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The Political Economy of Governing ISPs in China: Perspectives of Net Neutrality and Vertical Integration

Published online by Cambridge University Press:  22 September 2011

Henry L. Hu
Shanghai University of Finance and Economics. Email:
E-mail address:


Internet service providers (ISPs) have played an important role in China's internet regulation regime. This article illustrates how ISPs are governed to serve the government's regulatory goals. This involves examining some of the most extraordinary and profound insights concerning internet governance: the theories of the layers principle, the end-to-end argument and the generative internet. Chinese ISPs have been dependent rather than neutral regulatory intermediaries of the government. Moreover, in addition to telecommunication carriers, the radio and television networks affiliated to the State Administration for Radio, Film and Television (SARFT) are to become a new type of ISP that is capable of choking the free spirit of the internet, as recently demonstrated by the far-reaching policy of “network convergence.” This article argues that the policy has the potential to drastically alter the structure and ecology of the internet in China.

Special Section on the Internet in China
Copyright © The China Quarterly 2011

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1 The word first appeared in the title of a 1998 essay in Wired magazine (Niall McKay, “China: the Great Firewall,”, although this has nothing to do with the GFW discussed here. It is widely accepted that the word was first formally used to criticize China's policy in Charles R. Smith, “The Great Firewall of China,”

2 Jonathan Zittrain and Benjamin Edelman, “Empirical analysis of internet filtering in China,”; Murdoch, Steven J. and Anderson, Ross, “Tools and technology of internet filtering,” in Deibert, Ronald et al. (eds.), Access Denied: The Practice and Policy of Global Internet Filtering (Cambridge, MA: MIT Press, 2008)Google Scholar. For a later and comprehensive review of Chinese internet filtering practice, see OpenNet Initiative, “Internet filtering in China,”

3 Analysis shows that many netizens were more fond of browsing the overseas news republished by others rather than going across the GFW themselves. See Lu, Tian and Yao, Yao, “The war of GFW,” Phoenix Weekly, No. 2 (2009)Google Scholar.

4 However, the government is still able to order the domestic software manufactures to kill such circumventing software as a virus or malware. For example, Freegate, a popular software among Chinese netizens, is regarded as virus by almost all Chinese antivirus software.

5 Zittrain, Jonathan, “Be careful what you ask for: reconciling a global internet and local law,” in Thierer, Adam and Crews, Clyde Wayne Jr. (eds.), Who Rules the Net? Internet Governance and Jurisdiction (Washington, DC: Cato Institute, 2003)Google Scholar; John G. Palfrey, “Local nets: filtering and the internet governance problem,”

6 Goldsmith, Jack and Wu, Tim, Who Controls the Internet: Illusions of a Borderless World (New York: Oxford University Press, 2006)Google Scholar.

7 E.g. Computer Information Network and Internet Security Protection and Management Regulations, art. 10; Telecommunications Regulation, art. 62.

8 It should be kept in mind that the Chinese internet consists of commercial and non-commercial backbones. Commentators often either mix them up or simply ignore the existence of the latter. As a result, they may lose sight of the basic regulatory style of the government and make mistakes when studying, for example, the real name system in university BBS. For more details, see Hu Ling, “The internet infrastructure and its management”; Ling, Hu, “Real name system on the internet: origins and practices,” Internet Law Watch, No. 8 (2007)Google Scholar.

9 Hu Ling, “Real name system on the internet.”

10 For non-commercial networks' obligation, see Co-ordination Measures of Management on Internet Websites (17 February 2006); for commercial networks' obligation, see Telecommunications Regulation, ch. V.

11 The Notice of MII on the Special Measures of Legally Striking Internet Pornography (2007). All leading backbone carriers are members of the special striking leading group.

12 Saltzer, J. H. et al. , “End-to-end arguments in system design,” ACM Transactions on Computer Systems, No. 4 (1984), pp. 277–88CrossRefGoogle Scholar. For a detailed description of the role of end-to-end argument in the original internet, see van Schewick, Barbara, Internet Architecture and Innovation (Cambridge, MA: MIT Press, 2010, forthcoming)Google Scholar.

