Telecommunication Services in China:Implications from WTO Membership（2）


Dr.Shi Jingxia


V. Regulatory Reform of China’s Telecommunication Service

As widely recognized, an operational and efficient regulatory framework is conducive to maintaining a healthy and orderly telecommunication service market. China’s WTO accession also obliges it to adhere to the pro-competition regulatory principles inscribed in the Reference Paper.[121] Nonetheless, while technological advances combined with opening policy have catalyzed reform progress, China’s regulatory environment of telecommunication service is still at its infant stage of development. Consequently, in addition to the imperative steps of market opening, there is much more for China to be done in designing and implementing the regulatory framework to introduce effective competition.[122] Using the six principles listed in the Reference Paper as reference, this section will expound what China should do to foster a pro-competitive regulatory framework for basic telecommunication.

A. Competitive safeguards

For a good market-oriented policy to succeed, what does matter lies in the fact that the market is really open to competition.[123] In the meantime, meaningful telecommunication liberalization will not be achieved without strengthened pro-competitive market structure.[124] Therefore, regulation in telecommunication services, as in goods, arises essentially from the need to enhance market competition and remedy market failure, mainly attributable to the problems of natural monopoly.[125] Competitive safeguards are incorporated in the Reference Paper to serve this function by preventing major suppliers from engaging in or perpetuating anti-competitive practices. Furthermore, Members are required to take appropriate measures to prohibit such practices as unreasonable cross subsidization, abusing information from competitors and withholding of technical and commercially relevant information about essential service.[126] In effect, these provisions are imbued with the tenets of anti-monopoly of telecommunication markets. #p#分页标题#e#

As a reflection of China’s WTO commitments, Regulation on Telecommunication prohibits the telecommunication operators from restricting in any forms the users to opt for services provided by other operators, unreasonable cross-subsidization and providing service at prices below cost in order to squeeze out their competitors.[127] It is evident that these prohibited acts do not completely coincide with the anti-competitive practices defined in the Reference Paper, but they are similar when it comes to the issue of cross-subsidization.[128] China has been facing with cross-subsidization for a long time. A clear example is that MII retains a considerable degree of control over the price range for basic telecommunication, which were set administratively rather than determined by the markets. Consequently, this structure of prices is sustained through cross-subsidization within public monopolies or through government financial support. [129]Despite a justification with the concern of exasperating of existing disparities in this regard, the Reference Paper poses a threat towards these arrangements.[130]

In addition, China has obligation to prevent the major suppliers from abusing market position to curb competition.[131] Here presents an issue over how to define the major supplier. The Reference Paper defines ‘a major supplier’ as a supplier, which has the ability to materially affect the terms of participation (having regard to price and supply) in the relevant market for basic telecommunications services as a result of control over essential facilities or use of its position in the market.[132] This definition may be a little vague. Can it be read to include foreign operators who are major suppliers in their own home country and measures can thus be directed at them, impeding market entry? [133]Regulation on Telecommunication use the concept of ‘dominant telecommunication operators’, which refers to the telecommunication operators that control necessary basic telecommunication facilities and account for a large proportion of the market, thus able to influence substantially the market access of other operators.[134] It seems that the conditions of being a ‘dominant telecommunication operators’ are a little stricter than that of being a ‘major supplier’. In this sense, most of basic telecommunication operators in China can be deemed as ‘major supplier’ and are supposed to assume the corresponding responsibilities. #p#分页标题#e#

The Reference Paper contains no safeguard rules for governments when adopting the regulatory framework, which might lead to a failure in implementing effective action for preventing anti-competitive measures by domestic suppliers with market power.[135] Although Regulation on Telecommunication tasks the department in charge of information industry under the State Council with breaking down the monopolies of major operators,[136] the implementation of this task in China may be complicated and is unlikely to accomplish for some time. On the one hand, persuading the dominant interest groups to concede control is more fraught with difficulty.[137] On the other hand, the prevailing regulatory stance in the basic telecommunication for a long period has been managed competition rather than complete competition. Even to some extent, domestic regulation has been manipulated due to various considerations to protect incumbent operators from being exposed to full competition.[138] These issues need a comprehensive treatment in which the first priority shall be given to breaking down the government-protected monopoly.

B. Interconnection

Interconnection between networks of various operators is essential for a telecommunication industry to work effectively.[139] The experience of various countries further illustrates the crucial role of fair and transparent interconnection policy in ensuring competition.[140]

Interconnection principles arguably constitute the core of the Reference Paper. The section on interconnection covers all types of telecommunication service,[141] although the obligation of members are limited to those services scheduled in their WTO commitments.[142] Certain common elements required by an efficient interconnection, enumerated in the Reference Paper, reflect general principles adopted domestically in this regard. These elements include the ensuring of interconnection with a major supplier at any technically feasible point in the network,[143] public availability of the procedures for interconnection negotiations,[144] transparency of interconnection arrangements[145] and dispute resolution of interconnection.[146] In particular, interconnection shall be ensured on the basis of non-discrimination, timing, transparency, reasonable and cost-based charges.[147] The Reference Paper does suggest some baseline guidance as to the establishment of an efficient interconnection policy, although it fails to specify a costing basis, the degree to which networks have to be unbundled and whether a regulator can enforce an interconnection agreement.[148] #p#分页标题#e#

With the gradual introduction of competition and a multi-operator system in China’s telecommunication service market, interconnection has become a focus of attention in the new environment.[149] Moreover, given that the telecommunication service traditionally remains state-owned and lacks competition, it is more challenging for China to establish effective interconnection policy.[150]

China Unicom started to compete with CT in 1994 and experienced an uphill battle in its early years. Finally the MPT laid down provisional technical specifications and settlement methods and two operators reached a preliminary agreement on interconnection.[151] But the enforcement of this agreement presented a lot of problems. With more operators entering the market, the scope of competition has been expanded and the issue of interconnection has become more complex, which called for comprehensive regulations and operational mechanisms to adapt the changed environment.[152]

