WTO and China’s telecom reform / TPRC 2000

WTO and China’s telecom reform / TPRC 2000

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Assessing the WTO Agreements on China’s Telecommunications Regulatory Reform

and Industrial Liberalization*

Bing Zhang

(School of Public Policy and Management, The Ohio State University)

[Abstract]

By drawing on the new institutional economics, this paper presents the hypothesis

that the rules-of-law specified by the World Trade Organization (WTO), as an exogenous

institution for the Member States, theoretically will shape the Members’ domestic

telecommunications regulatory institutions somewhat, but that the actual effects will be

different and will depend on the institutional endowments of host countries and their

institutional stances. Empirically, this paper tests this hypothesis by examining the

impact of China’s prospective membership status in the WTO on its telecommunications

regulatory reform and industrial liberalization and explores the institutional barriers for

China to fully implement the WTO Agreements in this sector.

1. INTRODUCTION

On November 15, 1999 in Beijing, China and the United States signed “the

Bilateral Agreement Between the Government of the People’s Republic China and the

Government of the United States of America on China’s Accession to the World Trade

Organization”.1 The agreement cleared the biggest barrier blocking China’s entry into

the World Trade Organization (WTO).2

* The author would like to thank Jaison Abel, Bob Graniere, Douglas N. Jones, Mike W. Peng, and Rohan Samarajiva for helpful comments and suggestions on earlier drafts of this paper. All remaining errors are the responsibility of the author. 1 Xinhua, “PRESS COMMUNIQUÉ ON THE SIGNING OF BILATERAL AGREEMENT BETWEEN THE GOVERNMENT OF THE PEOPLE’S REPUBLIC OF CHINA AND THE GOVERNMENT OF THE UNITED STATES OF AMERICA ON CHINA’S ACCESSION TO THE WORLD TRADE ORGANIZATION ” China Daily, November 15, 1999. 2 In order to access to the WTO, China must negotiate with each Member of the WTO and get bilateral agreements on market access. The negotiation with the United States is believed to be the most difficult because of the strict requirements from the United States. For more analyses about the process of China’s access to the WTO, see Abbott (1998), Anderson (1997), Geest (1998), and Zhao (1998).


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Traditionally, the telecommunications industry in China has been closely

overseen and tightly controlled by the national government. It has also been shielded

from foreign investment in basic services since the very beginning.3 With accession to the

WTO, this highly protected industry will be finally exposed to foreign competition.

According to the China-US WTO Agreement, after China enters into the WTO, foreign

firms could take 50% ownership of value-added services in two years and 49% for

mobile and fixed-line services in five and six years, respectively.4 In addition, China has

accepted the principles of the WTO Reference Paper and made commitments to

implement pro-competitive regulatory policy in the telecommunications sector.5

By drawing on the new institutional economics, this paper presents the hypothesis

that the rules-of-law specified by the World Trade Organization (WTO), as an exogenous

institution for the Member States, theoretically will shape the Members’ domestic

telecommunications regulatory institutions somewhat, but that the actual effects will be

different and will depend on the institutional endowments of host countries and their

institutional stances. Here, the institutional stance is defined as an overall regulatory

attitude toward the subject in question (i.e. telecommunications liberalization advocated

by the WTO). Empirically, the paper tests this hypothesis by examining the impact of

China’s prospective membership status in the WTO on its telecommunications regulatory

reform and industrial liberalization and explores the institutional barriers for China to

fully implement the WTO Agreements in this sector.

While joining the WTO may well have a powerful impact on China’s political

and economic reforms overall, in the telecommunications sector, at least, this outcome is

not likely on either theoretical or empirical grounds. Rather, this paper demonstrates that

the impact of the WTO would have a limited impact on China’s regulatory reform and

liberalization when subjected to its internal and external institutional constraints. Thus,

the post-WTO telecommunications market in China will be open but there exist

considerable barriers and constraints in reality. As a consequence, this paper forecasts

that, partly because of the weak terms and conditions of the Fourth Protocol of the WTO

and China’s conservative domestic regulatory stance, much of the telecommunications

competition from overseas in China’s post-WTO era would most likely occur in those

3 In 1994, limited competition in wireless sector was introduced with the entry of Unicom. See Chang (1994). 4 The New York Times, November 15, 1999. Also see the summary of the US-China Bilateral WTO Agreement at http://www. Uschina.org/public/991115a.html (visited on January 4, 2000). For full text, see http://www.uschina.org/ (visited on March 19, 2000). 5 Ibid.


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telecommunications services with relatively low asset investments and high mobility,

such as Internet content services and other value-added services, rather than in facilitated-

based competition that was initially expected by the WTO.

This paper proceeds as follows: Section 2 sketches out an analytical framework

for the remainder of the paper to test the hypothesis. In the next section, the paper

describes and interprets the impact of the WTO on China’s pre-WTO

telecommunications sector. In section 4, through the lens of the WTO Reference Paper,

this article examines the institutional barriers for China in implementing its commitments

in post-WTO era. Section 5 concludes the paper.

2. AN ANALYTICAL FRAMEWORK

In this section, by following North (1990, 1991, and 1994), the paper first lays out

a general hypothesis. Then the institutional arrangement of the WTO, China’s

institutional endowment, and the interaction between them are discussed. The empirical

analyses will be given in the succeeding sections.

2.1. Hypothesis

As distinguished from neoclassical theory, the new institutional economics

emphasizes the bounded rationality and opportunism in human behavior, and transaction

cost in market exchange (Coase, 1937, 1960; North, 1990; Williamson, 1975, 1985).

Institutional theory contributes to the understanding of organization and its governance,

generally treated as a “black-box” in neoclassical theory (Williamson, 1985). Instead of

exclusively limiting on price and product quantity, the new institutional economics

argues that “institutions matter” in the case of costly transactions (North, 1994, p.360).

According to North (1990, p.3; 1991, p.97), institutions are the humanly devised rules

and constraints that structure human interaction in political, economic, and social affairs.

They are designed to create order and reduce uncertainty in exchange. Institutions consist

of formal rules (e.g. constitutions, laws, regulations, property rights) and informal

constraints (e.g. sanctions, conventions, codes of conduct). Both of them collectively

influence organizational governance. Specifically, he points out that institutional changes

exhibit the pattern of “path dependence” in an incremental manner (North, 1990, pp.92-

104). Further, he highlights the role of enforcement and insightfully for our purposes

points out that

“Although the rules are the same, the enforcement mechanisms,

the way enforcement occurs, the norms of behavior, and the subjective

models of the actors are not. Hence, both the real incentive structures and


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the perceived consequences of policies will differ as well (North, 1990,

p.101).”

