The domestic telecommunications markets of the countries in Asia differ in their structures, rates of growth, and reliance on inflows associated with terminating international calls. They also differ in their openness to foreign investment and in the style of the relationships between equipment manufacturers and carriers.
Countries may have `natural' foreign markets for goods and services. The criteria for these `natural' markets include geographic proximity, common language, and former colonies. There are also high-telecommunications-traffic destinations brought about by multinational corporation traffic as well as the presence of immigrants within a country.
The dynamism of global telecommunications markets is widely attributed to rapid technological development and an increasingly liberal policy environment - deregulation. Over the past ten years, the majority of world economies have embarked on reform paths, and noted significant expansion of their telecommunication networks and remarkable improvements in quality. But neither performance nor policy has been uniform across any region and the Asia-Pacific is no exception. Countries differ in both the sequence and magnitutde of reform. Nor is it apparent whether the improved performance has resulted from specific policy choices or despite them. It is not clear if more could have been achieved had policies been different.
The Asia-Pacific Region
The two countries commanding most interest for investors today, by a long shot, are India and China.
There is competition between those two countries in terms of which gets more investment and which is seen to be more proactive. India clearly has the advantage of being an English-speaking country, so from that point of view it is easier to do business there. India is also seen to be more transparent with regards to the rules and regulations.
"But when it comes to how the rules are interpreted and their implementation and enforcement of the rules, the situation vis-à-vis each of these two countries is less clear," says Jeanette Chan, partner at Paul, Weiss, Rifkind, Wharton & Garrison. "This is because India has gone through many, many changes in terms of regulators and it is rather like China, with a two steps forward, one step back rhythm."
Hong Kong and Singapore have very stable telecom regulatory regimes and there is always competition between the Hong Kong regulator, the Office of the Telecommunications Authority (OFTA), and Singapore's as to which is the better. "Singapore always wins," says Chan. "The major issues are SmarTone's 3G roll-out - about the sharing of the network, the number of operators and whether the 3G operators can use the 2G numbers, among other technical implications."
In Hong Kong PCCW has been the dominant carrier. But that status brings with it Universal Provision service obligations, which, from the dominant carrier's point of view, prevents it from being able to offer competitive prices.
This universal service is a major issue in the US when it comes to voice-over Internet Protocol (VoIP). What happens across the Pacific is important to Asia as the same issues will have to be tackled here sooner or later. Phil Spector, managing partner of the Paul, Weiss Washington DC office and head of the firm's Communications and Technology Group, detailed how the US is looking at this issue during a visit to Hong Kong in November.
"On Universal Service, the idea is that part of every phone bill that I pay goes to subsidize the provision of telephone services in less affluent areas, rural areas," says Spector. "We definitely have that subsidy mechanism. How to do that with these new services, such as VoIP? How do you impose the same kind of tax regime on them? It is not clear how that can be worked out."
Telephone networking methodologies and technologies are developed in a world where you have a single large carrier, typically a state-owned monopoly. Now, as much of the world is moving into greater private ownership, everyone is moving to technologies that in many ways make obsolete the huge investments the big companies made in their facilities.
Internet protocol (IP) technologies raise questions about investment in the phone networks and how these companies recoup that money. "These are not easy issues and those companies are saying they have to be compensated somehow to allow these competitors into the market," comments Spector.
Another issue is national security. An example of this came to light when Paul, Weiss was involved in representing Hutchison in the Global Crossing acquisition. That deal brought to the surface anomalous factors in the way the US uses its Homeland Act.
"If you looked at the law books you would see that the US market is open to investment in telecommunications as well as other sectors from foreign companies, that certainly includes Hong Kong and mainland Chinese companies," says Spector. "Both Hong Kong and mainland China are members of the WTO and the US is supposed to be an open market. In fact, as we learned from the Global Crossing situation, it is not open and the US used National Security as a way to keep out a company they were concerned about with no legitimate reason at all."
In the Global Crossing case no US company had been prepared step in, but two foreign companies, Hutchison and Singapore Technologies, had been prepared to invest many tens of millions. However the US authorities blocked Hutchison's involvement, claiming national security considerations.
"At the end of the day the US essentially sent a non-welcoming message to foreign investment by putting up many roadblocks," says Spector.
The US government treated Hutchison very unfairly, in the lawyer's view. "It reflected I think, as much as anything else, biases that people in the US have toward the Chinese government and Chinese Communism that are not consistent with reality." Some of that was motivated by 9-11, admits Spector but clearly China is a different issue for the United States. "So really 9-11 is only an excuse. I think it is also the case that the Bush administration, particularly some of the hardliners in the Defence Department, believe that the next global confrontation is with China. Now to my mind, even if you believe that, you are still better off bringing China into the world economy rather than isolating it from the economy. But from the standpoint of these people there was a threat and they were dealing with that threat."
