Despite complaints about revenue decreases from three telecom carriers, China's "Speed Upgrade and Tariff Reduction" policy is expected to give a strong push to the expansion of China's cyber economy space. The policy was released by the State Council, China's cabinet, in May after a State Council executive meeting presided over by Premier Li Keqiang, who said China will accelerate construction of a high-speed network with lower charges, support "Internet Plus" and foster new growth impetus.
The Ministry of Industry and Information Technology (MIIT) publicized the targets for "Speed Upgrade and Tariff Reduction" later, saying China's three basic telecom operators shall make all urban families in cities above the prefecture level to be covered by 100M optical network, and all other cities and villages to be covered by 4G network. Meanwhile, the telecom giants are asked to increase the average access speed of broadband networks in municipalities and provincial capitals to 30Mbps and that in other cities to 20Mbps, and to sharply lower the average fees for mobile telecom data traffic and fixed-line broadband access.
By the end of September, the three companies, China Mobile (CHL.NYSE; 00941.HK), China Telecom (CHA.NYSE; 00728.HK) and China Unicom (CHU.NYSE; 00762.HK; 600050.SH), had invested 259 billion yuan in network construction and Internet speed upgrade, and the amount will reach or exceed 435 billion yuan by the year-end. They will expand the coverage of fiber-to-the-home network to exceed 130 million families and increase the number of 4G bases stations to over 1.5 million by the end of this year. They had basically completed the work of reducing charges for fixed-line broadband access and cut the average prices of 50M access and 100M access by 30 percent and 20 percent, respectively. Meanwhile, they have cut the international roaming fees by more than 80 percent. Besides, the three telecom giants all began to implement the mobile data carry-over policy this October, which allowed the unused monthly data under the monthly package committed by the mobile service subscribers to be carried over for use till the end of the following month. Their work is expected to support the implementation of China's 13th Five-Year Plan (2016-2020). According to the proposal for formulating the 13th Five-Year Plan issued by the Communist Party last Tuesday, China will expand cyber economy space, implement Internet Plus action plan, improve telecom universal service mechanism, launch Internet speed upgrade and tariff reduction action, start construction of next-generation Internet ahead of other countries, and boost Internet-based innovation and innovation in fields of industrial organization, business model, supply chain and logistics chain. Internet Plus is the integration of the Internet and traditional industries through online platforms and technology, expected to serve as another new engine for future growth.
China Mobile's president Shang Bing said in May, when he was still holding the post of MIIT's vice minister, that "Speed Upgrade and Tariff Reduction" will increase efficient investment and boost information consumption, which will support the implementation of Internet Plus action plan and the integrated development of industrialization, informatization, new-type urbanization and rural modernization. The policy will also help reduce start-up costs, and become a new engine for the mass entrepreneurship and innovation and the increases of public products and services, according to analysts. Telecom expert Wu Hequan said "Speed Upgrade and Tariff Reduction" creates a sound basis and lowers the threshold for mass entrepreneurship and innovation. At present, starting up business through Internet has become a sign of the times. Among the top ten global Internet companies of 2015, four are Chinese companies; and among the top 20, six are Chinese companies. In Heze of east China's Shandong province, China Unicom has completed the construction of the first full-optical city, which means the fiber-to-the-home network has covered the whole city.
The optical fiber network provides Internet access with bandwidth between 20 and 100Mbps for more than 10,000 enterprises in local e-commerce village, called Taobao village, at prices half less than before. The favorable policy has attracted about 200 university graduates and more than 10,000 rural migrant workers to return home for business start-up and work. "Speed Upgrade and Tariff Reduction" is also a guarantee for China to carry out a national big data strategy in the 13th Five-Year Plan period. Ning Jiajun, an expert with the State Information Center, said China has entered into a new stage of driving business transformation with innovation, and it needs to give a full play to data and information in a bid to boost social and economic development. He added that the national big data strategy will promote the value of China's intellectual manufacturing products and boost the industry into medium and high-end.
However, low-speed Internet access and high tariff are still the main obstacles in the implementation of Internet Plus action plan. "Only after solving this problem can China put new Internet technologies, such as Internet of Things, mobile Internet and cloud computing, into actual uses, which will boost information consumption, upgrade traditional industries and foster new growth areas," said Geng Yan, an analyst with China's leading IT research institution CCID Consulting. The proposal for formulating the 13th Five-Year Plan reveals that Chinese government will further boost "Speed Upgrade and Tariff Reduction" in the next five years.
Analysts believe China will introduce private capital in and implement mixed ownership reform on the telecom industry to create an effective competition situation, and let the competition to drive telecom operators further reduce their telecom tariffs. Meanwhile, China will start construction of next-generation Internet ahead of other countries and even before the technologies mature enough, to strengthen China's voice in the international telecom area and Internet area. That will play an important role in the development of China's telecom industrial chain, which is the basis for Chinese telecom operators to upgrade their networks and increase Internet speed in the future.
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