International Journal of Communications Law and Policy Issue 7, Winter 2002/2003 REFORMING CHINA'S TELECOMMUNICATIONS LAWS LESSONS FROM THE AUSTRALIAN EXPERIENCE? by Martyn Taylor* A. The challenge of sustainable Chinese economic development China has achieved a dramatic economic transition under the leadership of successive Presidents Deng Xiaoping and Jiang Zemin. From 1978, the traditional Chinese agricultural economy, based on communist command structures, has been transformed into a socialist market economy with a burgeoning industrial and service sector.1 These economic reforms have been reinforced by far-reaching institutional and legal reforms, as is well documented in the literature.2 As a result, China has achieved economic growth rates averaging an astounding 8.9% per annum over the past 15 years.3 China’s economy now ranks as the world’s second largest behind the United States in real terms, suggesting China already ranks as a global economic superpower notwithstanding its developing status. However, as the World Bank has noted, China must overcome daunting internal challenges if it is to sustain its present growth trajectory.4 Such challenges include rising income inequality, declining international competitiveness, regional disparities and rising unemployment.5 These challenges are compounded by the global information revolution, which will force Chinese industry to undergo further rapid restructuring to remain internationally competitive. Relevantly, to address such challenges, the World Bank recommended to the Chinese government in October 2001 that China's existing five year strategic plan should be amended to further promote the development of Chinese telecommunications infrastructure.6 Indeed, while China has the largest telecommunications network in the world (dwarfing that of Australia), the accessibility of that network to the Chinese population remains comparatively low, indicating significant scope for further infrastructure development, as illustrated by the comparison in Table One below. * LLB(Hons), BA(Economics)(Hons), BSc, LLM; PhD candidate; Senior Associate at Mallesons Stephen Jaques specialising in telecommunications law and competition law. Submitted following study at the East China University of Politics & Law, Shanghai, China. The author can be contacted at [email protected]. The views expressed in this article are those of the author. 1 The term “socialist market economy,” refers to a situation in which market forces are relied on to improve efficiency while the government continues to manage many aspects of economic production, including by retaining a high degree of state-ownership. 2 See AES Tay “Introduction : Law and Legal Culture in China” in AES Tay & G Doeker-Mach (eds) Asia-Pacific Handbook - Volume 1: People’s Republic of China (Nomos Verlagsgesellschaft, Baden- Baden, 1998), pp 39-53. See also B Naughton Growing Out of the Plan: Chinese Economic Reform, 1979-1993 (Cambridge University Press, New York, 1995). 3 See World Bank “Country Economic Review: People’s Republic of China” PRC 2000-09, World Bank, Washington DC, October 2000, adjusted for recent statistics. 4 See CJ Dahlman & JE Aubert “China and the Knowledge Economy: Seizing the 21st Century”, World Bank Development Study (China), World Bank, Washington DC, October 2001. 5 Significant income disparities now exist, for example, between the richer coastal provinces and the poorer hinterland areas where ethnic minorities are heavily concentrated. 6 Chinese economic policy for the development of the telecommunications sector is articulated within China’s Tenth “Five Year Plan” (2001-2005) which sets out various targets for such matters as telephone line penetration and infrastructure investment. 1 International Journal of Communications Law and Policy Issue 7, Winter 2002/2003 Within the context of its rapid economic reform programme, China has already moved swiftly in recent years to reform its telecommunications sector. Such reforms were expedited by China's entry into the WTO in 2001, resulting in significant amendments to Chinese telecommunications regulation.7 However, towards the end of 2001, the Chinese government indicated that it would prioritise and implement yet further telecommunications law and policy reforms.8 Such reforms remain firmly on the Chinese policy agenda for 2003 and are likely to remain central to China’s future economic development strategy, particularly given the World Bank’s October 2001 recommendations.9 Against this background, this paper identifies further reforms that could be made to China's existing telecommunications laws and overall regulatory structure to address critical issues that Australia experienced during its own telecommunications law reforms. In undertaking