Is It Illegal for the SARFT to Prohibit Installing Youku and Iqiyi in Internet Cable Box?

Is It Illegal for the SARFT to Prohibit Installing Youku and Iqiyi in Internet Cable Box?

–Analysis on the Prohibition of Installing Youku App and Iqiyi App on the Internet Cable Box


广电总局(By You Yunting) According to some media reports, the State Administration of Press, Publication, Radio, Film and Television (the ”SARFT”) issued a rule to local administrations requesting to delete Youku App, Iqiyi App, Sohu App and browsers from Wasu Box and Internet cable Set-top boxes (the “boxes”), which enables users to support TV, games, online video, music and photos. At first glance, i was astonished how it could be called boxes if without Youku App, Iqiyi App and browsers. However, Hangzhou Wasu Digital TV Media Group confirmed receiving the rule shortly after the reports came out. That being the condition, we would like to analyze the rule.

The rule relies on the Demands for Management Concerning Operation of Institutions with Internet Television Licenses (the “Demands”), stipulating that “institutions integrated Internet and television shall be designed to establish cooperation on Internet television end product with a unique integrated platform,. The Internet television end product shall not have other Internet connection and shall not link to any other management system and database of Internet companies.”

The Demands, effective as of at the end of 2011, was actually planted a hint. As such, the rule is just issued to carry out the Demands. However, the videos of Youku Box, Iqiyi Box and Sohu Box are from their websites, which had already obtained the Permit for Spreading Audio-Visual Programs via Information Network (hereinafter referred to as the “Permit”) issued by the SARFT and also blocked network reaction and network pornography in accordance with the requests of the Issuance of the Administrative Regulations on Internet Audio-Visual Program Services issued by the SARFT. This also means that Youku, Iqiyi and Sohu are entitled to provide users of the boxes with their services.

A primary question is why a legal private-owned Internet companies could not broadcast their videos on the television through boxes. According to reports, two reasons are likely to interpret the question:

The first is copyright matter. Section 4, Article 1 of the Demands stipulates that, programs broadcasted on the platform of internet TV content services shall be of the same standard, scale, and management demands of those of television programs, and shall have the copyright as the program broadcasted on TV. On the basis of current laws and regulations, the contents of video websites are on-demand video but Youku and other video websites are authorized to have the right of communication of information via network. Under the condition, we think, the Demands, in conflict with the Copyright Law, shall be considered to be invalid.

Boxes could use two approaches to broadcast videos on the television, i.e., live broadcasting and on-demand broadcasting. Pursuant to current Copyright Law, broadcasting by means of wire dissemination shall be considered as the right of broadcasting, but on-demand broadcasting shall be contained in the right of communication of information via networks. As such, Youku, Sohu, Iqiyi and their apps provide on-demand services, thus belonging to the right of communication of information via networks. More detailed information please read my previous post Which Copyright Should Internet TV Operators Purchase.

The second is to protect the enterprises of radio, film and television. Since copyright is just an excuse, private-owned enterprises are willing to purchase the right of broadcasting under an open policy. The essence of the rule is to maintain departmental benefits and protect the interests of enterprises of radio, film and television.

The core content of the Demands is the Article 2, stipulating that the integrated platform of internet and television shall be a legal service platform of the internet cable television institutions issued by the SARFT. However, the SARFT is likely to issue the license to the state-owned enterprises in the television and radio industrial, thus state-owned enterprises may receive monopolies to operate internet cable television boxes. If private-owned enterprises are trying to provide that service, it is possible to pay for state-owned enterprises.

It is considered to charge for unreasonable departmental benefits, and the essence of the rule is a monopoly and unfair competition. Article 7 of the Anti-unfair Competition Law stipulates that a local government and its subordinate departments shall not abuse their administrative power to limit others to purchase the goods of the business operators designated by them so as to restrict the lawful business activities of other business operators. Article 8 of the Anti-Monopoly Law stipulates that administrative authorities and other organizations authorized by laws or regulations to administrate public affairs shall not abuse their administrative power to eliminate or restrict competition. Article 32 of the Anti-Monopoly Law stipulates that administrative authorities and other organizations authorized by laws or regulations to administrate public affairs shall not misuse their authority to force, openly or disguisedly, individuals or entities to sell, purchase, or use the products of Operators designed by said authorities.

If the governments break the law, administrative lawsuits can be brought to protect interests. In the radio and film industrial, they live in a military-style management. As governments play a dominant role in the radio and film industrial, private-owned enterprises are afraid to initiate lawsuits against governments. In my understanding, the rule may lead to a result that bad competition drove out good ones, which in turn disrupt the order of supervision. Under the fact that a fierce competition exists between legal boxes and unregulated copycatted boxes and now legal boxes were cracked down through deleting video apps and browsers such as Youku App and Sohu App, it is a good chance for copycatted boxes. Since copycatted boxes are unregulated, great users experience will make them encroaching on legal boxes’ market share.

Finally, I feel kind of pity for my ex-boss Chen Tianqiao, a legend who became the richest at his thirty-year-old ten years ago and hoped to change the world. He spent all the efforts of SNDA on producing an internet cable boxes called Shenda Box, which brings the Internet into sitting room. However, in the April of 2006, the SARFT issued a letter to China Telecommunication and China Mobile prohibiting SNDA as an example from bringing the Internet into sitting room without permits. Therefore, Shenda Box was stopped in the cradle.

Once again, Chinese entrepreneurs encountered such supervision similar to that of ten years ago. Why could Chinese entrepreneurs not change the world just like the others all around the world? Why could their efforts get killed only by a governmental document? Why could the SARFT treat private-owned companies so cold? Maybe it is because our political system is not a society with rule of law. As such, private-owned enterprises are not entitled to equal political status and freedom, and thus unlikely to receive equal treatment with state-owned enterprises.

Lawyer Contacts                                      

You Yunting86-21-52134918

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