China is investigating its two fixed-line operators, China Telecom and China Unicom, over alleged price fixing in the country’s broadband access market.
The antitrust division of China’s National Development and Reform Commission (NDRC) launched an investigation in the first half of the year after receiving complaints that the two operators held monopolistic control in the broadband access business, Li Qing, deputy director of NDRC’s price moniotoring and anti-monopoly bureau, told a news program on stated-owned broadcaster, China Central Television (CCTV).
Li said the two operators combined control two-thirds of China’s broadband access market, which means they have a strong hand with which to control prices.
“They are using their dominant market position to charge rivals high fees and offer more favorable prices to other operators who are not competing with them, “ Li said. “Under antitrust law, we call this price discrimination.”
In response to the allegations, China Telecom said the company would “fully co-operate with the regulatory authorities concerned on the investigation, and it has always been providing its broadband services strictly in accordance with the relevant laws and regulations.”
Unicom said “it is in the process of providing with the pricing, volume, turnover and other relevant information of its internet access bandwidth leasing business with the internet service providers for 2010.
If NDRC’s allegations are upheld, the two operators would face penalties of up to 10% of their annual revenues from internet access services, Li said. Internet access revenues at China Telecom and China Unicom last year reached 50 billion yuan and 30 billion yuan, respectively, Li added.
Statistics from China's Ministry of Industry and Information Technology (MIIT) show that the two operators have 261.5 GB of direct interconnections.
For the first nine months of 2011, latency between the two operators ranged from 87.7 to 131.3 ms, while packet loss rates between their networks were between 0.2% to 1.9%, exceeding MIIT's Provisional Regulations on Internet Backbone Connection Services, which require that latency and packet loss not exceed 85 ms and 1%, respectively.
This means that China Telecom and China Unicom have not achieved full interconnectivity, and that doubles the cost of access, Li said.