From the standpoint of the US economy, they need foreign investment, particularly in the telecoms sector. "It is very difficult to see how, in the current environment, we get there. Because, it's not just in telecoms, anything relating to the Internet or technology is made difficult. Even for Western European companies but certainly for Asian companies and particularly for Chinese companies, it is very, very difficult," concludes Spector.
Despite the mainland's accession to the World Trade Organisation (WTO), China's telecom market still has many restrictions for foreign investors. These are, arguably, archaic service definitions, overly stringent network security, limitations on geographical roll-out, absence of effective laws and of an independent regulator and restrictions on foreign ownership.
China opened `value-added' services (excluding mobile phone services) to foreign investors in January 2002, allowing up to 30% of shares in operations in Beijing, Shanghai and Guangzhou. This policy was extended to cover 14 more cities in January 2003. A year later, the foreign direct investment (FDI) cap was increased to 50% and geographical restrictions lifted altogether. In `basic services' - including mobile and fixed line telephony - China is to allow FDI up to 25 % from January 2005, in the three cities mentioned above.
All international data and Internet protocol-based services are considered basic services in China and not open to foreign participation.
When basic services are opened in 2005, the minimum capitalization required for a joint venture will be US$250 million _ according to regulations written by the country's policy-makers after the mainland joined the WTO.
The Central Government is expected to announce its decision on 3G technologies and standards in 2005. The authorities have not decided how many licences will be issued. "I suspect four, covering the four major operators," says Jeanette Chan of Paul, Weiss. "But now, with this probing on the telecom equipment procurement side, that is going to have an impact and delay the licensing, because they really have to clean up this mess first."
This reference is to a Lucent Technologies report that found its way into the hands of Beijing's anti-graft investigators. They have launched a probe into the multibillion-dollar deals Lucent Technologies and other foreign telecom equipment makers have secured to supply the mainland's vast telecom market.
The investigation comes after Beijing made a surprise decision in November 2004 to rotate the heads of China Mobile, China Telecom, China Unicom and China Netcom.
Several years ago, the central government rotated the heads of the four major state-owned banks before launching an investigation on economic irregularities at the Bank of China.
"I think this whole musical chairs ploy involving the CEOs of the four major telco firms is so typical of China," continues Chan. "These are listed companies and for any government to act in a manner that says `I don't care what the shareholders think', well! A lot of people, when they buy into a company buy into management. That's why companies hold roadshows _ to tell the people that this is the management and these are the people they are investing in."
Chan assumes the switch around is a prelude to the probing of the procurement policy and that there will also be a slow-down in the licensing process.
"They want to clean up the shop first and get rid of corrupt officials and then issue the licences and say these are the procurement guidelines that you must to go through. I think the Telecoms Law which was to come out in March 2005 will have guidelines covering the whole bidding process for major telco equipment suppliers," she predicts.
The hottest topic is the voice over IP (VoIP) issue. How is it to be regulated? "Currently it is not regulated and this is something that is very closely monitored by other countries. In China VoIP is considered basic telecoms so only major telcos can do it. That does not really make sense because basic telecoms are when you have a network. With VoIP really you don't have to have a network. It's just a platform overlaid on top of a network. You just have to hook it up."
"In China the problem is that, even though VoIP is in theory regulated most operators do not get a licence but just go ahead and offer the service. China has an issue in terms of how to clean up. If I want to regulate VoIP, how do I do it in an effective way that makes it work so providers of the service will able to provide the service and also qualify to get the right licence?"
With one of the most sophisticated telecommunications markets in Asia, Taiwan has a very progressive mobile sector that passed 100% penetration in early 2002 and that continues to grow. It had reached 110% penetration by March 2003. The island can also claim a very strong fixed-line telephone sector with a penetration of 57%. The telecom market is continuing to find new ways to develop.
The role of the government was pivotal to the way the market liberalized. Initially there was the strong push for competition with the incumbent Chunghwa Telecom and then the focus turned to privatization of that body. The privatization process was slow, however. Following a run of not really successful share sales, by April 2003 the government had only reduced its stake in Chunghwa to 79.6%.
"Telecom activities in Taiwan were rather slow these past two years," says June E. Su, specialist in telecommunications law, corporate law and foreign investment at Yangming Partners, Taipei. "I do not think the problem lies with regulatory barriers. The permitted foreign direct and indirect investment cap was lifted further in 2002. The licensing conditions for fixed-line telecom business licences were also relaxed further in September 2004.
"Despite that, however, there was no foreign investment at all during the past years. There was no applicant for a fixed-line licence when this possibility was opened in September 2004. I think telecom investment is slow because the overall global investment activity is slow."