this analysis, this paper undertakes a comparative analysis of Australia's and China's current telecommunications laws and assesses their effectiveness in meeting their respective policy objectives. This paper concludes with a number of law reform recommendations for the Chinese Government, consistent with the economic development strategy identified by the World Bank in its October 2001 report. Table One: Key comparative statistics between China and Australia10 Statistic China Australia Population 1,273.1 million 19.4 million Land area 9.3 million square km 7.6 million square km GDP (2000 est.) US$4.5 trillion US$445.8 billion GDP per capita (2000 est.) US$3,600 US$23,200 GDP composition 15% agriculture, 50% 3% agriculture, 26% industry, 35% services industry, 71% services Telephones lines in use 185.1 million11 9.6 million Telephone lines per capita (%) 15% 50% Mobile telephones 155.8 million12 10.3 million Mobile phones per capita (%) 12% 53% Internet users 27.5 million 8 million Internet usage per capita (%) 2% 41% 7 See S Nelson “Regulatory Watch: China” (2001) 33(12) Business Asia 9. 8 See “China Moves Ahead with Monopoly Phone Split”, Total Telecom Asia, www.totaltele.com, 11 December 2001. 9 China’s APEC Individual Action Plan for 2001, for example, comments that: (a) during 2002-2005, China will progressively open its telecommunications market after its entry into the WTO; (b) during 2005-2010, China will continue to implement opening policy, strengthen international cooperation and exchanges, and promote further opening of the Chinese telecommunications industry; and (c) during 2010-2020, China will actively create conditions to promote the integration of China's telecommunications industry into the world. See Government of China “Peoples Republic of China: Individual Action Plan 2001”, APEC, Singapore, 2001. 10 Statistics as at March 2002, unless otherwise stated. 11 See “China Mobile Users Hit 155.85 Million Mark in February: China Reports Record Rise in Mobile Phone Users”, Total Telecom Asia, www.totaltel.com, 27 March 2002. 12 See Total Telecom Asia, above n 11. 2 International Journal of Communications Law and Policy Issue 7, Winter 2002/2003 B. Comparative telecommunications sector reforms In order to analyse Australia and China’s current telecommunications laws, it is necessary to understand the historical context to their respective telecommunications reforms. Telecommunications sector reforms were initiated, on an international basis, during the late 1970s and early 1980s in recognition that state ownership was hindering the development of telecommunications infrastructure and the adoption of new services and technologies.13 Such reforms were partly motivated by the rapid evolution of new technologies and the considerable capital investment that would have been required by governments to implement such technologies and meet growth in demand.14 Such reforms were also motivated by an increasing international emphasis on competition policy and market mechanisms as a means to promote economic efficiency and increase social welfare. The primary purpose of such reforms was to provide consumers with a greater quality and diversity of services at a lower overall cost.15 I. Australian historical and policy context Historically, Australian domestic telecommunications services were provided by the Australian Post Office and, later, the Australian Telecommunications Commission (ATC).16 International telecommunications services were provided by the Overseas Telecommunications Commission (OTC).17 The ATC and OTC each comprised statutory commissions operating statutory monopolies in their respective sectors. In 1989, the Australian government corporatised the ATC while enacting the Telecommunications Act 1989 to implement the first stage of Australian telecommunications reforms.18 This legislation permitted limited competition in the provision of certain value-added services, while establishing an independent regulatory agency (AUSTEL) to protect consumers and ensure fair competition.19 In 1991, the Australian government enacted the Telecommunications Act 1991 which facilitated the market entry of Optus Communications Limited (Optus ) by way of competitive tender, and Vodafone Limited (Vodafone ), as large-scale private sector competitors.20 Meanwhile, the OTC and ATC were amalgamated to form Telstra Corporation Limited (Telstra) under 100% government ownership.21 Optus and Vodafone were granted statutory access rights to various Telstra networks and services, supervised by AUSTEL as independent industry regulator.22 Retail competition was increased by encouraging market entry by resellers who resold basic carriage services provided by Telstra. 13 See W Melody (ed) Telecom Reform: Principles, Policies