WTO WORKSHOP APEC TEL 28

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WTO WORKSHOP APEC TEL 28
Case study on implementing the WTOTelecommunicati
ons Reference Paper (PERÚ)
Carlos Romero Vice-Ministry of Communications Mini
stry of Transportation and Communications,
Perú 7 Oct. 2003, Chinese - Taipei
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Agenda

• Background
• Implementing the WTO Reference Paper Perú case
• Competitive Safeguards
• Interconnection
• Universal service
• License granting criteria
• Regulatory independence
• Allocation and use of scarce resources
• Communications and Information Technology
  indicators

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Background
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Background Perú

• 7 Oct. 1951 GATT ( Ministry of Treasury)
• Responsible for the international trade
  negotiations WTO Ministry of Tourism and
  Foreign Trade.
• Apr. 1994 GATS (General Agreement on Trade in
  Services) Uruguay Round. Peru reported
  engagements on telecommunications status quo
• Added Value Services Thirteen methods defined
• Apr. 1997 Peru reported specific engagements on
  basic telecommunications.
• Assuming the services of fixed telephony and
  local and international long distance
  communications would be on a period of
  exclusivity only until June 1999.

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WTO Telecom Reference Paper

• As part of the Negotiation Group on Basic
  Telecommunication (GNTB)
• Includes aspects related with
• - Competitive safeguards.
• - Iinterconnection.
• - Universal service.
• - License granting criteria
• - Regulatory independence
• - Allocation and use of scarce resources
• Until the end of the negotiation period 44
  Governments deposited Lists that included
  agreements. 31 of them were based on the
  Reference Paper.

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Implementation the Reference Paper Perú case
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Reference Paper
1. Competitive Safeguards
The Reference Paper points out that

• Measures will be maintained to avoid suppliers
  with control position to conduct anticompetitive
  practices. include
• Crossed allowance
• Use of the information de competidores with
  anti competitive results.
• Do not make available at the proper time
  información technical information on the
  essential facilities and relevant appropriate
  information, necessary to offer the services.

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Implementation RP (1/3)
1. Competitive Safeguards
In the Peruvian case, the implementation involved
the following

• The operators which provide more than one service
  and have revenues of at least US15 million
  dollars will be obliged to keep their books for
  each business lines.
• In observance of the rules that forbid the
  crossed allowances, tariffs of the dominant
  service operator in competence, offered by their
  competitors, through the access to the essential
  facilities, will be submitted to a periodic
  imputation test (retail tariffs of dominant
  operator will cover the costs)
• Unfair Competition Law defines deliberately as
  serious and subject to sanction, the infractions
  aimed at illegally subtracting the clients to a
  competitor.

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Implementation RP (2/3)
1. Competitive Safeguards

• To evaluate if there exist anticompetitive
  practices
• The regulator will determine if through strategic
  behaviors the companies generate obstacles to
  hinder or block the entrance or continuance of
  competitors in the market.
• The strategic illicit behaviors evaluated are
  those used to illegally increased the costs of
  the competitor or to reduce the costs of the
  offender.
• We can mentioned the following
• The systematic limitation
• Violation of secrets
• Introduction to the contractual infraction
• The unfair competition by violation of rules

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Implementation RP (3/3)
1. Competitive Safeguards

• The systematic limitation To prevent or hinder
  any third party to establish in the market, as
  long as it surpasses a natural market response.
• Violation of secrets Spreading and exploiting of
  the secrets by any third party without the
  authorization of the owner. This could be legally
  obtained but under reserve or illegally
  obtained, or to reach secrets by means of
  espionage.
• Introduction to the contractual infraction It
  considers the induction to the breach of
  contractual obligations through the influence of
  the offender in the counterpart of the affected
  competitor and the induction to the normal
  termination of a contract or the use of a foreign
  contract infraction .
• The unfair competition by violation of rules
  Avoids to use the market with an unfair advantage
  by law infraction.

