When the nation's telecom industry opened up to new competition in January, analysts predicted a long, slow death for state-run Chunghwa Telecom Co (
Instead, it's the three new firms that are withering -- and consumers are still cut off from low rates on long distance calls.
Each of the three new firms -- Eastern Broadband Telecommunications Co Ltd (
That's leaving them unable to offer international direct dialing service to customers.
Some analysts say that because Chunghwa controls access to Taiwan's 12.9 million home and business connections -- built with the aid of taxpayer money -- the state-run company is dragging its feet on connecting new competitors.
The three new firms announced they were ready for action in April and have been waiting since then to launch their services.
In order to tap into Chunghwa's network, new companies must first sign interconnection agreements. Eastern Broadband was the first to secure this agreement, and its competitors soon followed, giving the impression they would soon begin offering long distance services.
Instead, bugs in Chunghwa's computerized billing systems and revenue sharing agreements have held them back. Income generated by long distance calls is split between companies, partly for use of the line running from a Chunghwa connected home, and the other part goes to the long distance line operator.
"Taiwan Fixed Network requested that we set up a meeting between their company and Chunghwa to help mediate, which we did -- we set up a similar meeting for Eastern Broadband," said Andy Chen, senior specialist in charge of interconnection rules at the Directorate General of Telecommunications (
"We asked Chunghwa to move as quickly as possible on this," he added.
Chen said the Directorate General does not believe Chunghwa has behaved inappropriately in this matter, and he expects Eastern Broadband to finalize its agreement next week, followed by Taiwan Fixed Network and then Sparq by the end of June.
But one industry analyst disagreed with the government official, saying Chunghwa has been able to drag its feet "because of a weak regulatory body," namely the ministry.
"It's clearly in Chunghwa's interest to drag this out as long as possible," the analyst said, who requested anonymity.
Competition from the new firms is also expected to hurt Chunghwa in the pocketbook, snatching billions in revenue from its international direct dialing business.
In 1999, the firm raked in NT$40.8 billion (US$1.2 billion) just from international calls, and one analyst estimated Chunghwa would lose NT$21 billion (US$617 million) over the next three years to the new competitors.
The government is trying to auction off 480 million shares of Chunghwa over a 10-day auction. So far, the company's stock price has fallen 7.2 percent from NT$63.5 per share at the beginning of the auction down to NT$59 yesterday -- and a whopping 454.9 million shares remain unsold.
The auction ends on June 20, and most analysts expect most of the shares will still go begging for buyers.
Privatizing Chunghwa and ensuring the new telecom operators a fair chance in the market, however, are government mandates. The Telecom Act passed by the Legislative Yuan two years ago makes Chunghwa's privatization mandatory by the end of this year.
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