A National Communication Commission was scheduled to be set up in December 2004 but Su says its establishment has been delayed by the recent legislative elections.
In her view the regulator, the Directorate General of Telecommunications (DGT), has done a pretty good job. Chunghwa Telecom (CHT) - which is still majority-owned by the government - has been further privatized through public auction of its shares. But there is some disquiet among potential investors about the government's slow progress in developing and implementing competition policies and regulations to give practical effect to its liberalization commitments.
Commentators say the government should prescribe a transparent and clear policy for procurement of telecom equipment by operators, particularly CHT, to ensure that all manufacturers have an equal opportunity to bid on government projects.
As regards cellular telephony it is free. There is deregulation and a lot of competition to the extent that Taiwan appears saturated. It seems that no outsider is going to get new licences. Anyway the system works and there are arguably enough licences. The question now is what kind of new services are operators going to provide to increase their top line and bottom line.
The most important telecoms legal development in Hong Kong in the last few months, according to Connie Carnabuci, partner, at Freshfields Bruckhaus Deringer, is the merger control rule.
"The interesting twist is that in July 2004 (under the Telecommunications Ordinance section 7P that came into affect on July 9 2004) the government introduced a merger control law which means that where you are acquiring an interest in a carrier licensee and there is what's called `a change' in relation to that carrier licensee, it may trigger a review by the telecommunication regulatory authority OFTA."For investors in Hong Kong now that is the key issue."
A further topic is VoIP, where smaller firms are able to `piggy-back' on top of the big land-line telephone companies and offer additional services that depend on having access to those internationally connected lines. Smaller firms and firms that have come late into the technology are able to pick-up on the more recent features of the immerging technologies and can offer value-added services faster and cheaper than the big boys.
This is causing some upsets. For example PCCW sought to overturn the OFTA ruling that Hong Kong Broadband Network (HKBN) could legitimately use the services of PCCW to offer VoIP to its own customers and there was no legal need to pay PCCW any additional charge. (PCCW has now dropped its objection.)
"This VoIP issue is not limited to Hong Kong. It's an issue that is confronting the whole of the telecommunications industry. Because IP networks are now being used to carry voice traffic and the technology is developing in such a way that the quality of the service that you get is starting to be much closer to that on traditional fixed lines. It is particularly an issue for the fixed-line operators. The issue in Hong Kong is with those firms offering VoIP and using a third party's broadband network without paying any additional fee."
Are they getting a free ride? Like German and UK regulators, the Hong Kong government is currently holding a consultation on the issue. A consultation paper was issued in October.
Over in the US, the federal government is advised that there must be regulatory authority over VoIP if the technology is to develop quickly and uniformly. The Federal Communications Commission (FCC) chairman, Michael Powell, stated on October 19 at the VON 2004 trade show, "The first step is to establish federal jurisdiction."
Powell has sided with the VoIP community, though, calling for a hands-off approach. While there is support for a "light regulatory touch" on VoIP, industry commentators agree that all telecom firms must be treated alike.
"My own personal view," says Carnabuci, "is that we need to distinguish between wholesale and retail markets. If what you are doing is entering into a wholesale arrangement with someone who owns an IP network or broadband network, to then sell a retail service, there is an issue about appropriate remuneration for the party whose broadband network you are using."
In any kind of inter-connection discussion, it is usual that if the parties cannot agree then the regulator will step in and make the terms and conditions for the parties, having regard to the various criteria about their relationship and how the framework for that relationship is set up.
Telecommunications and broadcasting are regulated by two separate authorities in Hong Kong: The Telecommunications Authority and the Broadcasting Authority. The government has proposed establishing a unified regulatory authority to cover both telecommunications and broadcasting, similar to the FCC in the US and the Radio-Television and Telecommunications Commission in Canada.
There is no prohibition on cross-over of telecommunications and broadcasting services in Hong Kong. However, similar services may require different licences if they are provided via different networks: For example, pay TV services provided via the Internet only require a PNETS (Public Non-Exclusive Telecommunications Services) licence granted under the Telecommunications Ordinance but the same services provided via a broadband network require a broadcasting licence granted under the Broadcasting Ordinance.
PCCW - NOW broadband services are provided under a PNETS licence while PCCW - Netvigator broadband services are provided under a broadcasting licence. Hong Kong Broadband Network (HKBN) pay-TV services are provided under a PNETS licence whereas i-Cable is to launch telephone services via its HFC cable network under its FTNS licence. Competitors have objected to HKBN providing pay-TV services over the Internet without having obtained a broadcasting licence.