In sum, the new institutional economics recognizes the importance of institutions

in shaping organizational structure and socioeconomic development. Institutional change

will typically take the form of gradual evolution and the historical origins and

development matter. In addition, institutional consequences and performance will differ

due to the differences in enforcement mechanism and other factors along the way.

Viewed from the window of institutional theory, regulation can be regarded as a

kind of crucial formal institution influencing the liberalization of telecommunications

market. In the world trading system, services have two distinctive characteristics different

from goods in the General Agreement on Tariffs and Trade (GATT): most of them are

monopolized and subject to close governmental regulation (Kawamoto, 1997; Warren &

Findlay, 1998; Sapir, 1999). In reality, regulation can be used as an instrument to resist

opening of market and regarded as a significant barrier of market entry (Sauve, 1995;

Altinger & Enders, 1996).6 In other words, it is a common practice that domestic

regulation in the form of formal and enforceable institution has been manipulated for the

purpose of trade protection.

The WTO serves as a forum for the Members to collectively negotiate to

liberalize services outside of the scope of the GATT. Different from the GATT, one of

the most important characteristics of the WTO is that it is a rules-oriented organization.

Its multilateral concepts, principles, and rules are legally enforceable and binding on the

Members (Sauve, 1995, p.141). The Members must take into account the rules-of-law of

the WTO while making their economic policies.7 Clearly, in the setting of the WTO,

international law is intermingling and penetrating into the Members’ domestic formal

institutions and playing a much more important role in national policy-making processes

than before. Keeping this in mind, it is safe to say that legally binding rules of the WTO

as an exogenous formal institution would impose influence on the Members’ domestic

institutions including telecommunications regulation.

6 The political reasons behind the motivation to resist opening domestic market are explained by Kawamoto (1997, p.86) and Anderson (1997, p.751). 7 A concern of national sovereignty arises. As pointed out by Oman (1994, pp.33-34), a diminished national policy sovereignty is one of the results of globalization. Also see the discussion presented by Winham (1998, p.362).


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However, questions arise when we assess the implementation of the WTO rules

and principles. For instance, how will domestic institutions react with this new comer?

Accommodate to it, or resist it, or take it half-heartedly? Because the rules of the WTO

and schedules of commitments presented by the Members have to be finally implemented

by domestic administrations, the institutional stance in a host country plays a crucial role

in determining how far the promised commitments will be implemented. Subject to the

constraints of institutional endowment, the institutional stance reflects a status of

institutional equilibrium when compromises are reached between endogenous and

exogenous institutions (e.g. the rules of the WTO). A pro-competitive institutional stance

in the regulatory regime would actively and effectively incorporate the WTO disciplines

and would significantly boost the process of liberalization in the telecommunications

sector. But, a domestic regulatory institution with a contrary view can constitute a

significant non-tariff barrier to market entry and effectively frustrate some of the goals of

the WTO.

Since there exist pervasive and significant differences in political, legislative,

judicial, and executive systems among the Members, it is unrealistic to believe that the

implementation of the WTO rules would be homogenous. Further, there exist resistant

and conservative institutional stances and also motivations of opportunism for a Member

to be a free rider, e.g. getting benefits from other countries fully enforcing their

commitments, and at the same time, circumventing its own obligations. Typically, the

differences in institutional stance toward the WTO can account for the significant

variances in the scope and depth of the commitments presented by the Members,

exhibited in some empirical studies (Hoekman, 1995; Altinger & Enders, 1996; Aronson,

1997). Put another way, the countries with pro-competitive institutional stances most

likely make more commitments than those with opposite attitudes.

In short, in the implementation of the WTO Agreements, the Members’ domestic

institutional stances matter. At this point, it is safe to set up a hypothesis that the rules-of-

law specified by the WTO, as an external institution to the Member States, would

influence a Members’ domestic regulatory institutions and the liberalization of

telecommunications to some extent, but the actual effects could diverge significantly,

contingent on institutional endowments of the host countries and the regulatory stances

taken.

a. The WTO and telecommunications services


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Much has been written to interpret and assess the WTO Agreements related to

telecommunications liberalization.8 For the purpose of this paper, we only sketch a rather

simplified institutional framework of the WTO in the telecommunications sector (see

Figure 1).9

(Figure 1 Here)

For the telecommunications sector, the WTO rules-of-law and disciplines are

mainly reflected in following terms and conditions. First, as with the GATT, most-

favored-nation treatment (MFN) is firmly established as a universal rule for all service

sectors and should be committed to by all Members.10 According to MFN, the Members

should treat all other Members equally in telecommunications market access.

Second, the Annex on Telecommunications (AT) specifically addresses and

ensures “access to and use of public telecommunications transport networks and services

on reasonable and non-discriminatory terms and conditions for the supply of a service

included in its Schedule.”11

Third, the GATS specific commitments include obligations in market access,

national treatment, and additional commitments.12 For market access, the Members

should clearly indicate any limitations in their telecommunications services (basic and

value-added) for all of four modes of supply, e.g. cross border, consumption abroad,

commercial presence, and presence of natural persons.13 Apart from market access, the

GATS also prohibits the Members from discriminating against foreign

telecommunications service providers as compared with their domestic counterparts in

terms of national treatment. In the telecommunications sector, the Reference Paper was

8 For general discussion, see Bronckers & Larouche (1997), Fredebeul-Krein & Freytag (1997), McLarty (1998), and Tarjanne (1999). For the Fourth Protocol, see Tuthill (1997) and Drake & Norm (1997). For the Annex on Telecommunications, see Tuthill (1996). For the Reference Paper, see Fredebeul-Krein & Freytag (1999). 9 For the sake of simplicity, we intentionally overlook many items of the GATS and only present those related to the telecommunications sector. It is suggested to refer the legal text of the WTO/GATS for thorough understanding. In addition, it is beyond the scope of this paper to discuss the rules and principles of the WTO/GATS in detail. For classical literature, see Jackson (1969, 1995) and Hoekman and Kostecki (1995). 10 Exemptions are granted subject to meeting the conditions of the GATS Annex on Article II Exemptions. 11 AT Paragraph 5(a). 12 GATS Article XVI, XVII, and XVIII. 13 GATS Article I.


