The Battle to Lower Telecoms Costs

In an April 12 meeting between President Chen Shui-bian and student representatives, some students suggested that Chunghwa Telecom's ADSL rates were too high, and that the company's failure to lease out "last-mile" subscriber lines (the physical connection between the local exchange and the subscriber) was slowing the development of broadband access in Taiwan. It was clear that students were perplexed and felt the high cost of getting on the web to be unfair. President Chen's response: "Chunghwa can afford to make a little less money!" This remark sparked a whole series of price-lowering moves.

In fact the cost of domestic telecommunications had long since led some people to protest against it as unreasonable, but they had not been taken seriously. Hsu Wen-jen, the founder of the "Protest Chunghwa Telecom Association," has long maintained that Chunghwa Telecom (CHT) should not have a monopoly of subscriber lines, which are really part of public infrastructure. He says that five years ago Taiwan led the Asia Pacific area in establishing ADSL service, but in less than two years its broadband access fell far behind that of Japan and Shanghai, and the fees for access were higher than those in other Asian cities. This is the result of CHT's long-time monopoly, he argues. On May 1 Hsu led 1000 fellow Internet users to surround the Legislative Yuan demanding a change in the law and shouting out protests against CHT.

Given President Chen's intervention, and with the shouts of Internet users still ringing in their ears, Chunghwa Telecom finally acted. CHT chairman Ho Chen-tan announced in mid-May that beginning in June the company would begin leasing voice subscriber lines to other fixed network operators, and that costs could be expected to drop dramatically, below 60% of the current rate. In addition, charges for local telephone calls and ADSL Internet access would also be adjusted downward. It appears Taiwan's telecommunications market is entering a new "Warring States" period.

According to Point Topic, an international DSL and broadband survey organization, Taiwan's broadband penetration ranks second in the world at 7.9%, behind only South Korea at 11.4%.

But the Council for Economic Planning and Development of the Executive Yuan, using gross domestic product as a comparative measure, finds that Taiwan spends far more than the US, Canada, Japan, Hong Kong or South Korea on broadband Internet access. The Institute for Information Industry has compared ADSL rates in Taiwan and Japan. The results show that access speed in Japan is 22 times faster than that in Taiwan, yet the cost to Taiwan subscribers is two to three times as high. Obviously, Taiwan broadband, lacking the mechanism of market competition, is not only unable to elicit interest among potential subscribers, but harms Taiwan's digitization effort as a whole.

Industry insiders point out the reason broadband is inexpensive in Korea has to do with ADSL competitors. Cable TV broadband service is excellent and has been able to create balance and competition. In Japan, between the Internet service providers and the fixed network operators, there is another level of service providers who provide ADSL services. The intense competition leads to cheaper services.

As for Taiwan, private-sector fixed network operators have sought to rent subscriber lines from Chunghwa Telecom for some time. Several rounds of price negotiations have failed to find common ground, and the high rental fees have led to ADSL Internet access charges that have remained high.

Currently the monthly line rental for a fixed-line telephone is a NT$70 for the average subscriber. Adding a monthly ADSL rental fee of NT$449 (down to NT$410 on June 1), a person would pay rental fees of at least NT$480 a month. The Directorate-General of Telecommunications and some legislators have made some preliminary estimates and believe that a reasonable fee would be NT$280, so there is still lots of room for downward movement.

Aside from ADSL, rates for mobile phone text messaging have come down for the first time in nine years.

Chunghwa Telecom has announced that beginning June 1 the cost of text messaging will drop 50 cents a line. After this adjustment the new per-line rates will be: in-network, NT$1.5 and out-network, NT$2. This represents a 20% to 25% decrease. Taiwan Cellular Corporation's standard price of NT$2.5 per line for in-network messages and NT$3 for out-network messages will not change, but high-volume uses who rack up NT$30 worth of messages in one month will treated to 12 free lines of text. Asia Pacific Broadband Wireless Communications, Inc. has announced that beginning May 21 there will be a NT$1 decrease in both in- and out-network fees to meet Chunghwa's price levels. FarEasTone has not so far announced any change in its line price of NT$3 for in- and out-network messages.

Cell phone text messaging is an important way for today's youth to keep in touch with one another. The recent wave of price decreases is certainly something to praise, but compared with the Philippines' price of about NT$0.6 per message. Singapore's NT$1.04 and mainland China's NT$0.4, Taiwan's text messaging charges seem to have some room for downward movement.

In this atmosphere of decreasing prices for telecommunications, the Consumers' Foundation has raised the criticism of the "Three Nots": Not enough decrease, not enough sincerity and not enough clarity. The call to "lower even more" continues unabated. No matter what, the drift toward decreasing telecommunications costs is inexorable. Perhaps CHT chairman Ho Chen-tan is correct: "This is a long-term topic and one well worth looking forward to."