13 Solum, Lawrence B. and Chung, Minn, “The layers principle: internet architecture and the law,” Notre Dame Law Review, No. 79 (2004), p. 815Google Scholar.

14 Lessig, Lawrence, The Future of Ideas: The Fate of the Commons in a Connected World (New York: Random House, 2001)Google Scholar; Benkler, Yochai, The Wealth of Networks: How Social Production Transforms Markets and Freedom (New Heaven: Yale University Press, 2006)Google Scholar; Zittrain, Jonathan, The Future of the Internet – And How to Stop It (New Haven: Yale University Press, 2008)Google Scholar.

15 Zittrain, Jonathan, “The generative internet,” Harvard Law Review, No. 119 (2006), p. 1974Google Scholar; Lessig, Lawrence, “The architecture of innovation,” Duke Law Journal, No. 51 (2002), pp. 17831801CrossRefGoogle Scholar.

16 Nunziato, Dawn C., Virtual Freedom: Net Neutrality and Free Speech in the Internet Age (Stanford, CA: Stanford Law Books, 2009)Google Scholar.

17 Zittrain, “The generative internet.”

18 Mark A. Lemley and Lawrence Lessig, “The end of end-to-end: preserving the architecture of the internet in the broadband era,” UC Berkeley Law and Economics Research Paper No. 19 (October 2000).

19 For an overview, see Nunziato, Virtual Freedom.

20 Wu, Tim, “Network neutrality, broadband discrimination,” Journal of Telecommunications and High Technology Law, Vol. 2 (2003), p. 141Google Scholar.

21 Yoo, Christopher, “Network neutrality and the economics of congestion,” Georgetown Law Journal, No. 94 (2006)Google Scholar; Beyond network neutrality,” Harvard Journal of Law and Technology, No. 19 (2005)Google Scholar; Vertical integration and media regulation in the new economy,” Yale Journal on Regulation, Winter 2002Google Scholar.

22 Opinion of the General Office of CCP Central Committee and the State Council on Further Strengthening the Management of the Internet (2004).

23 One 2007 case in Shanghai manifested such a dilemma. The personal site of the plaintiff, Du Dongjin, was set in a foreign server and blocked by Shanghai Telecom by mistake. Mr Du not only wanted the site restored but also wanted Shanghai Telecom to reveal the secret black list and the blocking mechanism. Of course the court would not give him such an opportunity to challenge GFW and decided in favour of the defendant that the contract between two sides did not “warrant the plaintiff to successfully visit any particular website.” See Civil Judgment of Pudong New District People's Court of Shanghai (2007) Pu Min Yi (Civil) Primary No. 6518,

24 For example, strikes against harmful information might reduce the interests of the users directly and thus the value of their networks indirectly.

25 Administrative Verdict of Fu Zhou Intermediate People's Court of Fu Jian Province (1998) Rong Xing Final No. 76.

26 For a comment, see Qiren, Zhou, “Thanks to the Chen brothers: comments on the Fu Zhou IP telephone case,” in Shuwang jingzheng: zhongguo dianxinye de kaifang he gaige (Competition Among .Coms: Openness and Competition in the Telecommunication Industry of China) (Beijing: Sanlian shudian, 2001)Google Scholar.

27 Notice Concerning Questions Relating to the Operating Permit System for International Connections Business of Computer Information Networks (18 September 1998).

28 Notice Concerning Opening the IP Telephone Business in our Country (2 March 2000).

29 Although the backbone carriers officially denied the accusation, many local netizens found proof and posted it in the forums, e.g. Li Baiqing, “Tie Tong blocked BT officially,”

30 According to CNNIC, the number of broadband access users has been rapidly increasing since 2003. In mid-2009 there were 346 million, 90% of the total number of Chinese netizens. All ISPs tried to develop their broadband access business and the traditional dial-up access service almost disappeared. The Telecommunications Regulation does not make any distinction between different access technologies and ISPs. See CNNIC, The 25th Statistical Survey Report on Internet Development in China (January 2010),

31 See draft art. 44.

32 For more discussions of the SARFT's role, see Zhao, Yuezhi, Media, Market, and Democracy in China: Between the Party Line and the Bottom Line (Urbana: University of Illinois Press, 1998)Google Scholar; Wu, Irene S., From Iron Fist to Invisible Hand: The Uneven Path of Telecommunications Reform in China (Stanford, CA: Stanford University Press, 2009)Google Scholar, ch. 3.

