Price liberalisation
Impact on competition

China has made another far-reaching step towards deregulating its strictly regulated telecommunications market. On May 9 2014 the Ministry of Industry and Information Technology (MIIT) and the National Development and Reform Commission (NDRC) jointly issued a notice announcing the liberalisation of pricing for telecommunications services.(1) The policy entered into force on May 10 2014.


The price liberalisation in the telecommunications sector comes from the ruling party's vow to expand reforms comprehensively, viewing the market as the essential price-setting mechanism. The recent notice implements the State Council Decision on Removing and Delegating Some Items Requiring Administrative Approval,(2) which was promulgated on January 28 2014.

However, following moves relaxing market entry into the telecommunications industry, price deregulation is not a standalone policy. On January 29 2014 the MIIT approved China's second batch of virtual carriers, which included 18 companies with no government background. The first batch of 11 private virtual operators received their licences from the MIIT on December 26 2013.(3) These market mavericks are allowed to rebrand and resell mobile communication services sourced from the three large state-owned telecommunications companies and thereby enter into the mobile communication services market. Mobile communication services is a basic telecommunications service, which was previously regulated rigorously and provided solely by state-owned enterprises.(4)

Price liberalisation

Thanks to the new policy, China's telecommunications titans – China Mobile, China Telecom and China Unicom – are now allowed to set up, in response to customers' demands, their own price structures, price standards and billing systems for all telecommunications services, including basic services such as local and long-distance fixed-line and mobile calls, roaming services, text messaging and data services.

Nonetheless, the deregulation should by no means be interpreted as an absence of government oversight. According to Article 2 of the notice, when it comes to telecommunications charges with nationwide or cross-province effect, carriers must submit a pre-execution report to the MIIT and the NDRC. All other telecommunications charges must be reported to the relevant provincial telecommunications bureau and price administration before being executed.

Before the price liberalisation was introduced, the price of basic telecommunications services was highly regulated by the government. Article 24 of the Telecommunications Regulations provides that:

"Telecom charges are categorized into the price regulated by the market, the price guided by the government, and the price fixed by the government. Charges for basic telecom services shall be fixed by the government, guided by the government, or regulated by the market. Charges for value-added telecom services shall be regulated by the market or guided by the government.

Charges for telecom services for which there is sufficient competition in the market shall be decided by the market."

The following notices previously set out the government's institutional framework for the telecommunications sector, rather than market-driven pricing mechanisms:

  • the Notice on Further Strengthening Telecommunications Charges, jointly issued by the State Development Planning Commission (SDPC, now the NDRC) and the Ministry of Posts and Telecommunications (now part of the MIIT);
  • the Notice on Telecommunications Charges Regulated by Provincial Telecommunications Bureaus and Provincial Price Administrations, jointly issued by the SDPC and the Ministry of Information Industry (MII, now part of the MIIT); and
  • the Notice on the Tentative Rules on the Approval and Registration Process of Telecommunications Charges, jointly issued by the SDPC and the MII.

These three rules became invalid upon the entry into force of the new notice.

Based on Article 24 of the Telecommunications Regulations, the price liberalisation can be seen as an indication that sufficient competition exists in the telecommunications sector, including in the market for basic telecommunications services; therefore, pursuant to Article 24, prices will now be decided through market competition. However, it remains to be seen whether this interpretation is correct, considering that market entry has not yet been fully liberalised. For instance, fixed-line telecommunications services are still dominated by state-owned enterprises.

Impact on competition

Curbing abusive behaviours
The country's leading telecommunications providers have long been criticised – and more recently legally challenged – for abusing their dominant market positions. In 2008 Beijing-based lawyer Zhou Ze filed suit against China Mobile for its abuse of market dominance by imposing unreasonable conditions and exercising discriminatory treatment.(5) Also in 2008, another Beijing-based lawyer, Li Fangping, charged China Netcom (now part of China Unicom) with abuse of market power through discriminatory treatment.(6) In 2011 the NDRC launched milestone administrative investigations of China Telecom and China Unicom for suspected exclusion and deterrence of competitors or potential competitors by charging excessively high access and settlement fees for network interconnections; the case is pending.(7)

Responding to these criticisms, Article 2 of the notice provides that with respect to basic telecommunications services (eg, fixed-line and mobile voice services, text messaging and broadband), carriers must provide single-service plans in addition to package plans which bundle several services together. This will help to avoid anti-competitive tying. Moreover, Article 2 requires that carriers within a given business zone extend equal treatment to customers of the same type. This requirement is intended to curb discrimination.

Price war
As far as price competition is concerned, some commentators have predicted that with the loosening of the regulations, China's telecommunications sector has entered a phase of total competition, making a price war unavoidable.(8) The profusion of promotion plans among the emerging virtual operators seems to reflect this.(9)

However, others believe that given the years of fierce competition between the state-owned telecommunications companies, prices have already reached a record low. This leaves minimal room for significant price cuts post-liberalisation. The new notice thus may not be exciting news for virtual carriers, as the traditional operators still own a vast majority of the resources and accordingly gain the upper hand in competition. These new market entrants will need to strive to gain market share through non-price competition, such as by way of branding, content, services and channel offerings.

For further information on this topic please contact Hao Zhan or Annie Xue at AnJie Law Firm by telephone (+86 10 8567 5988), fax (+86 10 8567 5999) or email ([email protected] or [email protected]). The AnJie Law Firm website can be accessed at


(1) The notice (in Chinese) is available at

(2) The decision (in Chinese) is available at

(3) See "Virtual Operators to Disrupt Telecom Industry", available at

(4) For a detailed discussion of the restructuring of the telecommunications industry, see Grace Li, "Can the PRC's New Anti-Monopoly Law Stop Monopolistic Activities: Let the PRC's Telecommunications Industry Tell You the Answer", Telecommunications Policy 33, pp 360, 361-62 (2009).

(5) See (in Chinese).

(6) See (in Chinese).

(7) See (in Chinese).

(8) See (in Chinese).

(9) See (in Chinese).