In 1997, MII issued Temporary Regulation on Telecommunications Network Interconnection, which did not include certain basic concepts highlighted in the Reference Paper such as “sufficiently unbundling service”.[153] This Regulation was substituted by another Regulation, Provisions on the Management of Interconnection between Public Telecommunication Networks.[154] Comprising of 49 articles, this specific Regulation contains the interconnection obligations of telecommunication operators, setting-up of interconnection points and the apportionment and settlement of interconnection expenses, interconnection agreement and project construction, time limit and supervision for interconnection, network management following interconnection and coordination and disposition of interconnection disputes.[155] At the same time, MII also issued Measures on the Settlement of Call Charges between Telecommunication Networks[156]and Measures on the Settlement of Disputes over Interconnection between Telecommunication Networks[157] and other relevant Regulations governing interconnection. Measures on the Settlement of Disputes over Interconnection between Telecommunication Networks #p#分页标题#e#

In a higher level, Regulation on Telecommunications has a special section on interconnection,[158] embracing the provisions emphasized in the Reference Paper. For instance, it requires major operators not to refuse other operators’ request for interconnection to public networks.[159] The major operators shall, on the basis of non-discrimination and transparency, formulate the interconnection rules including the procedure, time limit, and catalogue of unbundled networks elements.[160] More significantly, Meanwhile, if the two parties fail to reach an agreement on interconnection within certain period of time, interconnection may even be made compulsorily by department in charge on the basis of hearing.[161]

Based on these interrelated Regulations, the operators signed interconnection agreements, and a policy framework for the regulation of interconnection is thus in shape. Nevertheless, the implementation of interconnection seems to indicate the real effect of these regulations remains rather limited.[162] The actual situation is worse than what can be expected with the increased competition brought about by the CT’s split.[163] Some telecommunication operators set obstacles on purpose, interfere with and prevent the interconnection by taking illegal measures. And there even occurs such incidents as cutting cables, destroying telecommunication facilities, which have seriously affected the provision of telecommunication service and heavily disturbed market order.[164] As widely pointed out, interconnection has become the bottleneck of restricting further expansion of China’s telecommunication market.[165] It can be expected that the interconnection environment will be more complicated as China’s WTO membership introduces more and more operators to join in telecommunication competition.

The unsatisfactory current status can be attributable to numerous reasons, such as the telecommunication operators’ lack of law awareness, no effective supervision measures, etc.[166] In order to effectively solve interconnection issue, China had to adopt tougher administrative measures, including establishing the system on monitoring the quality of interconnection, compulsory reporting by the telecommunication operators, personal liabilities of operators’ leadership, etc.[167] The Supreme Court, at the request of MII, is currently preparing for a judicial interpretation on telecommunication interconnection, by which those destroying interconnection will be subject to severe criminal punishments.[168] However, given the most fundamental reason roots in the failure of existing settlement measures and standards to act an effective stimulation for operators to provide interconnection, the key to solve the issue shall rely on fair economic means.[169] Keeping this in mind, there is a pressing need for MII to formulate more reasonable settlement price between the networks on the ground of comprehensive balance. #p#分页标题#e#

C. Universal Service

While competition delivers telecommunication service “abundance”, it spreads it unequally. Supply of telecommunication services based on full competition may have an adverse effect on the poor.[170] Consequently, universal service has been incorporated in many regulatory regimes as a crucial public policy to ensure the access to telecommunication service in rural and economically disadvantaged regions.[171] As the level of telecommunication development is pretty uneven, the implementation of universal service can be diversified across the spectrum of WTO members.[172] Recognizing the characteristics of public telecommunications in various jurisdictions, the Reference Paper allows the Member States to define the type of universal service obligation they wish to maintain so long as they are administered in a transparent, non-discriminatory and competitively neutral way.[173] However, putting universal service into practice poses difficult challenges for China in view of its unique national conditions. This section will explore how this significant theme can be taken up in China during its post-WTO era.

1. Toward A Pragmatic Framework of USO in China
While economic reform in recent decades has been successful in raising living standards for a considerable share of the population, China still remain one of the most digitally divided countries in the world.[174] Without exception, China heeds much attention to the issue of universal service in recent years.[175] On the one hand, under the context of the recent ambitious strategy of Big Western Development, universal service will greatly improve the level of informationalization,[176] so as to lay the foundation for China’s leapfrog development.[177] On the other hand, WTO membership will invite more extensive competition, whereas competition itself cannot offer China a solution to its digital divide. As pointed out, within a competitive environment, telecommunication operators in pursuit of profit-maximizing are inclined to enter the most profitable regions and markets.[178] On account of the potential conflict of interests between operators and the public, China shall not rely exclusively on market mechanisms in promoting its tele-density.[179] #p#分页标题#e#

In effect, in order to provide affordable access to telecommunication service for information have-nots, China has to figure out how to utilize competition to maximize access while minimizing information inequalities.[180] China is one of the most-populated developing countries characterized by the huge geographical region, rough natural conditions, and scanty populations in vast rural areas, as well as serious imbalance among various regions across the country in terms of telecommunication development. Although the telecommunication industry has experienced great improvement in general, the development is quite unbalanced.[181] These characteristics determine that a universal service policy in a bid to bridge its digital divide shall be specifically tailored to China’s characteristics.

Take the definition of universal service as an example.[182] The universal services may be defined in an essentially similar way in different jurisdictions, featuring the accessibility of telecommunication service and affordability by the whole public.[183] But there exist substantial disparities as to the specific scope and goal of universal service. The scope of universal service obligation in developed countries is generally wider than in developing countries.[184] Under the definition provided by International Telecommunication Union (ITU), universal services imply the situation where every household has installed a telephone, while universal access, which is the predecessor of universal services, means everyone may access to telephone services within a reasonable distance in any regions.[185] It is feasible for China to set universal access as the goal of universal service obligation at this stage.