Typical of this once-Portuguese enclave, Macau has quietly gone about the building of a strong modern telecommunications infrastructure. As its fixed-line numbers reached a highly serviceable level, the mobile telephone market took off and by early 2003 the number of mobile subscribers in the territory was nearly 300,000. Mobile penetration had reached 65%, compared with a fixed-line penetration of less than 40%. Rapid growth in the mobile sector was attributable to the opening of the mobile market to two new operators in August 2001. These compete with Macau Telecom and by early 2003 had captured a combined 32% of the mobile market.
As part of its transition to a market-style economy, Mongolia has committed itself to modernizing its telecommunications network and steadily introducing more state-of-the-art communications services. More than 50% of fixed telephone lines have been digitized. The country's telecommunications infrastructure, though, remains an obstacle to economic development. A heady rise in the mobile market saw an amazing 350% lift in the number of subscribers in 2001. Strong growth in the mobile market continued through 2002, into 2003, and continues today.
South Korea has one of the world's highest rates of Internet usage and has amazed the world with its take-up of broadband. Going into 2003, the country held first rank among nations in broadband penetration percentagewise, with over 80% of Internet-enabled households enjoying that high-speed connection. In terms of numbers, the total broadband subscriber base came second only to the US. Much of the credit for this rapid progress is due to progressive government policies. There were casualties however caused by the speed of deployment, however, as companies tried to cash in on the momentum. Broadband providers Korea ThruNet and Onse both went into bankruptcy in early 2003.
South Korea is a major world market for mobile technologies, in particular 3G. At the same time the country sees itself as playing a big part - as an equipment supplier - in Asia's push onto the world market for communications and entertainment related goods.
South Korea is the third largest mobile market in Asia, topping the 35 million subscriber mark in March 2004. The market is reaching saturation point, though, with about 75% of the population carrying a mobile phone. In mid-2004 the three mobile operators were banned from signing up subscribers, as a penalty for illegal discounting _ 30 days for KTF and LG Telecom and 40 days for SK Telecom.
The country's well-known protectionism over its own industries, together with opposition from vested interests in the domestic economy, have resulted in legislative change in the telecoms sector being rather protracted despite efforts to liberalize the industry. The government has intervened on numerous occasions. For instance, attempting to restrict the number of operators to a number officials think suitable for the country and by mandating the technologies the operators should use.
But competition now exists in the local, long-distance and international fixed-line sectors, albeit with only three companies involved. Also, of recent note, the government really has become liberal in its issuing of mobile licences though consolidation has reduced the number of operators to three there also.
Alongside the licensing of new service operators, the limits to foreign ownership are being dismantled. Again the process has been slow but is speeding up, with the government keen to make the country into a regional telecoms hub. Seoul's clearly articulated vision for modernizing the country's infrastructure has created true broadband competition, which in turn has helped prices fall and speeds rise.
Although its economy is still struggling, South Korea has made significant progress with many forms of digital technology. Citizens can get "video on demand" online, with high-definition video, going `for a song': Low-income students use high-speed Internet connections to take free tutorials.
The government has designated next-generation mobile communications as one of ten "new growth engines" that will help South Korea reach President Roh's goal of nearly doubling per capita GDP to US$20,000 by the end of the decade. Perhaps to this end, the South Korean government has attempted to set mandatory, single-technology standards for wireless telecommunications services.
The Ministry of Information and Communications (MoIC) had a plan to require all cell phone services to use only the so-called wireless Internet platform for interoperability protocol (WIPI) for downloading information from the Internet. WIPI was developed by a South Korean association funded by the Electronics and Telecommunications Research Institute (ETRI), a government-funded institute. In April 2004 a compromise allowed MoIC to implement WIPI, but also permitted cellular phones to be made compatible with other standards.
North Korea remains a relatively closed society. However, automatic switching facilities were in use in Pyongyang, Sinuiju, Hamhong, and Hyesan already in 1970. There were an estimated 30,000 telephones in 1985 - mainly available at government offices, factories, cooperatives and other workplaces. A satellite ground station near Pyongyang provided direct international communications using the International Telecommunications Satellite Corporation (Intelsat) Indian Ocean satellite. A satellite communications centre was installed in Pyongyang in 1986 with French technical support. There were few private telephone lines. There were international connections via Moscow and Beijing and in late 1989 international direct dialling service was introduced from Hong Kong. A few public telephone booths were available in Pyongyang 1990. An agreement to share in Japan's telecommunications satellites was reached in 1990.
In the 1990 AT&T became the first Western telecom operator to extend its services into North Korea. News of a limited mobile service was reported in 2002.
Pyongyang has so far provided average citizens with a walled-in Internet, journalist Ron Gluckman noted. In 1990 it set up the Korea Computer Centre, which built a national `intranet' much like the closed networks of corporations. Gluckman was given a peek at this system during a recent visit to the Grand People's Study House, Pyongyang's showpiece library. Dozens of young Koreans tapped away in a censored cyberspace he reported.