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committed to by most of the Members as a kind of additional commitment.14 The

Reference Paper is an important regulatory commitment aimed at creating a pro-

competitive, independent and transparent regulatory institution by the Members.15 The

paper lays out six guiding principles for the Members in redesigning their domestic

telecommunications regulatory institutions: competitive safeguards, interconnection,

universal service, public availability of licensing criteria, independent regulator, and

allocation and use of scarce resources.

As long as the Members make their commitments on telecommunications services

in MFN, AT, market access, national treatment, and the Reference Paper, they are

recorded in the national schedules that are attached to and form an integral part of the

GATS (Weiss, 1995, p.1188). These commitments are hard to withdraw or modify

(Drake & Noam, 1997, p. 800). More importantly, these commitments are legally binding

on the Members’ domestic institutions.

Finally, significantly different from its predecessor GATT, the WTO establishes a

dispute settlement mechanism constituting an integrated system of rules under uniform

institutional administration (Weiss, 1995, p. 1215). According to the Dispute Settlement

Understanding (DSU),16 an affected Member has a right to appeal to the Dispute

Settlement Body (DSB) against other Members who fail to implement their

commitments. Based on the panel investigation report, the DSB can authorize the

affected Member to retaliate against the offending members. Never before has the

governance of the telecommunications services in a Member been exposed to the strict

jurisdiction under international trade law.

Although the WTO/GATS institutional framework is appealing, it is important to

caution that there exists what might be called “architectural weakness.” (Sauve, 1995, p.

132).17 For instance, the principles of the WTO/GATS do not work unless the Members

make actual commitments to them. The scope and depth of liberalization in the

14 As of December 1998, sixty-eight Members made additional commitments on the Reference Paper, accounting for 90% of the governments made commitments on basic telecommunications services (WTO, 1998, paragraph 20). 15 According to Takigawa (1998, pp.41-44), the Reference Paper represents the first success by the WTO in intervening into the regulatory policies of member countries and can also be interpreted as a typical example where the US government exports its telecommunications policy to its trading partners. 16 See WTO (1994, Annex 2). 17 Sauve (1995, p.142) points out that the value of specific commitments on market access and national treatment lodged by GATS Members will be a function of the extent to which: 1). service sectors, sub-sectors or activities appear in individual schedules; 2). all modes of supply are bound; 3). limitations and qualifications apply to market access and national treatment undertakings; and 4). exemptions to the MFN


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telecommunications sector mainly depend on the extent of commitments (Hoekman,

1995; Kawamoto, 1997; Sauve, 1995). Further, how to ensure that these commitments are

faithfully implemented is another matter. In this last regard, it would be too early to claim

that the WTO/GTAS has already successfully opened global telecommunications

markets.

b. China’s institutional endowment and regulatory stance

In China, the authority of regulating the telecommunications industry falls to the

Ministry of Information Industry (MII), a successor of the Ministry of Posts and

Telecommunications (MPT) as a result of governmental restructuring in 1998.18 As

shown later, China’s telecommunications regulation and policy are also subject to the

constraints of its institutional endowment. With respect to the formal institutions, first of

all, China has no national legislation in telecommunications. As a consequence, the

overall regulatory regime lacks a solid legal foundation. Second, the judicial system is

rather weak and not really independent (Che and Qian, 1998, p.9). In fact, so far the

judicial institution rarely plays a role in telecommunications regulation.19 In contrast,

telecommunications regulation heavily rests on governmental administration and

intervention.

Policy-making in China is rather complex and fragmented (Lampton, 1992;

Lieberthal, 1992; Shirk, 1992). Important players besides MII are the State Council and

the State Planning and Development Commission (SPDC). The regulatory policies must

gain support from SPDC and approval from the State Council. Moreover, there are many

interest groups with powerful bargaining power which also impose significant influence

on telecommunications regulation and policy, as was reflected in the case of establishing

Unicom (Lovelock, 1996; Tan, 1994).

In such a setting of limited and fragmented institutions, regulation tends to be

uncertain and unpredictable.20 Because of lacking sound institutional environment to

principles listed. Too many exemptions dramatically weaken the effectiveness of the WTO/GATS in the liberalization of international telecommunications markets. 18 For related discussion about the function of MII, see Tan (1999). 19 As an exception, so-called China’s “First IP Telephony Case” happened in a period in which MII and China Telecom were suffering fiercely criticisms from the public. On January 20, 1999, Intermediate People’s Court in Fuzhou judged that the operation of offering IP Telephony service by a private firm is not illegal, a case appealed by the local branch of China Telecom. The court’s judgment stimulated a debate among the MII, court, and the public. See People’s Daily, January 30, 1999; Zhao (1999). 20 In the case of Unicom’s CCF, the MII announced Unicom’s financing mode, i.e. China-China-Foreign (CCF), is “irregular” and should be prohibited in September 1999, long after the “irregular” behavior happened several years ago. “CCF refers to a financing mechanism whereby a foreign partner of a venture invests funds in a joint venture which, in turn, invests in Unicom” (China Daily, September 15, 1999). CCF


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incorporate the rules-of-law of the WTO, it is doubtful whether the WTO rules and the

national schedule in telecommunications would be fully implemented without

reservation. Furthermore, apart from the above weakness in regulatory structure, the

regulatory stance toward market access in telecommunications is another barrier for the

implementation of the WTO Agreements. Generally speaking, there exist rather

conflicting opinions about the costs and benefits of accession to the WTO and the

opening of markets in telecommunications services, especially in basic services. On the

one hand, strong voices calling for breaking up monopoly, introducing competition, and

lowering prices can be heard from the society; on the other hand, there exist fierce

oppositions from the inside of the industry.21 In the end, the real driving forces which

place China’s telecommunications industry on the track of liberalization are not from the

inside of the telecommunications industry but from the political will of China’s

leadership and the pressure of accession to the WTO.22 However, the institutional stance

in telecommunications regulation does not fundamentally change accordingly in order to

accommodate to the WTO Agreements.

Recalling North’s path dependence theory and the importance placed on China’s

institutional stance as discussed earlier, it should be safe to expect that the WTO would

have some impact on China’s telecommunications regulatory reform and liberalization in

the short term but rather limited in the long term if without significant changes in the

institutional regulatory endowments and domestic policy attitudes in which the

telecommunications sector operates.

