"We will release no more licences in the near future, since these 10 operators are already enough to cope with the current market demand," said Liu Shifa, the chief of the Ministry of Culture's Internet culture division.

He said cultural administrations at all levels of government will now only accept applications for Internet cafe chains. Requests from individuals will be refused.

"Large-scale and chain Internet cafes should become a dominant form of operation in the market to curb illegal operations and create a clear Internet environment for people," Liu said yesterday.

The spread of illegal content among Internet cafes and their poor operating conditions have been a major problem in China's Internet industry.

After a fire in a Beijing Internet cafe about this time last year killed 24 people, mostly college students, the ministry required all such outlets to apply for new licences.

It is estimated that there are more than 110,000 Internet cafes nationwide, but the overwhelming majority of them are run by private operators.

The backing of the 10 Internet cafe franchises, which are mainly State-owned companies or their subsidiaries like telecom operator China United Communications Corp (China Unicom) or Great Wall Broadband Network under the China Internet Trust and Investment Corp, is seen as a major development within the industry.

According to the regulation from the Ministry of Culture, the operators have to open at least 20 outlets in at least two provinces, municipalities or autonomous regions.

They can either do it directly or by further franchising the network, but the operators must have a controlling stake.

Although Liu did not say when the 10 groups will have to start their operations, he said they had been given a deadline.

Liu said in addition, provincial governments can also approve three chain Internet cafe operators, which can only open outlets within their regions.

China Unicom, the only Chinese telecom carrier to conduct both fixed line and mobile telecommunications services, was also the only telecom industry group to gain a licence. But China Telecom and China Netcom also reportedly applied for licences.

China Unicom's subsidiary in East China's Anhui Province had purchased 5,000 computers worth more than 20 million yuan (US$2.4 million) in May to build 50 Internet cafes this year. It will now expand to 300 outlets.

Another operator, China Cyber Entertainment Co Ltd, a subsidiary of the State-owned China Audio and Video Publishing Corp, has started preparations in 12 cities to build 1,000 Internet cafes this year.

(China Daily June 10, 2003)