mbps, a fraction of the 30Mbps+ enjoyed by the
likes of South Korea. The
largest supplier of Internet access is China Telecom.

Market Leaders

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While much of the Chinese
telecom market has not been privatized, there are emerging leaders that
beginning to enter the market place. One factor of great importance is
despite large subscriber numbers, revenues lag due to low consumer
spending. This factor means that the companies are continuously in need
of funds to build out infrastructure, and will have difficulty competing
against gigantic well-funded foreign concerns as restrictions are lifted.

Fixed Telephone

The following companies are
market leaders in the Chinese fixed-line market:

China Telecom. China Telecom is still the dominant
player in the telecommunications market, despite two rounds of industry
reorganization that introduced competition. China Telecom has 87 million
wireline customers, and 127 million broadband customers. It provides
service to 21 provinces in southern China.

China Unicom. The Chinese government reluctantly
created China Unicom in 1994 in reaction to steady protests from several
organizations, including the China Electronics Association, the China
Telecommunications Industry Association, and the China Electronics News.
It now provides service to 10 provinces in northern China. The company has
historically struggled in a regulatory environment that greatly favored
China Telecom. As of its last published figures, the company maintains
64.2 million fixed-line telephone subscribers, 76.7 million fixed line
broadband subscribers, and 322 million mobile service subscribers.

China Mobile. Originally known as China Railcom, China
Tietong was
created in 2000 to add competition to the telecommunications market. It
renamed in 2004, and then merged with China Mobile in May 2008. Today, the
company provides local and long distance telecommunications service over a
nationwide network. It offers these services over 20 million access lines
and a
fiber-optic backbone than runs more than 123,000 kilometers. It offers
wireline broadband access to 97,000 subscribers.


China’s wireless market is
dominated by three state-owned telecommunications companies:

China Mobile. China Mobile is the largest wireless
carrier in the world,
with over 902 million customers. It is also the largest telecommunications
carrier in Asia.
The company markets its services under four brand names, depending on the
demographic it is pursuing. The primary brand name is GoTone,
but it also offers a prepaid service that is geared toward younger
called M-zone and a prepaid service for rural customers called Easytown.
In Hong Kong, China Mobile markets itself under
the Peoples brand name.

The company’s GSM network covers all 31 provinces in China and 99 percent
of the population as well as Hong Kong. Third-generation services are
available in 92 percent of all major cities in China, and the company
continues to build out its 4G and now networks. It reports that it has
over 400 million 4G customers. 5G figures are not yet known, due to the
network only having launched a few months ago.

The Chinese government
owns 74.25 percent of the company.

China Unicom. China Unicom was founded in 1999 and as
of August 2016 has 320 million customers, making it the second largest
wireless carrier in China and the sixth largest in the world. Its legacy
network runs on GSM technology, while the company’s 3G network uses
W-CDMA. In fact, China Unicom operates the largest W-CDMA network in the
world, covering 335 cities across the country and serves about 278.4
million customers.

Telefonica, a Spanish
telecommunications carrier, used to own eight percent of China Unicom,
while the Chinese government owns the rest, but the Spanish company sold
most of its ownership in China Unicom in July 2016 to pay down corporate

China Telecom. China Telecom is the smallest wireless
carrier in China, but
it still has , and 234 million mobile subscribers as of the end of 2019,
which still makes it the 13th largest carrier in the world.
China Telecom offers 4G service and limited 5G services, thanks to the
aforementioned state-sponsored launch.

China Telecom is a state-owned company.

The following table and figure provides information about the Chinese
mobile market.

Figure 2. China Wireless Market Share

Figure 2. China Wireless Market Share

Source: Carrier Data


The China Direct Broadcast
Satellite Company was created in 2008 by the merger of the Sino Satellite
Communications Company and ChinaSat. ChinaSat was created when the Chinese
government merged
several independent satellite companies in a restructuring plan. Its
business is providing backbone service to other telecommunications
although it does offer retail service to government agencies,
banks, insurance providers, and some other large businesses.

Broadband and Internet

In 1996, provisional
Internet regulations authorized four international gateway service
These have expanded through the years. China now has ten
Internet service gateway providers. These are:

  • China Science & Technology Network (CSTNET)
  • China Public Computer Network (ChinaNet)
  • China Education and Research Computer Network (CERNET)
  • China Golden Bridge Information Network (China GBN)
  • China Unicom Internet Network (UNINET)
  • China Netcom Public Internet (CNCNET)
  • China International Economic and Trade Internet Network (CIETNET)
  • China Mobile Internet Network (CMNET)
  • China Great Wall Internet Network (CGWNET)
  • China Satellite Group Internet Network (CSNET)

In addition to these
networks, China Internet Corporation (CIC), a Hong Kong-based company,
China Wide Web (CWW) and hopes to become the leading provider of on-line
services to the international business community in Asia.
will bridge the information and communications gap between businesses in
and the rest of the world. Unicom runs a network with the help of the
firm Sparkice. Other Beijing networks
Netchina Infotech, Eastnet, and ICNET.

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While the Chinese telecom
market is one of the fastest growing in the world, there are still many
problems to be overcome, especially in the area of infrastructure. 


