Stated-owned Chinese telco giants, China Telecom and China Unicom, are currently under government investigation for suspected monopoly violations related to their Internet broadband services, a move that may put China's antitrust laws under the microscope.
The National Development and Reform Commission (NDRC) had begun probing China Telecom and China Unicom for allegedly taking advantage of their dominant positions, regarding broadband access, to suppress competition from rivals and charging high fees, Li Qing, deputy head of the NDRC's price supervision and anti-monopoly department, said in a Xinhua report Thursday.
China Telecom and China Unicom together control two thirds of China's broadband market. If found guilty of monopolistic practices, both may face penalties of up to 10 percent of their annual revenues, Li added.
The telcos had agreed to cooperate with the probe, said Xinhua, a state-controlled news agency.
The move is the first such case involving large state-owned enterprises, and may lead the Chinese government to broaden the scope of its antitrust laws since the country implemented its first anti-monopoly law in 2008, the report said.
Gu Liaohai, a lawyer at Beijing-based Liao Hai law firm, told Xinhua that the probe would help improve China's anti-monopoly legislation and was a good start to improve local legislation and meet international law practices.
Sebastien Evrard, a partner at the Chinese office of U.S.-based law firm, Jones Day, added that the move was a "good sign" that the government was addressing broadband prices through anti-monopoly legislation, rather than relying on administrative measures.
One analyst, however, expressed skepticism about the purpose of the investigation. Paul Wuh from Samsung Securities said in a Reuters report: "It's odd for the government to talk about monopolistic behavior when they set up the monopoly." The report added that industry analysts did not think the investigation made sense since broadband ARPUs (average rate per user) had been under pressure over the past few years, and the rate instead would have spiked if a company was monopolizing the industry.