Despite the trauma affecting many Southeast Asian countries, China is persisting with plans to stimulate economic growth through infrastructure projects. As part of this plan, regional authorities have' been given backing to forge ahead with measures to develop domestic and international telecoms capabilities.
And, because fixed-line installations can be costly and time-consuming to install, wireless communications in general, and cellular in particular, have come to the fore. Each month a tranche of lucrative equipment contracts is secured by major international telecoms providers.
A new operator
While China has a long way to go before challenging the West in terms of mobile phone use, cellular growth rates are streets ahead of more mature markets. The Ministry of Post and Telecommunications (MPT) estimated that there were 13 million cellular-subscribers by the end of 1997, double the number of just one year previously. The International Telecommunication Union predicts that cellular subscribers will have risen from 6.85 million in 1996 to 30 million by 2000 ?an increase from 0.56 to 2.39 per 100 head of population.
Officially, there are only two operators ?the state-owned China Telecom (including its Hong Kong arm CTHK) and Unicorn (owned by a variety of ministries). A third, Great Wall, is due to make its debut in the very near future. To add to the competitive environment, the provincial and city telecoms authorities which have been established to operate cellular networks, do so with a large degree of autonomy. This is despite the fact that they are notionally owned by the central government. Take, for instance, the operators' freedom to choose between the various technical standards (see map).
One perceived brake on cellular growth is the continued ban on foreign ownership because telecoms are regarded as a strategic resource. The situation has been clouded somewhat by the change in Hong Kong's sovereignty and the new opportunities this presents to players in the SAR and on the rnainland. But in any case, an indirect form of investment has been taking place, since major suppliers have tended to help fund and manage the expansion of China's net-works in return for a share of the profits.
At the outset of the market reforms initiated in China in the late 1970s and early 1980s, cellular was viewed as a replacement for difficult-to-obtain wireline services. During this phase, analogue networks operating on the AMPS and TACS standards (see key) were selected because they were proven and technologically straightforward to install and support.
Given traffic problems and the demand for more sophisticated services, the main-land is taking the digital upgrade path blazed by Hong Kong a few years ago. In a remark-ably short time, China has developed a taste for Short Message Service (SMS) and dual-band GSM is being used to alleviate capacity problems in heavy traffic areas. At the same time. handset manufacturers have striven to meet the demand for local features such as Chinese language displays.
However, there is still an important role for cellular in bringing basic telephony to areas beyond the reach of the existing infrastructure and at reasonable cost. Specialist companies such as Celcore, and increasingly the larger corporations as well, are addressing this market with the intention of providing cost-effective solutions to low population density areas. This aim matches the Chinese government's intention of revitalising rural economies and stemming the mass exodus to overcrowded cities.
While the Global System for Mobile communication (GSM) digital standard is ideal for centres of population where traffic is heavy, Celcore's regional vice president for China, Leo Zhang, says the type of infra-structure that is used in cities such as Beijing and Shanghai would be very expensive to install elsewhere. Given that the majority of the Chinese population still lives in the countryside or in remote regions, this poses quite a problem to authorities and operators faced with the task of raising tele-density from the current level of only 8.1 lines per 100 head of population.
The price of handsets
Celcore has come up with a solution of a distributed network architecture with smaller local switches and base stations and a more cost efficient transmission backhaul to the public network, possibly via a satellite link.
Another factor which has proved a bather to the proliferation of cellular has been the high cost of handsets. Tariffs are controlled by the authorities and this means that despite a lowering of manufacturing costs arising from the creation of local joint venture manufacturing initiatives, phone prices have remained in the hundreds of US dollars. Since they are limited in the tariffs they can levy, operators cannot afford to subsidise phones and offer them at the give-away prices seen in the West.
The launch of pre-paid cellular services could help to make cellular more afford-able. Under this set up, a customer pre-pays for a certain value of calls and has a smart card credited accordingly. The main advantage is ensuring that people do not run up bills they cannot afford, but it alsomeans that several people can use their cards in conjunction with a single phone, thereby cutting the initial costs of becoming a cellular subscriber.
It seems that whatever the obstacles in the path of cellular growth in China, a way will be found to circumvent them.
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