2. Business Model Legality/ Regulatory Approval Investigation

Q1 (Telecom Regulations and Internet Businesses)

We understand that the Telecommunications Business Law applies to telecom carriers and providers, but does it also apply to community sites and other Internet service businesses?

Of course, the strictest regulations such as notification and registration apply to the so-called telecom-related businesses such as telecom carriers and providers. However, Internet services involving the exchange of information can also be subject to certain regulations under the Telecommunications Business Law, such as confidentiality of communications and prohibition of censorship.

A “telecommunications service” under the Telecommunications Business Law means “intermediating communications of others through the use of telecommunications facilities, or any other acts of providing telecommunications facilities for the use of communications of others”. And a business that offers telecommunications service in response to a request from a third party is a “telecommunications business”. So if you use a server to operate a community site, you are offering the use of telecommunications equipment for communications between third parties, and thus qualify as a telecommunications business.

On the other hand, if you do not intermediate communications of others, and you do not have installed telecommunications circuit facilities, even if you qualify as a telecommunications business, you are not subject to the stricter regulations of a “telecommunications carrier”, such as the notification and registration requirements. For example, a so-called bulletin board service offers a place where an unspecified number of people can exchange information, but is not “intermediating communications of others”, and thus would not be subject to the notification and registration requirements. Accordingly, a community site operator would not be subject to the stricter requirements of a “telecommunications carrier”, but would be subject to the regulations that apply to a “telecommunications business”, such as confidentiality of communications and prohibition of censorship.

This is a bit complicated, so for further details, please see the Ministry of Internal Affairs and Communications’ “Manual for Telecommunications Business Entrants (Supplement)”.

(Posted: January 27, 2012)