China Telecom operates a
fiber-optic trunk transmission network of eight horizontal and eight
trunk lines covering 23 provinces.
There are now more than 1.7 million miles of fiber-optic cable nationwide
on Asynchronous Transfer Mode (ATM), Synchronous Digital Hierarchy (SDH)
Dense Wavelength Division Multiplexing (DWDM) technologies and several
submarine cable participations, in particular with the USA, Japan, Germany

China recently added seven
new access points to the world’s Internet backbone, adding to the three
points that connect through Beijing, Shanghai, and Guangzhou. To expand
Internet backbone networks, China laid over 3,000 kilometers worth of
optic cable, and invested 2.9 billion yuan (US$477
million) in its construction. Driving the project were the country’s
three state-owned telecom operators, which provide most of China’s
Internet broadband.


Mobile telecommunications is one of the fastest growing sectors of the
Chinese telecom
environment. Its wireless segment is the largest in the world, with
approximately 1.5 billion mobile subscribers.

China has now made significant progress in its efforts to roll out 4G
services, with more than half of the subscriber bases of each of the three
major wireless carriers having access to 4G services.

China sharply reduced its lag time behind Western nations between the 4G
and 5G eras, already having launched one of the largest 5G deployments on
earth in the form of its original 50-city rollout. The state-owned nature
of the three major wireless telecom companies also means that this network
can serve customers from all three, massively increasing the size of the
potential customer base for the ongoing 5G rollout.


Beginning in mid-1998, a variety of Global Mobile Personal Communication
Satellite (GMPCS) systems joined other cellular technologies in offering
telecommunications services. Demands for mobile communications in China
enhanced by China’s diverse physical terrain. In China, where the
telecommunications infrastructure is still under construction, using a
satellite network for voice and data transmission is also a way to get
the limitations of existing landline and mobile phone networks.

There are more telecom
satellites operating in the Asia/Pacific region than in any other world
with capacity utilization at under 70 percent. The China Telecom Broadcast
Satellite company (CHINASAT), an arm of the former MPT, was established in
1995. It has the ability to handle any type of domestic satellite telecom
broadcast service, and it currently operates two satellites: the
ChinaSat-6 and China-Sat-8.

These entities have built
82 dedicated VSAT networks with more than 11,000 terminals. China has
the Beijing international oceanic satellite station that will deploy up to
oceanic satellite A-type stations and 100 M-type stations. There are
simplex lines on the satellite network, and approximately 70
transmitters and 30,000 satellite earth stations have been deployed. 

Data Transmission and Multimedia

The Chinese data telecommunications network platform in general is
complete, integrated, multifunctional, multi-layer, efficient, and
national in scope. China telecom providers invested $477 million in 2014
to upgrade and expand broadband networks. The leading backbone providers
in China are GreatwallNet, MobileNet, CSTNet, ChinaGB, UniNet, CERNet,
ChinaNet, CIETNet, and CRNet.

Broadband and Internet. The number of broadband
in China is growing at an annual rate of around 34 percent and
reached 350 million in 2019. All three of the country’s major telecom
carriers have been investing in their fiber-to-the-home networks in
metropolitan markets, and the service is now available to more than 1
billion homes there.

VoIP Services. China’s VoIP services have grown
dramatically and now reach over 200 countries plus internal

Is Market Consolidation on the Horizon?

When China Unicom and China Telecom agreed to start sharing 4G networks
in early 2016, some media outlets started to speculate that this could be
the first step in an eventual merger between the two companies since China
Mobile has such a huge lead over both of them in the wireless sector.
However, it is unlikely that the government would allow that to happen.

First of all, both companies are owned by the Chinese government, which
is trying to promote competition as much as possible. Secondly, a merger
would create a very dominant carrier in the rest of the telecom market.
While the combined company would have about 37.5 percent of the wireless
market, it would own 84 percent of the broadband and landline markets.

Strategic Planning

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China is the world’s
largest telecommunications and IT market. Since 2005 telecommunications,
computer use, and Internet continues to outpace other areas of Asia with
rates slowing from 20 percent to 13 percent per year in some of these
and aggressive modernization goals, the opportunity for investment is
Although dominated by the state, the major telecoms now have significant
foreign direct investment exceeding 50 percent,

WTO accession has removed a
number of barriers to entry in this market, and further liberalization is
expected. Regulation in China, however, is often difficult, and the
government’s first impulse is toward control. It is important to remember
protectionism in China is not only by government edict, but also through
actions of the various regulatory fiefdoms and government funded
There are, and will be, continuing disputes on the definitions of services
covered under specific WTO clauses. China is also using a tactic of
its own standards and requiring foreign companies to adhere to those
– in some cases, requiring them to license or buy technology from
competitors. Protection of intellectual property in these instances is
difficult, and China’s track record in this area is not good.

In general, it is best to
enter the China market either through joint ventures or through investment
existing concerns. The market and the politics of the market can be
complex, and there are numerous pitfalls. The rewards, however, can be
given the sheer size of this market and its rate of expansion. One
recent development is that domestic and foreign trading companies in China
longer require government approval to engage in foreign trade. This clears
lot of bureaucratic problems and red tape that has made investment in
Chinese markets
particularly difficult in the past.

