Former CNNIC Chief Says China Is Pioneering New Business Models In Tech

China is the fastest growing IPv4 market PAN YUE July 6, 2017 — China Money Network

At the World Economic Forum’s Annual Meeting of the New Champions (also known as the Summer Davos) in Dalian last week, China Money Network caught up with Prof. Xiaodong Lee, former president and CEO of China Internet Network Information Center (CNNIC), to chat about the development of the Internet industry in China and the country’s role in managing the world wide web.

CNNIC, established in 1997, is best known for twice a year publishing the Statistical Report on Internet Development in China, chronicling the growth and major trends of the nation’s Internet sector. As a unit operating under the Cyberspace Administration of China, the country’s main Internet control and oversight authority, CNNIC is also responsible for the registration of Chinese domain names and Roman letter names ending with.

According to CNNIC’s latest survey, there were 731 million netizens in China at the end of 2016, equal to the entire population of the European continent. There were 20 million registered .cn domain names, the largest pool of any country-specific domain names.

China is also far, far ahead of other countries in terms of mobile Internet usage. In total, more than 697 million people currently use mobile Internet in China, of which 469 million use mobile payment apps, representing a penetration rate of 67% . That compares to a mobile payment penetration ratio of just 19% for U.S. smartphone users in 2016 and an expected penetration ratio of 33% in 2020, according to eMarketer.

In addition, mobile payment in China goes beyond facilitating online transactions, and is widely used at offline venues such as restaurants, stores and transportation hubs, where users pay with their phones instead of cash or bank cards. Nearly half of Chinese mobile Internet users have utilized mobile payments while shopping at offline stores.

Prof. Lee, who holds a P.h.D degree from the Chinese Academy of Sciences and teaches at some of China’s top universities, also shared his views on how to better manage the Internet in the fast-growing Internet of Things (IoT) industry. He announced last week that he had resigned his post at the CNNIC, but did not reveal his next move.

Read below a lightly edited Q&A transcript between Prof. Lee and China Money Network host, Nina Xiang. Subscribe to China Money Podcast for free in the iTunes store, or subscribe to China Money Network weekly newsletters. You can also subscribe to China Money Podcast’s Youtube channel or Youku channel.

Q: CNNIC has been conducting bi-annual surveys of China’s Internet industry for the past 20 years. How has the focus of the survey changed over time?

A: At the beginning, the report only covered fundamental resource statistics, such as how many domain names there were, how many Internet Protocol addresses there were, and how many servers were connected to the Internet, etc.

As the Internet and particularly mobile Internet evolved, we tried to provide more detailed information covering different industries across different regions, as well as offering a lot of analysis based on the age or educational background of the users.

The most obvious trend is that companies were initially focused on “copy-to-China,” but more and more, there are new technologies and new business models originating from within China. That includes the sharing economy, think Mobike and bike sharing companies, and (innovative applications of) mobile payment services.

It’s a huge change in the past ten years, particularly in the past five years, I would say. It means that even more new business models and technologies will be applied first in China in the future.

Q: The next big boom looks to be the IoT industry, which is expected to reach over eight billion connected devices globally this year. What kind of regulatory and management challenges does this create for regulators?

A: I think if billions, or potentially trillions of devices are connected to the Internet, it means you need a more stable and secure infrastructure, as well as more identifications and more information exchange. For the regulators, they need to increase the barriers for the infrastructure, and to make sure that the infrastructure is stable and secure enough to support a large amount of devices connected to the Internet.

Also, a lot of devices means you need a lot of identification and IP addresses, and that’s why there is intense discussion in China right now on how to deploy IPv6 (Internet Protocol version 6) early.

In the older IPv4 system (that is near exhaustion), there are only around four billion IP addresses, and it’s not enough. Regulators need to create a new system, carefully managing different layers, including the physical infrastructure layer, the logical infrastructure, and the application content layer, to make sure that new development will be supported.

Q: The stewardship function between ICANN (The Internet Corporation For Assigned Names and Numbers) and the National Telecommunications and Information Administration of the United States Department of Commerce ended last October. How do you think China should position itself within ICANN to perhaps play a more important role in the management of the Internet globally?

A: I used to work for ICANN as the vice president for ICANN Asia from 2011 to 20013. I was in the executive team and took care of 55 countries in Asia Pacific. The three main functions of ICANN is that it acts as a coordination body to manage the domain, the IP addresses and some protocol parameters for global Internet.

The transition is really that the U.S. announced they would pass control of the function from the U.S. government to the global multi-stakeholder community. Actually ICANN was established in 1998 as a legal entity registered in California, following California law.

It signed a contract with the U.S. Department of Commerce to maintain the function of IANA (Internet Assigned Numbers Authority). Last September, the U.S. government stopped the contract, and ICANN became independent. They built a new company, a subsidiary of ICANN, called PTI (Public Technical Identifiers), to maintain IANA’s functions.

As a multi-stakeholder organization, ICANN has different representatives from different communities and different shareholders, sitting in the board. Since ICANN was established in 1998, China has been actively getting involved. Professor Qian Hualin was a former board member of ICANN. There are 20 board members in ICANN, including 16 voting members, and professor Qian Hualin was a voting member. But in recent years, there are no board member from China.

I don’t know if ICANN will have board members from China in the future, but there are some representation of China on some of ICANN’s supporting organization and advisory committees. Currently the vice chairman of the government advisory committee is from China; and I’m sitting on the security and stability advisory committee. There are also people from China on the the GNSO (Generic Names Supporting Organization).

ICANN opened the first engagement center in Beijing, the first engagement center opened around the world. I think ICANN has a very good relationship with China now.

Q: How do you think China’s role in managing global Internet will change in the next five to ten years?

A: Firstly, ICANN is a very important organization to maintain the fundamental and critical infrastructure resource of the Internet, but it’s not the only organization that supports the global Internet infrastructure.

For example, China gets IP addresses from APNIC (Asia-Pacific Network Information Center) for IP address allocation. There are currently two board members from China there. If you look at the next five to ten years, I think there would be at least two – if not more – board members from China.