8/3/98 NY Times. Bringing China Online, With Official Blessings
nytimes.com
By MARK LANDLER
HONG KONG -- Peter Yip is not shy about his ambitions. As
he steers a visitor through the bustling offices of the China
Internet Corp. here, Yip describes how his company will be a catalyst
for bringing the Internet to China and its 1.2 billion people.
Employees are busy collecting news dispatches from Reuters and
Bloomberg, which they send to Beijing to be translated into Chinese.
Later, China Internet will post the material on its service, where
anyone in China with a computer and the $30-a-month subscription
fee can log on to a world of Western news.
"The Chinese government recognizes that the Internet is a global thing,"
said Yip, 43, the vice chairman of the company, which is based in
Hong Kong and backed by the official New China News Agency --
not to mention an impressive array of American technology companies.
"That's why they've established a strategy and asked me to help them
create a vehicle to allow people to participate."
It is that kind of pronouncement
that makes Yip's rivals seethe.
They say China Internet, known as
CIC, is only one of dozens of
companies throughout the country
that are racing to put China on line.
In China, as in the United States, the Internet seems to be growing too
rapidly -- and in too helter-skelter a way -- for any single company to
mastermind its development.
"Because the Internet has taken China by storm, there are very
different proposals about how to develop it," said Don Xia, chief
executive of Unicom Media, a Hong Kong company that is developing
Internet services for China Unicom, one of the country's two main
telephone companies.
To Xia and others here, the debate is whether China's Internet should
be open or closed; raw or edited, anarchic or controlled. Yip's
company, they say, represents a more controlled, government-directed
approach. At the same time, hundreds of small-time entrepreneurs,
most of whom lack China Internet's financial backing or political
connections, are laboring to build a truly free Internet.
"CIC is out of step with what Internet users in China are about," said
Duncan Clark, managing director of BD Associates, a
telecommunications consulting firm in Beijing. "I think companies that
make deals with them are actually doing themselves a disservice."
The American companies that have made
investments in China Internet, or formed other
kinds of partnerships with Yip, include
America Online, Bay Networks, Netscape
Communications and Sun Microsystems. And
whatever the controversy that Yip may
arouse, the success of his sales pitch is proof
that a Chinese Internet is no longer just a
utopian vision, but a ripe opportunity for
sharp-eyed entrepreneurs.
According to the latest government statistics, 1.18 million people are
using the Internet in mainland China -- nearly double the number last
October. While cyberspace is still largely the preserve of
20-something men, it is growing beyond its roots as a tool for
academics. Nearly 80 percent of those surveyed said they had bought
merchandise over the Internet, and many said they used it for
information about entertainment, sports and business.
After much hand-wringing, Beijing seems to have decided that the
benefits of the Internet outweigh its dangers, although it still filters the
content of the World Wide Web through central computers and
periodically blocks access to Web sites like those of CNN and The
New York Times. Beijing is also upgrading China's network to carry
more data, and it has licensed more than 30 companies to offer
Internet access.
"The Chinese see the Internet as the savior of their economy," said
Kenneth Farrall, a Web site designer who lives in Xiamen, in
southeastern China, and is starting an Internet consulting firm. "My
impression is that the people blocking Web sites are paying lip service
to the old guard in Beijing."
Yet for all the talk about openness, Internet executives here say the
government is still drawn to the idea of creating a vast intranet within
the country. Such a network could tap the Web's riches but remain
walled off from features deemed subversive -- like pornographic sites,
postings from dissidents or anything about Taiwan or Tibet.
China Internet's model is tailor made for this approach. The company,
which was started in 1994, operates a proprietary news service called
China Wide Web, which has about 1,000 subscribers. For a fee of
$30 to $340 a month, depending on the level of service, subscribers
receive stock quotations and news from the New China News
Agency, Reuters, Bloomberg, the Nikkei wire service and Agence
France-Presse. But they cannot gain Web access because the service
does not have an Internet connection. By contrast, the majority of
people in China who use a dial-up service to get Web access pay a
monthly fee of roughly $68 for unlimited use, plus access charges
amounting to 50 cents an hour.
Yip said his long-term goal was to turn the China Wide Web into a
Chinese version of the World Wide Web, a vast consumer
marketplace with Chinese-language information and entertainment. He
said the lack of such content was the biggest hurdle to Internet growth
here.
"If you're in New York and you get on the Web, and everything
coming at you is in Arabic, you're not going to stay on all that long,"
said Yip, who lived in the United States for 20 years and speaks
rapid-fire English.
Another analogy for the China Wide Web may be America Online, a
subscription-based service that organizes material in a form more
digestible than on the Internet. Not surprisingly, China Internet has a
partnership with America Online, in which the companies are
developing a Hong Kong version of America Online service.
Yip's competitors point out that America Online has a link to the
World Wide Web, while the China Wide Web does not -- which
keeps the Internet's less acceptable material out of the country. "The
China Wide Web is an attempt to create a Web that is isolated from
the Net," Clark of BD Associates said. "We're kind of past that
already."
Yip acknowledged that the China Wide Web's lack of an Internet
connection was a weakness. But he said it was for financial, not
political, reasons: the dominant phone company, China Telecom, had
set access fees too high. Unless the government broke up China
Telecom's virtual phone monopoly, it would make no sense to offer
Internet access.
China Internet's close ties to the New China News Agency mean other
restrictions. The agency has several editors in the company's offices
who sift through dispatches from the Western services and pull any
that run afoul of laws barring the distribution of political news about
Taiwan or Tibet. "We're relying on Xinhua to interpret Chinese law
and ensure that we don't stray," Yip said, using the press agency's
Chinese name.
So far, China Internet has skirted trouble by sticking to less
controversial business and financial news. Its other products include
inoffensive features like a Chinese-language site about the World Cup
and one about film star Bruce Lee. But Yip said that merely by
distributing Western news, China Internet was doing its part to open
the country.
Yip, who started and sold several technology companies in the United
States before returning to his native Hong Kong in 1989, said the
industry's hostility reflected envy at his success in attracting partners
and frustration that most companies are still losing money on the
Internet.
Indeed, by most yardsticks China Internet would not seem that big a
threat. It has fewer subscribers than many of China's struggling
Internet-access providers. It has less than $10 million in revenue and is
losing money, although Yip said he expected annual revenue to exceed
$25 million in 12 months. And a much-publicized joint venture with
Pointcast, the leading purveyor of "push" technology on the Internet,
fell apart because of financial disagreements.
Still, Yip has raised $25 million from investors, and he has turned
China Internet into the first stop for technology companies seeking to
capitalize on Internet growth.
Some rivals said China Internet represented the triumph of
salesmanship over substance. "It's like a Hong Kong-style
newspaper," said Edward Zeng, chief executive of Unicom-Sparkice,
another Internet venture backed by China Unicom. "It's different than a
Western-style newspaper. There's more promotion."
Yip said he was wounded by the criticism. He said he had sought to
build bridges to the younger entrepreneurs, even introducing some to
executives or venture capitalists in the United States. "I don't want to
be perceived as Big Brother, trying to control the Internet," he said
with a sigh.
Copyright 1998 The New York Times Company
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