Telecom Equipment Licensing: China Revamps the Rules

Definition of Telecom Equipment

To some extent, the new Measures retain the basic licensing system set out in the 1998 Measures. Under the new Measures, a network connection permit must be obtained for:

(i) "Telecom Terminal Equipment", defined as telecom equipment providing subscribers with the capability to transmit and receive information that is connected to the terminal end of a public telecom network;

(ii) "Wireless Communications Equipment", defined as telecom equipment connected to a public telecom network that uses wireless transmission; and

(iii) "Network Interconnection Equipment", defined as telecom equipment that permits interconnection and mutual communication between the networks of different telecom carriers or telecom service networks.

The definition of "telecom equipment" in the new Measures differs somewhat from that used in the 1998 Measures. The 1998 Measures defined "telecom equipment" as hardware or software that sends, receives or transmits voice, text, data, images or information by the use of cable or wireless electro-magnetic or optical means. Presumably, the change reflects the MII's recognition of the need for a broader set of definitions in order to provide for future technological developments.

WIDE COVERAGE

The Measures are applicable to terminal equipment such as fixed and cordless telephone terminals, facsimiles, modems, pagers, and multimedia terminals. Wireless communication equipment includes microwave communication equipment, satellite earth stations and wireless and paging base stations.

Passing the Test

The Measures stipulate that if a network connection permit has not been obtained for the relevant telecom equipment, it may not be connected to a public telecom network and may not be used or sold in the PRC. Under the Measures, telecom equipment manufacturers must comply with State and technical standards and provide full after-sales support services to their customers. The Measures also specify that the labeling and outer packaging of the product must comply with PRC regulations.

Chapter 2 of the Measures sets out the procedures and documentation required to obtain a network connection permit. Article 8 provides that foreign producers can engage a domestic agency to submit the application on their behalf. Typically, this can be a PRC subsidiary of the foreign equipment manufacturer, although it is unclear from the Measures whether PRC agents and distributors can also act in this capacity for the foreign manufacturer. The Measures require equipment manufacturers to provide detailed product documentation, results of test reports and relevant product certification documents to an appropriate testing centre approved by the MII. Notably, Article 11 of the Measures stipulates that wireless communication equipment, network interconnection equipment and new products must be tested for a minimum of three months on a specific telecom network in the PRC or a simulated network designated by the MII.

Annual Inspection

A network connection permit may be issued within 60 days upon the receipt of the complete set of application materials. A permit is valid for three years. However, if the telecom equipment is modified during this period, additional testing procedures must be carried out. According to the Measures, personnel employed at testing centres are obliged to keep confidential information relating to the tested equipment. Clearly, these centres will play an increasingly important part in the certification of equipment in the PRC, and while the MII and its local counterparts retain the approval role, the technical input from the centres appears to be an essential element in the licensing process.

The Measures require the provincial-level telecom authorities to carry out annual inspection of the enterprises and the telecom equipment for which a network connection permit has been issued. The ongoing inspection requirements can be viewed as another attempt by the MII to monitor the activities of the growing number of foreign and domestic equipment suppliers operating in the PRC.