As information technologies support more freedom of industrial location. Local governments, in order to increase their own output, may use telecommunications investment as a competitive tool for attracting factors of production. This effect, in a production-function framework, would manifest itself as a negative output spillover effect to other provinces from telecommunications investment. This paper tests for spatial spillover effects of province level telecommunications services on province output by using spatial panel data for 30 provinces in China from 1993 through 2004. Findings indicate that a province benefits from its own telecommunications development, but the level of telecommunications services (it reflects development) in its "network neighbors" has a negative impact on its output.