Internet Not Too Expensive For The Chinese?

(ChinaTechNews.com)  Report: High Internet Fee Enlarges China's Digital Gap May 8, 2007.  May 8, 2007.

The World Bank and Peking University Public Policy Institute have jointly released a report which says information and communication technologies are vital for China to sustain its rapid economic growth and for it to become an innovation-driven society.

However, the report also says high Internet fees, insufficient regulation, dependence on foreign technology and a lack of talent are the four main factors that block China's information industry development. The report, entitled "China's Information Revolution: Managing the Economic and Social Transformation", says that the price of Internet use in China accounts for 10% of the total income level, which is almost 10 times that of the developed countries, and the high price is leading to an increasing digital gap between urban residents and rural groups in the country.

The report says China needs to further reform the laws and regulations in areas such as telecommunications, access to government information, data protection and privacy. It also needs to invest more to provide rural residents access to telecom infrastructure.

The data released by China Internet Network Information Center shows that more than 20% of urban residents in China have access to the Internet, compared with only 3% in the countryside. China is now drafting its first telecom law and will soon set up its first universal service fund, which subsidizes telecom operators for providing services in rural areas.

China has the world's largest telecom market and second-largest Internet user population. By the end of 2006, it had more than 144 million Internet users and 480 million mobile phone subscribers.

(China Daily)  Internet too expensive for most Chinese.  May 2, 2007.

Guangming Daily reports Chinese netizens spend ten times more money on the internet than people in developed countries.

A World Bank report released on Monday reports Chinese netizens spend an average of 83.5 yuan (US$10.8) on the internet every month, more than 10 percent of their monthly income.

People in developed countries spend an average of less than one percent of their income to access the same information online.

Experts say internet prices in China should be slashed by at least 20 to 30 percent.

Early this year, Minister of Information Industry Wang Xudong said limits would apply to internet fees in 2007.

Lots of people say the high internet fees result from the industry oligopoly. China is the world's second largest market for internet and broadband services, but a few state-owned companies still set the prices. In the absence of fierce market competition, these companies are understandably reluctant to reduce their fees.

But the high prices prevent many Chinese people from using the internet, which has become the domain of the rich.

Some expert predicts that the number of internet users is expected to increase at an unprecedented rate when internet charges are cut by 20 to 30 percent. Up to 20 million more people will join China's 137 million netizens annually and the total number of people online could reach 200 million by 2010.

(Tech.sina.com)  Beijing University of Posts and Telecommunications professor rebuts World Bank report: Internet fees are cheap in China, free access is impossible to achieve.  May 8, 2007.

[in translation]

On May 1st, media reports quoted India's Communications and Information Technology Minister as saying that India will achieve universal free broadband service for citizens by 2009.  On the same day, media reports say that according to the World Bank's newly released report "China's Information Revolution: Managing the Economic and Social Transformation," the Internet fees cost about 10% of the total income level.  This ratio is 10 times higher than in developed countries.  So all of a sudden, the subject of Internet fees drew attention and debate among netizens.

With respect to these media reports, Zeng Jianqiu (who is professor at the Beijing University of Posts and Telecommunications where he supervises doctoral students, director of the Information Economy and Competitiveness Research Center and doctor of philosophy from Cambridge University (UK)) expressed his views to the Xinmin Net.  He believed that India's claim to provide broadband access to all citizens is an "unachievable fantasy."  He also said that the statistics in the World Bank report are unscientific and unserious.  At the same time, he believes that Internet fees in China are not high.  In fact, it is lower than in many developed countries, and it will be getting lower and lower.

Zeng Jianqiu told Xinmin Net that he estimated that a big country like India will require 1-2 trillion US dollars to achieve free broadband service for all citizens.  This sum is obviously impossible for India, which has an annual GDP of less than 1 trillion US dollars.

Concerning the hopes of netizens for free Internet service, Zeng Jianqiu said that only certain rich countries (such as Singapore and South Korea) with small geographical areas can offer "free universal broadband access" as a social welfare benefit.  Many developed countries (including the United States) do not have free Internet access as a goal, and he felt that there was no need for China or India to provide free broadband service to citizens.

