From Iron Fist to Invisible Hand: The Uneven Path of Telecommunications Reform in China (review)

[ 180 ] asia policy From Iron Fist to Invisible Hand: The Uneven Path of Telecommunications Reform in China Irene S. Wu Stanford: Stanford University Press, 2009 • 208 pp. author’s executive summary This book examines the Chinese government’s vacillating liberal and conservative approach toward telecommunications reform, the policies that both promote and constrain business, and the major hurdles that lie ahead in reform. main argument Using six case studies in the telecommunications sector—the evolution of the regulator, changing market structure, foreign investment, interconnection, retail price wars, Voice over Internet Protocol (VoIP), and mobile phone service—this book finds that China is still struggling, often in a piecemeal fashion, to build a solid foundation for a rules-based telecommunications economy. Further complicating China’s telecommunications reform is the government’scompanioneffortstocontrol,forideologicalreasons,thecontent of communications, including the Internet. Thus China’s policymakers lurch forward and back in liberalizing telecommunications because they want to both control information and promote economic development. policy implications • When telecom and media authorities collide, the guardians of political ideology prevail. • Not until Beijing believes that greater media freedom serves the purposes of the state is this uneven path of telecommunications reform likely to change. When first introduced, the Internet was regarded as a telecommunication service; now it appears more like a media service. • In a number of cases, however, market and technological changes have forced policymakers to reform after the fact. • Pluralizing decisionmaking to include the views of businesses and consumers would result in a more orderly market, thus strengthening—not weakening—the government’s authority. [ 181 ] book reviews Twisted Tale of Telecommunications Tells Much Barrett L. McCormick A review of Wu’s From Iron Fist to Invisible Hand Irene Wu’s From Iron Fist to Invisible Hand: The Uneven Path of TelecommunicationsReforminChinadeservestobereadatmanydifferent levels. With less than 150 pages of text, this is a short and unpretentious work, but one that offers many great stories and explains complicated issues with clear prose. As director of research in the International Bureau of the U.S. Federal Communications Commission, the author is eminently qualified to tackle this subject. Telecommunications is an important case study in economic reform. Above all, this book explains one of the great successes of post-Mao China. In 1980 there were only 2 million telephones in China, but by 2000 the country had 230 million, expanding to 744 million by 2005. This, I would argue, is significant because the increasing number of telephones not only reflects increasing prosperity but—given that gaining greater access to information makes people more productive—is also a powerful stimulus to further development. The state’s reluctance to allow foreign and private firms access to telecommunications markets makes this sector a special case, but this reluctance also means that the telecommunications sector offers an especially vivid illustration of how politics and markets interact in China. China Telecom was a monopoly administered by its parent, the Ministry of Posts and Telecommunications (MPT), until 1993 when the government authorized a coalition of ministries led by the Ministry of Electronic Industry to create a competing firm, China Unicom. Competition was limited, however, as long as the MPT both owned the larger competitor and regulated the market. In 1998 the State Council intervened to reorganize both ministries as the Ministry of Information Industry (MII) and put more distance between regulation and ownership. According to Wu, the resulting competition was the main reason telecommunication services became so widely available in such a short period of time. Prior to Unicom, there was a backlog of over two million people waiting for telephone service. Afterward, vigorous competition for customers led to lower prices and better services barrett l. mccormick is a Professor of Political Science at Marquette University. He can be reached at . [ 182 ] asia policy and a virtuous cycle of market-oriented reforms that solved old problems but created new ones that stimulated yet more market-oriented reforms. At another level, this book presents a fascinating study in bureaucratic politics. Wu finds that firms did not gain access to telecommunications markets without ministry-level backing. As noted above, even ministeriallevel support is no guarantee of a level playing field. Wu outlines a series of such struggles...