The Chinese authorities have required three major telecoms carriers to share and jointly construct core passive infrastructure.
The scheme was designed to reduce duplicated infrastructure roll-out to increase investment efficiency.
China Telecom and China Unicom will benefit more from the scheme than China Mobile.
The Ministry of Industry and Information Technology (MII) has issued a statement urging the country's three major telcos—China Mobile Communications Corp., China United Telecommunications Corp., and China Telecommunications Corp.—to share and jointly build underlying passive telecoms infrastructure. The telecoms regulator will set up a task force of officials from the ministry, the state-owned Assets Supervision and Administration Commission and the three operators, to implement the scheme. In the statement, the ministry said that the operators' existing base station towers and ducts which link base station controllers and the base stations must be open for sharing. The operators must also cooperate on building any new towers and ducts in the future. No duplicated construction of such infrastructure will be allowed in any location, unless with approvals from the provincial authorities. The sharing and joint construction of other passive telecoms infrastructure will be implemented in phases, according to the statement. The MII added that none of the operators can sign exclusive lease agreements with another party. Penalties will be imposed on companies that do not follow the order, which came into effect 1 October. The MII, however, gave no details of how costs or capacity would be shared among operators.
Government Objectives: The move comes as part of the restructuring of China's telecoms industry, which involved merging six of the country's state-owned mobile phone and fixed-line operators into three nationwide carriers that offer both fixed-line and mobile services. The infrastructure-sharing scheme is aimed at reducing duplicated infrastructure construction and therefore enhancing the investment efficiency of the telecoms sector as a role. All three remaining telcos are facing substantial network investment requirements as they move towards an integrated business platform and prepare for commercial 3G roll-out. China Mobile’s capital expenditure budget in 2008 exceeds 120 billion renminbi (US$17.5 billion). China Telecom, which has acquired Unicom's CDMA mobile network, has planned to spend 80 billion renminbi on expanding and upgrading its CDMA network over the next three years. China Unicom, which is being merged with China Netcom, would invest up to 100 billion renminbi in their mobile infrastructure in 2009 and 2010.
Impacts on Operators: The infrastructure-sharing initiative will enable all three operators to reduce their capital expenditure (Capex) and operating expenditure (Opex) to some degree. Smaller mobile operators, China Telecom and China Unicom, will particularly benefit as the scheme would enable them to significantly speed up their service expansion. For China Mobile, the benefits of infrastructure sharing would be less straightforward. The mobile giant already expects to see increased competition in the mobile segment following the industry restructuring. Opening up its mobile networks to China Telecom and Unicom would help accelerate the mobile service roll-out by its rivals. To further stimulate competition and prevent China Mobile's near-monopoly in the mobile market, the regulator could introduce other so-called asymmetric regulatory measures, such as one-way mobile number portability, which would allow current China Mobile users to keep their numbers when switching to other providers, but prevent the customers of the other providers from keeping their numbers when switching to China Mobile. The operators will conduct trials on such system in two cities—Tianjin and Shenzhen—although it remains uncertain whether this would lead to a nationwide application in the future.
