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Phone Prices See Huge Drop
Phone users are enjoying much cheaper long-distance phone charges to the US and within China these days, but huge price cuts by the nation's telecom providers have yet to trigger a price war for Internet Phone (IP) business.
But analysts warn telecom operators to be careful not to follow the suicidal pricing battles of the colour TV sector.
IP is a form of purchasing phone service in which customers buy prepaid cards for calls that are placed via the Internet instead of using traditional phone lines.
China Netcom, a new and aggressive member in China's telecom industry, slashed the price of long-distance calls by as much as half in January.
The company now charges 2.4 yuan (US$0.29) per minute for calls from China to the US and Canada, down dramatically from the prior price of 4.8 yuan (US$0.58) per minute. The calls are also 30 per cent of the price of a fixed-line telephone call. International calls to some other countries were also cut to 3.2 yuan (US$0.39) per minute.
Calls to the Hong Kong and Macao Special Administrative regions and Taiwan Province were cut to 1.5 yuan (US$0.18) per minute, while long-distance calls within the Chinese mainland would cost 0.3 yuan (US$0.04) per minute.
Analysts said China Netcom, which controls about 5 per cent of the IP business, hopes to grab a greater market share via the severe price cut.
Not to fall behind, China Netcom's three main competitors -- China Telecom, China Unicom and Jitong -- also cut prices by selling their IP cards at discounts.
In some street-corner grocery stores, the IP cards from the three companies were sold at up to 70 per cent of their face value.
"Price cuts are one of the most powerful weapons to attract customers in the initial stage of an industry," said Xie Xiaoxia, a researcher with the Chinese Academy of Social Sciences.
The researcher said the Internet phone industry, which debuted in China in 1999, is still in its infancy.
In the last couple of years, IP business has boomed. Urban dwellers have taken a particular liking to this means of calling far-away friends or relatives.
But Xie fears telecom operators could become too successful too fast and overwhelm the network, making it hard to dial in.
Xie suggested the telecom operators enlarge their network bandwidth to avoid overcrowding before they slash prices to attract more customers.
Source: chinadaily.com.cn
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