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Reference Paper
2. Interconnection
The Reference paper points out that

• The purpose of the network interconnection is to
  allow the users of a supplier to communicate with
  the users of another supplier.
• The interconnection with a dominant operator
  should be assured in any point technically viable
  of the network where
• - Non discriminatory tariffs and of a quality not
  less favorable than the one offered for its own
  similar services or the services of its
  subsidiaries.
• On a timely basis and tariffs based in costs
  (transparent and should be sufficiently
  disaggregated.
• In additional points at a price that should
  reflect the cost of construction of the
  additional facilities.
• The applicable procedures to the interconnection
  should be available to the public.

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Implementation RP (1/4)
2. Interconnection
In the Peruvian case study, the implementation of
this principle involved the following

• The interconnection is of public and social
  interest it is mandatory, and is a special
  condition of the concession.
• Should be in harmony with the principles of
  neutrality, non discrimination, equal access and
  free and fair competition.
• Its execution should be done in the terms and
  conditions negotiated in good faith between the
  parts.
• The operators have the right to ask for and to
  obtain the interconnection with the established
  operators at the right time.

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Implementation RP (2/4)
2. Interconnection

• Supervised Negotiation
• The parts negotiate within the regulatory
  framework in force, but are submitted to the
  rules and determinations of the regulatory
  organism.
• If after a specific deadline the parties fail to
  reach an agreement, the regulatory organism
  should issue an interconnection order.
• Three key aspects
• (i) Establishment of interconnection charges
  limit by default.
• (ii) Determination of the interconnection
  points
• (iii) Control of new operators access to the
  essential facilities

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Implementation RP (3/4)
2. Interconnection

• Establishment of interconnection charges limit by
  default
• They should include the interconnection costs,
  contributions to total costs of the one who
  offers the services locally and a reasonable
  profit margin.
• The use of technologies more efficient and
  available is considered as well as an adequate
  time horizon, and the identification of the
  categories of incorporated costs.
• The information on costs should be
• - Provided by the company,
• - Mechanisms of international comparison
  based on best practices, and
• - Simulation of an efficient company.

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Implementation RP (4/4)
2. Interconnection

• Determination of the interconnection points
• Determination of the interconnection points by
  the involved operator
• One in each local area
• Additional points will be negotiated
• Control of new operators access to the essential
  facilities
• For the purposes of interconnection, a network or
  service should be disaggregated in essential
  facilities, that is, the adopted definition in
  the framework of the WTO agreements.
• The essential facilities will be chosen by the
  operators in the negotiation of the
  interconnection.

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Reference Paper
3. Universal Service
The Reference Paper points out that

• Each country defines its own type of world
  service obligation.
• It should be managed in a transparent way, non
  discriminatory and neutral regarding competition,
  
• It should not be more expensive than the
  necessary for the type of world service defined.

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Implementation RP (1/2)
3. Universal Service
In the Peruvian case study, the implementation
involved the following

• The concept considered is Universal Access
• Access to the domestic territory by a group of
  essential telecommunication services.
• Capacity of access to Internet will be a
  complementary objective. Evaluation of
  Cost-benefit.
• The operators obligation of universal access,
  pursuant to the concession agreement, involved to
  install at least a payphone in 1,486 rural
  populated centers.
• The provision of the world access is promoted and
  financed by the Telecommunications Investment
  Fund (FITEL).

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Implementation RP (2/2)
3. Universal Service

• Telecommunications Investment Fund (FITEL)
• Is formed with the contribution of operators
  according to 1 of the total annual amount of
  billed gross income and earned income de final
  and carrier service operators .
• This fund finances the provision of basic
  telecommunications services in rural zones of the
  country and preferential social interest zones.
• The service operation is in charge of rural
  operators, selected by competitive bidding
  according to the least subsidy requested for
  installation, operation and maintenance of
  services.
• The FITEL management is on the responsibility of
  OSIPTEL, and the Ministry approves the rural
  projects submitted by OSIPTEL.

