Telephone Charges: Do The Numbers Add Up?

On Christmas Day 2000, China's telephone users received an unexpected gift - a document that called for a substantial reduction in China's fixed-line telephone charges. While telephone charges have been falling in China in recent years, this new round of cuts represents the most significant reduction in tariffs to date. The details of the cuts are contained in the Notice Concerning the Structural Adjustment of Telecommunications Charges (the Notice), jointly issued by the State Development Planning Commission (SDPC), the Ministry of Information Industry (MII), and the Ministry of Finance (MOF), released on December 25 2000 and effective from January 1 2001.

Being kind to the consumer

China's major telecom operators - China Telecom, China Unicom, Jitong, China Mobile, China Netcom, and the newly formed China Railway Telecom (CRT) - must be wondering if the number crunchers at the SDPC, MII, and MOF have their calculations right. According to the MII, the total number of fixed line subscribers increased from 70.3 million at the end of 1997 to 108.8 million at the end of 1999, while fixed line penetration increased from 5.7% to 8.6% during the same period. So against this backdrop of steady growth and increased revenue for both the operators and the government treasury, why are China's bureaucrats suddenly being so kind to the consumer?