Digital Divide New Rules on Internet News Information

WHAT TYPES OF SERVICES ARE TARGETED?

Under the 2005 Regulations, internet news information services include the following three types of services: (i) publishing news information on websites; (ii) providing bulletin board system (BBS) services on current and political topics; and (iii) transmitting communications information on current and political topics to the public.

The 2005 Regulations do not elaborate on what specific activities are included under each of the three types of internet news information services. It is understood, however, that the first type of services refers to publishing or republishing news through the display of relatively static web pages within the meaning of the 2000 Regulations.

The second type of services refers to electronic message databases where people can log in and leave messages. Before the promulgation of the 2005 Regulations, operating BBS services had been separately regulated by special rules regarding such services. Adding BBS services to the scope of application of the 2005 Regulations indicates the Chinese government's intention to regulate the operation of chat rooms and online forums, which have been increasingly used as a public medium to exchange users' commentaries on current and political affairs.

It is unclear from the 2005 Regulations, or any of the previous regulations, as to what the third type of services comprises. It seems that a 'web log' or 'blog', which is often an interactive website containing a mixture of what is happening in a person's life and what is happening in the world, could fall into the scope of this type of service. It is known that people maintained blogs long before the term was coined, but that the trend only took off with the recent introduction of automated publishing systems. The recent development in China of blogs (its colloquial translation in Chinese is '博客') poses another challenge to the government's control over news publication. By including a third type of service without specifically referencing blogs, the 2005 Regulations could potentially cover future technologies that have the ability to instantly publish and receive information to and from the public.

In short, by adding BBS services and other types of communication services to the scope of application of the 2005 Regulations, the government is imposing tighter restrictions on the spread of unapproved news information.

WHO CAN OPERATE INTERNET NEWS SERVICES?

The 2005 Regulations in fact provide that only the following three types of entity (rather than individuals) can engage in internet news information services. They include:

i. Entities established by news agencies (e.g., newspaper publishers, radio broadcasters, TV stations and news reporting agencies) to publish news information not having been published or broadcast by themselves, provide BBS services on current and political affairs and transmit communication information relating to current and political affairs;

ii. Entities established by non-news organizations (e.g., companies holding an operating licence to engage in internet information services or internet content provider (ICP) companies) to republish news information, provide BBS services on current and political affairs and transmit communication information relating to current and political affairs; and

iii. Entities established by news agencies to republish news information already published or broadcast by themselves.

It seems clear from the linguistic context of certain provisions of the 2005 Regulations that the applicant entity that intends to engage in the internet news information services must be a separate entity from the news agency or non-news organization (such as an ICP company) that establishes the applicant entity.

Different sets of approval requirements apply to the above three categories of the applicant entities. If an applicant entity is established jointly by a news agency and a non-news organization, and the news agency holds 51% or more of the shares, such an entity will be treated as one established by a news agency. If the news agency holds less than 51% of the shares in the applicant entity, the latter will be treated as a business established by a non-news organization. This classification will make a difference in respect of approval requirements, including the number of journalists to be hired by the applicant, the level of registered capital of the investor and whether other considerations concerning the news industry sector will be taken into account by the respective approval authority.

WHAT ARE THE APPROVAL REQUIREMENTS?

In general, only news agencies directly under the supervision of the central government, provinces, autonomous regions, directly-administered municipalities, or municipalities where provincial governments are located, are qualified to apply to the State Council's Information Office for approval to establish an entity engaging in internet news information services or the publishing of original news information.

Non-news organizations, such as ICP companies that have been in operation for two years without violating any laws, regulations or department rules concerning internet information services are also eligible to establish an applicant entity. However, this approval requirement does not apply if a news agency only wants to establish an entity to engage in the internet news information services that republishes news already released or published by themselves. In this context, only a filing procedure with the State Council's Information Office or its local counterparts is required.

The approval requirements applicable to entities established by non-news organizations are as follows:

i. The applicant entity must have a set of sound and comprehensive internal regulations with respect to management of internet news information services;

ii. The applicant entity must have at least 10 staff members designated for news editorial works, at least five of whom should have no less than three years experience in professional journalism;

iii. The applicant entity must have the necessary working sites or office premises, equipment and funds, and the source of the funds must be legal;

iv. The applicant entity must be established by a legal person entity engaging in internet information services ('ICP sponsor') that has been in operation for at least two years;

v. The ICP sponsor must have not received any administrative penalties due to violation of laws, regulations and departmental rules concerning internet information services during past two years; and

vi. The ICP sponsor's registered capital should be no lower than RMB10 million, if the ICP sponsor is an enterprise legal entity.

It should be noted that one of the requirements in item (iii) above provides that the source of the funds for setting up the applicant entity should be "legal". Since under the current rules, foreign investment or participation in the news-reporting sector is illegal, this requirement could be interpreted to prohibit any forms of financial support directly or indirectly provided by foreign companies or foreign invested enterprises in China for the establishment of the applicant entity.

