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October 27, 1999

China Slashes Telecom Costs for Internet Access

By CBR Staff Writer

The Chinese Government has slashed internet-related telecoms fees for the second time this year to encourage the already rapid growth in internet subscriptions. The State Development Planning Commission and the Ministry of Information Industry (MII) have ordered cuts which will affect both internet service providers and individual subscribers. The biggest cut is 69% for international internet lease lines, with a 30% cut for digital data and analog lines. Monthly dial-up subscribers see a 45% cut, while there is a 50% cut in monthly trunk line services.

But the most welcome change in fee structure is the introduction of charging by one minute increments for dial-up subscribers. Under the current system charges are per hour which the MII now describes as an irrational burden on internet users. As well as the dial up costs subscribers currently pay access fees of up to 350 yuan ($42) a month, or a quarter of the average monthly income in China.

Zhang Xiatoie, vice director of the Ministry’s Finance Department, was quoted in the communist party’s official organ, the People’s Daily, as saying the fee adjustments are part of a plan to bring China’s telecommunication charges down to reasonable levels over the next several years.

So far this year Chinese ISPs have seen their monthly lease line telecom charges reduced from 430,000 yuan ($51,800) to 220,000 yuan ($26,500). Access to these lines represent 80% of the cost of doing business for ISPs in China, compared to about 6% for ISPs in the US.

The number of China’s internet users is forecast to triple this year from about two million in January to around 6.7 million by year end by US market research company the Strategis Group Inc. Other forecasts say there could be up to 10 million users by the end of this year and 50 million by 2003.

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