The Chinese government recently decided to offer foreign Internet service providers (ISPs) licenses to sell Internet services within the special economic zone called the Shanghai Free Trade Zone. This is a big step forward, and it's great news for those companies that were struggling to function at full capacity using local providers.
If you've ever had to operate a remote office in China, you're probably well aware that getting things accomplished over there takes an extra bit of patience and ingenuity. From a technology perspective, much of the difficulty revolves around inadequate data and voice communications between remote sites in China and facilities in the West. Until recently, the only options for ISPs were national carriers such as China Mobile, China Telecom, and China Unicom -- all of which are state-owned enterprises.
For years, enterprises with thousands or tens of thousands of employees in China resorted to building their own private WAN infrastructures using technologies like multi-protocol label switching (MPLS). This was done partly to circumvent the Chinese government's content filtering, but it mostly had to do with the limits on what Chinese-operated providers could deliver in terms of bandwidth, latency, and reliability. Even though services have improved in recent times, latency remains a major issue, so private MPLS networks remain an absolute must, despite the enormous costs.
The problem for small and midsized remote sites in China is that MPLS is cost prohibitive. The only alternative was to use a local Internet provider and tunnel traffic back to the West over a virtual private network connection. It was illegal for MPLS network owners to offer private-line services to their smaller counterparts, because the owners would then essentially be competing against state-run providers.
But the Chinese government is finally starting to relax its noncompete laws and accept bids from foreign service providers to offer Internet services to other foreign companies. The idea is that China wants to be seen as a flexible place to do business. A foreign ISP will be allowed to purchase a license, build its own MPLS infrastructure with very few hops back to the West, and offer low-latency services at reasonable rates to small to midsized remote sites that need them.
This is great news for many Western companies that were in desperate need of faster data communications, but I must reiterate that foreign ISPs are being allowed to operate only within the Shanghai Free Trade Zone. Companies with offices or factories in areas like Shenzhen are still out of luck.
But progress is progress, and hopefully the popularity of foreign ISPs working in the Shanghai FTZ will lead to relaxation of the foreign ISP competition rules in other major Chinese cities. This may be the turning point that many businesses were seeking in an attempt to bolster communications between the East and the West.