By the same token, given the longstanding ban against foreign investment in this sector, the 2005 Regulations reaffirm the position that foreign investment in applicant entities in the form of Sino-foreign equity joint ventures, Sino-foreign contractual or cooperative joint ventures and wholly foreign-owned enterprises is not allowed. Any form of "cooperation" between the entities engaging in internet news information services with foreign companies and foreign invested enterprises must, furthermore, be scrutinized and assessed by the State Council's Information Office for "security" purposes. This could be intended to ensure that the operations of the entities engaging in internet news information services are not affected by foreign companies or foreign invested enterprises through a set of "control" documents; an arrangement that has been widely used for ICP companies in China.

The 2005 Regulations also provide that approval for the establishment of applicant entities by non-news organizations must also be in compliance with other general requirements imposed by the State Council's Information Office. These include limits on the overall number of news publishing entities, as well as their structure and geographical allocation in the internet news information service sector. As such, even though an applicant entity and its ICP Sponsor may technically meet the above criteria, the State Council's Information Office retains considerable discretion in granting approvals based on these 'soft' considerations.

If the State Council's Information Office approves the establishment of the applicant entity, an Internet News Information Services Licence will be issued. The entity should also obtain other operating licences for operating a website and other value-added telecommunications services (e.g., BBS) with relevant departments responsible for the telecommunications industry (i.e., the Ministry of Information Industry or its local counterparts).

If any change in respect of, among other things, the name, address, legal representative or responsible personnel, shareholding structure, service items or website address of an entity providing internet news information services occurs, the original licence should be returned and replaced with a newly issued licence.

HOW TO OPERATE?

The 2005 Regulations specifically demand that an internal responsibility system be set up for contents management of news information. Many of the requirements imposed under the 2000 Regulations are retained. For example, the internet news information service providers may not publish objectionable information, and must immediately delete objectionable contents and materials displayed via BBS if discovered. They must retain records such as the login information of the user, content published, and the IP address of the user for 60 days and provide them to the relevant authorities upon request.

The 2005 Regulations set forth a series of additional requirements on the operations of the internet news information services. Major requirements include those set out below:

· News information on current and political affairs being republished or transmitted shall be the news information released by the news agencies directly under the supervision of central government, provinces, autonomous regions, directly-administered municipalities, or municipalities where provincial governments are located. The internet news information service providers republishing news information must enter into a written agreement with the relevant news agencies, a copy of which is required to be filed with the State Council's Information Office or its local counterparts for record. Thus, it is impossible for internet news information service providers to republish news information released by foreign news agencies.

· The source of news information shall be indicated and distortion of the original contents is not permitted for news republishing. Internet news information service providers established by non-news organizations are not permitted to release news information collected and edited by themselves.

· News information containing objectionable contents such as those violating the constitutional principles, endangering the security and stability of society, or revealing state secrets shall not be published or transmitted to the public. The 2005 Regulations add the following two items of objectionable information to the laundry list of objectionable content under the 2000 Regulations: (i) instigating illegal assembly, association, parade, demonstration or other public convention that disturbs social orders, and (ii) activities in the name of an illegal civil organization.

· Internet news business cooperation other than the provision of news information for republication between a news agency and an internet news information service provider established by a non-news organization must be reported to the State Council's Information Office or its local counterparts 10 days prior to the commencement of the intended cooperation. The 2005 Regulations do not expressly provide for approval of the said cooperation. This reporting requirement could, however, be used by the State Council's Information Offices or its local counterparts to block such cooperation activity if they deem it improper.

· The Internet news information service providers shall submit their annual business report to the State Council's Information Office within a specified time period.

WHAT ARE THE PENALTIES FOR VIOLATIONS?

Under the 2005 Regulations, the penalties imposed by the State Council's Information Office or its local counterparts against violators include a "warning" and/or an "order for rectification" and fines ranging from Rmb5,000 to Rmb30,000. If the circumstances are serious - like providing internet news information services without approval or licence, or publishing objectionable news information and refusing to rectify such according to order of the State Council's Information Office or its local counterpart - the relevant telecommunication administrative authority may order the violator to cease providing internet information services. Alternatively, the office can order internet access service providers to prevent violators from accessing the internet.

CONCLUSION

The 2005 Regulations will certainly create difficult and complex compliance issues for existing ICP companies publishing news, providing BBS services and other communications services. What impact the 2005 Regulations will have on the development of the news publishing business on the internet in China depends on how these restrictions will be implemented in reality and how the State Council's Information Office will grant approvals for establishing internet news information service providers. The love-hate attitude of the Chinese government towards the internet appears to be a major theme underlying many of China's regulations concerning such technology. As such, this trend will likely continue into the foreseeable future. We hope that any regulation that restricts the free flow of information on the internet will be carefully implemented. This will certainly go a long way in justifying the government's interest in maintaining both the stability and security of society.