2. Universal Service Fund as Financing Mechanism

In an economic sense, the provision of universal service incurs net costs for the provider, which ought to be appropriately compensated by some funding. The funding for universal service obligation can come from a number of sources, mainly cross-subsidies and universal service fund.[186] #p#分页标题#e#

The cross-subsidy method is traditionally used in monopoly era and fundamentally at odds with competition. When competition gradually becomes extensively, cross-subsidy is in peril of being squeezed out of the rate structure.[187] The current support system in China largely relies on the government’s favorable policy and internal cross-subsidy of dominant operator.[188] Although under the Reference Paper, it is permissible for China to define its own terms of universal service,[189] the current system is not the best way to achieve the goal of universal services due to its incompatibility with competition and notorious low efficiency.

China needs to adopt a more economically sensible policy option to attain universal service. Universal service fund, also known as a high-cost fund, is more in line with the principles of fairness, transparency, and competition-compatible, and is more operational in reality.[190] Accordingly, while competition can foster affordability by reducing costs and prices in profitable areas, a “universal service fund” can assist in ensuring that basic services are provided to unprofitable rural areas.[191] Actually early in 1998, MII began to plan universal service fund to subsidize telecommunication networks, especially in rural areas. But this plan failed to come out due to the different opinions between MII and Ministry of Finance (MOF) as to the collection basis, operational standards, etc.[192] Under this circumstances, MII had to take a makeshift, imposing on every operator with the universal service obligation in the assigned area in early 2004.[193] But in the long run, increased competition coupled with a universal service fund, adopted by more and more countries and becomes the dominant support devise for implementing universal service policy,[194] may provide China with the best opportunity for achieving the goal of universal service.

There are several associated issues to be solved as well. One is the selection of provider of universal service. CT was once the only incumbent operator with mandatory obligation of providing universal service. However, along with the increased competition and the following split, there is no incentive for CT to provide universal services any more as rural telephony services are in heavy losses.[195] Regulations on Telecommunication require all telecommunication operators to fulfill their mandatory obligation with regard to universal service.[196] Thus the fund shall be financed by sub-charges levied on all telecommunication operators, regardless of whether they are domestic or foreign investment operators.[197] But the implementing rules have not been ironed out yet. #p#分页标题#e#

MII may, through appointment or tender, determine the substantive obligations of telecommunications services providers with regard to universal service.[198] Given CT is already mandated to provide telecommunication services for a long time, it is likely that this role of CT will be continued.[199] However, in the long run, the best way of choosing the provider of universal service may be the auction mechanism.

Universal service fund provides compensation for universal service provider, calculated on the basis of net cost, usually equal to the difference between the revenues from providing universal services and the cost incurred.[200] According to Regulation on Telecommunication, the compensation policies for universal service shall be formulated by MII together with the MOF and the State Planning Commission and subsequently approved by the State Council.[201]

In addition, the universal service mechanism shall fit into China’s evolving regulatory framework. It is advised that China may use the US model as reference, which requires the establishment of a specified body to manage universal service.[202] Under this model, MII acts as decision-maker and supervisor of regulations while the management agency of universal services implements the relevant policies made by MII. Nevertheless, given it takes time to install ready the institutions, MII shall play dual roles in foreseeable future. The last, as far as the technological instruments to pursue universal service in China are concerned, the wireless service has been suggested as the most preferred choice.[203]

It is easy to understand that only with clarified legal framework can universal service obligation be smoothly implemented and regulatory uncertainties reduced.[204] Hopefully, the forthcoming Telecommunication Law will iron out more specifics on universal service mechanism.[205]

D. Public Availability of Licensing Criteria

As licensing mechanism for telecommunication operators can also be employed as barriers to market access, the Reference Paper requires that the criteria, term, and conditions for licensing, where applicable, must be publicly available and where an application is denied, reasons must be provided on request.[206] This requirement is valuable both from an administrative fairness point of view and to create certainty for investors.[207] #p#分页标题#e#
Like many other countries, China requires that all telecommunication service providers must obtain a license before it can legitimately provide any kind of services. Any organization or individual that does not obtain a telecommunication business license shall not be engaged in telecommunication service.[208] The licensing criteria of telecommunication service, however, are fiercely criticized both nationally and internationally, which exemplifies the gap between WTO’s transparency requirement and Chinese practice.[209] In effect, although the transparency has become the underpinning of international trade policy, it generally presents challenges to China’s legal system as China traditionally lacks the domestic publication requirements in its government.[210] Especially, China lacks over a long time a set of established and transparent criteria in awarding the telecommunication license, even for the national operators. These traits do not mesh well with WTO generally.[211]

WTO accession greatly advances recent strides in China’s improvement towards legal transparency regarding licensing criteria of telecommunication service. For one thing, license issuance guidelines for basic telecommunication and value-added service are spelled out in the Regulations on Telecommunication.[212] In the next place, MII also issued Administrative Provisions on the License of Telecommunication Business to address more detailed procedures.[213] According to these provisions, China generally sets up a licensing system for telecommunication business according to the different categories of business, i.e., basic telecommunication and value-added telecommunication.[214] Being engaged in different business is subject to different requirements and approval at different level. The conditions for engaging in basic telecommunication as a whole are much stricter than that of value-added telecommunication.[215] The criteria of eligibility for a license, examination procedure, a time limit for decisions to be made on licensing application and reasons for denial to be made available have also been set.[216] #p#分页标题#e#

Foreign entrants and their new ventures intending to conduct basic telecommunication business need to go through these licensing procedure, which will remain at the decision of MII. Prior to the enactment of Regulations on Telecommunication, most of the licensing decisions were made at a level even higher than MPT or MII, such as the State Council or the State Programming and Development Committee (SPDC). Moreover, these decisions are made more politically than economically and the process accordingly lacks transparency and is full of uncertainty.[217] Presently, under Regulations on Telecommunication, the license for telecommunication business can be obtained from MII or the telecommunications administrative authorities at a provisional level in accordance with their different scope and territory of business.[218] In issuing the license, the impact on national security, network safety, sustainability of telecom resources, environmental protection and competition in the telecom market need to be considered.[219] The pending issue here is the implementing regulations and details as to how MII will evaluate these factors in decision-making.

