With the flurry of OEM telematics activities now occurring in China, it is important to examine the unique regulations involved in being a telematics service provider (TSP) in that country and how Chinese rules restrict foreign companies while giving an edge to domestic wireless operators and map providers.
Foreign-owned or invested enterprises face difficulties in launching a telematics business in China because of the unique legal regulations that, presumably, protect Chinese businesses in related sensitive areas. In many cases, foreign companies normally have to partner with the local players.
Local Telematics involvement
Because of the legal issues involved, Chinese companies such as local TSPs, telecom operators, map providers and traffic information providers have an advantage over their foreign counterparts, though the technological know-how and market experience of the locals may not be as good as that of their foreign counterparts.
As major players in the field, wireless operators, for instance, aim at becoming independent TSPs. Already, China is witnessing the active involvement of telecom operators in telematics development, not only as wireless network carriers but also as independent TSPs. All three wireless carriers in China, particularly China Unicom, have made no secret of their ambitious market strategies in telematics.
For their part, map providers serve as independent TSPs in what is considered a unique role, exemplified by an announcement from NavInfo in April 2011 about its telematics service brand “Qujia,” or “Fun Drive” in English.
Meanwhile, a couple of local independent TSPs are focused on developing partnerships with automotive original equipment manufacturers (OEM) for factory-embedded telematics systems, although in some cases the OEMs may also provide aftermarket solutions. In one example, Beijing 95190, the top independent TSP in China, is the call-center partner for Toyota G-Book. Another entity, latecomer China TSP, has succeeded for the time being in acquiring as clients domestic automotive OEMs such as Chang’an, Geely and FAW.
General Principle of Telecom Regulations Defined
Telematics are solutions based on the flow of information to and from a vehicle. Based on this definition, telematics undoubtedly can be considered a type of telecommunications and so falls under the purview of the Telecommunications Regulations of the People’s Republic of China (Telecom Regulations), a set of governing policies that went into effect in September 2000.
China’s Telecom Regulations are crucial to regulating the country’s telecom industry and any value-added telecom services. According to the rules, telecom service providers must acquire an operating license before commencing business in China.
The Telecom Regulations also draw a distinction between basic telecommunications services and value-added telecommunication services. China telecom operation licenses are thus divided into two categories: permits for the operation of basic telecom business, and permits for the operation of value-added telecom business.
The regulations specify that foreign investment for the operation of basic telecom business cannot exceed 49 percent, while foreign investment for the operation of value-added telecom business cannot exceed 50 percent.
Foreign TSPs Have it Rough
The challenges are even more daunting for foreign TSPs in light of the additional restrictions imposed by the regulations on non-Chinese entities. Because they cannot get into the Chinese telecom business directly as wholly owned foreign enterprises, the foreign TSPs are forced to form local joint ventures or restructure their stake holdings in order to meet licensing qualifications. They also have to let go of the ownership of these joint ventures.
Furthermore, since some areas—such as the mapping business in China—are purely restricted to Chinese companies, international TSPs sometimes must abandon their established partnerships in the developed markets and find local counterparts in China, particularly when their established partners are unable to pass the legal challenges presented by the official Beijing apparatus.
For example, the digital mapping and surveying business is completely restricted to authorized Chinese enterprises. China’s State Bureau of Surveying and Mapping so far has issued licenses to just 11 companies, including AutoNavi and NavInfo, the leading OEM in-vehicle navigation map suppliers In order to keep the clientele of international automotive OEMs and TSPs, TomTom/Tele Atlas partnered with AutoNavi, while Navteq formed a local joint venture with NavInfo.
The strict regulations on Internet map service provider (IMSP) licenses for foreign companies also have deterred foreign enterprises like Google and Microsoft. As of mid-February, IMSP licenses had been granted to 105 websites across the country, including search giant Baidu, leading portal Sina, as well as Nokia and China Mobile. But so far, Nokia’s Chinese joint venture is the only foreign-invested company approved for IMSP.
Not until early June did IHS iSuppli report that Google and its joint venture partner in China finally applied for a license to operate its Google Maps online mapping service in the country. But with Google known to have a weak stomach for censorship, it remains unclear whether the search giant will follow the specific IMSP rule to routinely censor its Google Maps and Google Earth contents, simply in hopes of being approved for the license.
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