Study Of The Chinese Mobile Communications Market Competition And Regulation

The telecom industry in China has outgrown its GDP by 3 times for more than the past decade, and become the major contributor to China' s ever growing economy. In 2004, the total volume of China' s telecom industry reached RMB920. 5 billion, growing 37.5% over that of 2003, with total revenue of RMB520.5 billion. The total penetration of telephone in China reached 50% in 2004, with total telecom subscribers of 650 million, 316 million owning fixed line service and 334 mill ion owning mobile service. On the other hand, the growth has occurred amid changes since 1994 when telecom in China was still a monopoly. These changes include the birth of China Unicom, the several breakups of China Telecom and industry restructuring, the overseas listing of all major telecom operators, the increased competition of the telecom services, the ups and downs of XLT, the uncertainties of the issuance of 3G licenses, as well as another major restructuring of the telecom industry.Amid continuing growth of China' s telecom industry and constant change of industrial structure, regulatory trend has become clearer. The Chinese government has gradually followed international practice, introducing policies aimed at breaking up monopoly, bringing in more competition, and fostering effective market orientation. It would lead to more new entrants into the industry, and competition between new entrants and incumbents would increase. During this process, there are two questions worth studying. On one hand, what strategies should new entrants adopt in order to gain market share from incumbents that have first-mover advantages? On the other hand, how should the government regulate the industry in order to provide a fair playground for new entrants to effectively compete against incumbents? Comparatively speaking, the latter has garnered enough interests and attention from academia, industry practitioner and government agencies. There has been major development in both theory and real practice, with asymmetric-regulation based policy system becoming more mature. On thecontrary, there have been much less relevant studies on the first question. Existing studies on competitive strategies focus on either all competitors or incumbents, with less attention on strategies of new entrants. This dissertation intends to focus on this area.Major conclusions of this dissertation are as follows:First, the dissertation develops a theoretical framework encompassing competitive strategies for operators, government regulatory issues and effective market competition. The author believes that the key success factors for new entrants into mobile communications industry are two folded: internal factor, which is the competitive strategies, and external factor, which is government regulation. Only under both effective government regulation and proper competitive strategies could new entrants survive and prosper.Second, the study on new entrants into the mobile sector is developed through both theories and case studies. For the theoretical part, the author analyzes new entrants' strategic options from the perspectives of industry structure and strategy theories, and summarizes logical strategies for new entrants: from price competition, to differentiation, to core competencies, and to industry innovation. For the case studies part, the author provides detailed analysis on competition between China Mobi Le and China Unicom, and follows the same logic to develop competitive strategies for China Unicom as a new entrant.Third, pricing decision might provide competitive advantage for new entrants, but only short term. For a longer term, new entrants need to develop core competencies that are in line with industry development in order to effectively compete against incumbents. As competition on value chain becomes the major battleground for mobile operators, new entrants shouId strive to attempt vertical integration along mobile communications value chain, and to compete against incumbents by providing differentiated technology, product, services and business models.Lastly, because of mobile industry' s strategic position in the nation' s economy and its monopoly nature, government plays a key role in the shaping of the industry. To foster effective market competition and maximize social benefit, government tends to provide more support to...