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Some backgrounds of China universal
service---Village Access Project
(Chunxia Bai)
Page 1
Definition of UF in China
China Administrative System (Mainland)
Central Government
Provincal government (31)
Universal Service Project VA
Target:
Town and village
The basic goal
Administrative 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
May 23, 2017
Federal
State
City (333)
County (2861)
Town (44067)
Administrative Village (700 thousands)
An administrative village might include
several natural villages
Page 2
VAP started in 2005, why?
3000
2500
2000
Since 2000, China telecommunication industry
facilitated liberalization and privatization, in the
meantime. gap between urban and rural in
China enlarged and aroused concerns.
1500
1000
500
0
2000
2001
2002
2003
2004
2005
Fixed Telephone in Urban(million)
Fixed Telephone in Rural(million)
•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.
30%
25%
20%
15%
10%
5%
0%
2001
2002
2003
2004
2005
Fixed Telephone Increase Rate in Urban(%)
Fixed Telephone Increase Rate in Rural(%)
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China Rural Communications development Phase in Goals
Phase One
(Before 1997)
Phase two
(before 2004)
Phase Three
(before 2007)
Phase Four
(by 2010)
Phase Five
(2020)
All Counties established local Exchanges
Network extend to towns and villages
more than 95% of administrative villages have telephone
Access at the end of 2005, 100% by 2007. VAP
All natural villages access to phone. VAP
All towns connect to Internet
All families access to phones
Now in Phase 3 and Phase 4
May 23, 2017
Page 4
Roadmap of China Universal Service (national level )
Scope
Low Income Group
Pubilc Service Organizations (Schools &Hospitals)
High cost areas
city
town village
family individual
Coverage
Basic Telephone
Internet/Information services
Services
May 23, 2017
Phase three
Phase four
Phase five
Page 5
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
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Broadband penetration rate gap in China
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％
TeleInfo,CATR,2007
Page 7
Mobile Communications gap
2003——2007年东中西部移动用户发展
2 0 0 7 年普及率对比
45%
30000
70%
40%
25000
60%
20000
50%
15000
40%
30%
10000
20%
15%
5000
10%
10%
0
单位：万户
35%
30%
25%
20%
0%
2003年
5%
0%
全国
乡村
累计移动用户（东部）
普及率（东部）
2004年
2005年
2006年
累计移动用户（中部）
普及率（中部）
2007年
累计移动用户（西部）
普及率（西部）
来源：MII
Page 8
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 agricult
May 23, 2017
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Government roles in VA project
Planning 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)
May 23, 2017
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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
May 23, 2017
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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
May 23, 2017
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Technology and Service selection
-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
（FSTN/Cellular)
Relay/Trunk
（wireless/wire line)
Wireless Access
base station
SCDMA System
Fixed
Wireless
Terminal
SCDMA-400M: for villages in mountains and islands .
SCDMA-1800M: for towns in plains
McWiLL: Broadband Wireless access to Internet.
May 23, 2017
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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.
May 23, 2017
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Relationship of stated-own business and government
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.
NDRC
SASAC
realizes public
state-owned Assets Supervision
ownership
and administration Commission
National Development and
Reform Commission,
enforce antitrust
related issues
Industry regulator the
business plays in,
(for telecommunications
carriers, is MIIT)
Industry
development and
market regulation
policy conflicts
of different departments
might give carriers excuses
for elusive behaviors
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Challenge—non-subsidy policy sustainable?
How much state ownership should and could in common carriers’ operation?
Unclear Central –local government jurisdictions
Lack of systematic institution arrangements
Page 16
China Economy System Evolution
Since 1990s Economy restructure by Privatization,
Globalization, Liberalization
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)
Separate the ownership
and management of public sector
Privatize state-owned and
collective enterprise
Stimulus policy for private sector
growth (2nD FDI country)
Private sector
•
•
Small self-employed
business
others
set public assets supervision system
and market regulation system
Socialist Market
Economy
2007 About 40% GDP
public sector
• State-owned enterprises
Partially privatization
•Collective enterprises
totally or partially
Privatization 90%
•Private companies
play an important role.
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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
e
Transitional
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)
18
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Transitional institutional environments
Present: ambiguous governments’ roles; legislation behind
practice; inconsistent rules.
Someday? in future: Systematic institutional arrangements
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%
•Urbanization
7000m lives in countryside without public utility
and social security, unemployment pressure
•Globalization
Weak domestic private capital, lack expertise in
international trade rules etc.
•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.
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Central and local government jurisdiction in VAP
Two-layer regulation
former
•
Central level (MII)
Infrastructure &basic service;
inter-province VAS;
Common carriers
•
Local level (PCB)
PCBs are Provincial branches of MII,
independent of local government
Local VAS (non-facility information service)
Local VAS providers
UFO: VAP—Basic telephone
present
•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 +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.
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