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Is China on Track for Better IP Communications or Simply a Monopoly?

 
May 07, 2014
By Susan J. Campbell, TMCnet Contributing Editor
 

Freedom in communications is an important focus in the U.S., as consumers want choices when it comes to their devices, their solution and their provider. In China, this concept hasn’t been a well-known as freedom of choice hasn’t been a priority for the leadership. As the demands of an increasingly mobile market continue to intensify, however, the climate changed over the last five years. The winds, however, are shifting again and the outcome could be less than desirable.  


The latest is a deal being negotiated between the three Chinese cellcos. The deal centers on tower sharing and could expand to include base stations. If the details are worked out so a final agreement is reached, it could help to accelerate LTE (News - Alert) roll-out in China. The downside is the deal could put unwanted pressure on suppliers, which have been waiting for a 4G roll-out to support rare infrastructure growth in the wireless sector.

A broad look at the situation indicates good advancement potential for IP communications throughout China. A closer look shows that China Mobile (News - Alert), China Telecom and China Unicom would ultimately reduce the cost of a complete individual build-out to support LTE for each one and the ability to rapidly support the massive increase in mobile usage in China. It could also take away that freedom of choice in communications that has only seen limited life in China.

Analysts suggest that a successful deal would mean placing the passive infrastructure of each provider, most notable their power and towers, into a company owned by the state. The newly formed entity would then be responsible for securing and managing the assets. The approach has been successful in India and the Chinese government is pushing for the successful close of the deal.

The Ministry and Industry and IT has stated publicly that the successful venture would promote the protection of the environment, reduce costs and benefit end users. While such benefits are possible, the arrangement could also lead to the providers putting their access networks into a similar structure. If this were to happen, they would be hard pressed to differentiate their services to establish a competitive advantage.

Yet this could be the government’s focus – eliminate the weaker links and dominate with one provider owning all assets. That provider is owned by the state and pricing is set according to whims instead of a competitive market. This is where we apply the broad view again – it looks great on paper. LTE gets rolled out quickly, users get the access they want and the lower cost means lower pricing – at least at first. The conflicting network strategies of the three providers, however, could quickly render their one deal approach too complex for market viability. 




Edited by Alisen Downey
 
 
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