Analysis on the Boundary Decision of Chinese Telecom Operator--A Study Based on the Research of Transaction Cost

In recent years, the new competition pattern and booming telecom technology have transformed the Chinese telecom market from a seller’s to a buyer’s market, telecom operators must transform their operation from production centered to custom service centered. The important issue those corporations are confronting is how to create new operation modes, lower operation costs and develop new business.  In this paper we introduce the vertical chains of Chinese telecommunications service industry; analyze the motivation of the telecommunications enterprises’ vertical integration based on transaction cost; and then discuss the efficient causes that lead to the telecommunications enterprises’ execution of vertical integration strategy. The paper explains the features of telecommunications industry in terms of the evolutionary procedures for the telecommunications industry in China and the structure of Chinese telecommunications market. We also specifically discuss the organization boundary determination of Chinese telecommunications enterprise, tabling a proposal on tapered integration and strategic alliance between telecommunications operator and other enterprises.