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Issue 7: Developing Countries - China

Politics and Technology Converge: Case Studies on the Effects of Regulatory Reform on VSAT Adoption in Developing Countries

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C: COUNTRY CASE STUDIES - CHINA

Telecommunications Regulation in China

When China joined the World Trade Organization (WTO) in December 2001, major changes were made in China's regulatory system. Becoming a most favored nation required it to grant service suppliers of WTO treatment equal to the best treatment given her by WTO member countries. China's regulatory system was also required to be more transparent. This meant the country was expected to publish all internal regulations relating to trade in services, no later than their effective date. China was obliged to ensure that its monopoly service supplier activities were consistent with the General Agreement on Trade in Services (GATS). Further, China was required to have a mechanism for dispute resolution to ensure administrative review and appeal procedures when disagreements arose in connection with market access or national treatment.

It is important to note that China's strategy in joining the WTO has been to liberalize and not privatize. Liberalization is the opening up of an industry by encouraging non-government participation in the industry, and it usually involves the expansion of the number of participants or competitors in an established market without necessarily selling out to private businesses. Normally, privatization refers to the direct transfer of ownership and control to private firms or individuals.

China was also expected to have an administrative mechanism to deal with antitrust issues with policies to prevent major suppliers from engaging in anti-competitive practices. China was obliged to have an independent regulator to ensure that telecommunications regulatory authorities were separated from, and not accountable to, any supplier of basic telecommunications services. Also, China was to ensure fair allocation of resources by providing timely and non-discriminatory allocation and use of limited telecommunications resources, such as bandwidth, frequencies and rights of way.

In 1998, China created a telecommunications regulator independent from the telecommunications industry. It did so by merging selected functions of the Ministry of Post and Telecommunications (MPT), the Ministry of Electronics Industry, and the Ministry of Radio, Film and Television into a super telecommunications regulatory authority: the Ministry of Information Industry (MII). China liberalized its telecommunications market in 1999 at the time the MII began divesting China Telecom of some of its assets, resulting in the creation of four companies, each responsible for a different telecommunications sector. The entities were China Mobile, China Unicom, China Satellite and China Telecom. As a follow up, the MII adopted the following operational policies to ensure a vibrant telecommunications industry:

  • Full competition in the domain of value-added telecommunication and information services;
  • Ordered competition in the domain of satellite and wireless mobile telecommunication services, and
  • limited competition in the domain of basic telephony services.[25]

The result was the creation of a competitive telecommunication market. The MII encouraged further market competition through its licensing system, and an unsymmetrical regulatory approach that supported the weak and restricted the strong. Two more network operators were allowed entry into the service provider market: China Netcom Corporation (CNC) and China Railway Communications Corporation (CRC).[26]

According to the China Internet Network Information Center, China's online population was 45.8 million by the end of June 2002, an increase of 12.1million or 35.9% over the previous six months. Given these growth statistics, the government's prediction of 70 million Internet users by 2005 appears within reach.

The spread of data communications has been a significant development in the Chinese market. In late 1993, nine "value-added" service segments, including radio paging, 450 MHz and 800 MHz mobile radio services, and VSAT network operations were opened. In 1996, China constructed three data communications backbones. These were ChinaPac (China Public Packet Switching Data Network), a packet-switched data network; ChinaDDN, a nationwide digital data network; and the Golden Bridge Network, a VSAT-based data communications backbone.[27]

By 2002, China had permitted private ownership within joint ventures for value-added services, such as among providers of paging services, Internet services and Internet content in the cities of Beijing, Shanghai and Guangzhou. Later these opportunities were extended to14 other cities, namely Chengdu, Chongqing, Dalian, Fuzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shenyang, Shenzhen, Taiyuan, Wuhan, Xiamen and Xian. By the end of 2003, all geographic limitations constraining ownership in the telecommunications industry were expected to be eliminated.[28]

VSAT Applications in China

China's establishment of a domestic satellite-based public communication network, with more than 70,000 satellite telephone channels, helped to solve the problem of communication in remote areas. At the same time, VSAT communication services were developing very rapidly. There are now in China 30 domestic VSAT communication service providers and 15,000 small station users, including over 6,300 two-way users. Some 80 specialized communication networks have been established by such departments as finance, meteorology, transportation, oil, water resources, civil aviation, power, public health, education and the media with over 10,000 VSAT systems covering the whole of China. Since China opened its VSAT educational TV broadcasting services, more than 30 million people have received technical, secondary school and college education and continuing education through it. And a broadband multimedia transmission network has been established on the satellite direct broadcasting (DBS) platform to provide comprehensive remote education and information technology services.[29]

VSAT Regulation in China

In line with the commitments it made to enter the World Trade Organization, in April 2002 the Chinese government updated its regulatory framework for sectors in which foreign investment is encouraged. China's Foreign Investment Catalogue was revised at the same time to increase the number of sectors in the "encouraged" category and decrease those in the "restricted" category.[31]

Business Services: China's Civil Aviation Administration has installed a VSAT network as part of its data communication network upgrade that now covers 120 cities. The goal is to modernize China's airline reservation system; the network also carries voice traffic for the agency.[31] China's biggest maker of tobacco products, Yunnan Provincial Tobacco, installed a $16 million VSAT network to link more than 2,200 manufacturing, distribution and retail locations throughout China.[32]

Jitong Network Communications (now Netcom after a merger deal in June 2003)[33] is a satellite network operator that was established in 1994 by the Ministry of Electronic Industries for the primary purpose of providing Internet protocol telephone and broadband network services.[34] Jitong was the organization that constructed the Golden Bridge Network, a VSAT-based ISDN backbone, investing $11.8 million (RMB 100 million) in the network over the 1994-1997 period. The Golden Bridge is interconnected to the national (MPT) data networks supporting a variety of datacom services, including e-mail and electronic data interchange (EDI), at speeds ranging from 144 Kbps to 2 Mbps. The overall plan is to deploy VSATs technologies to interconnect state and private information networks nationwide. This network connects users to the Internet via satellite.[35]

Social and Political Services: Very likely, the Central China Television University has more students than the rest of the world's distance-learners put together. Its estimated population ranges between 1 million and 2 million.[36]

Shanghai Telemedicinet initiated a Telemedicine Project network in September 2001. It is an IP-based two-way satellite multimedia network linking 200 hospitals throughout China. The first phase of the project connected 20 sites with a hub in Shanghai. The network carries video and data traffic that makes medical expertise resident in China's major medical centers accessible to remote medical facilities throughout the country. Medical personnel are able to perform distant review of patient records, x-rays and charts and participate in tele-video consultation and diagnosis via this new network. The telemedicinet network makes possible a high degree of interaction among dispersed staff by way of remote-to-remote video communications.[37]

Ghana | China | India | Brazil | Israel | Lessons for Africa

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