Business Overview
Regulation of Telecommunications and
Internet Information Services
Regulation of Telecommunication Services
Under the Telecommunications Regulations of the PRC,
or the Telecommunications Regulations, promulgated
on September 25, 2000 by the State Council of the
PRC and most recently amended in February 2016,
a telecommunication service provider in China must
obtain an operating license from the MIIT, or its
provincial counterparts. The Telecommunications
Regulations categorize all telecommunication services
in China as either basic telecommunications services or
value-added telecommunications services. Our online
and mobile commerce businesses, as well as Youku’s
online video businesses, are classified as value-added
telecommunications services. The Administrative
Measures for Telecommunications Business Operating
License, promulgated by the MIIT in September 2017,
set forth more specific provisions regarding the
types of licenses required to operate value-added
telecommunications services, the qualifications
and procedures for obtaining the licenses and the
administration and supervision of these licenses.
Foreign investment in telecommunications businesses
is governed by the PRC State Council’s Administrative
Rules for Foreign Investment in Telecommunications
Enterprises, or the Foreign Investment
Telecommunications Rules, under which a foreign
investor’s beneficial equity ownership in an entity
providing value-added telecommunications services
in China is not permitted to exceed 50%. In addition,
any major foreign investor holding equity interest in a
business providing value-added telecommunications
services in China must demonstrate a positive track
record and experience in providing these services.
Based on the Notice regarding the Strengthening of
Ongoing and Post Supervision of Foreign Invested
Telecommunication Enterprises issued by MIIT in
October 2020, foreign invested telecommunication
enterprises will no longer be subject to prior MIIT
approval requirement, but still need to submit relevant
foreign investor qualification materials to MIIT when
applying for new telecommunication operating
permits or amended permits. Although the Negative
List allows foreign investors to hold more than 50%
equity interests in a value-added telecommunications
service provider engaging in e-commerce, domestic
multi-party communication, storage-and-forward and
call center businesses, other requirements provided
by the Foreign Investment Telecommunications Rules
shall still apply.
The MIIT’s Notice Regarding Strengthening
Administration of Foreign Investment in Operating
Value-Added Telecommunication Businesses, or the
MIIT Notice, issued on July 13, 2006 prohibits holders
of these services licenses from leasing, transferring
or selling their licenses in any form, or providing any
resource, sites or facilities, to any foreign investors
intending to conduct this type of businesses in
China. In addition to restricting dealings with foreign
investors, the MIIT Notice contains a number of
detailed requirements applicable to holders of
value-added telecommunications services licenses,
including that license holders or their shareholders
must directly own the domain names and trademarks
used in their daily operations and each license holder
must possess the necessary facilities for its approved
business operations and maintain its facilities in the
regions covered by its license, including maintaining
its network and providing Internet security in
accordance with the relevant regulatory standards.
The MIIT or its provincial counterparts have the power
to require corrective actions after they discover any
non-compliance by license holders, and where
license holders fail to take those steps, the MIIT or its
provincial counterparts have the power to revoke the
value-added telecommunications services licenses.
On December 28, 2016, the MIIT promulgated the
Notice on Regulating Telecommunication Services
Agreement Matters, or the Telecommunication
Services Agreement Notice, which came into effect on
February 1, 2017. According to the Telecommunication
Services Agreement Notice, telecommunication
service providers must require their users to present
valid identification certificates and verify the users’
identification information before provision of services.
Telecommunication service providers are not permitted
to provide services to users with unverifiable identity or
who decline identity verification.
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