Research On Technology Innovations And Incentive Regulation Of Chinese Telecommunication Industry

After more than one hundred years development, the world telecommunicationindustry has become an important basic industry, and also reflects it’s internationalcompetitiveness and innovations in every country.Compared with most countries in theworld, the technology level of Chinese telecommunication industry is relatively low.The purpose of this paper is to analyze the main factors influencing the technologyinnovations and industrial development in regulation system of Chinesetelecommunication industry, and to put forward suggestions for the reform of regulationsystem.By reseaching on the development course of world telecommunication intechnology innovation, industry development and the government regulation, this paperargues that technology innovation is a major driving force for telecommunicationindustry development. The nature of the telecommunication keeps changing, driven bytechnological innovation, from competition to natural monopoly, then to competitivecompetition. With the change of the nature of industry, government regulation in everycountry also keeps reforming, from strengthening regulation, deregulation and toincentive regulation. The relationship among technology innovation, industrialdevelopment and government regulation presents an spiral-iterative feature. Therefore,in order to analyze the function mechanism among the technological innovation,industrial development and the government regulation, this paper establishes the worldtelecommunication industry’s Spiral-Iterative Development Model. Analyzing theChinese telecommunication industry by using this model, this paper finds that Chinesetelecommunication industry is a kind of structive regulation, which strengthens industrycompetition by industrial restructuring, as keeps state-owned property rights dominant.This kind of regulation ignored the impact of state-owned property right on technologyinnovation, so resulted in the lower level of Chinese telecommunication industrytechnology, the backward development, and the lagging regulation. The laggingtelecommunication industrial development and technology innovation are not onlyinconsistent with Chinese economic power, but also unfavorable for Chinesecompetitiveness. According to Spiral-Iteration Model, this paper argues that thestructive regulation of Chinese telecommunication industry misleads the developmentof telecommunication industry deviates from Spiral-Iteration Model orbit. In order toimprove China telecommunication industry technological innovation, industry development, Chinese telecommunication industry regulation system should bereformed, to establish incentive regulation system, and to push the development ofChina telecommunication industry in the right direction.The main ideas of paper are:1. Technological innovation is one of fundamental driving forces of thedevelopment of the telecommunication industry. Technological innovation push thetelecommunicationmunications industry developes fast. The technological innovation invarious stages determines the technology features, and then telecommunication industrypresents the different nature in different stages, such as competition, natural monopoly,and monopolistic competirive. When the telecommunication industry shows the natureof monopoly, government regulation appears, and constitutes the institutionalenvironment for technology innovation.2. The relationship among technology innovation, telecommunication industry andthe government regulation shows the feature of iteration. Technology innovationdevelops under a certain regulation environment, so the regulation becomes one of theinfluence factors on technology innovation. The technology innovation, under therestriction of regulation, pushes the telecommunication industry to develop. Due to thedecrease of operation cost, the nature of telecommunication industry also changes, sogovernment regulation has to take some corresponding reforms to maximize the socialwelfare. Reformed regulation becomes the new constraint envioroment for technologyinnovation in the next stage, and a new round of technological innovation changes thethe nature of the telecommunications industry, and then leads to a new regulation. Thus,they shows the feature of iteration crossly, spiral up, and forms a Spiral-iterativeDevelopment pattern. This paper defined it as Spiral-Iterative Development Model.3. The government regulation of China telecommunication industry is a kind ofstructive regulaiton. Under the impetus of the technology innovation in the1980s,Chinese telecommunication industry introduced competition. But after20years ofregulatory reform, the government regulation of Chinese telecommunication industryalways taken way of restructuring, keeping the dominance of state-owned propertyrights, rather than the Spiral-Iterative Development Model. Structive regulation focuson every state-owned operator’s market share and their competition. So the operatorscompete each other mostly by price battle to promote their share quickly, not likeSpiral-Iterative Development Model, which is to improve the regulation environment oftechnological innovation through regulatory reform, then to reduce cost and price to promote the development of telecommunication industry. The difference ofdevelopment model results in the lower level of technology innovation in Chinesetelecommunication industry, and the industry development and regulation system lagsbehind the everage level of the world.4. The regulation system of Chinese telecommunication industry is not benefit fortechnological innovation. There are several regulators in