3. THE IMPACT BEFORE THE WTO ACCESSION

involves 45 projects with more than 20 foreign firms including Sprint, NTT, Bell Canada, and Cable &Wireless HKT, totally values US$1.4billion. See South China Morning Post, October 1, 1999; Xu (et al., 1999). 21 See Zhou (1999) and Di & Zheng (1999). Zhou believes that the advantages will dominate over disadvantages if China joins the WTO, and claims that the opening of the telecommunications market not only attracts technologies and capital, but also promotes the reform of regulatory mechanism. In contrast, Di & Zheng point out that China has to give up part of political and economic authorities as an exchange to join the WTO, and criticize the WTO as a pitfall decorated with beautiful flower. Also see Johnson (1999). 22 It was claimed that GBT Agreement effectively raised the bar for new entrants accessing to the WTO by requesting basic telecommunications services commitments as part of accession to the WTO (US Congress, 1997). As pointed out by Kawamoto (1997, 103), “it should be noted that it can be significantly advanced when a number of sectors are dealt with simultaneously, because that makes it more difficult for special interests to resist reform given the higher political profile and more transparent policy agenda.” Placing telecommunications liberalization with other goods and service sectors in one negotiation package, this arrangement significantly weakened the resistance and opposition from the telecommunications industry. In fact, concession in the case of telecommunications is an important bargaining chip for China to gain favorable conditions in other sectors on the negotiation table.


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As mentioned previously, the Fourth Protocol sends a clear signal to the countries

wishing access to the WTO that they must liberalize the telecommunications services and

make commitments to regulatory reform. Interestingly, the impact of the WTO on China’s

telecommunications sector happened even before China becomes a formal membership of

the WTO. However, a critical interpretation of this development is that it was designed not

to promote international competition but to defend domestic markets by hurriedly taking

administrative measures to boost the growth of national carriers in order to meet the

coming foreign competition.

3.1 Regulatory reform

The Reference Paper in the Fourth Protocol clearly stipulates that the regulatory

body should be separate from the telecommunications carriers and impartial to all market

participants.23 No matter how it interprets this principle, China’s government has to split

its telecommunications regulatory function from network operation and terminate the

regulatory mode of “twin status as both referee and player” (Xu, et al, 1999, p. 248), at

least at surface value.

As a practical step, China’s government in March 1998 reshuffled its

telecommunications regulatory institution through replacing the former regulatory body

MPT with MII. Compared to MPT, there were several important changes that should be

noted. First, by merging with the Ministry of Electronic Industry (MEI) and taking away

regulatory authorities scattered in other governmental departments, MII has significantly

expanded its regulatory authority from telecommunications to the broader information

industry. This measure effectively overcame the problems of fragmented regulation and

multiple regulators by creating a single regulator MII. Second and different from MPT,

MII cannot directly involve itself in the network operation. The regulatory and

operational function was nominally split off for first time in nearly fifty years.

To implement the WTO Agreements, the host country is expected to streamline

its domestic regulations and make new institutions to accommodate to the WTO

principles. As a significant change, MII pays much attention to enacting new regulations

and decrees to meet prospective international competition. In September 1999, MII

issued the “Temporary Regulation on Telecommunications Network Interconnection”.

This regulation consists of 10 chapters and 51 articles, and covers most of the important

issues about network interconnection, such as interconnection obligation, time, cost,

arbitration, and so on. In addition, after publicly collecting opinions, MII formulated a

23 Reference Paper, para 5


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regulation about telecommunications service quality in January 2000. This regulation

clearly defines the standards and requirements about network and service quality such as

repair time, successful connection rate, network reliability, etc. It is expected that

additional important regulations and rules will be enacted. Although these regulations are

not firmly based on telecommunications legislation, they contribute to reduce regulatory

uncertainty and improve transparency of policy.

3.2. Restructuring the telecommunications industry

According to China’s commitments made in its WTO trading agreement with the

United States, the full-services liberalization in telecommunications sector will be

implemented no later than six years after its accession to the WTO.24 How to ensure that

the domestic carriers now highly protected by the government will win the forthcoming

international competition is a serious challenge for MII.

Three striking measures for restructuring China’s telecommunications industry

were taken immediately after the creation of the MII. The first was to split the postal

service sector from telecommunications. Before that, the telecommunications sector

heavily subsidized the postal services. Separating these two sectors paved the way for the

government to treat them differently based on their specific industry characteristics and

needs.

The second step was to break up China Telecom into four independent companies

in fixed-line services (focusing on local, long-distance, and international basic voice

services, data services, Internet services, and other value-added/information services),

wireless service, paging service, and satellite communications service.

The third measure was to foster the growth of Unicom. Contrary to MPT, MII’s

attitude toward Unicom took a sudden U-turn shift. Instead of limiting its development,

MII took on the task of facilitating the quick growth of Unicom as its priority. For

instance, MII in 1999 initiated and completed a merger between Unicom and GuoXin, a

national radio paging company with 39.55 million subscribers, 60% of radio paging

market, total RMB13 billion (US$1.6 billion) assets, and RMB 1.453 billion (US$177.2

million) profit. In addition, MII promptly granted an operational license for the Internet

Protocol (IP) telephone service to Unicom in April 1999.25 Further, MII granted the

24 Although these are not the final commitments presented to the WTO and there exists a possibility that unfinished trade negotiations could push China to make more concessions, they at least act as the minimum conditions and requirements in commitments, according to MFN. 25 At the same time, MII also granted IP phone service licenses to China Telecom and Gitong Company.


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license of CDMA (Code Division Multiple Access)26 exclusively to Unicom and this

measure would greatly boost its growth in wireless market.

How can one understand how these dramatic changes happened in less than two

years? Could these reforms be accepted at face value? Why was China Telecom split off

in such a way? Next, we explore these questions and try to answer them by linking them

to the important role played by the WTO.

That entry into the WTO serves China’s long-run interests is a firmly established

belief of China’s government. It should be expected that, after entering the WTO, some

domestic industries will benefit from the WTO deal, and some will encounter serious

challenges, such as auto, banking, insurance, and telecommunications. China must act

promptly to reduce the prospective risks and losses in these highly protected “infant

industries” likely to accompany the accession to the WTO. In the telecommunications

sector, as an expected side effect of monopoly, China Telecom encounters serious

disadvantages in terms of productivity and production efficiency compared to its foreign

counterparts. Figure 2 shows that China Telecom only accounted for 10.7% and 51.7% of

NTT’s productivity and production efficiency, respectively in 1997. More seriously, the

know-how and experience about marketing and competition are very limited if not zero.

Viewing such significant gaps, MII has to hurriedly take actions to fix these problems.