Apart from the Chinese law that is highly generalized and lacks procedural guidelines,[220] there is limited governmental oversight of local legislative and administrative action, causing rampant local protectionism and no effective transparency. In this sense, China must streamline the multiplayered complexity that plagues its current legal system.[221] In any event, the transparency of licensing criteria is a relatively new thing for China, and it still has a long way to achieve the goal of real transparency.

E. Independent Telecommunication Regulator

The essence of free trade is that governments should reduce interventions in economic activities.[222] For the telecommunication service, potential conflict of interest might occur when the regulator is also the major operator. This makes an institutional, non-aligned regulator essential to the implementation and maintenance of a competitive market.[223] The Reference Paper addresses the issue of regulatory autonomy and calls for the creation of an independent regulator, which is separate from, and not accountable to, any supplier of basic telecommunications services. The decisions of and the procedures used by regulators shall be impartial with respect to all market participants.[224] #p#分页标题#e#

In China, the creation of an independent regulator became slow and time-consuming due to various sensitive institutional and political considerations, which has already invited fierce criticism from outside world.[225] It can be seen that by far two vital measures have been taken to ensure the independence of regulator.

The first step was the separation of regulator from operators. Prior to 1998, telecommunication services were not only regulated but also operated directly under the control of MPT. To separate the regulatory body from the operators, China took a stride towards bureaucratic reform, merging three Ministries to create MII as a distinct regulator in 1998.[226] Though the Regulation on Telecommunication interestingly failed to mention MII by name when referring to the ‘telecommunication regulator’, MII is in fact recognized as the watchdog of telecommunication industry in China.[227] Thus, at least on paper there has already been the separation of MII from operators as a result of telecommunication restructuring launched by MII after it began to play its role.

The second step is discharging MII from the duty on state-owned assets. In essence, if MII is to be the independent regulator the Reference Paper requires, it must entirely sever its connection with all operators.[228] It seems to be an unlikely occurrence in the short term owing to a major problem existing in the historically intimate relationship between regulator and operators in China.[229] As a basic fact, almost all of current operators are state-owned enterprises (SOEs) and MII is charged with the responsibility to protect and enhance the value of state-owned assets in those SOEs.[230] The key management staff of these operators is usually nominated by MII. As a result, how objective and impartial MII can be is still questioned. To cure this problem, the telecommunication industry recently experienced another momentous reform—transforming the supervision of telecommunication state-owned assets from MII into the State-owned Assets Supervision and Administration Commission (SASAC), which was established in 2003.[231] This is a crucial measure for MII to become more independent and dedicated to its regulatory role. #p#分页标题#e#

In spite of above measures, there shall be further steps to be taken to ensure a truly independent regulator. The current problem is, on the one hand, MII is seemingly the sole regulator, but most of the essential and regulatory decisions like the rounds of institutional restructuring and the final approval of licenses for basic telecommunication services were actually made by the higher authority, like SPDC and even the State Council.[232] The entire regulation procedure, the individual competence and authority of each regulator are unavoidably either vague or non-transparent. On the other hand, there exists a lengthy debate on the convergence of telephony, cable TV and Internet as a result of technological advancement.[233] In particular, MII and the Bureau of Radio, Film and TV (BRFT) have been contending for power and profits in recent years.[234] The non-interoperability of different ministries, incompatible standards and systems, and lengthy delays due to cross-ownership or cross-regulatory disputes keeps an independent and unified regulator far away from the realistic needs.

Having spun off the telecommunication operations arm in recent years, China is currently working on the system reforms of telecommunication regulator.[235] There is much speculation as whether MII will maintain its control, whether there should be a regulatory agency under the State Council, or will it be transformed into a true regulatory agency.[236] One scenario is to eliminate MII altogether within 5 years and turn the regulation of telecommunication and information network over to a new agency with the similar function of US Federal Communication Commission (FCC).[237] The latest Draft Telecommunication Law creates such a new agency—Telecommunication Supervision and Regulatory Commission, which may replace MII to regulate telecommunication industry.[238] But whether this Commission is to have full regulatory power as to the whole communication sector and can tackle the issue of convergence remains unclear. #p#分页标题#e#

It is certain that it will take time for any kind of truly independent regulator to emerge, given the coordination of interests and redistribution of powers among different ministries and departments could be very sensitive and difficult. In any event, the decision on how the sector should be regulated shall be made at a higher level and in a more coordinated way.