Government Protectionism of the Market

Protectionism in China’s
telecom sector is part of a larger nationwide sentiment, where China’s
manufacturers and service providers are given preferential treatment over
foreign counterparts. The policy reflects an effort to stimulate demand
boost China’s economic growth rate. It is also used as a means of
Chinese industry and lowering the cost of infrastructure build outs.
telecom operators have been told to make every effort to buy equipment
made in
China during any procurement process. Furthermore, joint venture
have been encouraged in equipment development areas to increase the
of locally produced telecom components.

There are several areas in
which protectionism shows up, despite WTO obligations and other agreements
open markets. First is in the definition of markets that are to be
on the WTO schedule – most recently, the definition of “value added
which are supposed to be opened as opposed to “basic services” which
remain controlled. Of particular importance here are VPNs, which are being
protected by definition and by the other strategy – which is development
and enforcement of a Chinese standard.

Another area of regulation
is the need to obtain a certificate as a “qualified equipment
supplier” when entering the China market. This is a matter of filing with
MII, and meeting the various tests of the carrier customer. Becoming
qualified for one carrier does not mean that the supplier is qualified for
There are a variety of other certificates that may need to be obtained,
depending upon the specific product.

Protectionism has eased
considerably in response to WTO obligations and global telecommunications
conditions. The lifting of government requirements for companies to gain
approval before engaging in foreign trade is likely to make things easier.
Foreign investment is being actively sought on the American stock market
companies from China Mobile to China Telecom, even during the market
although IPOs have not gone as well as initially expected. China has
itself relatively impervious to the global telecommunications downturn,
that has sparked a new wave of foreign interest. At this time, however,
companies that would invest still lack available capital themselves,
though this
is beginning to change as the global economy improves.

Foreign carriers with
projects or investment in China now include Telefonica, Vodafone,
AT&T, Japan Telecom, France Telecom and Sprint.

Internet Acceleration

The number of Internet
users in China has grown rapidly from a mere 10,000 in 1994 to over 861
at the end of 2019. Many subscribers
still use broadband DSL to access the Internet and log on for only two to
three hours
a week. Domain name registration is picking up speed, but the industry
lags more developed countries. Chinese ISPs are catching up in terms of
creativity, money, skills, and management know-how.

Chinese ISPs are suffering
losses while users complain of high fees, slow access times, and
content. Their high operational costs will only increase the Internet
access fees. Lacking venture capital funds or revenues, ISPs must look to
to expand their operations. Technology problems have also hindered the
of ISPs in China. Access speeds are far slower than in more developed
countries. However, with broadband access growing at an annual rate of
more than 79
percent, these issues are rapidly being addressed.

Internet Service Restrictions

China wants to open its
doors to the world, but open access to a free flow of information is seen
contradictory to and undermining of the values and practice of the Party
state. Many have wondered how and when Chinese authorities will limit
access to
content considered undesirable. China has further tightened
restrictions on Internet use in recent years, ordering Web surfers to
register with the police,
and closing down some Internet cafes due to alleged safety violations.
cafes have grown in popularity in the larger cities of China, being one of
few ways users can receive e-mail or surf the net anonymously. Chinese
have recently signed up to a code involving monitoring of access by their
users, but such measures are unlikely to ease all of the government’s

Once of particular
importance in China, Internet cafes, which
proliferated in urban areas, and created a control problem for the central
government. While these Internet access points had originally dwindled
somewhat to 136,000 in 2016 (down from 2013’s estimate of 150,000) but are
now once again climbing, year over year, thanks to the popularity of
online gaming in the country.

Unfortunately for its citizens, China wants to control the
content of available online information for as long as possible. In China,
censorship is enforced
by the public security bureau identifying unacceptable web sites and
blacklists of them to ISPs. Such control cannot last. As international
telecom access becomes available to more and more Chinese, there will be
little difficulty for Chinese citizens to log on to Internet access points
beyond mainland China’s control. There is now an army of censors watching
Internet access; some estimates place the numbers of the “Internet
Police” at over 30,000. Increasingly sophisticated automatic blocking
are being used, though they are thwarted by an increasingly skillful
user population.


According to MII, China has
among the lowest prices for voice wireline services, five times lower than
other developing countries. China’s cellular phone charges are even lower,
about one tenth of that in developing countries. China’s telecom charges
high in three main areas. First, China’s international calling is about
times the cost of that in the United States. Second, digital phone service
high because of the advanced equipment involved and the relatively small
of subscribers scattered across large areas. Telephone installation fees
been extremely high to compensate for the enormous construction costs in
building-out the infrastructure. Third, Internet access is very expensive.
MII has announced it will reduce prices in these three areas, despite the
losses that will accumulate, in order to promote wider use of the
services. It
has already shown that it will step in when pricing cuts get out of hand,
as it
has in the price war between China Mobile and China Unicom. 

On the other hand, dropping
prices provides lower margins for carriers, making it difficult for them
compete against oncoming foreign carriers. 

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