(Figure 2 Here)

A defensive strategy taken by MII is to simulate a competitive environment and

strengthen Unicom, a fledging competitor stuck in a business standstill due to an

unfriendly regulatory environment and uncooperative treatment from China Telecom in

interconnection.27 MII administratively ordered mergers other telecommunications

companies with Unicom and granted it special favors as the government did for MPT in

1980s.28 By doing this, MII hopes that China Telecom and Unicom can gain the know-

26 In China, the digital cellular system generally takes the European standard, GSM (Global System for Mobile Communications) based on TDMA (Time Division Multiple Access) rather than CDMA widely used in the Unite States. 27 MPT deliberately delayed negotiation, squeezed prices in the interconnection, was not willing to allocate wireless spectrum, and undercut the prices of wireless service, a core service of Unicom (Xu, et al., 1998, 1999). By 1997, Unicom market share in mobile phone service was less than 2%, and most of its network isolated from the public wireless and fixed-line networks controlled by China Telecom. More seriously, “China Unicom users are sometimes not able to dial 110 and 119 --- two fixed-line phone numbers controlled by China Telecom for police and fire brigade emergency calls.” China Daily, January 15, 1999. 28 MII can easily split off China Telecom and order mergers between Unicom and other telecommunications companies with little resistance because all of these companies are state-owned. So MII can restructure and assemble telecommunications assets and entities with its administrative power


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how of competition so that they can effectively defend themselves against foreign

competitors in the market place.

Splitting off China Telecom is another important measure taken by MII. This

action might seem counter-intuitive in that one would expect that an integrated China

Telecom would be more powerful and effective in meeting foreign competition than a

disintegrated one. However, breaking up China Telecom was a second-best choice as a

final compromise among several factors, including the overwhelming public discontent

with exorbitant prices and the bad quality of service, and pressures from the public for

terminating the monopoly.

If breaking up China Telecom is inevitable, the question is how to split it off ---

vertically, horizontally, or in the form of a hybrid? In the case of the divestiture of AT&T

in 1984, it was broken up by vertically splitting long-distance service from local service.

The merit of vertical disintegration is that it can promote competition in long-distance

service segment due to technological progress (Broke, 1994). As for the case of China

Telecom, its break-up is neither vertical nor horizontal because each company after

divestiture still monopolizes or dominates over in distinct service sector (non-horizontal)

and each service sector is provided independently without involving services from other

sectors either up-stream or down-stream (non-vertical).29 MII defends its breakup plan on

grounds that it remains “national teams”, and it is regarded as necessary to meet

prospective international competition (Liu, 1999). Under this plan, the current initiative is

merely to create several national monopolistic firms in separate sub-service sectors by

dismantling China Telecom’s previous domination over all telecommunications services.

Viewed this way, the structure of China telecommunications industry did not experience

fundamental changes in terms of market integration.

Another significant change is that more and more telecommunications companies

were publicly listed in the foreign stock markets.30 There are at least two important

instead of through the market as a way to allocate resources. This situation will encounter challenges as reforms stress the independence of State-owned Enterprises (SOEs) and more involvement of non-state-owned capital into SOEs through holding shares. 29 Theoretically wireless services can independently provide communication without the involvement of local fixed-line network. However, in practice, the interconnection between the two networks is becoming increasingly indispensable because customers in different networks should communicate each other. But for the sake of simple analysis, the paper emphasizes the feature that the two services are independent of each other. 30 China Telecom (HK) was listed in 1997. See Xu (et al., 1999). It was also reported that 25% of Unicom asset will be listed on the Hong Kong and New York stock exchanges scheduled for the middle of 2000, in order to raise $6 billion for its network rollout (CommunicationsWeek International, April 3, 2000).


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benefits associated with the current wave of public list. First, the domestic carriers can

effectively resolve capital shortages due to the recent price cuts. Second, it is a necessary

and effective measure to get experience of modern enterprise management. For the

foreign investors, public listing presents an important way to invest in China’s

telecommunications service markets because, as seen later, the chance would be rather

slim for foreign carriers to compete with China Telecom head to head in full-services

immediately after China’s entry into the WTO, especially in the fixed-line and other core

service sectors. In fact, whether foreign ownership could reach 49% for mobile and fixed-

line services in five and six years, as indicated in the China-US WTO Agreement, would

mainly depend on how much share of those domestic companies (e.g. China Telecom and

Unicom) would be listed in the stock markets. However, significant privatization through

public list is impossible at least in the foreseeable future.

Based on the analysis in this section, what conclusions can be drawn about

China’s current telecommunications reform? First, the pressure from China’s entry into

the WTO plays a direct and catalytic role to propel China’s government to restructure

China’s telecommunications regulatory regime and industry. In other words, without the

pressure from the WTO, China would not have taken such drastic actions in so short a

time. Second, even though the separation of the regulatory and operational functions is

the most significant progress in China’s telecommunications reform, it is only a

necessary rather than a sufficient condition to create a fair, transparent, pro-competitive,

and independent regulatory institution in accordance with the requirements of the

Reference Paper. Third, the breakup of China Telecom has little effect in promoting

actual competition, especially in fixed-line phone service. It is very questionable whether

the current “coached competition” between China Telecom and Unicom would have any

real effect in improving their competitive abilities and in meeting the coming

international competition. Finally, for domestic companies, public list is an effective way

to raise capital and transit to modern enterprises. But the portion of whole company asset

going to the public list, especially for national telecommunications carriers, would be

rather limited and subject to strict regulatory oversight to safeguard the governmental

ownership.

3.3. Impact on market performance and structure

Empirical evidence by way of market changes supports the hypothesis that the

WTO does influence domestic regulatory institutions and economic development. Table


15

1 sketches the changes in China’s telecommunications market between 1998 and 1999.

Because most actual regulatory changes and reforms were put into force after 1998,

driven by the pressure from the entry into the WTO, the information in Table 1

approximately reflects the impact of the WTO on China’s telecommunications market

performance and structure.

(Table 1 Here)

As a direct result of restructuring telecommunications industry and the price cuts

of 1999, fixed-asset investment dropped 9.7% as compared to 1998. The significant

reduction of telephone installation fees shrank the overall capital pool for investment.31

However, the price cuts in telephone, mobile phone, and Internet service greatly spurred

market demand as shown in the table. As expected, Unicom substantially benefited from

the favor policy granted by MII and expanded its market share in mobile service from 5%

in 1998 to 11% in 1999. One point deserves stressing. Even though the overall changes

shown in the table could not be entirely credited to the impact of the WTO, most of them

are directly or indirectly related to it. For example, while price cuts directly stimulated

the growth of demands, they are just part of the ongoing price structure adjustments to

meet the challenge of international competition prompted by the entry into the WTO.

