China's top economic planner is investigating China Telecom and China Unicom, two telecommunications giants, over alleged monopolistic practices in the broadband access business.
If confirmed, the two major operators could face billions of yuan in fines, the National Development and Reform Commission (NDRC) said Wednesday, adding that the investigation started in the first half of this year.
"In the Internet access market, China Telecom and China Unicom combined occupy more than two-thirds of the share. With such a dominant position in the market, they practiced price discrimination, raising prices for companies that are competing with them, while giving discounted prices to non-competitors," , said Li Qing, deputy director of the price supervision and anti-monopoly department of the NDRC.
China Telecom and China Unicom account for 90 percent of the country's broadband business and have formed a monopoly in the market, the Xinhua News Agency reported, citing an anonymous official with the NDRC.
Revenues from China Telecom's broadband business come to around 50 billion yuan ($7.9 billion) a year while those of China Unicom are nearly 30 billion yuan, Li said, adding that the two companies would face penalties of up to 10 percent of their annual business revenues if they were found guilty of monopolistic practices.
This is the first such investigation into China's large enterprises since the Anti-Monopoly Law came into effect in 2008. The result of the investigation is expected to come out soon, Li said.
Despite having the world's largest Internet population of 485 million, China's average broadband speed only ranks 71st in the world, while average costs are three to four times those of developed countries, said a report released in July by the Advisory Committee for State Informatization.
Liu Zheng, information director for business solutions at the research company Analysys International, told the Global Times that the probe may reduce costs for small operators and eventually benefit consumers.
"I don't expect a reshuffle in the market. Penalties won't lead to decrease of their market share. It's more of a warning to the two operators,"said Liu.