F. Allocation and Use of Scarce Resource

Within a competitive market, achievement of the benefits from telecommunication liberalization is dependent in part, however, on fair and effective sharing of certain scarce or finite natural resources.[239] At the same time, under the ‘global commons’ theory, inefficiencies of management and allocation of these resources in one jurisdiction can potentially spill over into others infringing on the overall effectiveness of the resource for all.[240] The Reference Paper includes commitments to allocate and use of scarce resources such as frequencies, numbers and rights of way in an objective, timely, transparent, and non-discriminatory manner.[241] In the meanwhile, the current state of allocated frequency bands will be made publicly available, except those detailed identification of frequencies allocated for specific government uses.[242]

In addition to Regulations on Telecommunication, MII also issued a series of administrative rules with regard to scarce resources.[243] In General, China establishes a system for the unified panning, centralized administration, rational allocation and paid utilization of the telecommunication resources.[244] Telecommunication resources refer to such limited resources as radio frequencies, orbital slots and numbering space through which telecommunication functions are realized.[245] It shall be noted that the rights of way are not clearly mentioned here. In practice, it seems that the rights of way currently do not fall into the ambit of scarce resources. This gives rise to some practical difficulties particularly when it comes to the construction of telecommunication infrastructure in such bottleneck loci as bridges, tunnels, commercial districts, etc.[246] It is strongly advised that the Telecommunication Law should include the rights of way in scarce resources.[247] #p#分页标题#e#

The allocation and use of scarce resources requires an equitable mechanism, appropriate to a competitive market and open to public scrutiny and understandable by contenders for such resources.[248] The Reference Paper remains silent on the concrete allocation measures so long as they are transparent, objective, timely and non-discriminatory.[249] According to Regulation on Telecommunication, the allocation of telecommunication resources shall take the planning, use and expected service capacity of such resources into consideration. The allocation can be done either through direct assignment or through auction.[250] But even though the auction approach is utterly transparent and can effectively utilize the spectrum, it is widely recognized that auction is not acceptable as the approach to the distribution of the limited spectrum resources for broadband wireless access and 3G, in light of the actual economic power and national realities of China.[251] Recently, MII took the bidding approach in the allocation of 3.5GHz broadband wireless access as the entry point and won applause.[252] There are some concerns on whether the allocation and use of scarce resources can be utilized as de facto quotas, which accordingly blocks the service provision by foreign entrants.[253] China shall be very wary of not resorting to discretionary methods in exploring more suitable measures for the allocation of scarce resources.

VI. Conclusion

With the WTO accession as driving force, China has taken a series of reform measures of strategic significance to telecommunications market in recent years, which successfully transformed itself into the largest telecommunications network as far as the subscribers are concerned.[254] At the same time, telecommunication network is migrating to a new generation of broadband multimedia information network and overall network capability and technological level are in the front rank in the world. China will continue to give priority to telecommunication service as it moves towards a more advanced, knowledge-based economy.[255] The market liberalization and competition required by the WTO membership further makes the prospect of Chinese telecommunication development more attractive than ever. #p#分页标题#e#

Much change is anticipated in this sector over the next few years: more market players from home and abroad; more abundant competition instead of simple price wars; more credible and transparent market access criteria and regulating framework; and a more independent and efficient regulating agency, etc. However, it shall be realized that these change cannot accomplish in an action due to the tension between China’s domestic policy reforms and WTO’s aspirations and the demand for China to liberalize its telecommunication service. On the one hand, those ingrained habits and traditional notions are difficult to get rid even though the telecommunication reform will inevitably touch vested interests to the quick. This is particularly illustrated by the conflicts of interests among various ministries and departments when it comes to the reform of regulatory framework.

On the other hand, as a huge developing country, China needs to strike a balance between the seemingly opposing goals of economic liberalization and social stability. The key challenge hereinto is to ensure that the market opening and regulatory reform and will maximize the benefits for the Chinese economy as well as achieve equity goals.[256] From a practical perspective, both market opening of telecommunication service and establishment of a pro-competitive regulating framework are dependent upon the fundamental background of political and economic developments in China. The implementation of WTO telecommunication rules in the spirit they have been created in turn relies on the institutional stance of the domestic regulation. In this sense, without the proper institution installed ready, the WTO membership may have some impact on China’s telecommunication service in the short term, but would be rather limited in the long run.[257]

China undoubtedly wants to make the most of telecommunication liberalization that it is now committed to undertake and then bring regulatory framework in line with the requirements of the Reference Paper. Given China will take time to adapt itself to the new competition environment designed by the WTO telecommunication rules, it is predictable that China will continue to follow the effectively proven strategy of gradual reform even during its foreseeable post-WTO era.[258] In any event, it is certain that the process of China’s telecommunication liberalization will be greatly accelerated with the WTO membership as catalyst. #p#分页标题#e#



