The Opening of Bolivia’s Telecommunications Market

By Facundo Fernández Begni and Esteban Russell

From: Latin American Law and Business Report

Introduction

In November, 2001, Bolivia opened the telecommunications market to allow free competition in all
telecom services.

Under Ley de Telecommunications (Telecommunications Act) 1632/1995, and following the commitments
of the IV GATS1 Protocol (World Trade Organization), the Telecommunications Agency, SITTEL, established Decree No. 26,005/2000 denominated “Plan for Opening up the Telecommunications Sector Market.” These regulations, together with Regulating Decree No. 24132/95, the Interconnection Regulations and the Special Regulations on Proceedings and Penalties for violation of the regulatory framework, make up the legal grounds on which free competition in the sector is based.

Background

Before November, 2001, 14 telephone co-operatives were in charge of local service. Each co-operative was licensed as a monopoly to provide telephone services in a specific geographic area. The Empresa Nacional de Telecomunicaciones (ENTEL S.A.M.) provided local services in areas where the co-operatives did not provide services. ENTEL also provides national and international long distance services and satellite services. Currently, the corporation is partially owned by STET International (a subsidiary of Telecom Italia), which, in 1995, obtained 50 percent of the stock for $650 million.

Cellular telephony service was offered by Telefonía Celular de Bolivia (TELECEL), an affiliate of Millicom International, and by ENTEL until November, 2000. In November, 2000, a third provider, Nuevatel PCS de Bolivia S.A., began operations. Nuevatel is controlled bythe American company Western Wireless International and Cooperativa Telefónica de Cochabamba (COMTECO).

Internet access service has been open to competition.

The License Regime

The new Regulations are intended to attract foreign companies to enter the market. The Regulations do not contain any restrictions on foreign investment. There are three formal kinds of market entry:

Registering the service:
• no restrictions as to the number of concessions;
• authorizes value added services or private networks;
• term of registration: 5 years. Renewable.

Contract for direct concession:
• no restrictions as to the number of concessions;
• authorizes local, national and international long distance telephone services, data transmission, subscription television, public telephones and resale of telecommunications services;
• term: 40 years. Non-renewable.2

Licensing through public tender:
• authorizes television, broadcasting, trunking, mobile telephony, circuit rental, radio-paging and wireless data transmission;
• term: 20 years. Non-renewable.

SITTEL has received more than 31 applications for concessions and licenses for new services. Among the
applicants (some of which are already providing services) are ENTEL, Nuevatel, AES Communications Bolivia (of AES Corporation), Boliviatel, ITS, and the national Cooperatives COTAS, COMTELCO and COTAP. The services requested are national and international long distance, local telephony, data transmission and cable TV.

Regulations establish freedom of prices for services classified as “competitive.” Prices for “Non Competitive” services are subject to price caps set by SITTEL. Mobile telephone service is deemed “Competitive” and Fixed Wired Telephony (local and Long Distance) as
“Non Competitive.”

Regulation Fees

All licensees or registered providers are required to pay SITTEL the following annual licensing fee:

• Licensees and register holders other than public service providers (radio taxis and private networks in general): up to 1 percent of the value of non-owned equipment.
• Concessionaires, licensees and registered providers that are public service providers (local telephony, long distance, radiopaging services, etc.): up to 1 percent annually of their operating gross income of the previous year.
• Broadcasters (radio, television): up to 0.5 percent of their operating gross income.

Interconnection Rules

Under Executive Decree No. 26011, the general principles of non-discrimination, reciprocity and obligatory are binding on the Interconnection Regulations.

• Within the same Local Area, no interconnection charges are paid.
• In traffic between mobile and fixed wire service, the Mobile Operator sets and collects the rate and pay the corresponding charge to the Local Operator. In both cases the user who originates the call pays. Interconnection charges are negotiated among operators.

Currently the charges negotiated among operators are:
• 3.4 cents for the origination and termination on fixed networks. This cost is slightly higher than
the world average;
• 7.6 cents for mobile networks.

1 General Agreement on Trade in Services. The IV Protocol relates to Telecommunication Services that Bolivia has agreed to as a signatory of GATS.
2A new public tender is required to grant a new concession. Former providers may take part.

April 30th, 2002.

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