MPT Describes Vietnam's Telecom Situation

UNCLAS SECTION 01 OF 03 HANOI 000910

SIPDIS

STATE PLEASE PASS TO USTR JMCHALE AND EBRYAN
STATE ALSO FOR EB/CIP AND EAP/BCLTV
USDOC FOR 6500 AND 4431/MAC/AP/OPB/VLC/HPPHO
GENEVA FOR USTR

SENSITIVE BUT UNCLASSIFED - HANDLE ACCORDINGLY

E.O. 12958: N/A
TAGS: ECPS EINT EINV VM SOE
SUBJECT: MPT Describes Vietnam's Telecom Situation


1. (SBU) SUMMARY and Introduction. On February 17, 2004,
the Ministry of Post and Telematics (MPT) addressed a series
of questions prepared and submitted in advance by Post on
the following topics: services and licenses,
interconnection, charges and dispute resolution, spectrum
allocation, and regulation and relationship with SOEs. Dr.
Phan Tam, Deputy Director General of the Department of
International Cooperation, led the GVN side, which also
included of six other reps from MPT's Legal Affairs, Finance
and Planning, Telecommunications, and Radio Frequencies
departments. Econcouns and Econoff attended the first
formal discussion of Vietnam's telecommunications situation
with MPT experts. END SUMMARY AND INTRODUCTION.

Services and Licenses
--------------


2. (SBU) Dr. Tam said that all basic services described in
the United Nation's International Telecommunications Union
(ITU) and the WTO's classification system were available in
Vietnam. Currently, there are five types of licenses: a)
network telecommunications, b) telecommunications services,
c) network experiments on a trial basis, d) establishment of
private networks, and e) telecommunications in exclusive
economic zones and on the continental shelf. Econcouns
asked what type of license covered Internet connection. Tam
said that the network license (type a) covered basic
Internet connection. The services license (type b) covers
value added and resale services that would include some
forms of Internet access. The private network license (type
d) is for internal networks for private companies and is
covered under Article 35 of the telecommunications
ordinance.


3. (SBU) MPT must verify and approve all license
applications. For a network license, approval takes 90 days
from submission of a complete application. The approval
process is not to exceed a period of 120 days. For a
services license, approval takes 60 days from complete
submission, not to exceed 75 days. Only state-owned Network
Infrastructure Providers (NIPs) can apply for a network
license. For the other licenses, all businesses may apply
as long as they operate in accord with the laws governing
foreign investment. Econcouns asked if there was any
restriction placed on what type of State Owned Enterprise
(SOE) could become an NIP. Tam responded that there was no
restriction as long as the SOE had infrastructure sufficient
to perform the service.


4. (SBU) MPT said that six firms have licenses to provide
network telecommunications: a) Vietnam Posts and
Telecommunications Corporation (VNPT),b) Vietnam Electronic
and Telecommunications Company (Vietel, operated by the
Armed Forces),c) Electronic Telecom Company (ETC),d)
Saigon Postel (SPT),e) Hanoi Telecom (Hannel),and f) Vina
Shipping Electronic and Information Company (Vishipel).
These companies are all wholly state-owned, except for SPT
and Hannel, which are joint stock companies with majority
state ownership. Neither stock company is publicly listed.
(COMMENT: While there is no monolithic monopoly and there is
some competition, it is only between SOEs. END COMMENT.)

Interconnection
--------------


5. (SBU) MPT defines interconnection as the provision of
technical and communications services, by NIPs with
essential facilities, to enterprises providing
communications services to consumers and other enterprises.
Costs are based on the agreement negotiated between the NIP
and the Service Provider (SP). The determination of
interconnection points is based on negotiations between the
NIP and the SP, but NIPs with essential facilities must
provide for SPs to make connections under favorable
conditions. For local calls, interconnection is usually at
the local exchange connection. For long distance calls,
interconnection normally is at the local tandem exchange or
the long distance exchange. For international calls,
interconnection is usually at the international exchange
station or the long distance exchange. Interconnection for
mobile calls can be at the local tandem exchange, the long
distance exchange, or the mobile exchange.

