New Telecom Circular Offers More Value-Added Services

Basic and Value-Added Services

The Telecom Regulations refer to two major categories of telecom services Ð "basic" and "value-added". The classification appears to be based on the general distinction between ownership and use of the public network infrastructure.

Basic Services

The Circular essentially adopts the same nine categories of basic telecommunications services set out in the earlier classification but also contains additional detail.

Mobile Communications Services

This section in the Circular contains significantly more detail than the September 2000 version. The earlier classification simply referred to mobile network telephone and data services, while the recent Circular lists mobile communications services as being analog mobile, trunked data and 2G and 3G digital mobile cellular communications services. The reference to 3G mobile services illustrates that China's regulators are paving the way for future service provision.

According to the recent Circular, analog mobile communications services are further categorized as large cell wireless mobile, trunked analog and analog cellular mobile communications services. 2G digital mobile cellular communications services are also further broken down into TDMA (GSM) and CDMA digital mobile cellular communications services.

Satellite Communications

Now included in the satellite communications services category are: mobile satellite communications services; lease and sale of satellite transponders; fixed satellite communications services; and VSAT communications services.

Data Transmission Services

The category internet and other public data transmission services has been expanded and now contains internet backbone network data transmission services, other data network transmission services (X.25; DDN; ATM; and frame relay data transmission services), public and subscriber telegraph services and wireless data transmission services.

International Communications

The section on international communications infrastructure and international telecommunications services has also been expanded. These services include the lease and sale of land based international communication network bandwidth, optical communication wavelengths, cables, optic fibers and other network elements as well as satellite international private line services. International telecommunications services include international long distance telephone services, international data communication services and international image communications services.

Paging Services and Resale Services

The Circular continues to carry a note to the effect that although radio paging services and resale of basic telecommunications services are categorized as basic services, they will be administered as value-added services. The question remains as to whether an operator of these services is required to have a basic or a value-added service operating permit. The former type of permit must be issued by the MII while the latter type can be issued by the local communications administration (if the services are intra-province only).

Value-Added Services

The previous classification listed nine forms of value-added telecommunications services. The Circular re-arranges these value-added categories into five categories of telecommunications services: fixed telephone networks; mobile networks; satellite networks; the internet; and other data transmission networks.

Call Centers

The first category, fixed telephone network value-added telecommunications services, now contains telephone information services and call center services. Although foreign investment in call centers is currently not permitted, many foreign investors have shown keen interest in setting up such centers in China's key cities.

Internet Services

The Circular now contains the category internet value-added telecommunications services under which the following new items are listed: internet data center services; internet virtual private network services; internet video and image conferencing services; internet call center services; and other internet value-added telecommunications services. This category also includes internet access services and internet information services, which existed as separate categories in the original classification. Presumably, the addition of internet data center services is intended to dispel any doubts that popular services such as web hosting and server warehousing are not covered under value-added services.

Other Services

The final new category is "other data transmission network value-added telecommunications services", which includes existing electronic data interchange services, voice mail services and e-mail services. The new sub-categories of computer information services, facsimile storage and retransmission services, and virtual private network services are also contained within this section.

China's accession to the World Trade Organization will provide for the gradual liberalization of the telecommunications sector and an increase in the permitted level of foreign participation in basic and value-added services. While the Telecom Regulations are silent on the permitted level of foreign participation, the new "basic" and "value-added" classifications set out in the Circular are noteworthy because they will affect both the timing of Chinese market entry by foreign companies as well as the maximum percentage of equity permitted.

By Nancy Leigh,

Baker & McKenzie,

Hong Kong