4. THE PROSPECTIVE IMPACT AFTER THE WTO ACCESSION

Significantly different from trade in goods, the barriers to entry for foreign firms

in the case of services may not be in the form of high tariffs or quotas but rather the form

and functioning domestic regulation in a host country (Warren & Findlay, 1998, p.445).

As pointed by Sapir (1999, p.53), “although regulation of service activities may be

imposed for purely domestic purposes, it almost always creates a powerful trade barrier.”

In other words, the regulatory institutional stance toward market access from foreign

firms could be well conservative, resistant, and hostile. Recognizing regulation as a

barrier to entry, the WTO Basic Telecommunications Agreement specifically laid out a

legally binding foundation, e.g. the Reference Paper, to require the Members to remove

regulatory barriers.

The prospective impact of the WTO on China’s telecommunications sector,

therefore, will mainly depend on the overall national institutional environment and

31 Generally installation fees accounted for 30-50% of capital for local network investment. It was charged by local PTTs to customers as a form of “tax”. It is this price policy that explains why the explosive network development did not face serious capital shortages, a problem that most developing countries encounter.


16

specific telecommunications regulatory stance of MII. Although the initial impact of the

pre-WTO accession is impressive as discussed earlier, the motivation behind it was to

defend against foreign competition rather than to facilitate it. There is no convincing

evidence that there is a plan to create a pro-competitive regulatory mechanism for

foreign competitors.32 Through the lens of the Reference Paper, this section first

examines the regulatory barriers in China’s telecommunications sector; then the outlook

for China’s telecommunications industry after its entry into the WTO is concluded.

4.1. Regulatory barriers

Because China’s current telecommunications regulatory institutions are at best at

an initial transitional period from a central-planning mechanism toward perhaps a pro-

competitive market orientation, it is not surprising that there exists a large gap between

the present reality and the principles of the WTO Reference Paper. The following are six

areas of consideration.

l Competitive safeguards

In accordance with the competitive safeguards specified in the Reference Paper,

MII should effectively prevent China’s telecommunications carriers with market power

from engaging in anti-competitive behavior such as cross-subsidization, concealing

technical information and specifications about network and services, etc.33 As mentioned

previously, the breakup of China Telecom does not really bring about competition in real

sense. Even in the case of mobile service which has the most noticeable competition, it is

questionable how far the current competition can go keeping in view of the fact that both

China Telecom and Unicom are state-owned firms (without fundamental interest

conflicts)34 and are under the command-and-control of MII. In fact, that competition

appeared to be fragile when MII and SPDC jointly intervened in the “price war” between

China Telecom and Unicom in November 1999, a fight “spawned by the country’s

expected accession to the WTO”. 35 Further, there has been no well-established and

coherent telecommunications competition policy to safeguard competition with the result

that cross-subsidy, distorted tariffs, and highly concentrated markets are significant

barriers to entry for potential foreign competitors. Lastly, some regulations enforced by

32 That many new regulations would be enacted does not necessarily mean that the overall institutional stance would become pro-competitive. The new regulations could be anti-competitive to some extent under the conservative stance with a protective approach. 33 Reference Paper, para 1. 34 They are different from private firms pursuing maximum profits for private shareholders.


17

MII are out of date and contrary to the WTO principles and China’s commitments. One

example is the prohibition of foreign investment in basic telecommunications services.

l Interconnection

Interconnection issues are highlighted in the Reference Paper. According to it,

interconnection with an incumbent carrier should be available to competitors at any

technically feasible point in the network upon request. Further, the terms and conditions

of interconnection should be timely, cost-based, transparent, and non-discriminatory.36

Interconnection is widely regarded as a necessary condition for

telecommunications competition. In the United States, the fundamental spirit of the 1996

Act is to promote competition in all telecommunications sectors, especially in local

phone markets, which are monopolized by Regional Bell Operating Companies

(RBOCs). The FCC issued its “First Report and Order” (FCC96-325) in 1996 to further

strengthen and clarify interconnection rules consisting of the obligation of

interconnection, fair pricing, and compulsory arbitration. The experiences in the United

States and other countries demonstrate that a sound interconnection order plays a crucial

role in safeguarding competition and promoting market entry in local phone markets.

Recently, MII issued an order concerning telecommunications network

interconnection, “Temporary Regulation on Telecommunications Network

Interconnection”. However, it is much looser in its provisions than the requirements of

the Reference Paper envision. For instance, the “sufficient unbundling” requirement in

the Reference Paper is not addressed. Because of this, telecommunications competition

would not happen except at the facility level. Interconnection related to other forms of

competition such as resale is not mentioned either. Also, MII’s interconnection regulation

does not consider the number portability as an obligation of China Telecom. Several

studies elsewhere have shown that most consumers would be reluctant to change their

telecommunications service carriers if they cannot keep their phone numbers (Petrazzini,

1996, p.64).37 No obligation for handling number portability would put competitors at a

disadvantage in competition. By the same token, the absence of an obligation on China

Telecom for an operation support system (OSS) would also raise high barriers to entry for

35 It is reported that a local branch of China Telecom in Chengdu responded Unicom’s price cuts in mobile service by cutting its mobile network access charges from RMB 800 yuan (US$96) to RMB 10 yuan (US$1.2). China Daily, November 28, 1999. 36 Reference Paper, para 2. 37 Citing from a research report, Petrazzini (1996. p.64) points out that “almost 70 percent of subscribers who would consider switching to a new operator if they could retain their telephone number would not switch if forced to change a new number”.


18

competitors in ordering, billing, marketing, etc. In addition, without dialing parity, it is

not surprising that current Unicom’s customers have to dial extra access code (i.e. “193”)

in order to access to long distance services.38 In contrast, China Telecom’s customers do

not encounter such a burden. In sum, even though it is a noticeable progress to issue a

regulation on interconnection, its real effect remains to be seen because it seems to

circumvent some critical interconnection terms and conditions stipulated in the Reference

Paper.

l Universal service

The Reference Paper recognizes that the universal service obligation of the

Members should not be used as an anti-competitive instrument, and should be

administered in a transparent, non-discriminatory and competitively neutral manner.39

Traditionally, China Telecom was responsible for the rollout and operation of the

national telecommunications network across the country. In 1998, it was reported that

32.9% of the rural villages had no phone facilities and no access to phone services (MII,

1998b). The operational costs in the western areas of the country are exceptionally high

because of the harsh natural conditions and sparse population. These factors make costs

high and revenue low in the absence of subsidies. Cross subsidies from the eastern to the

western, and from wireless and long-distance services to local phone service were the

chief ways of sustaining network integration and realizing positive externalities.

