At China's annual parliament in early March, Premier Li Keqiang called on telcos to "increase bandwidth and cut prices."
Just as he did last year and the year before that.
Even in a one-party state, politicians like to be seen as the consumers' friend.
In truth the continual jawboning on service and prices tells a story about the woeful state of competition. Virtually every one of China's 1.34 billion mobile subscribers and 731 million Internet users is served by just three state-owned networks.
The result is that China's average broadband download speed of 6.3 Mbit/s compares with a global average of 7 Mbit/s. It is behind every country in Asia except India and the Philippines, according to Akamai Technologies Inc.(Nasdaq: AKAM)'s State of the Internet report.
China badly needs more and better network infrastructure to help rev up its economy and meet growth in data traffic. But the government's determination that all infrastructure must remain in state hands means it is never going to catch up.
Timid attempts at reform have resulted in an under-funded and uncompetitive national cable TV network and the issue of dozens of MVNO licenses. In the two years since official launch, most MVNOs are either bleeding cash or have stopped trading.
Officials are toying with ways of bringing private investors into the game. They have run some small-scale pilots with private broadband operators and are promising to bring big Internet firms onto the share register of China Unicom.
The one thing they haven't tried is opening the $194 billion market to non-Chinese players.
This is in breach of the commitments China made upon entering the WTO in 2001. It promised to allow foreign firms to own up to 49% of a mobile or fixed-line operator by 2007. Instead it has placed in front of them a series of obstacles, such as minimum paid-in capital, to block entry. Even the value-added services (VAS) market, where foreigners were supposedly allowed to own up to 50% of companies, has remained mostly off-limits.
In what was seen as a breakthrough, US telco giant AT&T Inc. (NYSE: T) took a 25% stake in an enterprise-focused joint venture with Shanghai Telecom in 2000. That venture, now branded Unisiti, exists today as a fringe provider of VPN and MPLS services, still confined to Shanghai.
In 2006, with the Beijing Olympics on the horizon, AT&T's then-group president Forest Miller called on Beijing to "ease the barriers for entry."
But the only change since is that the issues have widened. It's no longer about only basic and VAS telecom services, but also cloud and data centers. Just last week, 50 US firms wrote to the Chinese ambassador calling for a more open cloud services market.
One mystery is that foreign telcos have never pushed hard for WTO compliance in the way that other industries have. US and European telcos have never felt shy about lobbying their own governments. Perhaps trade diplomats didn't believe telecom was as important as other industries, like the automotive and financial sectors, or perhaps they gave it up as a lost cause.
In any case, Chinese operators don't face any of the same restrictions when they cross the Pacific.
In contrast with foreign telcos, which cannot deploy in China and can serve enterprise services only with a local partner, China Mobile International is effortlessly scaling up its global reach and services. It has ten existing or planned points of presence in the US, where it has the right to serve its customers directly.
Chinese firms are starting to own infrastructure in foreign markets, too. Last year a Chinese ISP, Dr Peng, acquired a small California-based telco, Giggle Fiber, for $15 million. Dr Peng isn't allowed to compete directly against China Telecom Corp. Ltd. (NYSE: CHA) but can compete against AT&T and Verizon Communications Inc. (NYSE: VZ).
Now that the global trade game is being upended, this history matters. President Donald Trump has talked plenty about China's alleged unfair trade practices. And when it comes to telecom services, he's actually right. China hasn't met its WTO commitments at all.
It's not just Trump. There's no shortage of trade professionals who also believe that China is getting the better of trade and investment relations with the rest of the world, even as it positions itself as the leading free trade advocate.
These issues will be near the top of the agenda when Trump goes head to head with Xi Jinping, China's president, during a US-China summit in Florida early next month.
One idea that has gained traction is the principle of reciprocity. If the other party fails to meet its market commitments, it loses reciprocal rights until it complies. US Commerce Secretary Wilbur Ross has reportedly embraced this concept.
It's not a fix for every problem, but after 15 years of zero progress it's probably time for a fresh approach.
It may even help deliver the faster speeds and lower prices that Chinese consumers desperately crave.
Light Reading Robert Clark |
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