Pyongyang lifted a ban on cell phones in late 2002, only to end the experiment in the summer of 2004.
However, in a landmark deal, a US company, Startec, has signed an agreement with a North Korean telecommunications company to provide Internet and telecommunications services for North Korea. This telecom agreement not only represents the first US deal of its kind, but also symbolizes an opening of communications from North Korea to the world.
India is undergoing many changes relating to the regulation of its telecommunications industry.
David Hirsch, of Cleary, Gottlieb, Steen & Hamilton _ a specialist in M&A and capital markets _ opines that one of the most significant is related to the government lifting the capitalization requirement in the telecom sector. This refers to finance minister P. Chidambaram's proposal to hike the FDI limit in telecommunications companies from 49 % to 74 %, made in his July 8 2004 budget speech.
But there are critics saying such a move would not work as intended even though India needs investment in the telecom sector on a huge scale, including foreign investment, if tele-density is to be improved. They question whether foreign investment would help improve network coverage and make phones available to those in villages and remote areas.
Among local critics is economist Paranjoy Guha Thakurta who opines that while India needs that big investment in the telecoms sector, there should be more detailed justification for the government proposal to hike the FDI limit in telecommunications companies. He questions the suggestion made by the country's Left that India could emulate the Chinese strategy of first investing in domestic manufacturing facilities, forcing international telecom majors to collaborate with state-owned companies and then using the price advantage to capture foreign markets.
Thakurta compares the telecom scene in India and China, finding a striking contrast. China started mobile telephone operations in 1992, two years before India, although India had invited bids for cellular licences in four metropolitan cities in that year. China has two state-owned mobile phone operators; India has eight, including two public sector companies. China still does not allow foreign investment in telecom services, whereas in India, the "official" FDI cap is 49 %. Yet, against more than 42 million mobile phone subscribers in India, China currently has over 300 million mobile phone subscribers - with no FDI - Thakurta points out.
"On the basis of a Telecommunications Regulatory Authority of India (TRAI) recommendation, the government issued `Guidelines for Unified Access (Basic & Cellular) Services Licence' on November 11 2003, calling for basic and cellular services to be unified within the service area," says Rajeev Reddy, associate at A.R.A. LAW (Bangalore)p.
"Basic and cellular services licensees are permitted to migrate to Unified Access Services Licence regime under these guidelines. A Unified Access Services licensee can provide wireline as well as wireless services in a service area. Wireless services include full mobile, limited mobile and fixed wireless services."
TRAI came out with its draft recommendation on `Unified Licensing Regime' (ULR), keeping in view the technological developments. In its earlier recommendation, it provided that a Unified Access Services licensee could provide wireline as well as wireless services in a service area. Under the latest recommendations TRAI provides for three categories of licences:
(1) Unified Licence: This category covers all public networks, including switched networks, irrespective of media and technology being used, capable of offering voice and/or non-voice (data services) including Internet telephony;
(2) Class licence: This covers all services, including satellite services, which do not have two-way connectivity with the public network. This category excludes radio paging and PMRTS services but includes niche operators.
(3) Licensing through authorization: This category covers the services for provision of passive infrastructure and bandwidth services to service provider(s), radio paging, PMRTS and Internet Services including existing restricted Internet telephony (PC-to-PC, SIP device-to-SIP device, using lease line only, and PC-to-phones outside India only) but not Internet telephony in general.
India's Minister for Communications and IT, Dayanidhi Maran, announced in November plans for a `technology-neutral' spectrum policy to bring in an automated spectrum management system by December. This was aimed at obtaining objectivity, transparency, timely allotment and non-discriminatory allocation of the spectrum.
Outlining the new United Progressive Alliance (UPA) government's policy for the telecom, IT and postal sectors Maran said, "Spectrum sharing and co-existence are the key themes for the efficient utilization of radio frequency. Immense challenges are ahead for spectrum managers when technologies are evolving at a much faster rate."
Maran addressed the issue of the spectrum row between CDMA-based operators and operators that use GSM technology to provide mobile services.
With a view to encouraging rural telephony, the Minister disclosed that the government is aiming at setting up 76,000 Public Tele-Info Centres to provide broadband connectivity in the rural areas. "The tele-density in the rural areas is only about 1.67% as against 24% in urban areas. This gap needs to be minimized and our primary focus has to be on rural areas," Maran concluded.
The telecommunication administration in Bangladesh is handled by the Bangladesh Telegraph & Telephone Board (BTTB), which is run as a government establishment under the Ministry of Posts and Telecommunications (MOPT). The Board comprises of a chairman, and four full-time and three part-time members, all appointed by the government.