However, this mechanism is facing a serious challenge with the recent breakup of China

Telecom, and the coming competition in basic phone services in the post-WTO. How to

prevent cream-skimming and fairly allocate the universal service obligation among the

targeted telecommunications service providers is an emerging issue for MII. Because the

terms and conditions in the Reference Paper are rather broad and weak and lack credible

criteria and norms, it is an open question whether the Reference Paper can adequately

safeguard the universal service obligation from being manipulated for anti-competitive

purposes.

l Public availability of licensing criteria

As for the licensing issue, the requirements of the Reference Paper are also rather

weak. It merely stresses that the licensing criteria should be publicly available but leaves

the Members to decide what the criteria should be.40 There is nothing in the Reference

Paper about specifications and criteria of granting licenses (Fredebeul-Krein & Freytag

38 See China Computerworld, April 5, 2000. 39 Reference Paper, para 3.


19

1999, p.630). For basic telecommunications services, there currently is no licensing

criterion in China. Whether an applicant can get license is a political decision subject to

fierce bargaining. In fact, MII has limited authority to approve or refuse a license

application, except for competitive services. Approval from the State Council and SPDC

is crucial to get a license, especially for a national carrier. Without detailed criteria and

clear procedures, license regulation is full of uncertainty and lacks transparency.

l Independent regulator

Creating an independent regulator is called for in the Reference Paper. There are

two specifications in the guidelines. The regulator should be separated from and not

accountable to any supplier of basic telecommunications services, and the regulator

should be impartial and nondiscriminatory in dealing with all market participants.41 As

mentioned, China has split off the regulatory functions from network operation, but this

institutional restructuring is seen only a first step toward creating a truly independent

regulator. The real challenging task is to design a regulatory institution that will ensure

that MII would in fact perform reasonably independently.

Regulatory “autonomy” or independence is contrasted to regulatory capture in

public utility regulation (Phillips, 1988). With regulatory capture, “the regulator either

lost, or never had, the independence to make professional decisions on their merits

because of undue influence either from politicians, politically driven Ministries, or the

regulated monopolies” (Melody, 1997, p.195). On the contrary, independence from

government regimes means that the “regulators are free to carry out their functions in the

way they consider best satisfies their stated objectives, and their performance should be

judged solely on this basis” (Stern and Holder, 1999, p. 43). In addition, to be

independent from the regulated industry, the regulators should not unduly favor the

regulated firms at the expense of consumers (McNamara, 1991, chapter 7).

In the case of China’s current political institutions, to expect regulatory

independence from politicians, government, and the regulated industry at the present time

is asking a great deal. The Party is responsible for making fundamental socioeconomic

policy and controls the political and economic reform process. It is required that all

governmental agencies and social organizations should not deviate from the basic policy

and the political line set by the Party. In addition, The Party holds the power of

appointing and removing cadres and officials, including the Minister of MII. This is a

40 Reference Paper, para 4. 41 Reference Paper, para 5.


20

basic institutional status in China. Therefore, theoretically, it would be totally

unacceptable for MII openly to pursue absolute “independence”. Further, like most other

countries, the regulator remains a part of the government. Following the administrative

line, MII must implement the policy, decisions, and tasks directed by the State Council. It

is highly questionable whether MII can claim “independence” of the State Council and be

“free” to carry out its functions in the way it considers best satisfies its stated mission.

For historical reasons, MII has a deep-rooted and complex relationship with China

Telecom and other regulated carriers, and MII still has a strong influence over the local

postal, telephone and telegraph branches (PTTs). At least for now, MII still holds the

power to appoint, promote, and dismiss key officials of PTTs, including China Telecom,

China Telecom (HKT), China Mobile Communication Groups, Unicom, and provincial

Posts and Telecommunications Administrations (PTAs). In addition, most of the current

officials in MII come from the PTTs and the PTAs. In this kind of complex personnel

administration system, the line demarcating MII and the domestic regulated firms is hazy

at best. Also, the influence of the regulated industry on MII would be implicit if not

explicit. MII and PTTs share common values in ideology, ownership, and ultimate goals.

For instance, both MII and the PTTs are “state-owned”; both of them are accountable to

the Party and government; and they explicitly share the same nominal target of

committing to the progress of China’s telecommunications industry. In this context, the

idea of independence of MII from the telecommunications firms seems illusory and

maybe even far-fetched. In short, the unique political and institutional endowment of

China gives rise to specific and major challenges to creating an independent regulator for

telecommunications as intended in the Reference Paper.

l Allocation and use of scarce resources

Finally, the allocation of scarce resources, including frequencies, numbers and

rights-of-way should be carried out in an objective, timely, transparent and non-

discriminatory manner, according to the Reference Paper.42 In China, however, these

scarce sources presently are allocated in an administrative manner with limited

transparency and competition. This administrative-based mechanism for allocating scarce

sources will not meet the competitive demands in the post-WTO era. For instance, with

more foreign competitors entering into China’s telecommunications markets, the requests

for frequencies will rocket up. There is thus a need for China to reform and substitute

42 Reference Paper, para 6.


21

current administrative-oriented allocation system with a transparent, fair, timely, and pro-

competitive one.

4.2. Outlook

Based on the above analysis through the lens of the Reference Paper, the

disparities between current China’s telecommunications regulatory institutions and the

specifications of the Reference Paper can be seen as very significant. The regulatory

barriers identified above plus a conservative regulatory stance cast some doubts about

whether the rule-oriented WTO would have a dramatic impact on liberalizing China’s

telecommunications markets after its entry into the WTO.

In the new regulatory regime, more regulations are expected to be enacted to fill

the policy vacuum. But it is likely that these regulations would mainly be aimed at

establishing the rules of market competition such as the universal service mechanism,

radio frequency allocations, and price structure adjustments, and not toward

fundamentally restructuring its regulatory framework to include a workable independence

and transparency as is contemplated in the Reference Paper. As for market structure, the

core sectors such as fixed-line and mobile services are still be monopolized or highly

integrated; but peripheral services such as paging, Internet, and other value-added

services will be open to tough competition. The price structure can be expected to change

and gradually streamline the relation between local and long distance services. As a

result, the economic rents will decrease dramatically. A side effect may be to deter

market entry by foreign firms.

