On March 1, 2009, the Ministry of Industry and Information Technology of the People's Republic of China (MIIT) promulgated the Administrative Measures for Telecommunications Operations Licensing (the New Measures). The New Measures, which replace their predecessor promulgated on December 26, 2001 (the Old Measures), took effect on April 10, 2009. Although the fundamental regulatory framework for the telecom business remains substantially unchanged after the promulgation of the New Measures, the New Measures make the telecommunications sector more accessible to investors by lowering the market access threshold. In addition, the New Measures enact specific operational requirements and incorporate new rules for exiting from the telecommunications market.
Lowering the market access threshold may facilitate telecom convergence
One of the highlights of the New Measures is that they halve the initial capital requirements for basic telecom operators. Specifically, the New Measures stipulate that a basic telecom operator that provides services nationwide or across provincial borders must have a minimum registered capital of RMB 1 billion, compared with the previous requirement of RMB 2 billion. In addition, the New Measures reduce the minimum registered capital for a basic telecom operator that runs its business within a province, autonomous region, or municipality from RMB 200 million to RMB 100 million. Industry insiders expect that this change will facilitate the convergence of the different communications media (including telecom, broadcasting/cable and the Internet) by allowing more competitors to enter the basic telecom market.
Operators must fulfill specific duties in their operations
Compared with the Old Measures, the New Measures add an entire chapter on the regulation of telecom operations. With the aim to further regulate the telecom market, the new chapter specifies and formalizes certain requirements for basic telecom operators, value-added telecom service providers, as well as telecom authorities. For example, both basic and value-added telecom operators may not provide access services to any person that does not have appropriate telecom licenses or has failed to file with government authorities; the telecom authorities must establish a supervision mechanism to monitor the entire telecom market, and publish a blacklist of telecom operators that violate the telecom rules and regulations.
Exit requirements are enacted to protect consumers
For telecom operators exiting the market, the New Measures provide detailed procedural rules. A telecom operator must meet the following requirements if it intends to terminate its operations before the expiration of its business license: (i) its proposed exit must fit with the telecom authorities' overall plan for the industry; and (ii) it must have a feasible plan to address customer-related issues that arise after the termination of its operations, and already have taken steps to handle such issues. In addition, the New Measures enumerate the materials that operators must submit to the telecom authorities in order to terminate their operations. These materials include, among other things, a specific application letter, certain corporate resolutions, and a specific plan for settling post-termination costumer- related issues.