Telecommunications Industry in The People's Republic of China - Historical Overview

Historical Overview

Before 1994, the Ministry of Posts and Telecommunications (MTP) provided telecom services through its operational arm, China Telecom. Pressured by other ministries and dissenting customers, the Chinese government officially started the telecom industry reforms in 1994 by introducing a new competitor: China Unicom. China Unicom could hardly compete with the giant China Telecom.

In 1998, due to a ministerial reorganization, the MTP was replaced by the new Ministry of Information Industry (MII). The MII took two large scale reshuffling actions targeting the inefficient state-monopoly.

In 1999 the first restructuring split China Telecom’s business into thee parts (fixed-line, mobile and satellite). China Mobile and China Satcom were created to run, respectively, the mobile and satellite sectors but China Telecom continued to be a monopoly of fixed-line services.

The second restructuring in 2002 split China Telecom geographically into North and South: China Telecom - North kept 30% of the network resources and formed China Netcom (CNC) and 70% of the resources were retained by China Telecom - South or simply the new China Telecom. Parallel to this double fission, the telecommunications division of the Ministry of Railways (MOR) established a new actor in 2000: China TieTong.

These resources consisted of a 2,200,000 km long nation-wide optical network, based on Asynchronous Transfer Mode (ATM), Synchronous Digital Hierarchy (SDH) and Dense Wavelength Division Multiplexing (DWDM) technologies and several submarine cables, in particular with the USA, Japan, Germany and Russia.

To sum up, in the last decade the Chinese telecom industry has changed from a state-run monopolistic structure to state-run oligopolistic structure.

In May 2008, MII, NDRC and Minister of Finance announced the third restructuring proposal and also launched three 3G licenses. With the rapid development and serious competition, Chinese telecom operators face challenges on shrinking landline users, too rapid growth on mobile business, low profit services and great gaps among the carriers. The third revolution was to combine six main telecom operators into three, aiming of developing 3G business and full telecom services, and avoiding monopolistic and over competition.