Development and Reform Commission Experts: Long-term investment return period of broadband investment should be gradually reduced

The construction and maintenance of communication networks require huge funds. The cost recovery period is at least 78 years. After 4G is launched, 3G network assets of some operators will be gradually disposed of, there is no hope of cost recovery, and financial pressure is high. Operators need to gradually digest. Internet companies have the cost of leasing network resources, but they are lower than the international level.

Regarding the cost of Internet companies renting the telecommunication company's network resources, Shi Wei’s judgment standard is very simple—“When they built their own network on that day, it would indicate high network fees”. According to annual report data, in 2014, Tencent’s network costs (lease operators' bandwidth and server custodian fees) accounted for 7.7% of total costs and 5.4% of operating revenue. Baidu’s two indicators were 7.9% and 5.8%, respectively. They were 4.2% and 3.6%, respectively; while during the same period, the operator's network investment accounted for 34.6% of the revenue, and the network cost accounted for 65% of the total cost (in the case of China Telecom). In foreign countries, the proportion of bandwidth service costs paid by Internet companies and OTT companies is generally higher than that of China.

In addition, the core values ​​of Internet companies are significantly different from those of telecom operators. Internet companies are light assets. The core of their concern is how much value-added services can be formed on the Internet. However, the core of operators is universal service. The first thing to do is to ensure the security and stability of the network. Second, consider value-added services. Especially in the mobile field where technology is rapidly changing, operators spend more time building networks than they think. With the improvement of standards, from 2G to 3G to 4G and future 5G, almost every network upgrade operator needs to invest.

China is a 3G license issued in January 2009 and a 4G license issued in December 2013. In the last five years, the 3G investment cost of each operator is about 200 billion yuan. And China Mobile’s capital expenditure last year exceeded 200 billion yuan. China Telecom and China Unicom expect that the total cost of 4G network construction will reach more than 200 billion yuan. From the perspective of international experience, it usually takes 7 to 8 years for the return on investment of 3G networks and 4G networks. Taking China Telecom as an example, 3G networks built with huge amounts of money have only been used for 6 years to start investing in 4G networks. It can be said that the cost of 3G network construction has not been recovered, but before 2019, 3G network investment will still be given every year. China Telecom generates up to 20 billion yuan in depreciation costs. Despite this, operators are still trying hard to let consumers enjoy the high-speed network dividends. In June 2014, China Telecom’s 4G network speed was more than 10 times faster than 3G, but the tariff was 30% cheaper. In May of this year, in response to the “speed increase and fee reduction” call, it dropped by 30%. However, consumers are still happy to use the tariffs of South Korea and other 4G developed markets compared with ours. Shi Wei thinks this is not science. In South Korea, for example, it has a small land area and a dense population. Operators are much less likely to build networks than operators in China. In addition, South Korea’s 4G development has entered its fourth year and began to approach the 4G payback period. Its price reduction space is obviously larger than China’s just launched 4G. Therefore, consumers should have more rationality and patience to build networks for Chinese operators. Develop users and reduce prices further.

Shi Wei told reporters that he recently felt deeply when he was surveying remote areas such as Yunan, Guigui, and Sichuan, that even in remote and impoverished areas, signal coverage was good. This is the universal service obligation undertaken by Chinese operators and is admirable. Internet companies do not. Ordinary consumers may care more about whether they can make phone calls and play WeChat. However, to ensure that users in rural areas can enjoy the same service experience as urban users, they rely on the universal service obligations borne by operators.

The structure of China's terrain is complex. Two-thirds of them are in mountainous areas. About half of them are uninhabited areas. In these areas, it is difficult to imagine that it is difficult and costly for outsiders to build and maintain communication networks. Shi Wei said that according to economic strength, China’s universal service is the best solution in the world. China's "Village Project" has achieved remarkable results so far. According to a document issued by the General Office of the State Council in May, by the end of 2015, more than 95% of administrative villages had fixed or mobile broadband, achieving deep network coverage in areas above township and townships, and 4G users exceeding 300 million. By the end of 2017, more than 80% of the administrative villages have achieved fiber-to-the-village, rural broadband households have seen a significant increase in the penetration rate; 4G networks have fully covered urban and rural areas, and the penetration rate of mobile broadband population is close to that of medium-developed countries. Shi Wei believes that our country proposes to vigorously develop modern agriculture, and the efforts made by the three major operators in the “Village Project” will make unexpected contributions to the future economic development in rural areas.

Shi Wei stressed that the root cause of the smooth development of universal service lies in whether it has established an effective mechanism. China now has a certain amount of financial compensation for universal service, but it can be said that it is a small sum of money. Judging from foreign experience, effective mechanisms have a major impact on solving universal service problems, such as government procurement mechanisms. Taking the United States as an example, when it comes to implementing universal service projects, the model of government procurement, construction of operators, and government pay is implemented. Premier Li Keqiang released a very important signal during the "two sessions" this year. It is necessary to emphasize government procurement and establish relevant mechanisms. It is worth looking forward to. Shi Wei believes that when China's universal service mechanism is actually implemented, government needs, corporate construction, and government procurement will be effective.

At present, there have been discussions abroad regarding whether Internet companies should assume universal service obligations. France’s telecommunications regulatory agency, ARCEP, previously required Skype to register as a telecom operator according to local laws, and at the same time undertake the opening of emergency telephone services and allow it under legal conditions. Judicial monitoring phone and other operators should bear the responsibility. At present, there are many Internet companies in China that provide similar telephone functions. Shi Wei believes that in the case of whether such Internet companies should assume universal service obligations, China can also conduct research in due course.

The communication industry is a service industry, not an industry. It is unreasonable to understand monopolies in terms of judging standards in the era of industrial economy. The competition in the field of China's basic telecommunications has become very fierce. New entrants are constantly involved, and there is no monopoly that the public understands.

With the advent of the mobile Internet era, especially the rise of smart terminals, cloud management technology has continued to mature and develop. The separation of services and networks has accelerated. Internet companies have gradually taken up the core of the industrial chain, and their operating performance is in full swing. The business revenue and profits of telecommunications companies The rate plummeted. The rapid development of Internet companies has prospered the content and application market, and increased certain traffic income for telecommunications companies. At the same time, however, Internet companies have also launched a number of businesses with communication functions, and they directly replace the core businesses of telecommunications companies through free-to-air services. The increase will not be able to make up for the loss of its business income. The substitution effect will gradually occupy the mainstream. It can be said that while operators provide effective support for the development of the Internet, they have not received due rewards. Instead, they are facing increasing threats. If this kind of partiality and symbiotic relationship between the two types of enterprises cannot be effectively improved, it will be a long-term solution. Reducing the telecom operators’ capabilities and willingness to invest in the network will destroy the entire ecological environment of the information and communication industry and affect the smooth implementation of the “Internet Plus” strategy. In the next few years, the demand for funds for network infrastructure construction will be huge, and Internet companies will need to shoulder their due obligations, and solve problems such as the construction and use of network facilities through market-based mechanisms.

In the "Internet +" era, operators must attach great importance to their own channels. The concept of pipeline is completely different from the original, and some private capital cannot do it. Operators must be smart. The smart pipeline is China's biggest advantage. What kind of content we put up in the end and what is open through the capital market and open through the financial and industrial methods are all worth serious research and exploration.

At present, the "Internet Plus" advocated by our government represents different meanings at the level of operators and Internet companies. For operators, "Internet +" is the link between operators and enterprises, while OTT's "Internet +" is the interface between the Internet and ordinary consumers. Shi Wei interprets this.