Getting A Permit: Guidelines For Telecom Operators
January 31, 2002 | BY
clpstaff &clp articles &The recently promulgated Administration of Foreign-funded Telecommunications Enterprises Provisions (外商投资电信企业管理规定) (the…
The recently promulgated Administration of Foreign-funded Telecommunications Enterprises Provisions (外商投资电信企业管理规定) (the New Telecom FIE Regulations, see pages 30-35 and 48-55) should be read in conjunction with the Administration of Telecommunications Business Permits Procedures (Document No. 19) promulgated by the Ministry of Information Industry (MII) on December 26 2001, and which entered into effect on the same day as the New Telecom FIE Regulations.
No Permit, No Service Provision
Under the September 2000 PRC Telecommunications Regulations (中华人民共和国电信条例) (the Telecom Regulations), all telecom operators in China must possess a telecom services operating permit1 before they are allowed to provide telecom services. Document No. 19 governs the application for, approval and administration of such operating permits.
Types of Permits
Document No. 19 refers to three types of operating permits: the basic telecom services operating permit, the cross-regional value-added telecom services permit and the value-added telecom services operating permit. In accordance with the Telecom Regulations, the operating permit for basic telecom services must be issued by the MII, and only PRC operators in which the state holds 51% equity are eligible for a basic telecom services operating permit.
A permit for cross-regional value-added telecom services allows the operator to provide inter-provincial services. Again, the MII is responsible for issuing these operating permits. It should be noted that the term "province" refers to provinces, autonomous regions and municipalities directly under the central government.
In contrast, a value-added telecom services operating permit enables the holder to provide intra-provincial services only, and is issued by provincial communications administrations. Notably, in the case of foreign-invested telecom enterprises, the issuing authority for the operating permit is the MII.
Two Parts to the Whole
Each operating permit is made up of two parts:
- a main section which contain the particulars of the operator, the type(s) of telecom services, the service area(s) permitted, and the valid term of the operating permit itself; and
- an appendix section setting out the requirements on the use of the operating permit, the rights and obligations of the operator, special items, and the annual inspection status of the operating permit.
Operating permits are valid for:
- five or 10 years in the case of basic telecom services, depending on the actual type of services being provided; and
- five years in the case of value-added telecom services, regardless of whether the services are inter- or intra-province.
Provision of Services
An operator can only provide the type(s) of telecom services within the service area(s) specified in its operating permit. Unless otherwise provided for in the operating permit, if an operator fails to provide the specified telecom services within the designated service area(s) and within one year after obtaining its operating permit, the permit may be revoked or the right to provide services within the designated area(s) may be cancelled. Presumably, the imposition of a time limit allows the MII and its local counterparts to monitor the timely rollout of services and to rectify any unauthorized activities.
An operator that is permitted to engage in inter-provincial services must establish a subsidiary or a branch in each province that is listed in its operating permit. Significantly, Document No. 19 reiterates the requirement that the state's equity or shareholding in any subsidiary of an operator of basic telecom services must not be less than 51%. However, an operator may, with the approval of the authority that issued the operating permit, authorize a subsidiary to provide some of its permitted services, provided that the operator retains not less than 51% equity in the subsidiary, and the subsidiary fulfils the requirements for the provision of telecom services. Document No. 19 stipulates that an operator cannot establish more than one subsidiary to provide the same type(s) of service in the same province.
Ongoing Inspection Requirement
Interestingly, an operator must obtain approval before it or its subsidiary effects a merger or division, change in shareholder, transfer of operating right, adjustment of the service area(s) or termination of any service. Approval must be obtained from the relevant authority that issued the operating permit. In addition, where an operator changes its name, registered address or legal representative, it must file such changes with the authority that issued the operating permit.
Under current PRC regulations, all enterprises including foreign-invested enterprises must undergo an "annual inspection" by submitting certain documents and corporate certificates for review by a number of government departments. According to Document No. 19, basic and value-added telecom operators have an additional obligation to pass the annual inspection requirements of the relevant authority that issued the operating permit. An operator who either fails to participate in the annual inspection or fails to rectify any non-compliance discovered during the annual inspection process may have its operating permit cancelled by the authorities.
The permit system set out in Document No. 19 provides no real surprises for telecom operators as many of the requirements were foreshadowed in the Telecom Regulations and the New Telecom FIE Regulations. What is interesting is the level of monitoring that the MII and its local counterpart will exercise on the operator once the operating permit is issued. Service providers are obliged to obtain approval and/or register certain changes with the MII or the local telecom bureau, adding another layer of red tape to their business activities. To some extent, the ongoing requirements specified in Document No. 19 will allow the industry regulator to keep close watch over the activities of service providers during the term of the operating permit.
By Nancy Leigh,
Baker & McKenzie, Hong Kong
Endnote
- In the article on pages 30-35, these documents are referred to as licences. Both terms refer to the same document allowing operation of a telecom service.
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