By virtue of a 1979 Ordinance, the monopoly rights and the power to issue licences, for both telecommunications and wireless services, were transferred to the BTTB. Section 8 of the ordinance sets out the functions of the board in very wide terms, including exercise of all powers of the Government under the Telegraph Act 1885, except to make rules under the Act and to determine certain disputes with a local authority. The powers of the BTTB are in practice severely circumscribed by the need to obtain Government approval under Section 8(i) and the First Schedule of the ordinance for its capital and revenue budget and for many changes in the employment conditions of its workers.
"A National Telecommunication Policy was announced in 1998 and the Telecommunication Regulatory Commission was set up in 2001," says Ken Chia, principal, IT and Communications lawyer at Baker & McKenzie. "In the same year, a National Telecommunication Policy came into force and we have been assisting the Bangladesh Telecommunication Regulatory Commission (BTRC) under a UK Department of International Development contract in relation to the opening up of various sectors, starting with fixed-line competition and VoIP."
However, at present the country's telephone system is plagued by incompatibilities that has mobiles unable to connect with land-land lines and further communication complexities. The due change-over to a digital system promises to cure that, given time and investment.
A Cellular Mobile Telephone Service was started by Pacific Bangladesh Telecom Ltd (PBTL) in 1989 with the Advanced Mobile Phone Service (AMPS) system. Recently it has shifted to CDMA technology.
The other three operators, Grameen Phone Ltd (GP), Telecom Malaysia International (Bangladesh) [TMIB] and Sheba Telecom (bought out by Egyptian company Orascom in November 2004, now Banglalink) are providing cellular service with GSM technology.
The most extensive transmission network is being established by Grameen Phone, which is upgrading the fibre optic cable network of Bangladesh Railway, available along railway routes all over Bangladesh. Grameen Phone is also establishing a 140 Mbit/s microwave link between Khulna and Chittagong via Barisal.
A spokesman from Orascom, when taking over Sheba Telecom, stated to the press the company would invest US$250 million `as soon as the government created a level playing field for all cellular phone operators' - a hint that legal oddities are affecting investment and constraining the development of telecommunications.
The Bangladesh Telecommunication Regulatory Commission asked the Internet service providers and mobile phone operators to form a committee (April 2004) to suggest ways for the government to regulate VoIP services to facilitate the government's decision on opening up Internet telephony. The report of the six-member committee stated that VoIP operators do not need to pass the traffic through any central exchange or an Internet exchange. The committee, however, noted that the commission needed to have some arrangement by which the IP traffic could be monitored and metered to protect government revenue and stop illegal delivery of voice traffic.
The committee also suggested that public switched telephone network operators, mobile phone operators, Internet service providers and VSAT (very small aperture terminal) hub service providers be allowed to form their own consortiums to offer VoIP services, provided that their services were available to all concerned and their operations are made accessible to the commission for online monitoring. The rates, fees, and charges should be left to be decided by the market.
A comprehensive Pakistan Telecommunication (Reorganization) Ordinance was announced in 1996. This established the framework for the creation of Pakistan Telecommunication Authority (PTA) as an independent regulator of all telecommunication activity in the country. "This has proved to be a most important Ordinance," says Reza-ur Rahim, senior country analyst, J.P. Morgan, Pakistan.
"The fixed line tele-density figure today is 3 % and for mobile phones 4.4 %, which is 4.5 million lines in service and 6.1 million subscribers respectively," he says. The figures indicate a telecommunications regulatory and policy challenge as the country seeks to emerge into a competing part of the world of Information Communication Technology (ICT).
Pakistan at the time of its inception in 1947 owned a small telecom base with 14,000 operational telephone lines. The telecom service was meant just to meet the needs of country administration. The year 1962 saw the first sector change when post, telegraph and telephone services were separated by establishing independent T&T and postal departments. In 1990 gradual sector reform was started, with measures within the existing legal and regulatory framework. In line with emerging trends, private sector participation and deregulation initiatives were taken in the years 1989-91.
The PTA set up in 1996 covered the Frequency Allocation Board (FAB), the National Telecommunication Corporation (NTC) a second carrier in Pakistan exclusively for public sector communication needs _ and the Pakistan Telecommunication Employees Trust (PTET). The 1996 ordinance provided details of the establishment, constitution, powers and rights of the PTA, FAB, NTC, PTCL and PTET and defined the terms of the monopoly of the PTCL, the mechanisms of transfer of assets, liabilities, employees, rights and obligations. This law also covered issues such as rights of employees transferred from PTC to the other entities and national security.
In 2002, under another ordinance, the division was changed to the Ministry of Information Technology & Telecommunications (MoITT) to handle the IT and telecom sector policies allowing investment, transfer of technology, competition and so on.
