 | Issue: | Latin America IV 1997 |
| Article no.: | 5 | |
| Topic: | Colombia Ahead on Telecommunications Opening Worldwide | |
| Author: | Gustavo Pena-Quinones | |
| Title: | Commissioner | |
| Organisation: | Telecoms Regulatory Commission, Colombia | |
| PDF size: | 24KB |
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Article abstract
The establishment of the new regulation in the telecommunications sector was achieved via a transparent process involving agreement between different players and overcoming pressures from unions and the legal order. This new regulation is expected to create a balanced development of the telephony sector in Colombia, allowing competition in long distance service, assuring the avoidance of major problems, and delivering the benefits of liberalisation to users of these services.
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Introduction Those who have had the opportunity to know Colombia, identify it as a country that fights for its development in an independent and secure way, a country that displays one of the best indicators of Latin America for foreign investors. The interest shown in the last privatisation process has demonstrated that it continues to be an attractive country for those who want to invest capital and make profits. European banks (mainly Spanish) and Latin American investment companies and many others, have seen that Colombia has a political and economic structure that offers guarantees and security. It is the oldest and strongest democracy in the region and it has shown a sustained economic growth over the last 50 years. Colombia is located on the north-western corner of South America with coasts on the Caribbean sea and Pacific Ocean. It has an important geopolitical position in Latin America. With 40 million inhabitants and an area of 1,141,000 km2, 70% of the population lives in cities and urban areas. There are 37 cities with over 100,000 inhabitants. Telecommunications Sector The -telecommunications sector has characteristics of its own that differ substantially from most of the countries of the world and may well be unique within this area. At this time, the sector is open to competition in all services. Colombia has more than 30 companies that offer local telephony services in different cities and towns, more than 80 companies that offer services of data transmission and 6 cellular telephony companies that began to operate 3 years ago. Revenue from the telecommunications sector contributes almost 3% of the Gross Net Product. Figure 1 shows the distribution between services for 1996: The Ministry of Telecommunications is in charge of planning for the sector and the regulation of mobile, cellular telephony, data transmission services, Internet service providers (ISP), radio-electric spectrum, the technical plans of numbering and signalling in the sector, and broadcasting services. There are also two regulatory commissions: one in charge of television National Television Commission, and the other in charge of regulating telecommunications considered as public telephony service. In 1994, the Telecommunications Regulatory Commission (CRT), was created by the Public Utility Services Law. The local telephony service was open to competition. This law also established the parameters by which the CRT could define the structure for long distance service. The telecommunications market is open to competition and to national and foreign investment in all fields, except for cellular telephony until September 1, 1999. The CRT has become an active, independent entity that was able to break 50 years of long distance monopoly. Telephony Market Thirty-one companies offer local telephony services in many cities and nearly 10 new companies will begin offering service within the next 2 years. Only the National Telecommunications Company, TELECOM, is authorised to offer national and international long distance service. Most companies are state-owned, but only TELECOM is owned by the central government. Most of the others are owned by the cities or departments (states). The country is geographically divided in 32 departments (states) and a District Capital, Bogota. Two thirds of the surface are covered by 10 departments with low population, and almost zero telephone density. One third of the country surface concentrates most of the telecommunications companies and economic activities. The authorisation given by the Public Domiciliary Services Law of 1994 began the process of breaking up the monopolies. Today, there are three companies competing in Bogota, the capital city of 6 million inhabitants: two of the companies are offering local telephony service and the other one is expected to begin operations by this December. The established company, ETB, is owned by the city and has 1,600,000 lines in service. TELECOM will finish the year with almost 100,000 lines in service; and a new company owned by the city of Medellin, EPM, expects to establish around 90,000 lines in 1998. Barranquilla, the fourth Colombian city, already has two companies competing. The established company, owned by the city, has nearly 130,000 lines and the new one, Metrotel, started to compete at the end of 1995 and now has 46,000 lines. Perhaps a unique case in the world is Girardot, a city of 100,000 inhabitants, which at this moment has three companies competing: the established company, with around 20,000 lines in service; a new one that entered in 1997 with some 10,000 lines; and TELECOM with 3,000 lines. The local telephony service, contrary to most countries, has begun to experience important competition levels. Any legally established company in Colombia is allowed to offer local telephony service in any city, no matter if it is through national or foreign capital, subject only to completing certain minimum requirements. The CRT, the regulatory authority, has established very precise rules for interconnection, assuring