Report: China spells out some telecom rules

The Chinese government spelled out on Wednesday for the first time how it will define “value-added” telecommunications services, a key element of its rules for foreign ownership in China’s telephone and Internet industries.

The government has promised to open up the “value-added” telecommunications service sector to foreign investors – for eventual ownership up to 50 per cent – when it joins the World Trade Organization (WTO), but it had not previously defined which services would be defined as value-added and which as basic services.

A broad range of products, including Internet services and content, videoconferencing, e-mail and voice mail, databases and fax services, will be defined as value-added services, according to an article posted Wednesday on the Web site of the official People’s Daily newspaper. The list also includes reselling of basic telecom services, which could mean that partly foreign-owned companies could lease network capacity from Chinese mobile operators.

Significantly, the list of value-added services also includes “online handling of data and transactions,” which implies a more open market for foreign investment in electronic commerce and ASP (application service provider) services.

In addition to foreign investment, the value-added service sector will be open to private domestic companies, which could become more competitive against the dominant state-owned carriers.

China’s WTO agreements with the U.S. and the European Union say foreign companies are to be allowed to own as much as 30 per cent of value-added telecom service providers upon China’s accession to the group. The allowed percentage would rise to 49 per cent after one year and 50 percent after two years, the report said. For Internet firms, 49 per cent ownership would be allowed immediately and 50 per cent the next year.

Basic telecom services, on the other hand, are defined as fixed and mobile telephones, data services, satellite services and leasing or selling network capacity to other carriers. Thus, only a basic service provider could make a business of reselling or leasing its own network. “Delivery of Internet and other public data networks” also is defined as a basic service, which implies that building or controlling a physical network is a basic service and less open to foreign investors.

Companies providing basic telecom providers initially must be at least 51 per cent owned by the state, with looser requirements to be phased in later.