Some backgrounds of China universal service---Village Access Project (Chunxia Bai)

Some backgrounds of China universal service---Village Access Project

(Chunxia Bai)

April 21, 2023

Definition of UF in China

China Administrative System (Mainland)

Central Government

Provincal government (31)

City (333)

County (2861)

Town (44067)

Administrative Village (700 thousands)An administrative village might include

several natural villages

Federal

State

Universal Service Project VA Target: Town and villageThe basic goalAdministrative Villages /natural villages must have access to telephones

The minimum requirement at least two telephones be available in an village, one in the public telephone booth and the other in the office of villagers' committee

Since 2000, China telecommunication industry facilitated liberalization and privatization, in the meantime. gap between urban and rural in China enlarged and aroused concerns.

0

500

1000

1500

2000

2500

3000

2000 2001 2002 2003 2004 2005

Fi xed Tel ephone i n Urban(mi l l i on)

Fi xed Tel ephone i n Rural (mi l l i on)

0%

5%

10%

15%

20%

25%

30%

2001 2002 2003 2004 2005

Fi xed Tel ephone I ncrease Rate i n Urban(%)Fi xed Tel ephone I ncrease Rate i n Rural (%)

VAP started in 2005, why?

•1997, ChinaTelecom (Hong Kong) with 51% private ownership set up, operated in 2 provinces;1999-2000, Competition between ChinaTelecom and new carriers ( China Mobile, China Unicom , China Railcom, China Satcom ) started•2000, China Unicom IPO in New York and Hongkong stock markets, first foreign joint venture (AT&T) enter China telecom.service market;•2000-2004, 4 major carriers all became mixed ownership with strategic foreign investors join.

April 21, 2023

China Rural Communications development Phase in Goals

Phase One(Before 1997)

All Counties established local Exchanges

Phase two(before 2004)

Network extend to towns and villages

Phase Three(before 2007)

more than 95% of administrative villages have telephone more than 95% of administrative villages have telephone Access at the end of 2005, 100% by 2007. Access at the end of 2005, 100% by 2007. VAPVAP

Phase Four(by 2010)

All natural villages access to phone. VAPVAPAll towns connect to Internet

Phase Five(2020)

All families access to phones

Now in Phase 3 and Phase 4

April 21, 2023

Roadmap of China Universal Service (national level )

city

Coverage

ScopeScope

Services

town village

Basic Telephone

Internet/Information services

High cost areas

Pubilc Service Organizations (Schools &Hospitals)

Low Income Group

family individual

Phase three

Phase four

Phase five

Since 2007 VAP extend to three parts

2008 VAP statistics:

1. VAP: 99.7% administrative villages, 92.4% natural villages access to phones (at least two phones in each villages)；

2. Rural Internet :

– Whole country 98% towns access to Internet, among them 97% towns by

Broadband. In 27 provinces Internet is available is available for all towns.

– Whole country 89% administrative villages could connect to Internet, In 19

provinces Internet is available for every administrative villages. 3. Rural Information Service

– Rural oriented Website, Town Information Station, and IT training ,

– experiments in 10 provinces

TeleInfo,CATR,2007

China Broadband subscribers

71.84m ( 2008 is 83.4m), Top two in

the world

But national penetration only 5.3%

Sharply Gap between regions:• Beijing Shanghai: 30%;• Eastern,8.45％；• Mid-ern, 3.46％；• Western, 2.98％

Broadband penetration rate gap in China

MobileMobile CommunicationsCommunications gapgap

来源：MII

2003——2007年东中西部移动用户发展

0

5000

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20000

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30000

2003年 2004年 2005年 2006年 2007年

单位

：万

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累计移动用户（东部）累计移动用户（中部）累计移动用户（西部）普及率（东部）普及率（中部）普及率（西部）

2007年普及率对比

0%

5%

10%

15%

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25%

30%

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45%

全国乡村

April 21, 2023

How to implement VA Project in China

VA project is a kind of Socialistic Type of Campaign

----- Promoting rural economic development, enforcing rural education

and enriching rural lives by establishing information infrastructures and service platform

in rural areas.