competition, and creating a favourable atmosphere so that new operators can offer their services without major problems. By now there are nearly 20 interconnection cases of local telephony among companies across the country. With the CRT’s regulation issued in September, it is expected to have two new long distance operators in the short-term and one more next year. Therefore, the number of interconnection cases are expected to increase next year. Opening Long Distance Market to Competition The first steps were taken to break monopoly in long distance service from 1994. The established company, TELECOM, is an atypical operator since, although it can offer diverse telecommunications services across the country, it had concentrated in offering national and international long distance services and local telephony in small remote towns, in order to be certain of achieving universal service. TELECOM started to change its strategy from expedition of the opening Law, and began to invest in local telephony projects ‘BOT’ to start competing in the main cities: Bogota, Medellin, Cali, Bucaramanga, Manizales, Pereira, etc., preparing for competition in long distance service. As a result of the Law, telecommunications structure shows a new sector with companies trying keep up to date, capitalised and radically improve their internal structure and conditions for users and clients of the service. The establishment of the new regulation was achieved via a transparent process involving agreement between different players and overcoming pressures from unions and the legal order. The legal pressures began when local telephony companies claimed their rights before judges and tribunals. These companies presented demands before the tribunals for the existing inequity between themselves and TELECOM, the last company with a long distance service monopoly. The CRT made Resolutions 86, 87 and 88 in September, structuring the whole regulation of the telephony service in Colombia, in which Resolution 86 regulates the opening of the long distance telephony market. Fundamental Objectives of the Regulation The objectives of the regulation are as follows: · To create a competitive atmosphere in the whole telecommunications sector, which will offer abetter service, reduce costs and therefore the price of the average invoice. It will create new employment and attract new national and foreign investment. All this within the agreements signed by Colombia with the World Trade Organisation on Basic Telecommunications Services; · To assure that the Colombian local telephony operators have the opportunity to take advantage of the telecommunications market liberalisation and the flexibility to associate or affiliate somehow with national and foreign partners; · To prepare TELECOM to compete with the new licenses, and make it attractive to potential investors, and to be better prepared to associate with foreign companies if convenient; The entire new regulation is clearly structured to benefit Colombian citizens. Agreement Process Starting from June 20, the CRT carried out agreement meetings around the country with the different players in the sector. On August 5, fulfilling the first goal of the agenda, an explanatory audience on the long distance process modifications was presented for public opinion. On August 12, the draft of the Resolution (13 titles) was published on the CRT’s web site, with the purpose of receiving comments and suggestions. Furthermore, to focus the effort of the sector towards the new regulation, the CRT organised an intensive work of agreement with all the players of the sector at the end of August. Indeed, the whole new regulation was made taking into account all the comments that were received through the agreement process. Resolution CRT No. 086 This Resolution, historical for the telecommunications sector and for the country’s development, was released on September 1 and regulated the opening of the long distance telephony market in Colombia. · TELECOM, as established operator, was legally authorised to offer long distance service without paying for the license; · The term of the license for new operators is for 10 years, automatically extended for the same period; · To achieve a licence, the operators must become Domiciliary Public Services Companies (ESP) legally established in Colombia, but they can have any foreign capital participation; · Licence applications will only be accepted from companies or partners which have a minimum of 150,000 installed and in-service phone lines in the national territory. If it does not have this number of lines, these lines can be built up by the new company; · The license will be issued within the 10 days following the presentation of the application; · The initial rate for the license for new operators, was defined by means of the Resolution 88 as US$ 150 million. · All long distance operators will pay 5% of their gross revenues to the Communications Fund (with the purpose of providing telephony services to people that actually do not have this service), understood as total gross revenue minus access and usage charges, and payments to international carriers; · The new long distance operators must have a partner or an operation agreement with a company that has experienced 400 million minutes of international long distance traffic; · The new operators must interconnect with 12 local operators, the 6 cellular operators and TELECOM before beginning operation. After a year of service they must interconnect with operators that have between 20,000 and 50,000 lines and by the second year of service they must interconnect with all operators in Colombia; · There is a Special obligation of Universal Service – the new operators will not only contribute to the Communications Fund, but they must also build and operate around 60 Integrated Centres of Social Telephony, CITS, (places where national and international long distance telephony, Internet