Latin American Forum on Communications January 25 - 28, 2000 The Latin American Forum on Communications Online 4/24/00 – 5/24/00 Edited Overview The Latin American Forum on Communications (LAFC) Online jointly sponsored by the Public Utilities Resource Center (PURC) of the University of Florida, Nortel Networks, itFlorida.com and infoDev was held April 24 – May 24 2000 addressing various issues in telecommunications development in Latin America This online forum is a supplement to the Latin American Conference on Communications, held January 25-28, 2000, in Miami, Florida This online forum provided participants with the opportunity to readdress salient issues presented during the conference Summarized below are the submissions of the participants on the topics of technological change, competition, regulation, mobile licensing, and electronic business development Technology Change How are technology changes affecting telecommunications policy? Are these changes threats or opportunities, or are they both? How these changes affect competition? How does competition affect technology deployment? Participants agreed that the dynamic nature of the telecommunications industry stirs competition and is ripe with economic opportunity In the same respect, the rapidity and differences of such changes can be quite challenging, particularly to the beneficiaries of the status quo Even with the potential for opposing views, the participants in the forum all looked favorably to the changes in technology The idea supporting their optimism is the positive result of rapid social development and creation of opportunities Although this change is regarded as a positive force, the comments varied in how regulation should adapt to technology change Perhaps the strongest line of agreement was governments should base policies on services and not on technologies Of particular concern is the disparity between the swiftness of technology versus the deliberate nature of regulation Colombia was presented as an example where Voice over IP, callback, and other new methods of long distance made costly long-distance licenses of US$150 million almost valueless shortly after they were granted The participants agreed that overly specific telecommunications regulations have a short life span because they often become obsolete shortly after implementation Of lesser discussion, but of equal importance was the effects technological change has on competition regulation One commentator suggested the complexities and conflicts that arise support the tendency for regulators to regulate everything In summary, the general consensus was that regulators must realize that it is impossible to have total control of all activities without hindering the development of the sector Competition How should countries open markets to competition? What is the role of privatization? What is the effect on rural service? How will countries address global industry consolidation? Forum participants expressed unanimity in striving for uninhibited competition, however, the participants cited a major stumbling block in Latin America, the faulty implementation of privatization The sentiment was that privatization could not successfully occur without the simultaneous liberalization of markets The majority feeling was that the privatization process should be both clear and transparent in order for consumers to feel confident in the process and in the companies that provide the service One of the participants believed that privatization in and of itself was neither good nor bad being that empirically the results vary from successful to dismal failures A few other key areas that were lightly touched upon were rural service and global consolidation The participants agreed that stimulating competition in rural areas is often difficult because of low demand One solution offered would be the state subsidizing universal service obligations through vouchers that are given to companies that attract customers in such areas Another approach is to auction subsidies in rural areas, such as has been done by Chile and Peru Another area of concern is the present trend of global consolidation, which can be viewed as either threatening or non-threatening One discussant felt as though the influx of mergers as an inevitable tendency Another discussant referred to the growing disparity between rich markets and impoverished markets as a negative effect of consolidation Regulation What regulations are important when countries reform telecommunications markets? What are the roles of ministries and regulators? How much deregulation should occur? The topic of regulation ignited the most discourse on methods of utilizing legislation So much so, the issue of regulation periodically overlapped into the discussion of other topic areas Issue areas involving regulation included: Regulatory Independence, Transparency Legitimacy & Credibility Heavy vs Light Regulation and Deregulation Asymmetric Regulation Resale of Rights and Licensing The online discussants were rather thorough in describing the ideal character of a regulatory body The most effective regulator, as suggested by the online discussion is one that is independent, autonomous, non-bureaucratic, and transparent A regulator who appears to be influenced or easily captured fosters distrust The Peruvian regulatory agency OSIPTEL was offered as an example of a regulator with rules that provide for independence For example its funding is received by a 0.5% fixed percentage of all operating companies revenues It was further indicated that true independence is reliant on the existence of an organizational structure that would guarantee independence and that political support at high levels is also necessary This assertion included another relevant issue: the role of government in telecommunications The varying degrees of support for government intervention lie on a continuum ranging from deregulation to heavy regulation One suggestion was for reform of judicial policy to create a legal defense for consumers Another suggestion was for limitations on bureaucrats so that their processes are heavily regimented and their discretion restricted These ideas reflect a trade-off between regulatory flexibility, which is important for adjusting to new situations, and limiting regulatory discretion, which is important for predictability and for control of bureaucratic tendencies Another discussant argued that, as markets become more liberalized, regulators should continuously re-evaluate their roles and be conscious of the cultural change that takes place within their countries Although this participant offered this suggestion, he further stated that the best possibility for Latin America would be deregulation, whereby the markets and the users can offer the best service at the smallest expense The capacity of the regulator to use discretion in a transparent manner requires a balance between quick adaptation to