Zeng Jianqiu said that certain ministries in India often boast about their work.  But anyone with a modicum of commonsense can judge that India has no ability to provide universal broadband access by 2009.

Concerning the assertion that "Internet fee in China is 10 times higher than in developed countries," Zeng Jianqiu thought that the data on which the conclusions rests were unscientific and unserious.  He did not think that the criterion should be the ratio of "Internet fee to income level."

Zeng Jianqiu said that the best scientific standard should be a direct comparison.  In China, the monthly bill for broadband service is usually between 80 to 120 yuan.  In the United States and the United Kingdom, the corresponding bill is around US$20.  Thus, the fees in China are less than in many developed countries.

Zeng Jianqiu told Xinmin Net that over the past 10 years, the communications industry in China has been growing at 2 to 3 times the rate of growth of the GDP as a whole, and it is the engine for economic development.  China is now the second largest Internet market in the world and the results are obvious.  The Internet fees today are obviously lower than those several years ago, and they will continue to go down in the future.

Concerning the claim by some experts that "the monopolies have kept prices artificially high when the Internet fees could be at least 20% to 30% lower," Zeng Jianqiu said that the allegation of monopoly is not substantiated and that the Internet service industry is not monopolized.

Zeng Jianqiu told Xinmin Net that there are many Internet service providers in China.  China Telecom, Tietong and China Net Com compete fiercely at the regional levels, so the present Internet fee levels are not due to the lack of competition in the market.  It is irresponsible to claim that monopoly exists.

Zeng Jianqiu believes that the present fee levels in China are restrained by three factors.  First, the construction of the Internet is still being carried out in China and the basic infrastructure is still not yet mature.  Second, although the total number of netizens is 137 million and it is still increasing, there are not too many long-term dedicated users.  Third, the current fee structure is based upon demand considerations in developing the market with less emphasis on operating in an existing market. 

(北在野 Beizaiye's blog)  Three flaws in Zeng Jianqiu's <Internet fees are cheap in China, free access is impossible to achieve>.  May 9, 2007.

[in translation]

I read Zeng Jianqiu's essay <Internet fees are cheap in China, free access is impossible to achieve>.  He is an advisor hired by China Net Com and has been recently teaching classes at China Net Com.  If he takes money from someone, he'll have to work for them.  That is why he is saying things that are contrary to what he must know to be true.

This person is middling with respect to theory, his practical experience is poor-fair, he has virtually no frontline experience and his speaking skills are also poor-fair.  Due to his age, he wants to accomplish something but he has been put down by people like Lu Tingjie.  Therefore his frustrations are understandable.

In his essay, he made three errors of a commonsense nature:

1. "A big country like India will require at least 1 to 2 trillion US dollars in order to provide universal broadband access."  China is a lot bigger than India.  At this moment, the total investment on the Internet in China is far less than 1 trillion US dollars.  Besides, the cost of equipment is getting cheaper and cheaper.  The difference between 1 trillion and 2 trillion is 2-1 = 1 trillion, and that is not the same as the difference between 1 to 2 dollars.  At the same time, the social and economic benefits from this level of investment is impossible to estimate.

2. "The scientific standard should be the comparison of absolute values."  If this is true, then China should be more affluent than the United Kingdom or France, because the absolute size of China's GDP is bigger than the GDP's of the United Kingdom and France.

3. "The Internet service provider industry is not a monopoly."  This statement is obviously not based upon any investigation.  Although Tietong, the local China-Telecom's, the local China-Net-Com's and Gehua Cable TV Network are competing against each other, these operations are dwarfed by the big players of China Telecom and China Net Com.  I will discuss the detailed reasons at another time.

From the perspective of the discussion on this subject, Zeng Jianqiu has made a contribution towards eventual free Internet access in China.  This is because his erroneous opinions have aroused further attention from people.

Broadband access is still very expensive in China at 100 plus yuan per month (the cheapest rate is supposedly 60 yuan) or about 1/5 of the monthly income of a production worker.  This is unthinkable.  Furthermore, we have another 900 million farmers who should have equal rights for Internet access.