Overview (February 2004) - International Law Office

The year 2003 saw a gradual evolution of the Taiwan telecommunications regime. Such changes as occurred were primarily driven by recognition of the need to adapt existing laws and regulations to a new market landscape in which the lines between competing technologies have begun to blur. While Taiwan did not perhaps do all it could to keep pace with such changes, measured progress was nonetheless made that should help Taiwan's telecommunications environment to remain an attractive target for foreign investment, while at the same time safeguarding consumer interests.

Groundwork Laid for Unified Regulator

At present there are three different laws governing the broadcasting industry which are administered by the Government Information Office (GIO), and a separate law governing telecommunications companies which is administered by the Ministry of Transportation and Communications.

To streamline regulation of the telecommunications and broadcasting companies (and end years of internecine conflict between GIO and the ministry), last year the Executive Yuan submitted to the legislature two landmark bills: the Basic Law on Communications and Broadcasting, and the Organic Law of the National Communications Commission. The basic law, which was passed by the Legislative Yuan on December 26 2003, unifies the telecommunications and broadcasting regimes under the administration of the National Communications Commission. The organic law stipulates how the commission is to be established, its scope of authority and its governance by a panel of independent commissioners. Unfortunately, the organic law bill was shelved by the Legislative Yuan during the 2003 year-end session and its passage is expected to be postponed until after the March 2004 presidential election. This leaves the basic law redundant for the time being, and thus progress towards the establishment of a unified telecommunications and broadcasting regime must be seen as mixed.

The Legislative Yuan did pass an amendment to the Television Broadcasting Law in December 2003 requiring that the organic law be passed by December 24 2004. However, since the organic law in turn stipulates a six-month deadline after its promulgation for the creation of the National Communications Commission, it could be mid-2005 before the commission is formally established.

Interconnection, Numbers, Equal Access and MVNOs

In 2003 the Ministry of Transportation and Communications promulgated the following regulations which implemented 2002 amendments to the Telecommunications Act:

• the Interconnection Regulations;
  
  
• the Number Portability Regulations;
  
  
• the Equal Access Service Regulations; and
  
  
• the Telecommunications Number Regulations.

Of the four, the Interconnection Regulations address the most pressing concern: easing the stranglehold which former government monopoly Chunghwa Telecom still holds over the fixed-line telecommunications network in Taiwan, especially the crucial 'last mile' connections to subscriber households. These regulations add flesh to the bones of Article 16 of the Telecommunications Act, which requires that Type I operators permit other Type I and Type II operators to interconnect to their networks on reasonable and non-discriminatory commercial terms. For Type I operators that are dominant market players, such as Chunghwa, the requirements are stricter, including an obligation to permit interconnection at any location where it is technologically feasible to do so (regardless of claims about economic feasibility).

The Interconnection Regulations further ensure that the right of interconnection may be enjoyed by requiring that all network interconnections comply with uniform standards of service announced by the Directorate General of Telecommunications, the telecommunications arm of the ministry. The regulations specify the basis on which interconnection access fees are to be charged and the sharing of tariffs among mobile-network, fixed-network and/or Type II operators. They further set forth a list of terms to be incorporated in every interconnection agreement between Type I and Type I/Type II operators, as well as provisions governing arbitration of interconnection disputes by the directorate general.

The Number Portability Regulations were promulgated pursuant to Article 20(1) of the Telecommunications Act, which requires that telephone and other numbers assigned to subscribers be portable, so that a subscriber may keep an assigned number when changing residence or provider. The regulations apply to both fixed-network and mobile operators, and compliance will be mandatory from January 1 2005. Detailed provisions are included on the manner of provision of the service and the allocation of fees.

The Equal Access Regulations were also promulgated pursuant to Article 20(1) of the act, which requires that Type I operators allow their subscribers to use the long-distance and international network services of a competitor. Among other things, the regulations stipulate the implementation timetable for each category of service provider.

The Telecommunications Number Regulations govern certain issues relating to the use of telecommunications numbers and were promulgated pursuant to Article 20(1) of the Telecommunications Act. The regulations harmonize the allocation, retrieval and usage of serial, subscriber, identification and other telecommunications numbers, and replace all previous regulations on number usage. The regulations reflect a government policy that telecommunications numbers should be treated as a scarce resource, and stipulate a new and controversial requirement that operators must pay governmental fees for the use of these numbers. Such fees will include:

• penalty charges for failure to use the minimum mandated percentage of allocated numbers within a specified period;
  
  
• surcharges on revenues derived from the lease to subscribers of specifically requested numbers; and
  
  
• an annual charge payable by all operators that allocate numbers to their subscribers.

The charges will be phased in from July 2005. Other significant provisions include requirements pertaining to the retrieval and revocation of telecommunications numbers.

The Administrative Rules on Type II Telecommunications Businesses were also amended in 2003 to include mobile virtual network operators (MVNOs) within the scope of permissible Type II operators. The Directorate General of Telecommunications began accepting MVNO business licence applications in September 2003.

Telecommunications Act Amendments

An amendment to the Telecommunications Act was promulgated on May 21 2003. The key change effected by the amendment was a new requirement that all buildings (except as exempted by the Directorate General of Telecommunications) contain a dedicated telecommunications room, and other indoor and outdoor telecommunications equipment necessary to permit fixed network operators to connect their network to the building and provide broadband and other telecommunications services to users in the building.

New requirements relating to the following issues were incorporated in the act:

• inspection of telecommunications terminal equipment;
  
  
• relocation of telecommunications lines;
  
  
• administration of radio broadcasters; and
  
  
• regulation of radiation emissions from telecommunications equipment.

Future Initiatives

Liberalization of fixed-line licence regime
The Directorate General of Telecommunications announced in late 2003 that it plans to liberalize fully the telecommunications fixed-line licence regime by December 2004, thus fulfilling one of Taiwan's commitments in relation to World Trade Organization accession.

From the latter half of 2004 the directorate general will begin accepting applications for integrated network fixed-line licences for the provision of general domestic and international telecommunications services. There will be no cap on the number of such licences that may be issued and no deadline for the submission of applications. However, the entry requirements remain steep for licence applicants: among other things, the required minimum paid-up capital is NT$40 billion, and the obligation to complete at least 1 million subscriber ports within six years of the issue of the licence is burdensome.

Infrastructure construction project
In July 2003 the Executive Yuan announced a plan to allocate NT$60 billion (about US$1.7 billion) towards the construction of an extensive system of public telecommunications ducts. Upon completion, the ducts will be leased to licensed fixed-line network operators, which will install telecommunications lines in the leased ducts. The purpose of the plan is to assist fixed-line operators in bridging the 'last mile' between their networks and consumer dwellings, thereby promoting increased competition in the local telecommunications industry and providing consumers with better, cheaper broadband and other telecommunications services. The project is scheduled for completion in 2008.

Telecom Technology Centre
The Executive Yuan has approved a four-year budget of NT$2 billion for development of a Telecom Technology Centre in the Luchu Science-Based Industrial Park located in southern Taiwan, with Director General Jian of the Directorate General of Telecommunications to serve as the centre's first chairman. Initially, the centre will serve as a national telecommunications accreditation centre, but over the long term the centre will be developed into a world-class telecommunications research centre. The centre is scheduled to begin operations this month.

For further information on this topic please contact Arthur Shay, William Edwards or David C Yeh at Shay & Partners by telephone (+886 2 8773 3600) or by fax (+886 2 8773 3611) or by email (Arthur@elitelaw.com or edwards@elitelaw.com or davidyeh@elitelaw.com).