33 Lynch, Daniel C., After the Propaganda State: Media, Politics, and “Thought Work” in Reformed China (Stanford, CA: Stanford University Press, 1999)Google Scholar.

34 Baker, C. Edwin, Media Concentration and Democracy: Why Ownership Matters (New York: Cambridge University Press, 2007)Google Scholar.

35 Lessig, The Future of Ideas; Cooper, Mark, Media Ownership and Democracy in the Digital Information Age (Stanford, CA: Center for Internet and Society, Stanford Law School, 2003)Google Scholar.

36 The Notice of the General Office of the State Council on Strengthening the Management and Construction of RTN (26 June 1998).

37 The Notice of The SARFT on Strengthening the Management of Radio, Movie and TV Programmes through Information Networks (October 1999).

38 In practice, there are three typical models for IPTV, developed in Shanghai, Hangzhou and Qingdao respectively. For a critical review, see Hui, Yu et al. , “Study on the regulatory policy of convergence of networks,” in Hui, Yu (ed.), Gonggong zhengce yanjiu baogao ji I (Collections of Public Policy Research Report I) (Hangzhou: Zhejiang University Press, 2008), pp. 3648Google Scholar.

39 Yan, Zhou, Zhongguo shuzi dianshi chanye zhengce de xingcheng yanjiu (Study on the Formation of the Policy of the Digital TV Industry in China) (Beijng: Communication University of China Press, 2007)Google Scholar; Jixiang, Peng (ed.), Chinese Television in the Age of Digital Technology (Beijing: Peking University Press, 2008), pp. 198201Google Scholar. Obviously, DTV is less competitive than IPTV, because the latter has many more users.

40 The SARFT has strictly controlled the creation, aggregation and broadcasting of video programmes, especially the barrier against foreign capital. When Rupert Murdoch's effort to enter China was about to succeed after ten years' struggle in around 2004, the new ideological policy of the Hu Jintao era changed to be hostile again. The SARFT was afraid that video online sites could become another form of TV programme and could co-operate with the IPTV industry and circumvent the regulation.

41 Measures for the Administration of the Publication of Audio-Visual Programmes through the Internet or Other Information Network (2004), art. 5.

42 Provisional Management Measures of Approving the Internet Broadcasting End-device (12 November 1999), art. 4.

43 Board of Caijing Magazine (ed.), Guangzhi de huanghun (The Twilight of Regulation) (Beijing: Social Science Documentation Press, 2003)Google Scholar.

44 According to some sources, the slow speed of the SARFT to advance DTV made the state realize that the status quo without competition must be changed and decide to introduce capital from ISPs into the new industry to advance the overall transformation of DTV. See Luan Lu, “Encouraging DTV industry to develop, telecommunication and broadcasting industry enter into each other from quitting from each other,” However, according to the State Council, there are obvious differences between the entitlements of the SARFT and MIIT. The former is encouraged to engage in the telecom business with no limitations while the latter is encouraged to engage only in radio and TV creation and transmission businesses, which is just one aspect of the radio and TV business. The power of editing and broadcasting still remains in the hand of the SARFT.

45 Nan Fang Daily, “Network convergence speeds up; the SARFT engages in cell phone industry,”

46 The deadlock was broken in Jiang Su province as an experiment in July 2009. See “Network convergence might proceed asymmetrically,” Some commentators have doubts about the competitiveness of SARFT: see Xie Wen, “Three problems concerning network convergence,” New Century, No. 4 (2010).

47 Yu Hui et al., “Study on the regulatory policy of convergence of networks,” pp. 54–56.

48 Wang Taihua, head of SARFT, has another higher position in the Party system, that of vice-minister of CPD. Another vice-minister, Cai Wu, also holds a government position, head of the State Council Information Office. This means that the voice from these two ministries is more powerful and effective than other special content regulators, and they are less unlikely to be transformed into one market player.

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