November 9 -- The National Development Reform Commission (NDRC) is investigating possible monopolistic practices by China Telecom (0728.HK) and China Unicom (600050.SH, 0762.HK) in the domestic broadband market, reports cb.com.cn, citing CCTV.

According to the Advisory Committee for State Information, through the end of 2010, though the average broadband speed in China was ranked 71 worldwide, the per second megabyte fee for broadband access in China is 3-4 times that of developed nations.

The report added that the average broadband speed in China is not even one-tenth the speed of advanced nations such as the U.S., U.K., and Japan.

Li Qing, vice president of a related NDRC department, said the authorities had commenced investigations into the two operators to determine if they had abused their dominant market positions to prevent other companies from entering the broadband access sector.

According to Li, China Telecom and China Unicom had between them, a two-thirds share of the broadband market, and had practiced price discrimination, raising prices for companies that are competing with them, while giving discounted prices to companies which are not direct competitors.

During the first nine months, the two companies recorded packet loss ratios of between 0.2 percent and 1.9 percent, below the regulatory requirement of one percent.

According to a rough calculation by a government department, competition in this sector could reduce broadband prices by 27-38 percent over the next five years, resulting in cost savings of between 10 billion yuan and 15 billion yuan for end users.

China Telecom generates annual revenue of 50 billion yuan from its Internet business, while the figure for China Unicom hit 30 billion yuan.

Should the operators be found guilty of monopolistic practices, they could face fines of between one and 10 percent of operating revenue.

Shares of China Unicom rose 2.6 percent to close at HK$16.58 per share today.