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Phone charging system needs overhaul
2002-01-29
Business Weekly
Adjustments to China's fixed-line telephone charges are urgently needed to revitalize the traditional business, according to industry experts.
The present charging system, which saw its last price adjustment in March 2001, still has major shortcomings. These problems are hindering rapid growth in revenue for fixed-line operators, said Yang Peifang, a telecoms expert at the China Academy of Telecoms Research.
He said the present local fixed-line charges - 0.18-0.22 yuan (2-3 US cents) for the first three minutes and 0.09-0.11 yuan (1-1.5 US cents) for each additional minute - do not encourage people to speak at length on the phone.
"A mature charging standard should encourage people to buy things in large amounts as evidenced in supermarkets where lower prices are also given to customers for wholesale products," Yang said.
Prices should be more flexible and lower if people use the phone for a long period of time, he said. For instance, the per minute charge should be lowered after a certain amount of time. With lower charges for longer calls, people would tend to use their telephones more frequently.
But the present system, he said, does not provide any price incentive for people to talk on the phone for an extended period of time.
Many people, afraid of spending too much time on the telephone, tend to stare at the clock once a call exceeds five minutes, the expert said.
This situation reflects problems with the present inflexible charge standard, Yang said.
To encourage people to use telephones more often, operators should introduce more flexible price packages, the expert said. Such package services are widely used in places with developed telecoms industry like Hong Kong and the United States where telecoms operators offer packages that allow people to make unlimited phone calls for a fixed price.
China's fixed-line operators should follow suit and introduce more price packages to provide more choice for their customers, Yang said.
China's fixed-line telecoms operators, although in a friendly environment, are facing declining revenue growth. In year 2001, China Telecom registered revenue growth of 6 per cent, marking the first time in the last decade that telecoms growth was surpassed by GDP (gross domestic product) growth, which hit 7.3 per cent last year.
The inflexible charge standard, which discourages people from making calls, has led to negative revenue growth for fixed-line businesses in some provinces.
Charges for both local and long distance phone calls should be adjusted, said Zhang Xinzhu, a telecoms researcher at the China Academy of Social Sciences.
Zhang said the present charge for long distance calls - 0.07 yuan (0.08 US cent) per six seconds - is still expensive compared with other costs.
He said the cost for long distance calls has been significantly reduced with the installation of many high capacity optic fibre telecoms trunk lines.
The expert forecast a price adjustment or a new charge system offering more choices in the near future.
Fixed-line telephones, which are used by more people than any other telecoms device, have rich revenue potential if the carriers expand their services, Zhang said.
China Telecom and China Netcom, the country's top two fixed-line carriers which are still undergoing structural reorganization, have no plans to change their charging systems in the short term.
"All we want for the time being is stability," said an official with China Telecom. He said the company has no plans for adjusting its pricing scheme in the short term.
China Railcom, the newcomer in the fixed-line business, has quietly introduced package services in some areas. As a new player in the market, China Railcom is best positioned to adopt new technology and new marketing weapons.
The newcomer's flexible marketing strategy will soon influence the dominant players, experts said.
Major fixed-line operators will have to adjust their charge standards and offer more choices if they want to keep their customers from turning to mobile phones, experts added.
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