-----Several governmental departments including MIIT, NDRC, SASAC and MA involved in VAP

in policy making and planning

-----A Transition from Political Campaign to Market Oriented Mechanism Planner and manager: MII (now MIIT) and its provincial branches. Undertakers ： 6 telecommunications carriers( consolidated into 3 in 2008) Time frame:

2004 experiment in 13 provinces

since 2005 rollout in whole country

General goals to 2020..

MII, Telecomm. regulator; NDRC: competition authority; SASAC: public owner, MA: Ministry of agriculture

April 21, 2023

Government roles in VA projectPlanning and tasks designation ： MII makes the long term goals

and annual plans , and distribute annual tasks to carriers. MII provincial branches PCB in charge of coordinating, supervising and examining.

Processing management : Every quarter every TA assess every

carrier achievements in its province and report to MII. MII make statistics analysis of whole nation and report to Central government, provincial governments, all carriers and main public medias.

Privilege policies : Spectrum and numbering used in VA could be an exception of

national uniform plan, flexible in choose new techs

Tariff ： carriers have the discretion of setting price ,only requirement

is not higher than cities. Compared to restrict price regulation in cities (dominant carrier floor price, non-discrimination terminate fee between different carriers)

April 21, 2023

Investment

From 2004 to 2008, Every Carrier invest VA project and fulfill the

tasks by itself. They totally 460Billion RMB (99% used for equipments and

engineering layout).

Since 2006, Treasury department of Chinese Central government

provide 3.5 to 4 billion RMB to subsidy 6 carriers for their deficits in VA

project installation and maintenance. -----Carriers need put in its own

money.

Provincial governments provide some privilege policies in Tax, power

supply and land usage .Some provinces have appropriate funds for VA.

-----Provincial governments try to play more part.

Long term---Establish Universal Service Fund

April 21, 2023

How to designate tasks?

Principal ： the more strength, the more assignment. Calculated by a study group consists of officers from MII, SASAC,NDRC

and MA, representatives of six carriers, and neutral scholars, in terms of annual

revenue, subscribers market share, etc.

Distribution: Segment the 31provinces into six designate areas.分片包干——指定区域Every carrier in charge of making the villages and towns in his designated area

accessible and affordable to telephone. According MII Five-year-plan,

accomplish designated tasks (the numbers of unconnected villages) in set

timeframe and in designated provinces.

Each carrier’ task is consistent but might be adjusted at the beginning of every year after a intensive discussion and bargain

April 21, 2023

-Technology: low cost, wide coverage; fool-proof and robust; Domestic equipments preference.

- Network : Achieve VA goals by extending its existing networks

Fiber/copper loop,; GSM& CDMA,

FWA SCDMA (China innovated system oriented to rural),

VSAT, Globalstar and AceS

-Cheap and practical user terminal equipments, e.g, Rural information sets, Economic handsets, Easy

Computers

-Service, 119, e-governments, agricultural produce related information service.

local Exchange Relay/Trunk （ FSTN/Cellular) （ wireless/wire line)

Fixed WirelessTerminal

Wireless Access base station

SCDMA System

Technology and Service selection

SCDMA-400M: for villages in mountains and islands .

SCDMA-1800M: for towns in plains

McWiLL: Broadband Wireless access to Internet.

April 21, 2023

Why non/little-subsidy UF policy works in China

Undertakers are all state-owned common carriers.

3State-owned enterprises have special roles in china economy system and relationship with

governments. There are 3 basic Service providers (common carriers, state-owned), 1844 national

value-added service providers( 90% are private).20000 local VAS providers.

Political pressure

High rank Managers are nominated by Central Government. Their Assessment

includes both economics achievements and political corrects.

