China Mobile shows antiquated culture

Such logic sounds unfamiliar to people in Hong Kong. To build critical mass, Hong Kong carriers did exactly the opposite in the initial stages. They offered the service at prices that the market could accept, sweetened with various incentives, such as unlimited access to the Internet, to woo early subscribers.

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Having quickly built up a large enough customer base, the Hong Kong carriers are no longer offering any incentives although prices have been kept at levels they consider "acceptable" to new customers. That is the predictable and proven strategy to launch a new service or product in a market-oriented environment.

In contrast, the strategy adopted by China Mobile for launching its 4G service on the mainland seems arbitrary and crude. In Hong Kong, such an approach applies only to the utility monopolies, such as electricity and gas.

Under an arrangement that applies to each individual monopoly, its return, at a capped rate, is tied to the capital investment it makes in infrastructure. This means that there is a built-in mechanism allowing the monopoly to raise charges to maintain the rate of return when new investments are made.

Such arrangements have worked well in Hong Kong because the operations of these monopolies, all publicly traded companies, are sufficiently transparent, allowing for close supervision by the government and scrutiny by the public. As a result, rates are set largely through a process of consultation that seeks to balance the interests of shareholders and consumers.

There are obvious lessons China Mobile and other dominant State-owned enterprises should learn from if they want to survive the mainland's market-oriented economic restructuring that is expected to gather momentum in the coming years.

The author is a senior editor with China Daily.

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