"As the telecom industry has reported rapid growth and can now satisfy demand, the levies for fixed-line telephone installation, mobile phone initiation and other extra charges issued by local governments will be wiped out," said a document jointly issued by the Ministry of Finance and the Ministry of Information Industry (MII).

Starting from the 1980s, subscribers for fixed-line telephones have been charged installation fees up to 5,000 yuan (US$604).

The charge was reduced to around 1,000 yuan (US$120) in recent years, but remained a considerable burden for families that live in the countryside.

Meanwhile the initiation fee for mobile phones decreased from about 2,000 yuan (US$240) in 1997 to 100 yuan (US$12) recently.

"Such policy changes will help save phone users about 20 billion yuan (US$2.4 billion) each year," according to an official with the Ministry of Finance.

He claimed phone subscription charges introduced in the early 1980s were a special government policy to boost the development of the telecom industry by investing hugely in basic infrastructure.

With the charges being scrapped, the demand for telecom service in the country is expected to increase further, the unnamed official said.

"Such installation charges should have been cancelled a long time ago as the telecom companies should get development capital via commercial devices," commented Yang Peifang, a senior researcher with the China Academy of Telecommunications Research under the MII.

Instead of putting the heavy burden on customers, the telecom companies could get money by issuing bonds, borrowing from banks or going public, said Yang.

The elimination of installation fees will boost the development of fixed-line business as the growth of the sector has slowed down in recent years.

Fixed-line telephones are facing severe competition from mobile phones. According to statistics from the MII, China had 160 million fixed-line users and 111 million mobile phones users at the end of May.

The number of mobile phone users may exceed that of the fixed-line as early as next year, Yang said.

China's dominant fixed-line operator, China Telecom, and its rival China Railcom, which is scheduled to kick off nationwide operation in mid-July, both welcomed the decision.

"Service quality should be the final method that helps customer decide which carrier they choose," said Dong Binfeng, spokesman of China Railcom.

He said the company's business would not be influenced by the elimination of the installation fee.

China Telecom, the major fixed-line telecom operator, has been the subject of recent heavy criticism by its customers.

It adopted a new charging system in March which has raised bills for city telephone users by around 20 to 30 percent.

(China Daily 07/02/2001)