China Telecom and China Unicom have been ordered to shut down their low-cost XiaoLingTong mobile telephone system in order to free up the radio spectrum for 3G services. The two companies have been given three years to shut down the networks.

The China Daily newspaper reported that the country's regulators are worried that the XiaoLingTong networks could interfere with China Mobile's TD-SCDMA based 3G network. XiaoLingTong, or PHS networks typically operate in the1880-1930 MHz frequency band.

According to government figures, China had 68.9 million Xiaolingtong users last year, a decrease of 15.6 million from 2007. In comparison, mobile phone users in the country grew 94 million to 641 million last year.

In 2005, the MIIT tried to clamp down on the growth of the XiaoLingTong networks by forbidding customers from roaming between cities, and restricting access to the city area where the customer was registered.

In an online survey conducted by China's major Internet portal Sina.com, about 70 percent of over 35,000 respondents said they still want to use the Xiaolingtong service. Although the service is provided by Unicom and Telecom, over 30 percent of the respondents said they are likely to switch to rival China Mobile after the service is shut down.

The largest vendors of the system are UTStarcom and ZTE.