The companies, beginning October 1, can decide prices for some well-competitive telecoms services, such as call display, alarm clock services and multiparty phone calls, the Ministry of Information Industry announced last week in a notice to telecoms firms.

Telecoms firms have in the past been required to follow prices set by the MII, with the exception of limited services such as IP telephone and paging services.

Telecoms carriers must inform MII of price changes, the MII said.

Telecoms carriers will be able to adjust prices of peripheral services, while MII will continue to strictly control basic services such as phone call charges.

An MII spokesman denied the move will result in price fluctuations in basic telecoms services.

MII divides telecoms services into two categories: basic and value-added services.

Basic services, firms' major source of revenue, include phone call services over fixed-line and cell phones and Internet services.

These services are strictly regulated by industry authorities. Price changes will lead to responses from both telecoms carriers and customers.

Value-added services for fixed-line customers include newly developed, peripheral services, such as call display, tracing crank phone calls, alarm clock service and multiparty communications.

Value-added services for mobile phone customers include a mobile secretary, short message services, tracking a caller's location and information services.

Industry insiders suggest telecoms carriers will reduce prices for value-added services to woo customers.

Most telecoms carriers have declined comment on the policy change.

Allowing firms to set prices for value-added services will have a positive impact, suggests a senior manager at China Netcom, one of China's two major fixed-line carriers.

MII is trying to revitalize fixed-line carriers' development, the source said, on condition of anonymity.

China's two major fixed-line carriers - the other is China Telecom - are coping with rapidly declining revenue growth.

Value-added telecoms services have become popular, and reduced government involvement could spur development of new services, the source said.

The government is relying more on the market instead of government policies, suggests Lu Tingjie, deputy dean of Beijing Telecommunications University's graduate school.

Market pricing will not necessarily lead to price cuts, Lu said, even though that generally has been the case.

Some telecoms experts suggest MII did not go far enough.

Fees for mobile telecoms services should be adjusted and cut by a big margin, Yang Peifang, telecoms expert at China Academy of Telecoms Research, said.

Current charges for mobile phone services, about 0.4 yuan (5 US cents) per minute, is too high, Yang said.

Mobile carriers have launched price wars in many Chinese cities - except Beijing, Shanghai and Guangzhou - which drove down service fees.

Unreasonably high fees were a major reason for the price wars, Yang said.

The carriers violated telecoms regulations when they cut mobile service prices, Yang said.

But, Yang added, the firms were retaliating against high prices set by MII.

The government should loosen its grip on telecoms carriers, suggests Zhang Xinzhu, a telecoms expert at the Chinese Academy of Social Sciences.

But, Zhang warned, the government must prepare for severe price wars after it lets telecoms operators set their fees.

All of China's telecoms carriers are State-owned enterprises.

Zhang predicts these firms will launch price wars, without considering potential losses, to capture greater market share.

The telecoms regulatory system must be reformed, Zhang said. The current system has both loopholes and barriers to development.