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Q1. Yingqiao, it’s called price liberalization for telecom services. Is it going to have a big impact on the telecom market and consumers in China?

 

A1. Well. Yes and no. Yes because this move is part of the country’s landmark¹ reform package announced late last year, when officials promised that market forces will play a greater role in the economy. But analysts² say this move won’t have a major impact on the telecom market because pricing in the sector³ is already pretty much market-driven, and the companies have generally avoided price war in the past. But they say this new policy could bring more flexible pricing and service packages, and help carriers add more low-income, rural users. And the policy sends a clear signal: the invisible hand of the market should lead the way.

 

Q2. The telecom sector seems to be one of the frontiers for these broader market reforms. What other moves have we seen in this sector?

 

A2. Well the Big Three carriers had the door to their closed shop opened, when private capital was allowed into this sector beginning last December. That’s when China began to issue licenses⁵ to virtual network operators. They have been allowed to lease mobile facilities of the "big three", and repackage them for their own customers. 19 private firms got the license⁴, including the internet giant Alibaba and online retailer⁶ JD.com. These two companies have not yet come online. But this week, a company called Telephone World became the first virtual operator in Hangzhou in east China. It’s unable to offer much of a price advantage, but the company is promising⁷ to provide better services such as in-home set-up assistance. Analysts say these 19 virtual operators could infuse the industry with new services and fresh ideas, which in turn will push the State-owned operators to reform and improve themselves.

 

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