CHINA INFORMATION TECHNOLOGY LAW NEWSLETTER
Vol. 4, No. 15 - November 28, 2003
TOPICS THIS ISSUE:
- Firms Alarmed Over Encryption Order
- New Telecom-Industry Policy Urged
- Chinese Internet Service Providers Pledge "Self-Discipline"
- Yahoo Buys Chinese Software Firm
- Chinese Netizens To Hit 78 Million
- Genesis Technology Group Announces License Granted For Short Messaging Services To Its Chinese Subsidiary It Division
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Firms Alarmed Over Encryption Order
U.S. officials and businesses expressed alarm about newly issued regulations that appear to require equipment makers to deal with their Chinese competitors to get access to the encryption standards required for wireless networks.
Details of the new rules are unclear. But industry reaction suggests the issue could brew into yet another area of trade friction between Beijing and Washington.
According to industry officials and analysts, the rules that took effect on December 1 grant only 11 Chinese equipment makers free access to domestic encryption standards for wireless local area networks now required of all vendors, both foreign and Chinese.
Other manufacturers must deal with the 11 companies in order to obtain the technology, they said.
U.S. manufacturers are "deeply concerned" about the requirement, said Anne Stevenson-Yang, Beijing representative for the U.S. Information Technology Office, an industry group based in Washington.
Stevenson-Yang said her office was seeking more information about the new regulations, and was also speaking with the government on behalf of American companies.
American officials have been raising the issue with the Chinese government and with other foreign governments for months, according to the U.S. Embassy in Beijing.
Some in China expected that more companies might be chosen, and that the technology may be available through the State Standardization Publishing House.
Wired Equivalent Privacy is the leading encryption standard for wireless networks, which are increasingly used for Internet connections in public spaces such as hotels, coffee shops and airports. But such networks are notoriously vulnerable to hacking, and Wired Equivalent Privacy is relatively weak.
The new standard would give Chinese regulators more control over the telecommunications medium. It is compulsory for all manufacturers and importers of all wireless network equipment used in China, though products contracted, imported or produced prior to the ban's effective date were given a six-month grace period.
Chinese officials in charge of handling encryption issues in Beijing were not available for comment.
According to a report published in the Asian Wall Street Journal recently, the 11 companies listed as having free access to the new encryption standards include major international technology firms, like computer maker Legend Holdings, and also telecoms equipment makers like Huawei Techologies.
Others are much less well known: Shenzhen Mingwah Aohan High Technology Co; Wuxi Jiangnan Computer Technology Research Institute; Shanghai Koal Software Co.; Shenzhen ZTE IC Design Co.; SDT Telecom Co.; Chengdu Westone Information Industry Inc.; China IWNCOMM Co.; Shenyang Neusoft Co. and Beijing Watch Data System Co.
Critics of the new policy say the move to require cooperation or purchases from those companies appears to be a blatant attempt to boost the domestic industry.
Chinese manufacturers lag behind in wireless technology, and the government could also be concerned about having to follow, or even pay patent royalties on, standards set overseas. China recently released its own standard for DVD technology, EVD, as part of a push to wean itself from reliance on foreign standards.
"It's transparently unfair. On what basis were those companies chosen?" said Duncan Clark, managing director of BDA China Ltd., a Beijing-based Internet consulting firm.
Though some in the industry said they doubted the government would really require companies to form alliances or buy the encryption technology from the designated Chinese vendors, Stevenson-Yang said U.S. manufacturers were taking the new rules seriously.
"These are published domestic regulations," she said. "They have the force of law."
(Source: Associated Press)
New Telecom-Industry Policy Urged
The Chinese government is striving to create a better policy environment for the country's fledging telecommunications industry, Jiang Yaoping, head for the Ministry of Information Industry (MII), China's telecoms regulator, made the comment at the 2003 China Telecoms Industry Annual Meeting.
The MII was in a race to draft an overall law on the country's telecoms industry. Previously, the MII set up a draft group exclusively for the law. Since the first draft was issued in November 2002, the MII has made efforts to conduct nationwide symposiums and solicit public opinions.
China's phone subscribers have reached over 512 million by October 2003, two years ahead of the target set in the country's tenth five-year plan. Of the total, mobile phone subscribers have overtaken fixed-line subscribers to notch up 257 million. The phone coverage in China has rocketed from 8% in 1997 to 40% at present, 4 percentages higher than that in the world.
China currently has 68.5 million Internet subscription households, ranking the second in the world and the Internet Protocol (IP) business has moved to account for 41.86% of the total long-distance phone business.
In addition, the value-added telecoms business has been fast growing. To date, the MII has issued over 8,400 telecoms value-added licenses with a year-on-year growth rate of 31%, 2,000 more than that in 2002.
Seeing the soaring telecoms industry, the MII always holds a cautious optimism for the good of implementing steady and practical policies. To date, the whole telecoms industry has raised USD21.5 billion funds in the global market under the permission of the MII, according to Jiang.
Moreover, Jiang revealed in the meeting that governments of all levels were striving to shift from direct management to regulation and supervision. The MII issued two policies over the market supervision.
The MII also created a public information and technology platform in an effort to offer information services for telecoms players across the country.
As to the 3G slow take-off, Jiang said that the MII has completed overall tests on 3 international standards, WCDMA, TD- WCDMA and CDMA2000, for the good of paving way for domestic telecom carriers and makers.
The 3G application business I still not mature worldwide and therefore the time has not come to measure up for the Chinese government to auction its first 3G license, he added.
(Source: Comtex News Network)
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Chinese Internet Service Providers Pledge "Self-Discipline"
On December 8, 2003, over 30 Internet news information service units such as Renmin, Xinhua, China, Sina, Sohu, and Net Ease jointly signed the "Internet news information service self-discipline pledge". This indicates that China's Internet news information transmission industry has started on a standardized path.
