Although the new rules on telecom and Internet content management still need to be modified, the sector has hailed the publishing as a milestone in the IT industry which had not embraced a national law or law-effective regulation in the past half-century.

“The regulations not only mean a great achievement in terms of industry law-making, but also mark the break-up of state monopoly in the area of telecom and Internet investments,” said Chen Yin, a director of strategy planning with the State Telecom Administrative Bureau.

The Telecom Regulation, totaling seven chapters and 81 items, allows both foreign and non-government investors to invest in Internet and telecom businesses. But only telecom-oriented investors can participate in basic telecom service under the condition of at least a 51 percent share control by the government.

The clear definition has removed the long sense of policy doubts from foreign investors who are seeking ways to penetrate into China’s telecom and Internet market.

However, the regulation excludes the main concerns of foreign investors, but promises a special regulation soon by the State Council.

Experts say controversy over the policy extent towards foreign involvement in the telecom sector still exists and it is hard to reach a consensus within such a short time.

But, there must be some special requirements for foreign participation in the country’s most profitable telecom market where fledgling domestic players are too weak to compete with world telecom giants, analysts said.

“We can never ignore our own industry’s survival and we need somewhat a transition period,” said one expert.

The new regulation classifies the telecom business into two sections. One is defined as basic telecom service, including fixed-line and mobile phone, paging, data and satellite communications. The second, valued-added telecom business, covers Internet content providers (ICP), Internet service providers (ISP), Internet data centers (IDC) and application service providers (ASP).

“The items of regulation covering different business sectors respectively are very applicable, setting a basis for the effective application by both the supervising body and mass enterprises,” Chen said.

Before the 1990s, the telecom sector was directly controlled by the government administration, the former Ministry of Post and Telecom, through the monopoly of China Telecom.

With state control there was no need to design industry regulations since China Telecom was solely responsible for everything related to post and telecom services, ranging from set prices to network construction.

The emergence of China Unicom, established in 1994 to challenge China Telecom’s monopoly hold, became a cornerstone in the deregulation of China’s telecom market.

The competition and conflict between the two companies, together with the arrival of China Mobile Communications Corp and other telecom service on the market, has been an embarrassment for the top supervisors of the Ministry of Information Industry (MII) who have been unable to find an effective rule to regulate the market competition.

The dilemma backlashed as consumer complaints about inferior telecom service steadily bloated.

The chaos was highlighted by an inter-connection dispute between China Telecom and China Mobile in August which threw some 260,000 mobile phone users off line for nearly 24 hours in Lanzhou, Gansu Province.

Song Junde, a professor with the Beijing University of Post and Telecom (BUPT) said traditional administrative intervention to regulate the market has proved inferior as fiercer competition forces local operators to break the rules.

“The release of a law-effective regulation will ensure a fair competition market climate, which benefits all industry players,” Song said.

The new regulation, with the basic principles of maintaining quality service and fair competition, defines the duties and responsibilities shouldered by telecom operators in the areas of service charging, inter-connection, service quality and telecom security.

However, the release of the two IT regulations does not mean the market operation environment will improve overnight. The key problem is how to keep the rules applicable and enforced, experts said.

For the Internet Content Regulation alone, implementation is doomed to encounter more difficulties ahead.

The new IT regulation requires Internet content providers to keep 60-day records of user activities online for necessary inspections by related government administrations, including user’s log-on time, Internet account, web address and other information.

“The ICPs are prohibited from providing information related to anti-government, obscenity and anti-social stability, and intruders will be punished according to the actual situations,” states the ruling.

Some ICPs complain that they cannot effectively oversee the activities of Internet users who log onto their websites, especially the interactive sections of chat rooms, online forums and message boards.

“We must comply strictly with any government regulation, but we cannot control what content users should talk about and post on our forums and boards since the primary function of the Internet is free participation,” said an ICP manager, who declined to be identified.

Some insiders say that if the regulation is applied strictly, the participation fervor on the Internet would be frustrated, resulting in a sharp decline of site hits and online advertisement sales.

However, some Internet players, especially larger firms, hailed the regulation, saying content operation has a rule to follow.

“The regulation can ensure normal market operations and it’s also our responsibility to provide clean online content,” said Chen Tong, content manager with Sina.com, the country’s most popular Internet content provider.

Chen said Sina.com has changed its real-time message board to be unprompt while arranging 24-hour supervision over the content in online forums and chat rooms.

Dozens of participants are kicked out of Sina’s online forums and chat rooms each day for dirty or anti-law speeches, said Chen.

(China Daily 10/15/2000)