More Than Just Fun and Games: Value-added Telecom Services In China

Permit System

In line with the Administration of Telecommunications Business Permits Procedures (see China Law & Practice, February 2002, p. 96), the Provisional Measures provide that a permit system is to be implemented for the provision of such value-added telecommunications services. Any entity that provides such services in the Beijing area must obtain a "value-added telecommunications services operating permit" issued by the BCA. Organizations and individuals that have not obtained a permit may not engage in the provision of such services. Notably, examination and approval for the provision of value-added services in the Beijing area is divided into two categories: access projects and service projects.

Access projects refer to the setting up of service platforms linked directly to mobile networks and the provision of access services to operators of service projects. Service projects include the provision of various types of value-added services such as mobile data services and positioning services to mobile subscribers by means of the service access platforms.

Meeting the Requirements

The Provisional Measures stipulate that companies operating access projects must have a registered capital of at least Rmb5 million, while companies operating service projects are required to have a minimum registered capital of Rmb1 million. Applicants must have a good reputation and employ appropriate technical personnel who hold professional qualifications issued by the Ministry of Information Industry. The applicants should also prepare feasibility studies and relevant technical and market data. The BCA will review applications and issue a decision within 60 days after receiving the relevant materials.

Moreover, if a provider needs to terminate its operations, it must submit an application to the BCA 60 days in advance after ensuring that it has fulfilled its obligations to its subscribers. It may cease business only after approval has been obtained.

Getting Access

Providers of mobile telecommunications services in the Beijing area must provide equal access to authorized providers of value-added telecommunications services. They must guarantee long-term and stable access and may not suspend services without authorization. Further, providers in the Beijing area that have permits for the provision of value-added telecommunications access projects must provide equal access to all authorized providers.

Agreements must be concluded between mobile service providers and content providers who have obtained the necessary permits to operate value-added telecommunications services. The agreements should clearly set out the liabilities, rights and obligations of all parties.

Prohibited Acts

The Provisional Measures stipulate that providers of mobile network value-added telecommunications services should not adopt the following anti-competitive practices when providing services. They may not require subscribers to purchase terminal equipment that they designate nor refuse to provide, delay the provision of, or suspend services to subscribers without proper grounds. Further, providers of mobile network value-added telecommunications services must not engage in the following: undertaking a business that involves basic voice services; restricting subscribers from choosing telecommunications services of other service providers; using any exclusivity clauses or obstruct in any manner the entry of other providers of such services; or provide services at less than cost or engage in unfair competition with the objective of driving out competitors. Penalties for the violations of the Provisional Measures will be imposed in accordance with the PRC, Telecommunications Regulations (中华人民共和国电信条例).

Changes and Termination

In line with the Operating Measures, the validity period for a value-added telecommunications service permit is five years. The BCA implements an annual inspection system for the service permits and failure to pass the annual inspection will result in the cancellation of the permit.

What's Next?

It will be interesting to see when the MII and the other provincial telecommunications authorities will follow the BCA in issuing new regulations on value-added telecommunications services. The market is expected to be a lucrative one with analysts projecting that the mobile games industry alone could be worth US$17 billion worldwide by 2006. With the rollout of CDMA and the new generation of mobile phones, China's urban rich will soon have access to some powerful new toys.

By Nancy Leigh,
Baker & McKenzie, Hong Kong