An overwhelming amount of foreign investments in all service sectors would not

likely happen immediately after China’s accession to the WTO. As indicated, the scope

and depth of competition will be rather limited. Because of the significant sunk costs

required and the high risks associated with an uncertain regulatory environment, foreign

investors may not have great interests in China’s long-term basic telecommunications

services without creditable commitments from regulator (Levy & Spiller, 1994). Instead,

they will most likely target the services with lower capital requirements and high

mobility such as callback, Internet access and content services, etc. As to business

strategy, a joint venture could be expected to be the most common choice because it can

effectively reduce investment risks. One can also expect the targeting of customers and

market niches to be cautiously selected rather than rashly.

5. CONCLUSION


22

By drawing on the new institutional economics, this paper argues that the WTO

principles and disciplines do have positive effects in promoting telecommunications

liberalization on its Members, but that actual progresses toward the WTO goals would

exhibit great variations and mainly depend on the specific institutional endowments and

regulatory stances of the Members. Specifically, this paper theoretically and empirically

explores the impact of China’s entry into the WTO on its telecommunications, regulatory

reform, and industrial liberalization. As North (1990) points out, institutions matter, and

they especially matter in the case of telecommunications reform---its depth and degree.

From the point of view of the WTO/GATS, the first-best way to implement the WTO

Fourth Protocol would be to engage the Members’ regulators and assist them in realizing

a regulatory transition toward pro-competitive institutions. Specifically, ensuring that the

regulatory institutions and stances of the countries actively incorporate rather than

passively resist the WTO disciplines is central to determining the transitional pace and its

effects. Even with this, it is argued here that the overall domestic institutional endowment

and regulatory stance would be finally decisive. The commitments made by the Members

would make sense only if the implementation of the WTO Fourth Protocol becomes a

self-enforcing action driven by the Members themselves in the context of a cooperative

regulatory stance toward the exogenous institution of the WTO.

In China’s telecommunications sector, the conservative regulatory stance would

be carried into the era of post-WTO, and, if true, this means that the telecommunications

market would be open in name but constitute constraints to extent in reality. Indeed, how

much market share foreign firms are permitted to hold, as indicated in the national

commitments, and how much they really take are totally different things. This may be

especially the case in basic and core services. Fundamentally, to create a pro-competitive

regulatory environment in China’s telecommunications sector has to depend on further

political and economic reforms.

If accurately appraised, the implications of this paper are profound. For the

China’s regulators, it calls for ongoing regulatory restructuring and specifies the existing

regulatory barriers impeding its implementation of the commitments on market access

and regulatory reform. For the WTO/GATS, this paper presents an analysis of the

interaction between the Member’s domestic institutions and the exogenous rules and

disciplines from the WTO, demonstrates that the national institutional environment and

regulatory stance matter in the implementation of the WTO Agreements, and offers a

case study of China to exemplify these arguments. The findings buttress the argument


23

made in the studies elsewhere that the architectural weakness of the GATS needs

significant improvement. Further, this paper assesses China’s regulatory environment

and industrial structure in the post-WTO with regard to foreign investors and

multinational enterprises interested in its telecommunications market. The implications of

the China’s accession into the WTO for foreign investors’ entry strategies are discussed.

Finally, this paper presents an analytical framework built on the new institutional

economics. The findings of this paper support general principles of the new institutional

economics. The analytical methodology exhibited in this paper is not limited in the

setting of the WTO/GATS, but is useful in evaluating more general interaction

mechanisms between institutions and socioeconomic development, especially for

transitional economies.

In the end, China’s telecommunications sector is now in a crucial transitional stage. The

driving force placing it on the track toward liberalization comes directly from pressures

surrounding China’s entry into the WTO, a rules-of-law-based institution. It would need

much more painful and patient efforts to fully realize the necessary regulatory and

industrial transition that will results in both domestic and international benefits as

promoted by the WTO.

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Figure 1. The WTO/GATS institutional framework Source: Constructed by the author.

Figure 1. The institutional structure of the WTO/GATS for the basic telecommunications

services

Source: Constructed by author.

GATS

WTO

The Fourth Protocol

Dispute Settlement Understanding (DSU)

Annex on Telecomm-unications

General Rules

MFN

(as one of rules)

Specific Commitments

Market Access

National Treatment

Reference Paper

GATS

National schedules and the implementation in Members


29

Table 1 The Impact of China’s pre-WTO entry on its telecommunications industry 1998 (without the

impact of the WTO) 1999 (with the impact of the WTO)

Change

Fixed-asset investmenta 168.1 billion yuan (US$20.28)

151.8 billion yuan (US$18.31)

- 9.7%

Fixed-line phone installation fee (average at national level)b

1010 yuan (US$121.8)

725 yuan (US$87.5)

- 28.2%

Mobile network access fee (average at national level)c

800 yuan (US$96.5)

500 yuan (US$60.3)

- 37.5%

Leasing international line rate (2MBPS, for Internet Service Providers (ISPs))d

431,600 yuan (US$52,063)

320,000 yuan (US$38,600)

- 25.9%

Fixed-line customers (million)e

87.35

108.8

24.6%

Mobile phone customers (million)f

25

43.2

72.8%

Telephone penetration (per 100 population)g

10.53

13

23.5%

Internet consumers (million)h 2

8.9

345%

Market share of Unicomi 5% 11% 120% Market share of China Telecom (mobile)j

95%

89%

-6.3%

a. MII (1998a, 1999). b. People’s Daily, 08/13/99 (Installation of second telephone lines at same home address is free.) c. Ibid. d. China Daily, 03/01/99. e. Ibid. a f. Ibid. g. Ibid. h. China Computerworld, 03/03/00. i. South China Morning Post, 01/17/00. j. Ibid.


30

Figure 2. The comparisons of productivity and production efficiency between China Telecom and some foreign telecom carriers (1997)*

215

254

211

37

175159

204

311

210

319338

246

179

227 222 228

346330

0

50

100

150

200

250

300

350

400

Ameritech BellSouth

BritishTelecom

ChinaTelecom

DeutscheTelekom

FranceTelecom

GTE NTT SBC

Productivity ($ per emloyess, 000s) Production efficiency (lines per employee)

* Productivity is defined as the ratio of revenue over the number of employee, and production efficiency as the ratio of total subscriber lines (fixed and mobile) over the number of employee. Source: Complied by the author based on WTO (1998) Table A4, A6, and A7.

Documents

WTO and China’s telecom reform / TPRC 2000