Fighting underground

Subway operators and telcos go to battle

Fighting underground

Can't talk. I'm on a train...

Like a dropped phone call, the once-animated dispute between Guangzhou Metro and the city’s mobile carriers has suddenly gone silent.

The dispute started several months ago when the mobile operators complained about the fees the subway operator was charging for using their base stations – which allow calls to be made and received by passengers on underground trains.

At present, base stations are constructed by the Guangzhou Metro, and then leased to telecom operators for a monthly rental fee.

The mobile carriers, mainly the Guangzhou branches of China Unicom and China Mobile, are cross. “The rental price for base stations is unacceptable,” a telecom official told the Southern Weekly.

Guangzhou Metro quickly fired back, arguing that the rental charges were justified by the high costs of the in-tunnel signal receivers. They also compare charges in Guangzhou to counterpart cities. Shanghai’s mobile carriers pay fees of Rmb100 million a year to cover all the city’s metro lines, says the Shanghai Daily.

So who’s right? Hard to say, but subway operators – usually taking advantage of their monopoly status – are known for raising rental prices aggressively. Guangzhou Metro lost money for the first four years of its operations so has since looked for ways of clawing back its investment. In 2008, rental income from telecom partners grew by Rmb10 million ($1.5 million) from the previous year even though no new subway stations were added over the year. That suggests the subway operator merely raised rental fees, Southern Weekly reckons.

As more subways are constructed around the country – over 19 Chinese cities are expected to lay 2100km of track by 2015 – telco operators are worried that they will be hit by spiralling rental fees on the increasing lengths of track.

So in July, the mobile carriers asked the Guangzhou government to intervene. The outcome was that mobile operators are to be responsible for building their own subway base stations in future, while the metro company charges appropriate fees for renting out the space.

That seems straightforward enough. But the negotiations have reached another impasse. According to the Southern Weekly, the parties are now disagreeing on what the mobile operators should be paying for the rental space, as well as how they should be permitted to install the base station systems.

Industry observers say it is progress, nevertheless. “The greatest achievement is that the telecom operators took back the right to construct the base stations,” says Li, an official with one of the telcos.

The dispute comes at a time when the country’s telecom companies are sharpening their pencils on costs. All three leading operators – China Mobile, China Telecom and China Unicom – have been under pressure to cut expenses to combat slowing growth and the costly roll-out of third generation networks (see WiC3).

China Mobile, the country’s largest telecom operator, saw its average revenue per user (ARPU) – a gauge of profitability – drop from Rmb83 a month to Rmb75 in the third quarter of this year. China Telecom also saw its ARPU decline in the same period.

Guangzhou commuters should consider themselves lucky. In Shanghai, a similar dispute led to ongoing bad blood between the city’s metro company and the telecom carriers. Commuters complained of calls frequently dropping off the network, with the two sides blaming one another for the faulty reception.

Commuters just want the problem fixed. One passenger told reporters that the temperamental subway signal might even have got him fired, as his boss was livid when the commuting employee couldn’t be reached at a crucial time.

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