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Monopolies curb innovation by adding fees

Xinhua | Updated: 2013-04-03 17:32

BEIJING - In response to grumbles from China's monopolistic telecom operators, the country's industry regulator said last weekend it is possible that the operators will be allowed to impose fees on WeChat for signaling channel usage.

The move has caused quite a stir, with the vast majority of Chinese mobile Internet users, who enjoy using this free, user-friendly chat app developed by Chinese Internet giant Tencent, coming out in strong opposition. After all, they believe charges on app providers will inevitably be passed on to consumers.

At the heart of the issue lies the sentiment that monopolies are challenged and irritated by innovation. Regulators and telecom service providers are trying to defend the current monopoly by making a series of flimsy and flawed accusations.

It doesn't make sense to say that WeChat and other Over-The-Top (OTT) content services have generated too much data traffic and occupied much of telecom service providers' signaling channels, as the service providers allege.

Given equal market access, the ability to attract heavy data use partly reflects the competitiveness of the apps and their developers.

Currently, Chinese telecom operators do not charge for the use of the signaling channel. If OTT providers were forced to pay fees, would it mean they could get better services? And for those who say no, wouldn't that constitute unfair treatment?

Meanwhile, telecom carriers have never disclosed what preferential treatment they have given to their own apps. It is highly likely that they have moved to give special treatment to their products, as precedents show that unfair competition is prevalent under a monopolized market.

IT companies have struggled to grab a piece of a heavily monopolized pie. Their success is worthy of applause, not accusations.

Moreover, telecom service providers argue that their mainstay businesses are being crippled by OTT services like WeChat, which presents a false dichotomy.

Text messaging used to generate big bucks for telecom operators. However, it was not because the service was exceptionally good, but because telecom operators were the only ones to offer it.

Not surprisingly, when the cheaper and more efficient short messaging communication tool WeChat hit the market, the traditional text messaging service lost its appeal.

In light of this, telecom operators should reflect on some questions that they couldn't be bothered with before: What is a more appropriate pricing mechanism for services like text messaging? Should these charges be adjusted now that the industry has finished the money-burning phase of infrastructure construction? How can telecom operators develop more appealing products?

Meanwhile, telecom giants aren't the only ones in a pickle. IT operators are also facing pressure to feed the public's craving for more free Internet services that are accessible and allow users to easily share information. A handful of IT companies like Tencent are surviving, and thriving, on innovation, which should be a lesson to monopolistic telecom operators.

Moreover, telecom operators' position that it is reasonable to collect extra fees on top of existing data use charges is one that lacks substance. But in the absence of a perfectly competitive market, how can anyone define what is "reasonable" and what is not?

In the early days of China's mobile Internet industry, the costs of purchasing and using a cell phone were prohibitive for most people, as operators were grappling with the costly burdens of infrastructure construction and network maintenance. However, those days have passed, and consumers do pay for mobile data whenever they use WeChat and other web-based apps.

Therefore, how is it reasonable for telecom operators to charge additional fees in the name of network maintenance, especially when they already benefit from rising data flows generated by popular apps?

Chinese telecom operators have all gone public, so they are justified in pursuing profits and success. But in what way? In the mobile Internet era, even companies that are part of the monopoly need to play by new rules.

Given the difficulty in breaking existing patterns of interest, the fundamental way of ensuring sustained profits may lie in creating an environment that features mutual growth. Such an environment would engage not only telecom operators, but also OTT service providers and users.

Many people say they talk "nonsense" on WeChat. They say they are hooked now because the service is free, but once the free days are over, they probably will cut the "nonsense." If costs are driven up too far, maybe we'll all get back to the good old days of talking face to face.

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