【Exprss】

[121]WTO: Report of Working Party on the Accession of China, Part II—Schedule of Specific Commitments on Services and List of Article II MFN Exemptions, supra note 8 (China undertakes the obligations contained in the Reference Paper in Annex I attached hereto as additional commitments to telecommunication service).
[122] See Kang & Feng, supra note 49, 1178.
[123] See Estella & Nagle, supra note 34, 248.
[124] See Cowhey & Klimenko, supra note 35, 6.
[125] See Mattoo, supra note 9, 326.
[126] According to the Reference Paper, WTO members are committed to preventing anti-competitive practices in telecommunication by instituting, “competitive safeguards.” The Reference Paper describes the following practices as anti-competitive: (a) engaging in anti-competitive cross-subsidization; (b) using information obtained from competitors with anti-competitive results; (c) not making available to other services suppliers on a timely basis technical information about essential facilities and commercially relevant information which are necessary for them to provide services. See Reference Paper, supra note 10, section 1 (competitive safeguards).
[127] Id, article 42.
[128] Not all cross-subsidization is anti-competitive, but it can easily become so in monopoly markets when the profits from exclusive services are used to undercut competitors’ prices in non-exclusive service sectors. See Bronckers Larouche, Telecommunication Services and the World Trade Organization, 31(3) Journal of World Trade (1997), 27.
[129] China to Open Up Its Basic Telecommunication Sector, Asia Port Daily News, September 19, 2002, available at 2002 WL 24350966.
[130] See Mattoo, supra note 9, 328.
[131] See Reference Paper, supra note 10, section 1 (competitive safeguards).
[132] Id, definitions. Also in this section, ‘essential facilities’ is defined as facilities of a public telecommunications (a) are exclusively or predominantly provided by a single or limited number of suppliers; transport network or service that and (b) cannot feasibly be economically or technically substituted in order to provide a service. #p#分页标题#e#
[133] See Fredebeul-Krein & Freytag, supra note 48, 628-29.
[134] Regulation on Telecommunication, supra note 61, article 17.
[135] See Fredebeul-Krein & Freytag, supra note 133, 628-29.
[136] Regulation on Telecommunication, supra note 61, article 4 (the surveillance and control of the sector should abide by the following principles: the separation of administrative departments and enterprises; the break down of monopolies and the encouragement of competition, transparency, fairness and just practice).
[137] See Mattoo, supra note 9, 327.
[138] See Miltion Mueller & Peter Lovelock, The WTO and China’s Ban on Foreign Investment in Telecommunication Services: A Game Theoretic Analysis, 24 Telecom. Pol’y, 743.
[139] For a basic account of interconnection issues, see ITU: Trends in Telecommunication Reform, 2000-2001, Interconnection Regulation. See also W. H. Melody, Interconnection: the Cornerstone of Competition, in Telecom Reform: Principles, Policies and Regulatory Practice (Lyngby, Denmark: Den Private Ingeniorfond, Technical University of Denmark, 1997).
[140] See Fredebeul-Krein & Freytag, supra note 133, 629.
[141] Reference Paper, supra note 10, para.2.1.
[142] Id.
[143] Id, para. 2.2.
[144] Id, para. 2.3.
[145] Id, para. 2.4.
[146] Id, para. 2.5.
[147] Id, para. 2.
[148] See Fredebeul-Krein & Freytag, supra note 133, 630.
[149] See e.g., International Telecommunication Union: ITU-D Study Groups, Interconnection and Interoperability among Networks in China, Document 1/142-E, 2002, at http://www.itu.int/ITU-D/study_groups/SGP_1998-2002/SG1/Documents/2000/142e.doc, p.1.
[150] See Tracy Cohen, supra note 23, 728.
[151] See e.g., ITU-D Study Groups, supra note 149, 2-3.
[152] Id.,3.
[153] Temporary Regulation on Telecommunication Network Interconnection, issued by the Ministry of Information Industry of the PEC on September 7, 1997, effective as of the same date. #p#分页标题#e#
[154] Provisions on the Management of Interconnection Between Public Telecommunication Networks, supra note 66.
[155] Id.
[156] Measures on the Settlement of Call Charges between Telecommunication Networks, supra note 66.
[157] Measures on the Settlement of Disputes over Interconnection between Telecommunication Networks, supra note 66.
[158] Regulation on Telecommunication, supra note 65, section 2, Telecommunication Interconnection.
[159] Id., article 17.
[160] Id., article 18.
[161] Id.,, article 20.
[162] See Kang Rui & Feng Xiaoju, supra note 49, 1180-81.
[163] See Guo Dongying, Can One Mountain Have Two Tigers?—Interconnection Breaks Out between CT and China Netcom, Economic Watch (Jingji Guancha Bao), June 29, 2003.
[164] See Circular of the General Office of the State Council, supra note 71.
[165] See e.g., Zou Yiping, Interconnection is the Most Typical Tight Corner for Telecommunication Regulation, Communication Information (Tongxun Xinxi Bao), March 6, 2003. See also Tracy Cohen, supra note 23, 740.
[166]See e.g., Circular of the General Office of the State Council, supra note 71.
[167] Id.
[168] See Liu Qi, The Judicial Interpretation on Telecommunication Interconnection will Come Out, Jinghua Times (Jinghua Shibao), February 23, 2004.
[169] See Fu Xuming, Analysis on the Ultimate of Hindering Interconnection Lies in the Economic Benefits, China Economic Times (Zhongguo Jingji Shibao), May 28, 2003.
[170] See Markus Krajewski, Public Services and Trade Liberalization: Mapping the Legal Framework, 6(2) JIEL, 341, 345. This is often cited as a reason for the persistence of public monopolies. For example, in history, the term “universal service” was once the justification used by AT&T for promoting an interconnection policy that would lead to a single monopoly network. See Thomas G. Krattenmaker, Telecommunications Law and Policy, (2nd ed. 1998), 350-51.
[171] See Mattoo, supra note 9, 334. #p#分页标题#e#
[172] Where the policy is instituted (developing or developed country), the level and origin of contribution to it (firms or subscribers), and the model chosen by government to effect it (monopoly or multiple providers) will inform the degree to which it is valued. See Laura B. Sherman, supra note 35, 367-369.
[173] Reference Paper, supra note 10, para.3.
[174] See Mattoo, supra note 9, 325.
[175] 10th Five-Year Plan, supra note 54, para.3.6.7 (Establishing universal service contribution and government subsidizing mechanism).
