Newsletter
TELECOM LAW UPDATES
An amendment of the Telecom Law (the Amendment) was passed by the Legislative Yuan on 22 October 1999 and promulgated on 3 November 1999. Pursuant to the Amendment, substantial revisions have been made to the Telecom Law. Below is a snap shot on some of the issues that may have impacts on the local telecom market.
Liberalization of Foreign Ownership Restriction
Currently, the total foreign ownership limit on any Type I telecommunications enterprise, which includes direct ownership and indirectly ownership, is subject to a 20% cap. The Amendment increases the foreign ownership level such that, in addition to 20% of direct foreign ownership, the total direct and indirect foreign ownership may reach 60%. However, the stated-owned telecom operator, Chung Hwa Telecom (CHT) will continue to have a total (that is, direct and indirect) foreign ownership ceiling of 20%. The implementation date for the new foreign ownership cap will be subject to a separate announcement to be made by the Executive Yuan.
The Directorate General of Telecommunications (DGT) is now in the process of reviewing the timing for lifting the foreign ownership restriction. One proposal is to immediately lift the restriction and the other is to lift it after the deadline for fixed network tender, i.e., 30 December 1999. The latter is to avoid any implication on the fixed network tender. It appears that the foreign ownership issue will no longer tie to the WTO accession by the ROC.
Interconnection Principles
The Amendment articulates that the arrangements for network interconnection must be made in accordance with the principles of transparency, reasonableness, non-discrimination, unbundling and cost basis. Furthermore, the negotiations between the operators for network interconnection should be concluded within three months after a request is made. Or, the DGT may cut in for mediation. In light of the changes made in the Amendment, the DGT will soon announce the Interconnection Regulations so as to implement these interconnection principles.
Accounting Separation
The Amendment requires a Type I operator to establish an accounting system which can separately calculate its assets, liabilities, income, cost, profit and loss. To be specific, such accounting system should enable an operator to provide the costs of the respective business activities and unbundled network element. Along with this new provision, the Ministry of Transportation and Communication (MOTC) will announce the Guidelines Governing the Accounting Standards for Telecom Operators shortly.
Universal Telecom Service
The universal telecom service means that the necessary telecom services of specified quality should be available to all nationals at an affordable price. Under the current regulatory framework, the MOTC will designate an operator engaged in the local network business to provide universal telecom service. The cost for provision of universal telecom service should be shared by Type I operators and designated Type II operators. The MOTC will also announce the Regulations Governing Universal Telecom Service shortly.
Tariff Control
Under the old Telecom Law, a rate-of-return model is adopted and it requires the tariff formula be approved by the Legislative Yuan. The Amendment adopts a price capping model. The procedures for implementation of such tariff control will be announced by the DGT. One of the issues relating to the tariff control regulation is the rate rebalancing program. In connection with introducing competition in the telecom market, rate rebalancing would be necessary to prevent market distortion which would otherwise entail, as new entrants in a cross-subsidized market would choose to skim the cream if such an opportunistic option were available. Nonetheless, rate rebalancing will not only involve competition issue but also political complications. It is not crystal clear at this point as to whether and how the DGT will implement any rate balancing programs.
Prevention of Anti-Competitive Practices
The Amendment prohibits dominant carriers in the telecom market to engage in anti-competitive practices. A dominant carrier is defined as a carrier who has control over essential telecom facilities or dominant power over the market price. A dominant carrier should refrain from engaging in unfair trade practices, such as to refrain from improperly determining, maintaining or changing the prices or the manner for provision of the services or conducting any other acts by abusing its market standing.
Facilities Sharing
The Amendment also provides a legal basis for a new entrant to make a request to the incumbent operator for sharing of bottleneck facilities during the construction of its network infrastructure. The incumbent operator may not reject the request for sharing of bottleneck facilities without proper cause. Procedurally, the facilities sharing should be subject to negotiations between the operators. In case there is no agreement on whether or not to share a particular facility, the DGT may cut in for mediation. However, whether a facility is considered bottleneck facility will be determined by the DGT on a case by case basis.