How long has AT&T; been involved in China? What would you say are your strengths in the market and who do you see as your main competitors?

AT&T; International Western Electric opened a telephone equipment facility in Shanghai in 1918 in partnership with NEC and the Republic of China. That company (IWE) was sold to IT&T; in 1925. Thus ending AT&T;'s participation in China telecommunications market.

Correspondent relations with China for international telephone traffic were opened in 1937 and that relationship continues today. There was a period between the establishment of the Peoples Republic of China in 1949 and the beginning of the reform and opening of China in the early 1970's when AT&T; did not make any settlement payments to China.

A settlement was negotiatied and paid in the early 1970's covering about a twenty year period when payments were withheld in compliance with USA laws. A major expansion of AT&T;'s presence in China began in 1993 with the establishment of AT&T; China to consolidate and integrate all AT&T; activities in China under a business unit with a senior AT&T; officer as CEO. With the tri-divestiture of AT&T; in 1996, the company was divided into three independent companies in China - AT&T; China Inc., Lucent Technologies China and NCR China. Each company is persuing its own strategy and objectives in the China market independent of each other. My further responses to questions are in relation to AT&T; China which is engaged in providing international telecommunications services to our customers in the USA and China. We also support our multinational corporation customers global network needs consistent with China's policies. As China's telecommunications market continues to develop and open up, we hope to participate in partnership with China's MTP in accelerating its development of advanced services.

Our strengths in the China market are: our position as the operator of the world's largest and most technically sophisticated telecommunications network; our AT&T; brand - one of the most recognised in the world; our very large customer base of multinational corporations around the world; a high quality and large on the ground organisation dedicated to developing our business in and with China and serving the growing needs of our customers; and, AT&T; Laboratories.

AT&T; China's principal international telecommunications services competitors are Sprint Global One and BT/MCI. The next tier include all other international carriers operating in China.

Can you outline the state of telecoms market in China? How developed is it and where is it heading?

The China telephone infrastructure equipment market is the world's largest. In 1966, more than twenty million lines of new capacity were added to the network. This is approximately equal to a third of all new lines installed in the world. At the end of 1996, telephone density was approaching seven percent national average with much greater densities in the coastal areas and major cities with very low densities in the rual and western areas. The outlook for infrastructure development is for continued growth in the 1996 range through the balance of this century and probably well into the next one. Both digital landline and wireless capacity is being expanded at a rapid rate. In fact, if the present pace of development continues, China will probably pass the USA as the owner of the largest domestic digital telephone network in the world in terms of number of lines of capacity at around 2005. High capacity fiber optic backbone trunk routes are being installed to connect all of China's provinces and major cities. There are eight east/west routes and eight north/south routes either installed or planned. In telecommunications infrastructure, China can be viewed as leaping over the industrial age and into the information age.

The development of the telecommunications services market lags significantly behind the infrastructure market. Nevertheless, China has made meaningful progress over the past four years in developing services beyond voice. Data, Internet access, video conferencing service availability are increasing in both geography and quality. The systems and processes to provide high quality customer service and satisfy sophisticated customer needs will take considerable time to develop.

In my view, the focus of China's telecom development over the next five to ten years will increasingly be on data, Internet and video services in the more developed areas while the provisioning of basic services will dominate the rural and western areas. If China is to continue its pace of economic growth and development toward a developed market economy, it will need to achieve a telephone density approaching twenty-five percent by 2010-2015. The financing of such growth will be a challenge for China and the industry.

What part are foreign companies playing in the development of the telecoms infrastructure in China?

Every major foreign telecommunications infrastructure equipment company in the world is involved in China's market. The net result is that the China market is the most competitive of any market I know; therefore, prices tend to be among the lowest in the world.

