China opened radio paging service and part of value-added telecom services in 1993, hundreds of small companies providing communication and information services, including Jitong Corporation, emerged successively. As an experiment for introducing competition in basic telecoms, in December 1993, the State Council approved the establishment of China United Telecommunications Corporation; In the following five years, the voice of abolishing monopoly was getting louder and louder. However, due to the fact that the construction of national telecom infrastructure was just in its high tide, dramatic reform steeps were postponed until 1998. Changes only took place in the MPT’s internal organization by means of assigning government functions and business functions separately to different departments. At the same time, the issue of telecom reform was extensively and seriously discussed both inside and outside the industry.
In 1999-2000, the first round of telecom market restructuring was carried out. The former China Telecom was divided into 4 independent groups based on business lines: fixed network, mobile network, satellite communications and radio paging. In the same time, China Unicom was reinforced and reorganized by injecting capital, managerial expertise, and merging the Paging Group. Meanwhile, a new competitive carrier, the former China Netcom Corporation (CNC), was founded.
In 2001, another competitive carrier, China Railcom, was established and licensed for basic telecom services, which was later disengaged from the Ministry of Railway. On December 11, 2001, China became a full member of WTO, and was committed to open its telecom market to foreign investors step by step before 2006.
In 2002, the second round of telecom market restructuring was carried out, aiming to further break up monopoly in the local fixed line market. The former China Telecom was, once again, divided into two by geographic area. Based on fixed networks in 21 provinces (regions and municipalities) in southern and western part of China, a new China Telecom Group Corporation was set up. While fixed networks in 10 provinces (regions and municipalities) in northern part of China, together with 2 independent companies, China Netcom and Jitong, comprised China Network Communication Group Corporation (CNC). The split-up scheme allows the two large fixed-line groups to enter into each other’s markets, and to extend their business scope (mainly referring to mobile communications) “when conditions are ripe”. The set-up celebration of the two fixed line group companies on May 16, 2002, marked the 4-year telecom reform had come to an end.
After the reform, China’s telecom industry has been transformed from monopoly to competition. The separation of government and business functions has been realized. And a new market layout has been taken shape, where 6 basic telecom operators and over 10 thousand value-added service providers compete and cooperate with one another, regulated by the MII. Now, in each of the major telecommunications services, there are at least two companies competing with each other. The market share of basic telecom operators in 2004 is shown in the following Fig.
