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Traffic Roaming Being Canceled: Organization Structure Becomes The Biggest Challenge For Operators

At the 1st Session of the 13th National People's Congress, Premier Li Keqiang made a report on the work of the government. When talking about the telecommunications industry, the report suggested that the "improve the speed and cut down the tariff" program should be further intensified, traffic roaming fee should be canceled and mobile network traffic tariff should be cut down by at least 30% in 2018.

The three major operators all responded to the appeal and indicated that they will resolutely implement the requirements by increasing the network speed and reducing the tariff, canceling the traffic roaming fee and reducing the mobile network traffic tariff by at least 30% this year. It also became the emphasis of the three operators’ work in 2018.

Conditions for further implementing of this program have matured

In fact, the "improve the speed and cut down the tariff" program is no longer new for operators and consumers. Since 2015, the three major operators have repeatedly improved the network speed while reducing the communication tariff.

In terms of improving the speed, the number of optical fiber broadband users and mobile broadband subscribers in China both ranked the first in the world in 2017. At present, 50Mb and above broadband users have accounted for over 70% of total home broadband users, 4G subscribers have reached up to 1 billion at the end of 2017.

In cutting down the tariff, the operators have carried out multiple strategies, such as improving network speed while not increasing the tariff, no clearance of the remained traffic data and cancelling the long distance and roaming tariffs of voice calls. In the past three years, the broadband unit price has declined by 90% and mobile communication cost has decreased by 83.5%.

In 2017, the unlimited traffic package, Internet card and other services have greatly reduced consumers’ communication spending. Taking China Unicom for example, it launched ‘ice cream’ package, Tencent cards and other low-cost packages in 2017, which surrendered profits of CNY 3.83 billion in total, including CNY 960 million in mobile communication cost and CNY 2.87 billion in broadband cost, the broadband unit cost reduced 65% compared to the same period of 2016.

Canceling roaming fees may cause competition in above 90 branch companies

Since the three major operators all adopted the develop pattern of group and branch companies, each branch has its own market. However, with the cancel of roaming fee, the market competition boundary will be completely destroyed, a branch company with lower tariff could attract users from all places around the country.

In the current market, the branch companies have launched low-cost unlimited local traffic packages, once the roaming fee is canceled, the national traffic cost will be greatly reduced. It is a fatal attraction for users in regions with high tariff, such as Beijing, Shanghai and Guangzhou.

In the future, if the operators couldn’t adopt effective measures to unify national traffic tariff before cancelling the roaming fees, the competition among different operators in local places will become a competition among over 90 branch companies, not only the competition among China Mobile, China Unicom and China Telecom will be intensified, but also the branch companies in high-tariff regions will be challenged by low-tariff branches of the same operator.

The branch company pattern may disappear

Once national package tariff and business have formed, the branch companies will no longer be needed.

In the early development stage of mobile network, the operators’ branch companies all carried out independent operations and were responsible for the network construction, maintenance, billing and customer service system. However, after the large scale construction of 3G and 4G networks, the operators’ demands for unified management and breaking the barriers between different provinces became more intensified.

At the same time, with the cancellation of roaming fees, each branch will face competition from other operators around the country. In order to avoid competition inside the operator’s branch companies, the existing ‘branch company’ pattern will be changed. A unified maintenance, billing and customer service system may become the operation mode in the future.

It will also bring obvious benefits, with the formation of a national business platform, the operators could build a unified backstage and carry out centralized management, the tariff can be truly unified and subscribers will no longer need to make difficult choices.

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