Chinese telecommunicationindustry, belonging to government departments. Regulation cost is higher, anddepartment interest is difficult to coordinate. Regulation of entrance is based onproperty rights structure of state ownership, and limits stricktly the private capital toenter. Regulation system is also lack of substantive withdrawal mechanism. Theseregulations leads that telecommunication enterprises lack enough technology innovationincentiveness. The price cap regulation without adjustment in time is insufficient toinduce technology innovation. Monopoly enterprises under structive regulation is easyto collude together. These problems caused Chinese telecommunication industry lackstechnology innovation incentives.The theoretical innovation of this paper:1.Establishing the Spiral-Iterative Development Model among technologyinnovation, industry competition, and government regulation by using institutionaleconomics theory, regulation theory and industrial theory. This model is based on thethe mechanism of the interaction relations among government, industry, and enterprise.Through establishing the model, we can get the mechanism between the macro level,industry level and the micro level. However, the existing regulation theories oftelecommunication industry focus on maximize self-interest from the micro level by themethod of game theory, while ignoring the interaction between technology innovation(an important driving force) and industry regulation.2.Put forward the structive regulation pattern of Chinese telecommunicationindustry. Compared with Spiral-Iterative Development Model, the essence of Chinatelecommunication regulation is structive regulation pattern since1990s. This is a kindof structive regulation，so as to balance the market share between state-ownedenterprises.This regulation mode mainly focused on industry competition, and neglectedthe incentive effect of the regulation on technology innovation. The concept of structiveregulation is profoundly reveals the difference between Chinesetelecommunicationmunication industry regulation and Spiral-Iterative Development Model of the world telecommunication industry. This theory can help to find thefundamental reason of insufficient technology innovation, low development level ofindustry and lagged government regulation in Chinese telecommunication industry.3. Puts forward the incentive model of technology innovation of state-ownedenterprise in telecommunication industry. Spiral-Iterative Development Model theoryand empirical test prove that the state-owned property rights is a significant negativeimpact on technology innovation, while the difference between Chinesetelecommunication regulation and most countries in the world is that China keeps thestate-owned property right dominant position in the telecommunication industry. Lackof independence regulator is also a feature of the regulation system in Chinesestelecommunication industry. This model reveals the causes why the Chinesetelecommunication industry lack of the innovation incentives.The practical significance of this paper:1.Spiral-Iterative Development Model outlines the rules of worldtelecommunication industry development, and the rules has a guiding significance onsettle the the relationship among technology innovation, industrial development andgovernment regulation. Due to the government regulation is the institutionalenvironment for technology innovation, and technology innovation is an importantdriving force for the development of telecommunication industry, therefore, thegovernment should eliminate the factors hindering the technology innovation, andsetting up the incentive regulation system for technology innovation, so as to improvethe level of telecommunication industry development.2.Through study on the development path of world telecommunication industry bythe Spiral-Iterative Development Model, under technological innovation and regulationrestriction, this paper fully reveals the difference between Chinese sructive regulationand most other countries’ government regulation. Just because the model of sructiveregulation, the level of technology innovation and industrial development are lower thaneverage level of the world. These analysis will let the government, the enterprises fullunderstand the performance of Chinese telecommunication industry.3.The idea of structive regulation of Chinese telecommunication industry fullyshows the characteristics of telecommunication industry regulation and development inthe past20years in China. The structive regulation was a necessary institutionalarrangements in oder to keep state-owned enterprises in a dominant position, and also tobalance their market shares. So, the main reason of this institutional arrangement is the state-owned property right. The research of this paper provodes the theoretical basis forthe reform of state-owned property rights of China telecommunication industry.4.Establish an incentive regulation system for Chinese ICT industry. Eightcounterpolocies of the system is a logical unit based on incentive regulation theory andinstitutional economic theory. This paper proposes to enact the law regulating ICTindustry—The Act of Information and Communication; to set up independentregulatory agencies; to carry out the reform of state-owned property rights as soon aspossible; to carry out network separation; to separate regulations in the field ofwholesale and retail; to establish the yardstick regulation for technological innovation;to implement universal compulsory regulation and network safety regulation. Theserecommendations have practical significance on the present regulation system reformfor Chinese telecommunicationm industry.