To stay abreast of technological changes, the PTCL embraced VoIP by working with operations and maintenance contractors to develop IP gateways. There was a guaranteed monthly payment for traffic volume for each of the three IP gateways that were installed at Karachi, Lahore and Islamabad, where international bandwidth for IP connectivity was provided at prevailing commercial rates.
In March 2004 the government amended the Pakistan Telecommunication (Reorganization) Act, 1996 (Act XVII of 1996), to promote a competitive environment, making the Telecom Deregulation Policy investment-friendly. In April 2004, policy guidelines for global mobile services were issued by the Federal Minister for Information Technology of Pakistan regarding the GMPCS (global mobile personal communication services) through satellite to ensure cheaper telecom services for remote areas.
In October 2004 the Federal Minister for Investment and Privatization Dr Abdul Hafeez Sheikh informed the media that the government had gained US$291 million each on the sale of two licences, one from the Norwegian firm Telenor, and one from Al Warid of the UAE _ bringing in US$582, with Paktel.paying the same fee for converting its analogue licence to a GSM licence.
"Orascom owns 89% of Mobilink and has a 62% market share as of August 2004," explained Rahim. "Paktel is 98% owned by Millicom International Cellular and they agreed to pay the government US$291 million for a GSM licence."
"Now there is a third GSM player, in addition to Mobilink and U Phone (the PTCL subsidiary), bringing the total to five players in the competitive environment of GSM and one player that has CDMA technology. All this development shows the large untapped market that these companies are competing for in Pakistan."
The five GSM operators are: Mobilink, U Phone, Paktel, Telenor, and Al Warid. Instaphone is the only analogue operator.
"Recently the government auctioned 12 long-distance international (LDI) licences and 73 fixed-local-loop licences, for US$6.0 million and US$0.8 million each respectively. Twenty companies have bought frequency spectrum for wireless local loop and this resulted in a further US$242 million going into the government coffers - all of this because of deregulation driven by the PTA," commented Rahim.
Following the success of an inaugural auction of fixed-line licences in August 2004, the government has recommitted itself to the sale of state-owned Pakistan Telecommunication Company Limited (PTCL) as an integrated telco operator. "Privatization has well and truly set in," concluded Rahim
Throughout the period of the two-decade-long conflict between the government and the autonomy-seeking Tamil Tiger armed faction, Sri Lanka's telecommunications sector has been struggling to develop. With the hope of an enduring peace and a general improvement in the country's social and economic well-being, the telecom sector was well positioned for vigorous growth. But prospects seem less bright with the more recent breakdown in peace talks.
With a low tele-density of 5 % at year end 2002 and the major initiatives that were put in place then, conditions were about to give a boost to the building of a national infrastructure and to opening the market to more competition. However, investors are still deterred given the uncertainties. On a positive note, as Sri Lanka Telecom is gradually losing its monopoly on international calls, this has led the way for the market to open to competition.
The Telecommunications Regulatory Commission of Sri Lanka was established under the Sri Lanka Telecommunication (Amendment) Act No. 27 of 1996. As the national regulatory agency for telecommunications in Sri Lanka this institution is responsible for the development of the telecommunication industry. Its mandate is to shape the regulatory process, protect public interest and be responsive to challenges from the market.
There is justification for the Maldives claim of an efficient and up-to-date telecommunications system. Through the efforts of the country's monopoly telco, Dhivehi Raajjeyge Gulhun Pvt Ltd (Dhiraagu), there is now full telephone service coverage of the archipelago. As well as operating the fixed-line network, the company also runs a GSM cellular mobile service and is an Internet Service Provider (ISP). Its monopoly finishes in 2008, but there are pressures being brought to bear to open sections of the market earlier than then. The licensing of a second ISP in the Maldives is a healthy sign that the government is indeed interested in opening up the market well before that 2008 date.
Telecommunication services have been growing strongly in Nepal over the last decade. Despite that some 50% of demand for service remains unmet. Rural services, in particular, have advanced hardly at all owing to the need for higher investment, with no sight for investors of an early monetary return. More than 60% of telephones are concentrated in the capital Kathmandu, while 55% of villages have no telephone access at all.
At the same time, a further complication in the development of the sector has been the cancellation of parliamentary government by the increasingly cornered monarchy. Besides that is the widespread insurgency by so-called Maoists rebels, whose resort to violence has taken a serious toll on the telecommunications infrastructure throughout the country.
The Nepal Telecommunications Authority (NTA) is the telecommunications regulatory body, an autonomous body established in 1998 in accordance with the Telecommunications Act, 1997 and Telecommunications Regulation, 1997.