Social pressure

State-owned establish from scratch by public capitals, the public ever sacrificed personal benefits

for their growth;

Generally have high reputation in Chinese, the public expect them more social accountabilities

than ordinary enterprises.

Long term profits attraction enable carriers leverage between government and private

shareholders

New subscribers more and more come from rural market (accounts for 30%).Compared to city market,

less competition.

Convinced by China Mobile’s successes in rural markets.

Industry development and market regulation

Industry development and market regulation

enforce antitrust related issuesenforce antitrust related issues

realizes public ownershiprealizes public ownership

Industry regulator the business plays in,

(for telecommunications carriers, is MIIT)

SASACstate-owned Assets Supervision and administration Commission

NDRC

National Development and Reform Commission,

There are about 100 state-owned business now. In future the number will drop to 50 or so by privatization and consolidation. They are under the supervision of three different departments of Chinese central government. Their joint aggressive pushes made non-subsidy universal services in China possible.

policy conflictsof different departments

might give carriers excuses for elusive behaviors

Relationship of stated-own business and government

Challenge—non-subsidy policy sustainable?

Lack of systematic institution arrangements

How much state ownership should and could in common carriers’ operation?

Unclear Central –local government jurisdictions

China Economy System Evolution

1949-1979

Planned Economy

Public sector 95%• state-owned and -run

enterprises (basic and key industry)

• Collective owned and run enterprises at different administrative levels ( province, city, county, town, village)

Private sector• Small self-employed

business

• others

Socialist Market Economy

2007 About 40% GDPpublic sector

• State-owned enterprisesPartially privatization

•Collective enterprises totally or partially Privatization 90%

•Private companies play an important role.

Separate the ownership and management of public sector

set public assets supervision systemand market regulation system

Privatize state-owned and collective enterprise

Since 1990s Economy restructure by Privatization, Globalization, Liberalization

Stimulus policy for private sector growth (2nD FDI country)

18Module und Variations_E

e

Socialist market economy• Market plays fundamental role in resource allocation and price set

• Economy shared by diverse forms of capital

• Public sector be dominant player in infrastructure and key industries. absolute or relative share holding adopted under different circumstances

Can go there? How to get there? No one has clear ideas. No emulated path.

“Crossing the river by feeling for the stones” (Deng xiaoping)

step by step

find so

lution by doing

Transitional

Transitional institutional environments

•Hard to reach national consensus because of heavy controversies; •Corruption, during privatization•Compromise between different benefit groups, domestic need and international pressures

Adjusting and reforming gradually• Transition from lots of temporary departmental rules to formal law ;• A lot of coordination case by case among different level governments, and government-enterprises.

Astonishing changes for 1.3 billion people in 30 years compared to cultural traditions and history burdens of 5000 years•Industrialization ---50% rural population engages in agricultural produce, 1978 is 80% •Urbanization7000m lives in countryside without public utility and social security, unemployment pressure•GlobalizationWeak domestic private capital, lack expertise in international trade rules etc.

Present: ambiguous governments’ roles; legislation behind practice; inconsistent rules.Someday? in future: Systematic institutional arrangements

formerformer

Central and local government jurisdiction in VAP

presentpresent

• Central level (MII)Infrastructure &basic service;

inter-province VAS;

Common carriers

• Local level (PCB)PCBs are Provincial branches of MII,

independent of local governmentLocal VAS (non-facility information service)

Local VAS providers

•Central level (MIIT)Basic service and inter-province VAS by MIIT

Carriers supervised by NDRC+SASAC+MIIT

•Local level ( PCB)PCBs become an department of provincial

governments they located;PCB jurisdiction keep unchanged

UFO: VAP—Basic telephone

UFO: VAP +Internet access +Rural information service

Local governments try to play a part in local ICT service development. But they have not enough influence in carriers and many provinces have to rely on central-level investment on UFO.

Two-layer

regulation

Some backgrounds of China universal service---Village Access Project (Chunxia Bai)

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