CHINA INFORMATION TECHNOLOGY LAW NEWSLETTER
Vol. 1, No. 15 - December 5, 2000
TOPICS THIS ISSUE:
- Ministry of Information Industry Reverses Course
- 69 Million Wireless Internet Users by 2004
- Pfizer, Domestic ISP in IP Law Dispute
- China Railway Receives License
- China Deals Blow to VeriSign's Web Domain Service
Ministry of Information Industry Reverses Course
Late this week the Ministry of Information Industry (MII) clarified its position regarding changes in the method of payment of cellular-phone charges, backing off of plans to convert from the present system where both parties pay to a system where only the calling party pays.
MII's top official, Wu Jichuan, announced that there would not be any changes in cellular-phone billing for at least two years. This is in contrast to signals that MII was implementing just such a system. Official newspapers and an MII representative had previously announced the planned change.
The new billing plan would have hurt the revenues of Chinese telecoms China Mobile and China Unicom in the short term, although it would have provided subscribers with lower fees, which would have result in increased subscriptions in the long term. Of course, the telecom's stock price would presumably have fallen somewhat had the billing policy been definitively altered, as a result of the change in expected short-term profits. However, investors were concerned about the uncertainty of the situation, as MII did not clearly announce the change. This uncertainty, perhaps inflamed by past incidents of heavy-handed government intervention, has hurt the telecoms' stock prices substantially. The lack of official clarification of the new policy allowed rumors in the media to prosper, adding to the confusion.
These rumors have taken their toll on large telecoms China Mobile and China Unicom. The telecom's shares have plummeted as wary speculators, fearful of sweeping changes in the regulatory environment, fled the telecom sector. Stocks of China's largest telecom, China Mobile, have decreased about 20 per cent since November 22, while China Unicom has lost around 25 per cent over the same period. This week, shares of China Mobile hit an 11-month closing low and China Unicom's shares hit an all-time intraday low.
Now that the damage has been done, it might have been wiser to go forward with the proposed changes. By all accounts, MII did in fact plan to make the billing changes, despite Mr. Wu's statements to the contrary. For instance, on Wednesday MII ordered Yueyang Mobile Communications Co., a subsidiary of China Mobile, to revert back to the original billing system, which had been scrapped only a week earlier. Changing the billing system is an arduous process, and that process had seemingly begun.
Such a change would undoubtedly hurt the telecom's stock prices in the short term, but the long-term benefits of the calling party pays system, combined with lower fees, may make the new policy worthwhile. Scuttling it now, after implementation of the new plan has begun, would appear overly cautious. The losses suffered by the telecoms cannot be easily or quickly recouped, and the share price would have surely stabilized, even without this help from MII. In any event, now that MII has put an end to the confusion, the share prices have stabilized somewhat, and will likely rebound, albeit slowly.
(Sources: South China Morning Post, China Daily, People's Daily)
69 Million Wireless Internet Users by 2004
Last week's China Business Times predicted China will have 69 million people using mobile phones to access the Internet by 2004. The paper anticipates that the next few years will see rapid development in the number of wireless Internet users. The Beijing-based paper also predicted that by 2004, the number of mobile phone users in China will be 236 million and Internet users will reach 120 million.
China is now focussed on upgrading the current second generation of mobile telecommunications, the GSM, to the third generation, characterized by a wide-band network. This third generation technology will provide opportunities for the development of the mobile Internet.
China Mobile, the country's largest mobile telecommunications operator, has been charging ahead with wireless application protocol (WAP) services. WAP is a specification that provides easy, secure access to Internet information and other services through mobile devices.
(Sources: Xinhua News Agency, China Business Times)
Pfizer, Domestic ISP in IP Law Dispute
Pfizer, an American pharmaceutical company and the makers of Viagra, brought suit against Shenzhen Online on Wednesday. The ISP and portal had registered the domain name viagra.com.cn. The case may turn into an important case in the burgeoning area of IP protection in relation to domain name rights. It raises interesting and unique questions of law.
Shenzhen Online, which is owned by two subsidiaries of China Telecom, registered the domain name in 1998, before Pfizer had obtained approval to sell Viagra in China. However, the company never began a website using the Viagra name. Additionally, it lost the rights to the domain name in October, because it failed to pay a registration fee.
Pfizer has aggressively protected the Viagra trademark against Chinese companies producing counterfeit medicines. Now the company wants the court to rule that Pfizer's trademark was violated by Shenzhen Online's registration of the domain name. It is unclear when Pfizer applied to trademark the name Viagra.
Despite the fact that the issue is now mooted because Shenzhen Online no longer owns the domain name, Pfizer presses on, emboldened by several recent cyber-squatting cases that favored trademark owners.
While the need to provide strong intellectual property rights in the context of domain names is an important policy goal of the Chinese courts, this case is by no means ideal to strengthen IP rights. Pfizer is asking the court to make an unnecessary, theoretical ruling, which is nearly worthless in China, which has a civil law system, where precedent holds little power. Additionally, the court will find difficulty in awarding damages to Pfizer, as Shenzhen Online never attempted to use the domain name, although they did refuse a request to hand the name over to Pfizer. Nonetheless, the progress of this case will be closely watched by lawyers and companies alike, as a gauge of how far the courts in China are willing to go.
(Source: South China Morning Post)
China Railway Receives License
Deregulation in the domestic telecom market, in anticipation of World Trade Organization accession, moved one step closer as the railway sector received a license to provide telecom services nationwide.
China Railway Telecom, now the country's biggest special communications network, is to be officially established in the coming weeks to provide fixed-line and data transmission services.
The new firm is expected to focus on the country's fixed-line communications market, which is currently dominated by China Telecom.
The new firm will have the right to operate basic telecom services like long distance calls, local calls, data transportation and Internet related business, but not mobile communications.
China Unicom, which was established in 1994, was China Telecom's first competitor in theory, but because of its lower network capability, China Unicom was not a big factor in the market. With China's pending WTO accession, the government decided to decentralize the telecom service industry in 1998, by breaking up China Telecom's monopoly into four independent parts. This most recent opening of the market to domestic players has become another major step in the reform.
The existing railway-based system is massive. By the end of 1999, the total length of Railway Telecom's network was 120,000 kilometers, 40,000 of which was optic fiber. The network covers 500 big and medium-sized cities around the country. The total value of the railway telecom network is estimated at around 10 billion yuan (US$1.2 billion).
It is expected that China Railway Telecom will go public in both China and the United States within the next three years.
(Source: China Daily)
Lehman Lee & Xu
China Lawyers, Notaries, Patent, Copyright and Trademark Agents
(formerly known as the L&A Law Firm)
Suite 188, Beijing International Club
21 Jianguomenwai Dajie, Beijing 100020 China
Tel.: (86)(10) 6532-3861
Fax: (86)(10) 6532-3877
http://www.chinalaw.cc/
To unsubscribe from this newsletter click here or send an email to chinalaw@chinalaw.cc with UNSUBSCRIBE_IT in the subject line.
The China Information Technology Law Newsletter is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.