The incumbent provider is Nepal Telecommunication Corporation (NTC), formed in 1990. As of 2003, the company had about 400,000 land lines and about 160 telephone exchanges. The staff runs to about 5,800. There is a waiting list for land line phones of about 300,000 - but this looks like it might change when people get wind of the convenience - and economic advantage - of mobile phones. Telephone density is only 1.5 %. NTC revenue is threatened by the illegal use of IP telephony.
In 2002 the government began to privatize the telecom sector. United Telecom was the first private competitor in the telco sector, as a joint venture between MTNL (India) (26.68%), VSNL India (26.66%), TCIL Telecommunications Consultants India Ltd (26.66 %) and Nepal Ventures Private Ltd, (20%).
Only operating in the Katmandu Valley, United Telecom is deploying Wireless Local Loops (WLL) technology, which is ideal for public telephone network operators in regions with poor cable infrastructure as an economic means of providing a basic telephone service.
Spice Nepal (Pvt) Ltd was granted a licence for operating a cellular mobile service in September 2004 and will be the second licensee to operate such services in Nepal.
ZTE Corporation of China recently announced a new CDMA contract for Nepal whereby the company will supply CDMA2000 1X equipment to build a network that will cover the country´s main populated areas.
Until relatively recently Bhutan has been isolated from the world in terms of its telecommunications capability. The country's mountainous terrain is a barrier to the development of any sort of infrastructure. While Nepal had connection to the outside world as early as 1974, in Bhutan's case it was not until the introduction of trunk calls between Bhutan and India in 1999 that television, satellite dishes and Internet services started to appear. Between 1996 and 2002, this small country of less than a million people had invested around US$27 million in telecommunications infrastructure to provide the country with a fixed network.
Bhutan's royal government initiated the first telecommunication network in 1963, during the First Five Year Plan (1961_1966), to support road construction services. Modern telecommunication network development process began only in the early 1990s. There is a fully digital national telecommunication network, interconnecting all the 20 Dzongkhags (districts).
All the provincial governments had phone services by 2003. As digital-type telephones were introduced, the quality and reliability of services were also improved remarkably compared with the analogue type that existed before.
The number of subscribers in all Bhutan was over 20,000 in 2003 and the penetration rate of telephones was 3.09%. This was over the average penetration rate for telephones in low-income countries of 2.7% cent. It outdid the figures for neighbouring countries (1% in Nepal and 2 % in Pakistan).
Internet services were introduced in June 1999 with the establishment of DrukNet, the first and only Internet Service Provider (ISP) so far. The 77th Session of the National Assembly passed the Bhutan Telecommunications Act 1999. The Government also undertook a major restructuring exercise in November 1999. Subsequently, the Division of Information Technology (DIT) was established to promote IT development in the country and the Bhutan Telecommunications Authority (BTA) to regulate the telecom sector.
The Department of Telecom was transformed into a wholly state-owned corporation, Bhutan Telecom (BT), in July 2000. The former Ministry of Communications was divided into two ministries in June 2003 _ the Ministry of Works and Human Settlements and the Ministry of Information and Communications (MoIC) _ taking into account the dual nature and distinct characteristics of the construction and ICT industries.
Bhutan Telecom became the sole provider of all telecommunications services in the country. The national tele-density reached about 3.25 per 100 inhabitants. However, rural tele-density remained very low (about 0.01%), as about 79% of the people still live in rural areas, with only 76 of the 201 Geogs (blocks) connected to the national network.
In the fourth year of its establishment, DrukNet had about 2,000 customers in a population of approximately 700,000. There were about 7,000 computers nationwide. At the most 5,000 people access the Internet, which is less than 1 per 100 inhabitants. Literacy, in general, is 54%. Computer and ICT literacy is very low.
The DIT has regularized computer hardware purchases, initiated IT awareness campaigns in schools, and continues to develop system guidelines. It also initiates private sector participation in ICT activities and has developed a Government Web portal, www.bhutan.gov.bt, as a step towards e-governance.
With ICT Vision 2007 the Ministry of Information and Communications is committed to facilitating and enabling access to ICT for all Bhutanese, and promoting its use to achieving Gross National Happiness (GNH). The MoIC envisions "inclusive information and communications for all Bhutanese, Dzongkhags and Geogs by 2007".
The key elements of the ICT Vision 2007 are: Establishing secure, sustainable, affordable and appropriate ICT access network connecting all the Dzongkhags and Geogs, educational institutions and hospitals to the global information infrastructure; Ensuring adequate development of human capacity, in particular, professional ICT human resources, and promotion of private sector participation, to harness the vast untapped potential of ICT; facilitating development of appropriate and user-friendly applications (for e-governance, e-education, e-health and e-business) and local content.