Foreign telecommunications service providers are also present in China in support of their bilateral telephone traffic. In addition, many are seeking ways to contribute to China's infrastructure development to the extent China's foreign ownership and operation prohibition policies allow. When China opens its telecoms services market, foreign companies will be able to make a greater contribution to accelerating the development of advanced services required to support an increasingly sophisticated economy and its multinational corporations' global communications needs.

The Chinese MPT aims to greatly increase teledensity and bring telecoms to every rural village by the end of the century. Can this be achieved, and what opportunities do such plans offer to foreign companies?

The size and terrain of China's geography and the nearly one million villages make rural telecoms development a challenging goal. It is not clear how foreign companies can effectively and profitably contribute to this goal. In the USA, rural telecoms development was supported by the Rural telephone Administration--a government agency--particularly during early development of telecoms rural infrastructure.

It appears that China will need to make use of various wireless technologies as well as landline systems to efficiently provide telecoms services for its rural and remote villages. Also, it must develop some system for subsidising the costs versus the ability to pay. Univeral service or even universal access to service will be difficult for China to achieve in the remaining few years of this century.

Why are the Chinese authorities so keen to greatly improve teledensity, and what benefits do you think an improved telecoms infrastructure could bring to the Chinese economy as a whole?

Chinese authorities believe that to sustain rapid economic growth, they must provide the essential infrastructure to support long-term high levels of growth. These are transportation, energy and telecommunications. Therefore, the emphasis on teledensity development addresses one of the high priority infrastructure sectors which enables a sustained high rate of economic development. Of course , there are other essential sectors which must be developed such as banking and financial services and agriculture if growth is to be supported over the long-term.

Given the pace at which telecoms technology is evolving worldwide, can China hope to catch up in the foreseeable future?

In terms of telecoms infrastructure equipment, China is currently installing state of the art systems and its network is largely digital. So in that sense China is currently catching up with the rest of the world as it builds its network. On the other hand, if you look at service development, universality of service, network efficiency and reliability, seamless interconnection, and customer care, China has much work to do over many years to catch up with the developed world. In addition, there is a serious question as to whether the current structure of the telecommunications service industry can achieve China's goals without major restructuriing and opening up. The reform process in this industry moves slowly in China. For example, a telecom law has been in the works for a number of years and is still several years away at best. In the meantime the pace of deregulation in the rest of the developed world accelerates at an ever increasing pace - so, in the broader sense of telecoms technology, China falls further behind even as it tries to catch up.

The International Telecommunications Union has said that information infrastructures could help countries like China participate in new information economies. Given China's suspicion of the Internet, do you think the country will ever establish an information superhighway?

It is my understanding that China has made a decision not to restrict the growth of Internet access in China. There are sites on the Internet that China would like to be able to block access within China, such as those containing pornography and politically sensitive material/dialogue groups. Despite these concerns, they have determined that the positive value of the Internet outweighs these negatives. So, Internet access in China is growing rapidly. The quality and availabilty continue to need improvement.

China is building the basic high capacity digital trunks to support an information superhighway. Several Chinese agencies are conducting studies and developing plans for networks and databases. In addition, there are at least four networks with connection to the Internet operating in China such as the one linking colleges and universities. While some of the basic elements are in place or planned, a significant commitment to an information superhighway will probably not be among China's highest priorities until the second or third decade of the 21st Century.

How important is the mobile telecoms market in China? Is it true that it is actually more developed than the wired telecoms market?

On a percentage growth basis, the mobile telecoms market--cellular and radio paging - is the fastest developing market in China. Paging is expected to reach upwards of 100 million subscribers by the end of 2000 and cellular at least 18 million - which is probably conservative. Paging is a very important tool where teledensity is low - it allows you to conduct business even if you do not have a phone of your own.

Digital cellular technology(GSM) is being rapidly deployed in the major cities of China to supplement and eventually replace analog systems. China is also evaluating CDMA cellular technology by conducting several trials around the country.

In the future, China will undoubtedly deploy additional wireless tedhnologies such as personal communication system (PCS) and fixed loop wireless.