At the inaugural meeting of the China Internet News Information Service Work Commission held recently, these 30 units promised to obey government administration and public supervision voluntarily, to resist firmly the Internet transmission of harmful information such as obscenity, pornography, and superstition, and to resist the substance of information that violates the fine cultural traditions and moral standards of the Chinese nation.
Cai Mingzhao, deputy director of the State Council Information Office, said that the Internet has completely permeated all aspects of China's social life. All Internet news information service providers (ISP) need to fulfill their social responsibilities conscientiously, observe the relevant laws, regulations, and socialist moral standards strictly, enhance self-discipline, and create a healthy Internet environment. He also indicated that as the working body of the Internet Society of China (ISC), the China Internet News Information Service Work Commission would organize, draw up, and implement self-discipline standards for Internet news information services and launch a self-discipline education drive. Internet news information service units and other related ISP units that have acquired credentials in accordance with law to publish and transmit news information may all apply to participate.
(Source: BBC Worldwide)
Yahoo Buys Chinese Software Firm
Yahoo's acquisition of 3721 Network Software is an effort to expand its presence in China's rapidly developing Internet market.
As previously reported, Yahoo will pay about US$120 million in cash over two years to acquire 3721, a Hong Kong-based company that develops software used for Internet keyword searches. 3721 will become a wholly owned subsidiary of Yahoo Holdings (Hong Kong).
Under the deal, Yahoo will take control 3721's Beijing operations, which it considers central to tapping revenue from local small and midsize businesses. "The agreement provides outstanding and complementary personnel and technology to support and grow current Internet needs across China and Asia," said Allan Kwan, managing director for Yahoo in North Asia.
Yahoo expects the acquisition to close in the first quarter of 2004.
3721 sells Chinese-language keywords for Roman-alphabet domain names. The idea is to make it easier for local Web users to find their sites by typing Chinese-language terms into their search bars.
The company sells software to install into a Web browser to enable the Chinese keyword service. It charges US$115 a year for specific company names and US$1,300 a year for broader category names such as "laptops" or "restaurants." The company partners with local web portals that support the software on their websites.
Selling search-related services has been a priority for Yahoo. Earlier this year, the company acquired search technology provider Inktomi for US$235 million and then bought search company Overture Services for US$1.63 billion, two deals aimed at generating more revenue from search.
(Source: ZD Net)
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Chinese Netizens To Hit 78 Million
The number of Internet surfers in China is expected to reach 78 million soon, according to a report on the development of the Internet in China.
The report, given by Hu Qiheng, chairwoman of the Internet Society of China, at the Second Internet Conference of China, said that by the end of the year there would be 500,000 websites and 30 million online computers in China.
According to Hu, China's Internet industry has made remarkable achievements in both technical innovation and services in 2003.
She especially mentioned that the importance of the Internet was clearly shown during the outbreak of severe acute respiratory syndrome (SARS) in the first half of the year, during which a large number of people in cities turned to the Internet to carry on their business.
However, Hu admitted that in comparison with developed countries, the Internet in China is still in its first stage.
For example, the number of Internet surfers in China accounts for only 5.2% of the country's total population, while the percentage in the USA is 63.2 and the average percentage among all countries is 10.7.
In addition, online administration and operation of businesses is not so widespread in China as it is in developed countries.
Although 47% of the 8.3 million small and medium sized companies in China have Internet connections, only 11.1% of them conduct e-business.
In comparison, 60% of small sized companies, 80% of medium sized companies and 90% of large ones in the USA are doing e-business.
Meanwhile, the ministry will encourage the development of all sorts of public data bases, speed up the establishment of a system for information sharing, and promote the use of the Internet in fields such as the industrial sector, education, culture and health care.
In addition, the ministry will strengthen its management and work quickly to formulate laws on information security, given problems such as online crimes and the promulgation of unhealthy information.
Since the Internet was put into business use in 1990s, it has spread into more than 240 countries and regions around the world and the number of users has reached 700 million, according to Xinhua.
The Internet entered China in 1994 and in recent years, the number of users has been increasing by 5 to 6% monthly. Currently the number of Internet surfers in China is second only to the number in the United States.
The Ministry of Information Industry estimates that by 2005, online computers will reach 40 million and 15% of the population of China will be surfing the Internet.
(Source: People's Daily)
Genesis Technology Group Announces License Granted For Short Messaging Services To Its Chinese Subsidiary It Division
Genesis Technology Group, Inc. a leading Sino-US business development firm and the first US-based Trust Member of the Shanghai Technology Stock Exchange, announced today that the IT division of Shanghai Yazheng (Yastock) Investment Consulting Company, Limited, a wholly-owned subsidiary of GTEC, obtained a license to operate as a wireless content provider, aggregator and mobile marketing provider in Shanghai. This license will be upgraded to a national level after three months.
David Tian, Chief Technology Officer, said that they have been providing content of gaming and lottery information via wireless short messaging services in the past several months. The response has been good whereby over 1,200 individuals have signed up for services by paying about $3 per month. Over 100,000 test messages have been transmitted in the past 3 months. With this license, the company can double their profit margin and easily market services to millions of cell phones users. Their goal for the next 12 months is to have a base of one million subscribers by working with major wireless carriers in Shanghai.
The mobile communications industry has developed rapidly in recent years in China. There are 255 million users that send 400 million SMS every day. SMS is now the 5th largest media in China.
In 2002, China's mobile phone users sent over 90 billion text messages, from 18.9 billion in 2001 and one billion in 2000. Remarkably, one out of every three messages transmitted in the world is in Chinese.
(Source: Business Wire)
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.
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