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Internet Bar License Ban Crimps Expansion Plans

China began the suspension of the registration of new Internet bars Thursday after receiving numerous complaints against illegal practices in Net cafes. The ban may put a crimp in the expansion plans of existing license owners around the country.

The new provision was stipulated shortly after the government started a six-month nationwide inspection on Net bars last month.

The authorities initiated the campaign to crack down on Net cafes operating without licenses and permits, to stop minors from coming into the facilities and to halt the spread of pornographic and superstitious information over the Internet.

"The government decided to implement the ban because the market is quite chaotic at present," a State Administration of Industry and Commerce spokesman said.

With the aim of developing the Net bar market in a more regulated fashion, last June the Ministry of Culture authorized 10 large companies, all with close government ties, to open Net bar chains.

China Telecom Corp, China Unicom Ltd and eight other companies with at least 50 million yuan (US$6.02 million) in registered capital received licenses.

Each province, autonomous region or municipal government was given the right to issue three local licenses for qualified investors to open chain Net bars in their jurisdiction.

"The new provision will have little effect on our Shanghai business as there is little room for new competition under present market conditions," said an official surnamed Li with the Shanghai Three-Dimension Computer Management Service Co Ltd, an operator of about 20 local Net cafes.

"But it has made our expansion plans in Guizhou Province uncertain," he added.

The company has recently invested millions of yuan to obtain a license for operating Net bars in the southwest province.

It opened its first Net bar there last week and plans to set up 10 outlets in total in Guizhou this year.

Despite securing the license from the Ministry of Culture, it was still necessary for the company to register with the local administration of industry and commerce before it opens a new outlet.

The State Administration of Industry and Commerce said it would coordinate with the Ministry of Culture to work out details on how the new provision would apply to those existing license owners, according to an official of the administration who asked for anonymity.

The Shanghai Branch of China Telecom Corp, one of the major Internet access service providers, said that the regulation would not have a significant effect on its Internet access service.

Company sources said the Internet bars accounted for less than 0.1 percent of its total corporate data service clients.

As a license owner, Shanghai Telecom also plans to establish a network of around 200 Net bars in Shanghai, under the chain store name of Green Power.

Since the company will achieve its target mainly through franchising existing legal Net bars, the new regulation would have little effect on its planning, according to a man named Si who was overseeing the Green Power project.

China has stepped up its illegal Net bar crack down after a 2002 Beijing fire killed 24.

Many of the dead were university students staying there to surf the Web or play games overnight.

(Shanghai Daily March 5, 2004)

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