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New Regulations Restrict Joint Ventures in Telecom
Telecom-JV business restricted
The country's telecoms watchdog has introduced regulations aimed at tightening the management strings to joint ventures of licensed carriers.
The new rules once again threw into focus the problems that have emerged between telecoms and broadcasting sectors.
The Ministry of Information Industry's regulations stipulate that for joint ventures set up by basic telecoms operators and other domestic State-owned firms, if the licensed telecoms carrier has fewer than 51 per cent of the shares, the joint venture should apply to the ministry for a licence before engaging in telecoms business.
If the licensed carriers have over 51 per cent of the shares, the joint venture should register with the ministry if it wants to operate telecoms businesses.
Ji Jinkui, director of the Policy and Regulation Department, said the ministry was tightening management of the licences of basic telecoms carriers.
As a carrier could set up many joint ventures, if all the joint ventures operate basic telecoms businesses, one licence would be enlarged many times, Ji said.
Although he said the regulation did not target any individual carrier, it is widely believed that China Netcom will be the first target. One of its major owners, the State Administration of Radio, Film and Television (SARFT), is what the ministry may really be targeting.
China Netcom, with investment from the entertainment programme regulator, the SARFT, formed some joint ventures with local broadcasting companies in some provinces and cities with shares of less than 51 per cent.
These joint ventures -- in Hangzhou, Qingdao, Chongqing and other cities -- are operating basic telecoms businesses such as data transmission, network bandwidth release and Internet access.
Under the ministry's new regulations, most of the joint ventures between China Netcom and the SARFT should apply to the ministry for licences, as China Netcom controls fewer than 51 per cent of the shares in those companies.
The new regulation would be a severe blow to China Netcom, said Shi Wei, a researcher with the Office for Restructuring Economic System under the State Council.
China Netcom, with a strong SARFT background, named itself the carriers' carrier by constructing a backbone network and breaking China Telecom's monopoly in bandwidth release.
But the regulations would meet with many difficulties, as local broadcasting companies are always protected by local governments, said Shi.
With the help of the new regulations, troubles between the ministry and the SARFT have again emerged.
The SARFT, manager of broadcasting companies, owns a rich cable network resource which could be used to transmit telecoms signals. But under strict control of the government, it still maintains a closed door.
The ministry recently held out an olive branch, saying it encouraged equal entry of telecoms and broadcasting companies.
But the offer met with another refusal from the SARFT, which said the broadcasting sector should be allowed to operate telecoms business while at the same time remaining closed to telecoms companies.
Many economists believe equal entry of the telecoms and broadcasting sectors should be encouraged, as the network resources of both would be better utilized and the telecoms monopoly would be broken.
They said the ministry's new regulations were a response to the SARFT, which wants to enter the other's business while at the same time closing its own doors to the other sector.
Difficulties between broadcasting and telecoms companies have worsened in recent years. There have been many quarrels.
Although the SARFT refused to open its doors to telecoms companies and the ministry thus wants to clean the broadcasting firms out of the telecoms business, economists regard the mutual entry of the two sectors as not too far away.
The network resource of the broadcasting sector should also be under the ministry's management, and the SARFT, which has no experience in operating communications networks, should focus on making more movies and TV programmes instead of entering into the telecoms business, said Yang Peifang, a telecoms expert with the China Academy of Telecom Research.
He said the network convergence of telecoms and broadcasting would not be too far away as the Chinese Government has set encouraging network convergence as its major task over the next few years.
Source: China Daily
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