After much delay, the assignment of 4G spectrum in China was announced at the end of last year and went largely as expected. The winners, to no great surprise, were China Mobile, China Telecom and China Unicom – underlining the importance the government places on managed competition and influence infrastructure development.
The assignment of spectrum raises interesting issues over whether or not 4G will reshape the telecommunications landscape in China and how, if the expected demand is realised, the quality of service will be maintained.
The Third Plenum in early November stressed the decisive role to be played by markets but also the importance of government decision making. Spectrum policy is an area where these two forces are closely intertwined.
The drive to 4G services may stretch spectrum assignments to their limits and expose the misallocation of resources to other spectrum users. Hence it is worth looking at who holds what spectrum, especially frequencies that can be re-farmed – without entering a discussion of what spectrum is held or used by the military and security services
It is worth noting that the often overlooked cable TV companies, predominantly owned by local or provincial governments, own considerable amounts of spectrum in the lower (but in the West, highly valued) spectrum bands. There have been proposals to consolidate and transform the Cable TV sector – currently characterised as locally owned services, providing one-way content distribution to approximately 210 million households, of which just under 6 million receive Internet services.
Despite complex geographic structures and the uneven distribution of different functions between cable companies in the same province, the cable companies are in effect owned and regulated by the same entity – the SARFT. Legislation is in place to allow the consolidation of the cable industry and in principle allow it to migrate towards a fully-fledged communications network, providing additional competitive forces in some markets and ensuring universal access in others.
However, the reform agenda is caught in a turf battle between the communications regulator and its stakeholders, and the media regulator and its stakeholders. It may just be that reassigning spectrum to the big three telecoms networks – along new licences for the cable companies and a transfer of funds for investment – could be the mechanism that unblocks the reform process.
Don’t your breath, but likewise don’t be surprised if changes in the market structure of the communications sector now actually happen.
Whilst discussing spectrum and licences, it is also worth considering China’s mobile virtual network operators (MVNOs). The big question is: who are they? As with many decisions in China, there is both transparency and obfuscation. MVNO licences have been award, in principle, to 11 organisations. The proposal is for a two-year experimental licence, with comments on the proposals due to be submitted in the next few weeks.
However, there are unofficial indications as to who has a licence. Alibaba, through its subsidiary HiChina, has confirmed it has a licence. Other successful applicants include Telling Telecommunication Holding, Beijing Bewinner Communications, Lianlian.com, e-commerce giant Beijing Jingdong Century Trading Co Ltd (JD), mobile phone retail chain store D.Phone Group and Busap Holding Company Ltd.
Busap (which provides TV services to bus company operators) already has a network of some 50000 wi-fi hot spots serving over 100 million customers.
The final decisions are yet to be made and some firms sitting on the fence may declare their interest. Tencent has so far remained silent, yet there are many who think it – along with Alibaba’s already declared interest – will push for a MVNO license. Similar debates surround Baidu who have it clear of their desire to move into the mobile space.
In the fourth and final part of our series, we take a closer look at the details of the Third Plenum as they relate to telecoms policy.
Howard Williams is Emeritus Professor at the University of Strathclyde Business School.
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