Charges and Dispute Resolution
--------------


6. (SBU) According to MPT, the basic principles governing
charges are as follows: a) charges must comply with policies
governing social-economic development and conform with
international standards, b) charges must be based on actual
costs that are in line with international standards, c)
charges must be calculated in Vietnamese Dong.
Interconnection costs have two basic components, the costs
of setting up the interconnection and the actual connection.
Therefore, charges for interconnection must be based on how
and where the link was established as well as on the actual
costs involved in establishing the connection. There should
also be no discrimination between companies offering similar
services. NIPs should also facilitate the provision of
unbundled services from SPs with appropriate charges based
on the actual costs of providing each service. The costs
shall be itemized by appropriate segment of service and
shall be fairly and reasonably calculated in comparison with
international and regional charges. Charges may also take
into account certain contributions to provide low-cost
public services, mainly to rural areas.


7. (SBU) There are two types of disputes, those that happen
during the negotiation process and those that happen during
operations, according to MPT. During a negotiation dispute,
MPT will arbitrate, but if a party is unhappy with the
decision the party can appeal to the Administrative court.
However, the party must carry out MPT's decision in the
meantime. After the decision of the Administrative Court
has been rendered, the party can appeal to the next level in
accordance with the Litigation Procedural Law, but that will
be the final appeal. A dispute occurring during operations
is handled in a similar fashion. Econcouns asked about
dispute resolution involving users of services and the
company providing the service. Tam replied that the
contract would cover such a case and that the business
contract law would apply if the dispute went to any court of
law.

Spectrum Allocation
--------------


8. (SBU) MPT is responsible for spectrum allocation. The
Prime Minister promulgates the national frequency plan.
Regulations must comply with international standards set by
the ITU. MPT has detailed regulations on channel,
bandwidth, and reuse. Econoff asked if "reuse" meant that a
company with a license could resell a portion of its
allocation. After several minutes of discussion in
Vietnamese among the MPT attendees, Tam replied that "reuse"
only referred to whether a company could use the frequency
elsewhere in the country if there was too much interference
in their present location. If a company has excess
bandwidth, the firm must allow the government to re-allocate
it.


9. (SBU) Econcouns asked whether the GVN approached
spectrum allocation in a similar fashion to land, where the
GVN allows private ownership of land use rights, but not of
the land. Tam said that analogy was correct. MPT does not
have an auction process like the process in the U.S.
Properly licensed companies can apply to receive a one-year
license that is similar to a rental of the frequency. MPT
and the Ministry of Finance determine the fees. Regulations
are currently being drafted for fixed and wireless use of a
local loop.

Regulatory Regime and MPT's Relationship to SOEs
-------------- -


10. (SBU) MPT is the administrative office that regulates
the telecommunications companies. There is no business
relationship between MPT and the SOEs. SOEs operate under
the enterprise law, and the Ministry of Finance controls the
capital and financial aspects of the SOEs' operations. MPT
has about 550 employees nationwide. About 150 staff is
engaged in policy making in Hanoi. Econcouns asked how the
President of VNPT is selected. This question also caused
quite a bit of conversation on the MPT side before Tam
responded that the Prime Minister assigns the President and
other officers of VNPT. Other companies such as Vietel and
Vishipel are controlled by other government entities
(namely, the military and the maritime industry),which
choose their own officers internally. Stockholders of the
two joint stock companies are involved in the selection
process of their officers.

Concluding Remarks
--------------


11. (SBU) Econcouns conveyed his concern that, although
reform has begun, much remains to be done. He also stressed
the importance of this sector to maintaining Vietnam's
robust economic growth. To illustrate the benefits of
liberalization, he cited the example of the Japan's decision
to deregulate its mobile market as the springboard to
Japan's spectacular cell phone market growth. Tam responded
with two points, first that Japan faced a great deal of
difficulties on its path of reform, and that the GVN was
very interested in increasing competition. Both sides
agreed on the value of continuing this dialogue.
PORTER