In August 2014, the Taiwan National Communications Commission (“NCC”) made some revisions (“Revisions”) to the regulations on Type II telecoms business, which include amendments to the Regulations for Administration on Type II Telecoms Business (“Type II Business Regulations”) and the issuance of new Guidelines for Application to Operate Type II Telecoms Business (“Guidelines for Type II Business Application”), as well as guidelines on investment in the telecoms business in Taiwan by citizens from Mainland China (“Directions for Mainland China Investment”).
In Taiwan, telecoms business is divided into two types: Type I and Type II. Type I business involves the establishment and management of basic telecoms infrastructure (e.g., fixed/mobile physical network); Type II business refers to “value-added” telecom services (e.g., Internet access services, audio conferencing services, and mobile virtual network services). While a Type I business is generally characterized as a franchise business, a Type II business may only be run by applying for prior approval from the NCC.
The significant aspects of the Revisions include:
1. Clarification of services under Type II business
Prior to August 2014, the NCC identified the services belonging to the Type II business category, but only provided a limited explanation on these types of services. Under the new Guidelines for Type II Business Application, the NCC provides for a more thorough definition of the services under the Type II category in order to clarify its scope. For instance, the NCC now defines “data switch communications services” as the data communications services provided by operators to customers within a closed user group, which use the operator’s packet switch equipment via the circuits held by a Type I business operator, e.g., X.25, frame relay, and asynchronous transfer mode ("ATM") services. The revised definition is expected to help determine whether a particular service/arrangement belongs to a Type II business category (and therefore requires an approval).
2. Information security and facilities access control
Under the amended Type II Business Regulations, the NCC adds certain requirements regarding information security and facilities access control to be followed by the Type II operators.
3. Requirements for outsourcing of software design and system operation
The amended Type II Business Regulations require any outsourcing of software design and system operation by Type II companies to be submitted to the NCC in advance, and entitles the NCC to object to such outsourcing arrangement under certain prescribed circumstances.
4. Investment in Type II business in Taiwan by Citizens from Mainland China
Under the Directions for Mainland China Investment, the NCC specifies certain requirements for investors from mainland China in order to be able to invest in a Type II Business in Taiwan, which include the following: an investor must be a public telecom company; the amounts invested must not exceed 50% of the shares or capital of the Type II company; and the Type II company must obtain ISO/IEC 27001 security certification.