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Reference Paper
4. License granting criteria
The Reference Regulatory paper states that

• When a license is required, the public will have
  at their disposal
• a)   All license concession criteria and the
  terms usually required to resolve.
• b)     Terms and conditions of licenses
• Upon request of the interested party, the
  reasons for refusal will be informed.

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Implementation RP (1/6)
4. License granting criteria

• To provide telecommunications public services a
  previous concession is required. The granting of
  the concession is formalized by subscribing a
  concession agreement .
• There are no restrictions on the nationality of
  the capital, being possible to be 100 of foreign
  property. In this case, it is necessary to have a
  domiciled legal representative in the country
• The number of operators that may provide a
  specific service is not restricted.
• The operator decides which technology meets
  better his needs, technologies are not regulated.
  
• The State does not intervene in characteristic
  aspects of the business activity.

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Implementation RP (2/6)
4. License granting criteria
In case of Peru, the implementation involved the
following

• The establishment of maximum terms for granting
  concessions 50 days, and 70 days exceptionally.
• To inform the public of the procedures,
  requirements, and terms and conditions of the
  concession contained in the type concession
  agreements.
• During the process, aspects not involved with the
  business management are not evaluated, such as
  specific technologies that the applicant will use
  in providing the services, and studies on
  technical-economic feasibility.

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Implementation RP (3/6)
4. License granting criteria

• The granting of a concession may be denied when
  
• The national security is in actual or potential
  danger or it is against the public interest
• The applicant is not up to date with the payments
  on demand resulting from fees, rates and canon
  for any granted concession or authorization
• The applicant has been fined, and has not
  complied with the previous payment of the same
• Having not elapsed two (2) years since he was
  sanctioned with the cancellation of any
  concession or authorization of the
  telecommunications service among others.

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Implementation RP (4/6)
4. License granting criteria
The concessionaire is subject to the following
payments

• A. Only Payment (prior to the signature of the
  agreement)
• - Concession fees 0,25 of initial investment.
• B. Regular payments (annually)
• - Commercial operating rate of the service
  0,5 BGI
• - Contributions to the Telecommunications
  Investment Fund, FITEL 1,0 BGI
• - Contribution of supervision to OSIPTEL 0,5
  BGI
• - Canon for using radioelectrical spectrum, if
  any.

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Implementation RP (5/6)
4. License granting criteria
The Policy Guidelines on Telecommunications
Market Opening, establishes

• the policy of access to the telecommunications
  market should be transparent, objective and
  undiscriminating
• to apply effectively the administrative
  simplification and celerity principles in
  granting concessions
• to use competitive mechanisms for designing the
  spectrum when the availability of frequencies
  limits the number of operators in a service.
• The granting of concessions is carried out
  through two alternative mechanisms
• (i) Upon request of the party, or
• (ii) Tender

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Implementation RP (6/6)
4. License granting criteria
Added Value Services

• For the provision of Added Value Services, it is
  a requirement to be registered managed by MTC.
• The added value services are those that by using
  carrier, final or spreading services as a
  support, add any feature or facility to the
  service that serves as it
• The procedure for such registration is free and
  performed in a maximum term of 10 working days
  upon submitting the application.
• The providers of added value services make a
  contribution to OSIPTEL (0,5 BGI)
• The provision of Added Value Services will be
  suspended when the operation causes damage to the
  telecommunications network.

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Reference Paper
5. Regulatory Independence
The Reference Regulatory paper states that

• The regulating body will be independent of all
  provider of basic telecommunications services and
  will not answer before it.
• The regulating body will be independent of all
  provider of basic telecommunications services and
  will not answer before it

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Implementation RP
5. Regulatory Independence
In case of Peru, the implementation involved the
following

• Creation of a regulating body (OSIPTEL) with a
  technical, economic and administrative
  independence, and the following functions rules,
  regulation, supervision, inspection, sanction and
  solution of controversies
• The regulating body develops a methodology of
  work that allows to ensure the most openness in
  the regulatory decision-making
• - Duty of publishing previously all rules of
  general nature
• - Public Hearing
• - Mechanisms of settlement between the
  interested parties for the solution of
  controversies.
• - Creation of bodies member of a professional
  association ad hoc
• - Access of the public to the Information
  Services and Documentation.