[176] China commenced to carry out the Big Western Development Plan in 2000, involving 12 provisions and 367 million people in the Western China. With the aim of ensuring the overall development of Chinese economy, this plan is claimed to be the largest-scale and toughest plan in the human history. See Shi Ying & Cui Qingxin, China Focus: Continuing to Push Forward the Strategy of Big Western Development, Xinhua Net, April 1, 2004.
[177] See Tao Lin, et al., Universal Service Obligation in China’s Telecom Sector: Situations, Reforms, and Implementations, World Bank Technical Assistance, No. C070100-S-TCL-RF-CN, 80.
[178] Generally, the cost of providing service per subscriber is lower in more densely populated areas. In a competitive environment, profit-motivated telecommunications operators would be forced to charge high rates in rural areas. In addition, telecommunication operators will focus on serving high-usage businesses in dense urban areas (the “profitable cream” of telecommunication customers), not rural areas or low-usage households. This is the so-called “cream-skimming” or “cherry-picking” effect. See Generally Stuart M. Benjamin et. al., Telecommunication Law and Policy, 2001, pp.631-32.
[179] See Shin-yi Peng, Universal Telecommunication Services in China: Trade Liberalization, Subsidy, and Technology in the Making of Information Equality in the Broad Band Era, 4 APLPJ 21, 31.
[180] Id., 36. #p#分页标题#e#
[181] China is usually divided into three regions, i.e., Eastern, Central, and Western China. The coastal areas in Eastern China are on average better developed while the Central and Western China lag far behind. See Tao Lin, et al., supra note 177, 16-17.
[182] Historically speaking, telecommunication service was once a limited concept, referring only to telephone service. When the situation has changed along with technological development, the concept of universal service becomes dynamic and varies over time and space. In recent years, a common trend seems that with the development of advanced technologies, the scope of universal services has been enlarged continuously. Then an issue on how to define universal service in the modern era emerges. See e.g., Joint Board Rejects Advanced Services, Other Additions to Universal Service, State Telephone Reg. Rep., July 19, 2002, available at 2002 WL 16921539.
[183] See generally Margot Freeman Saunders & Nancy Brockway, Access to Utility Service (National Consumer Law Center ed., 2002). See also, Shin-yi Peng, supra note 179, 22.
[184] A case in point, now in the US, the school and library program includes Internet and intranet services in the scope of universal service policy, though it is currently not feasible in China.
[185] See Peter Benjamin & Mona Dahms, ‘Background Paper on Universal Service and Universal Access Issue’, Prepared for Telia Telecommunications in Society 1999, Seminar, Sweden, June 1999, available at: http://www.communitysa.org.za/Telia.doc.
[186] Id.
[187] See Generally, Stuart M. Benjamin et. al., supra note 178, 631-32.
[188] There is a large gap of tariffs among different services, more than compensating for the cost difference, which forms the foundation of cross-subsidization. From the perspective of local services, universal service policy in China was for a long time not implemented through government’s providing subsidies to end users, but by offering fiscal policy support for the operator to make investments in expanding network coverage. #p#分页标题#e#
[189] Reference Paper, supra note 10, para.3.
[190] See Tao Lin, et al., supra note 177, 46.
[191] See generally OECD, Universal Service Obligations in A Competitive Telecommunications Environment (1996), at http://www.oecd. org/pdf/M00018000/M00018091.pdf (offering a comprehensive examination of universal service). See also Saunders & Brockway, supra note 183.
[192] See Chen Zhigang, Different Opinions Between MII and MOF: The Telecommunication Universal Service Fund is in Dystocia, 21 Century Economic Report (21 Shiji Jingji Baodao), March 17, 2004.
[193]In February 2004, China commenced its trial project according to a document made by MII—‘Universal Service in Rural Areas—the Implementation Plan of the Telephony Available for Every Village Project’. This plan assigns the administrative areas in which six basic telecommunication operators assume their universal service obligation within the following two years.
[194] The US, Canada, Australia, and India etc., which have comparable land sizes as China, have set up universal service fund. See Shin-yi Peng, supra note 179, 39.
[195] In fact, if it were not the government’s tough administrative inventions, CT would have cut the service. See Tao Lin, et al., supra note 177, 21.
[196] Regulation on Telecommunication, supra note 61, article 40.
[197] China MII Calls for Universal Service Fund to Develop Western Areas, AFX NEWS LTD., May 20, 2002, available at LEXIS, News Library, UPI File.
[198] Regulation on Telecommunication, supra note 61, article 40.
[199] See Pangestu & Mrongowius, supra note 7, 8-9.
[200] See Tao Lin, et al., supra note 177, 46.
[201] Regulation on Telecommunication, supra note 61, article 40.
[202] See Tao Lin, et al., supra note 177, 63.
[203] Technically speaking, the emerging wireless technologies are more appropriate for the scattered populations of western rural areas. See Shin-yi Peng, supra note 179, 29. See also Abramson, supra note 51, 38-40. #p#分页标题#e#
[204] See Tao Lin, et al., supra note 177, 76.
[205] See Shin-yi Peng, supra note 179, 49.
[206] Reference Paper, supra note 10, para.4.
[207] See Tra, cy Cohen, supra note 23, 745.
[208] Regulation on Telecommunication, supra note 61, article 7.
[209] See Kang & Feng, supra note 49, 1181.
[210] Transparency provision that requires international access to and awareness of member countries’ domestic law stems from public notice tenets of American Law American administrative law requires that regulatory agencies publicize their actions, offer the public notice and comment opportunities, and subject themselves to judicial review. See Sylvia Ostry, China and the WTO: The Transparency Issue, 3 UCLA J. Int’l L. & Foreign Aff. 1, 3 (1998), 2-5, 11.
[211] See Abramson, supra note 51, 28.
[212] Regulation on Telecommunication, supra note 61, article 8-16.
[213] Administrative Provisions on the License of Telecommunication Business, issued by MII on Nov. 18, 2001, effective as of January 1, 2002, the text is available at: http://www.mii.gov.cn/mii/zcfg/bl19.htm.
[214] Regulation on Telecommunication, supra note 61, article 7.