access and fax services will be offered), in all the places where telephony services do not exist. The minimum restrictions and market conditions indicate that there will be a limited number of long distance service operators, perhaps only three or four. The vertical integration should benefit local companies significantly, and may make them more attractive to new investors and potential foreign partners. TELECOM will have to compete in long distance service very soon and, therefore, must increase its efficiency. The first license will probably be given in 3 to 4 months time, and it is expected that the new licenses will begin operations during the first quarter of 1998. More than four operators in the long distance market will become a catalytic element in the activity of the sector, being an important factor of balance, a situation that will be reflected in benefits for telecommunications users. Resolution CRT No. 087 Resolution 87 unified the whole regalatory framework, involving reviewing according to the experience of the CRT, and the development of the sector at national and international level in consideration of the total opening-up of the sector. The resolution has the following titles: I. General Principles This explains the purpose and application environment, and defines 80 terms used in the resolution. II. Public Basic Commuted Telephony Services TPBC Regime. In this title the general regime of services of TPBC is developed, including the TPBCLD. They are diverse topics, such as the commercialisation of services Resale, the goal of the Social Telephony Plan and the topic of Call Back and outlaw services. The situation of imminent danger is also regulated as regards to telecommunications, and the measurement and commutation of international traffic. III. Competition Regime. It establishes a regulation to prevent the restriction of free competition in telecommunications. This has special importance in a sector facing a transition from a monopoly system to a competition situation. Clear rules are made so that users are not harmed by companies abusing their dominant position. Anti-competitive agreements are also prohibited, as is discriminatory treatment against operators of TPBC. There are rules related to rates and users. The whole rule-making process is set to give all the operators of TPBC the security of competing freely, assuring that the opening-up of the market produces the expected benefits to users. IV. Interconnection Regime. One of the most polemic topics when making the transition from a monopoly system to a competitive market, is interconnection. In the case of new long distance operators it implies the ability to route their traffic through the local operators’ networks in such a way that the user who carries out the call, and the user that receives it, are connected. Very precise rules are established to fix the places and characteristics for interconnection between different operators and clear procedures for direct negotiation. The CRT will mediate to solve problems in case of disagreement, and put into practice the interconnection regime between operators. V. Rates In this field, the regulation has established a radical change modifying the methodology for rates adjustments, from increases in inflation that did not take into account increases in productivity, to a rate regime based on the long-term incremental cost. In addition, it establishes a regulated rate regime for monopolistic companies, and a freedom regime for those companies that have begun to offer telecommunications services in competition. This title defines specific values of access and use charges that should pay operators to finish a call in another operator’s network, changing the rules for the agreements made by the companies some time ago which did not recognise the real situation of interconnection. VI. TPBC Operators Obligations In this title the obligations for universal service are settled, as well as the consumption measurement systems and the necessity of following official technical rules. VII. Protection to Users Rights Since most cities still maintain a monopoly structure, the regulation on this topic is crucial. Clear rules were established for relationships between operators and users, their protection on rates, invoices, etc. VII. Regulatory Entity This title confirms the technical, economic and administrative independence of the CRT and the way it settles contributions that the regulated operators are charged. The internal organisation structure of the Commission is also defined. IX Right of Way and Use and its Imposition This is one of the aspects that required a regulation from the CRT, since in the interconnection processes where the CRT has intervened, a conflict has generally occurred. For this reason, operators and owners of properties are given pledges of their right of way and use of telecommunications network infrastructure giving specific terms for the direct negotiation, compensation and intervention of the CRT. This is why the operators and land owners are obliged to allow the use of telecommunications infrastructure, giving specific terms for direct negotiation, and the CRT’s intervention if necessary. X. Management and Results Control The Public Services Law establishes a pledge structure for all public telecommunications services operators to create and maintain procedures for management control. This aspect is regulated in this title by defining rules to balance control mechanisms, general principles of internal control, and management and results control. The procedure is simplified from previous resolutions with only 12 indicators of management control defined. Conclusion This new regulation is expected to create a balanced development of the sector in Colombia, allowing competition in long distance service, assuring the avoidance of major problems, and delivering the benefits of liberalisation to users of these services.