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Reference Paper
6. Allocation and use of scarce resources
The Reference Regulatory paper states that

• All procedure of allocation and use of scarce
  resources (spectrum, numbering and right of way)
  will be performed in an objective, appropriate,
  transparent and undiscriminating way.
• The details of performed allocations shall be at
  the publics disposal.

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Implementation RP (1/3)
6. Allocation and use of scarce resources
Scarce Resources

• The Radioelectric Spectrum consists of a limited
  natural resource that is part of the national
  wealth.
• It is the Ministrys responsibility to manage,
  determine, assign and control the radioelectric
  frequency spectrum. 
• It is the Ministrys responsibility to manage and
  assign the numbering.
• The Policy Guidelines on Telecommunications
  Market Opening establishes measure to be ensure
  the allocation and use of scarce resources
• Radioelectric spectrum
• Numbering

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Implementation RP (2/3)
6. Allocation and use of scarce resources
In case of Peru, the implementation involved the
following

• Use of competitive mechanisms (competitive
  bidding or tenders) for designing the spectrum
  when the availability of frequencies limits the
  number of operators in a service.
• The allocation entitles to the right of use of a
  certain portion of radioelectric spectrum. The
  provision of different services in only one band
  will be allowed..
• Establishing Goals of Frequency Use to be applied
  to all Assignments of Spectrum. Besides,
  mechanisms will be established in order that
  frequencies revert to the State by means of the
  partial or total revocation of the assignment.
• The amounts for the right of use of the
  radioelectric spectrum and the terms of payment
  of the same will be subject matter of specific
  regulations.

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Implementation RP (3/3)
6. Allocation and use of scarce resources

• The competent public entity will publish
  periodically a frequency band program.
• The Ministry will have a National Registry of
  Frequencies where the performed assignments will
  be registered.
• The Ministry will establish the procedure and way
  of access of the public to the information of
  such registry, taking into account its degree of
  confidentiality and the national security.
• The telecommunications operators are enabled to
  receive from the Ministry, the required numbering
  for the operation and commercialization of their
  services.
• The designation of numbers is performed upon
  request of the interested party or by drawing
  lots, in the strict observance of equity
  principles of access, transparency and celerity.

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Communications and Information Technology
indicators
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Telecom services indicators (1/3)
Fixed and mobile telephony services
Source MTC
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Telecom services indicators (2/3)
International Long Distance tariff variation
performance
Source Osiptel
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Telecom services indicators (3/3)
Percentage of homes in Metropolitan Lima
Source Apoyo Opinión y Mercado (Junio 2001)
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Information Technologies (1/5)
Source ITU 2001.
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Information Technologies (2/5)
Internet users per 100 inhabitants
Source ITU 2001.
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Information Technologies (3/5)
Percentage of homes in Metropolitan Lima
Source Apoyo Opinión y Mercado (Junio 2001)
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Information Technologies (4/5)
Outstanding option for medium and low income
sectors
Internet Public Cabins Trend
June 2001 Estimated by 2002 4Q Source
Telecom operatorsInternet survey
byOsiptel Prepared by MTC
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Information Technologies (5/5)
1867,000 people in Lima access to the Internet
at least once a month (33 of Lima population)
Internet users How do they connect to the
network?
Source Apoyo y Opinión de Mercado (october 2001)
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Universal Access Indicators (1/2)
Universal Access and FITEL
Source FITEL
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Universal Access Indicators (2/2)
Universal Access and FITEL
1,600 Internet Public Cabins in rural areas
planned by 2003
Source FITEL
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Thank you
Arzobispal palace, Lima - PerúPROMPERU's Archive
/ PROMPERU
Machu Picchu, Cusco - PerúCarlos Sala / PROMPERU
More information www.mtc.gob.pe