[215] Id.,, article 9, 10, 11, 13 & 14.
[216] Administrative Provisions on the License of Telecommunication Business, supra note 213, article 9, 10, 11.
[217] See Kang & Feng, supra note 49, p. 1181.
[218] Regulation on Telecommunication, supra note 61, article 9.
[219] Regulation on Telecommunication, supra note 61, article 12.
[220] See C. David Lee, Legal Reform in China: A Role for Nongovernmental Organizations, 25 Yale J. Int’l L. 363, 368 (2000).
[221] See Sylvia Ostry, supra note 210, 12, 19.
[222] See John H. Jackson, The World Trading System—Law and Policy of International Economic Relations, 11 (The MIT Press, 2nd ed., 1997).
[223] See Tracy Cohen, supra note 23, 746.
[224] Reference Paper, supra note 10, para.5.
[225] For example, according to USCIB (Council for International Business), China’s lack of an independent regulator has negatively impacted market opportunities commitments. See China Continues to Maintain Major Telecom Barriers, World Trade, ProQuest Information and Learning, Vol. 16, Issue 4, available at 2003 WL 8000698. #p#分页标题#e#
[226] In March 1998, MII replaced the MPT, the Ministry of Electronics Industry (MEI), and the Ministry of Radio, Film and Television (MRFT) and was designated to oversee the information industry in China.
[227] See generally, Regulation on Telecommunication, supra note 61, article 3, 7, 9, 11, 12, 14, 17, 19, 20, 21, 22, 25, 26, 26, 29, 44, 45, 54, 56, 64, 65, 69, 70, 71, 73, 78, 79. These articles use the expression of “the department in charge of information industry under the State Council’ rather than directly referring to MII. But according to the general understanding and practice, these two terms are actually the same.
[228] The fact that the Reference Paper, however, is silent on the need for regulators to be separate from and not have to be accountable to government has been raised as a criticism of its content. Someone argued that while ‘independence’ has a number of facets, it does not necessarily include the power to make policy, ‘but rather the power to implement policy without undue interference from politicians, or industry lobbyists. See Melody, supra note 139, 25. But whilst the provisions of the Reference Paper in this regard remain vague, accepting this characterization of independence goes some way to alleviating these anxieties. See Tracy Cohen, supra note 23, 746.
[229] See Kang & Feng, supra note 49, 1182.
[230] In theory, the duty of protecting and enhancing the value of state-owned assets shall be undertaken by the Bureau of State-owned Assets Administration under the Ministry of Finance. But MPT and MII were fill-ins regarding the exertion of this duty in practice. See Chen Jinqiao, Regulation Trend and Policy Prospect of Chinese Telecommunication Regulation in 2004, People’s Post and Telecommunication Newspaper (Renmin Youdian Bao), January 30, 2004.
[231] Id.
[232] See Kang & Feng, supra note 49, 1182.
[233] Convergence in this context refers to the ability to access or deliver a set of services, such as telephony, television, streamer vides, Internet over the same transmission system. See John Ure, China’s Telecommunications and IT: Planning and the WTO, Working Paper of the Telecommunication Research Project (TRP), Hong Kong University, at http://www.trp.hku.hk/papers/2002/china_planning_wto.pdf, 5. #p#分页标题#e#
For an excellent assessment of competition in telecommunication and international trade in light of convergences, see Arlan Gates, Technological Change, Industry Concentration and Competition Policy in the Telecommunications Sector, 58 (2) Univ Toronto Faculty of L R (2000), 83. See also Fredebeul-Krein & Freytag, supra note 48, 628.
[234] Xu Shaohong, MII and the BRFT: Two Joyful Enemies?, Communication Information Newspaper (Tongxin Xinxi Bao), Sep. 19, 2001.
[235] See Lin Min, The Biggest Impact of WTO Entrance on Telecommunication Industry is the Regulatory Reform, Communication Information Newspaper (Tongxin Xinxi Bao), Jan. 9, 2002.
[236] See Pangestu & Mrongowius, supra note 7, 41.
[237] Id.
[238] See Tao, supra note 73.
[239] See e.g., INTUG Position Paper: Users Object to Auctioning the Scarce Telecom Resources, at http://www.intug.net/views/auctions.html.
[240] See E. Senunas, The 1997 GATS Agreement on Basic Telecommunications: A Triumph for Multilateralism, or the Market, BC Intell Prop & Tech F 111, 1997, 422.
[241] The Reference Paper, Supra note 10, para.6.
[242] Id.
[243] See e.g., Administrative Measures on Telecommunication Numbering Space (Decree No. 28 of MII), issued by MII on January 29, 2003, effective as of March 1, 2003; Provisions on Distribution of Radio Frequency (Decree No. 14 of MII), issued by MII on November 8, 2001, effective as of the same date.
[244] Regulation on Telecommunication, supra note 61, article 27, para.1.
[245] Id., para.2.
[246] Ma Zhigang, Studies on Legalization on Telecommunication Rights of Way, Communication World (Tongxin Shijie), Vol.143, February 2004.
[247] Ma Zhigang, Advising the Telecommunication Law to Include the Rights of Way, People’s Post and Telecommunication Newspaper (Renmin Youdian Bao), December 13, 2003.
[248] See e.g., INTUG Position Paper, supra note 239.
[249] The Reference Paper, Supra note 10, para.6.
[250] Regulation on Telecommunication, supra note 61, article 29. But in fact there exists objection to auctioning scarce telecommunication resources. See e.g., INTUG Position Paper, supra note 239. #p#分页标题#e#
[251] See Chen Ruming, Strategy Considerations of Frequency Planning and Spectrum Management in China for Adapting to the International and National Telecommunication New Environment After China’s WTO Accession, paper presented at ‘Conference on Broadband in China’, Beijing, 4-5 March 2002.
[252] International Telecommunication Union (ITU): World Telecommunication Indicators, Dec. 2003, at http://www.itu.int/ITU-D/ict/statistics/at_glance/basic02.pdf.
[253] See Mattoo, supra note 9, 322.
[254] See Rowan Callick, Businesses Line Up for A Piece of China, Australian Financial Review, August 12, 2002, available at 2002 WL 21086288.
[255] China will strive towards the objective of enabling our telecommunication network to be the largest one of the whole world in size and capacity and its technological level and service quality to reach a new elevation by the year 2005. See the 10th Five-Year Plan, supra note 54, 3.3 (targets of development).
[256] See Pangestu & Mrongowius, supra note 7, 1-2.
[257] Id., at 40.
[258]See Kang & Feng, supra note 49, 1179.