changes without disrupting stability This participant observed that the lack of regulatory bodies that have an appropriate balance of flexibility and control creates a serious threat to competition and rapid sector development The discussion surrounding the concept of transparency was led by the Peruvian Case It was stated that the transparency of OSIPTEL does not depend anymore on its functioning, but on the institutional norms, the transparency of its management, and the behavior of its civil servants OSIPTEL takes numerous steps to ensure transparency, including providing web publication of all activities by main executives and representatives and an open public discussion that considers all ideas OSIPTEL's practices are embodied in institutional norms regarding management and its rules for civil servants Several documents were provided OSIPTEL that explain the practices: Transparency Rules, Ethics Code, Statement of Purpose, and excerpts from the Law of Telecommunications While the end goal of any market intervention is for the promotion of freer trade and enhancement of competition, the use of the asymmetric regulation to promote competition is controversial The argument of the participant favoring asymmetric regulation (legalized disparity in policy between incumbent operators and new entrants, generally with a more lenient approach towards new competitors) cites its ability to attract new market entrants Such regulation would be a necessity because incumbent operators are often guilty of anti-competitive behavior The incentives provided by asymmetric rules would also avoid monopolization of the former state monopoly Another participant agreed with this argument because of the potential for additional bureaucracy, a potentially unfavorable characteristic of regulators In response to this criticism he stated that the additional burden of regulating entrants would be no burden to the regulator because regulators are obliged to serve the country's policies This obligation also permeates into attracting investment, and pursuing policies that facilitate easier market entry, which is ultimately beneficial for all There were other arguments in opposition to asymmetric regulation One participant offered Colombia as an example of a country that is not specifically in favor or against it whereby the primary criteria for legal rules is the liberty of competition The licensing of rights to sell excess capacity of telecommunication by electrical companies was a question posed by one of the participants In reply, another noted that, in Colombia, no regulation exists that prohibits companies that transport electricity to also be a carrier in telecommunications Mobile Licenses Are new mobile licenses required for 3G? Should countries coordinate mobile licensing? In both El Salvador and Colombia, there are no specific criteria to receive a 3G license, which raised a few concerns Firstly, because there are large quantities of additional spectrum, some believed that there should be regulations that restrict the use of this capacity strictly for 3G Secondly, one participant warned against overpricing the licenses and not being able to sell them The participants gave a few prescriptions regarding the regulation and future implementation of mobile licensing, particularly in the realization of the uniqueness of Latin America One participant stated that the objective should be recognize Latin America's unique identity in matters of regulation and not try to copy what has been done in other places He added that Latin American policy makers need to observe, "tropicalize,” and believe in what is good for the region Along similar lines, another participant cited the limitations some Latin American countries have such as the lag in connectivity, low scale economies, the high cost of PC’s, the predominance of English content on networks, and the high cost for the use of the local networks is fairly high Other suggestions focused on the regulatory practices involving 3G technology The first being that the large quantity of spectrum lines may lend themselves for the use of other things besides their initial intended usage Monitoring for unauthorized services is suggested in order to ensure the licenses cover their intended service The other area of concern is the high prices for a license Colombia was again cited as an example of where exorbitant prices were paid for licenses that later became useless when technology overcame the service boundaries Conclusion Although many areas were addressed during the online forum, many of the issues raised could have been further developed along with specific plans of action This circulation of ideas provoked consciousness to issues that are salient to Latin American countries that are sincere about fostering telecommunication development LAFC Participants Dr Henoch Aguiar Secretary of Communications Argentina Dr Jose Alfredo Arce Director General of Telecommunications Ministry of Economic Development Bolivia Ms Silvia Jauregui Chief planning, coordination and control Superintendent of Telecommunications Bolivia Mr Leonardo Mena Chief Division of strategic planning and studies Ministry of transportation and communications Chile Mr Gustavo Pena REGULATEL Colombia Dr Nestor Roa Commissioned Expert Commission of Telecommunication Regulation Colombia Dr Monica Trujillo Tamayo Secretary General Ministry of Communications Colombia Mr Douglas Velasquez, Attorney Colombia Mr Roberto Alfaro Torbio, Engineer Director of Telecommuncations Regulation authority of public services Costa Rica Mr Leonel Fonseca Cubillo Regulator general-president of Joint directive Regulation Authority of public services Costa Rica Mr Claudio Rosas, Engineer Director General of Strategic Planning National Secretary of Telecommunications Equador Mr Lorenzo Saa Congress Equador Mr Ernesto Lima, Attorney Superintendent of Energy and Telecommunicaions House of the President - Technical Secretary El Salvador Dr Eduardo Lozano Manager of Telecommunications Superintendent General of Electricity and Telecommunications (SIGET) El Salvador Mr Jose Raul Solares, Engineer Manager of Operations Superintendent of Telecommunications Guatemala Mr Eduardo Emilio Gandour, Engineer Chief Department of Inspection CONATEL Honduras Dr Dante Mossi Commissioned Secretary CONATEL Honduras Mr Hector Rodriguez Secretary General COMTELCO Honduras Mr Ricardo Rodriguez Director General of International Cooperation Federal Commission of Telecommunications Mexico Mr Jaime Deschaps General Coordinator of Telecommunications Commission of Telecommunications Mexico Dr Luis Javier Guerro Advisory Coordinator of the undersecretary of communications Secretary of communications and transports Mexico Mr Mario Gonzalez Lacayo, Engineer Ministry Director TELCOR Nicaragua Mr Leon Emilio Halphen, Attorney Legal Advisory Regulator Entity of public services Panama Mr Gerardo Rojas Paiya, Engineer Administration Advisor ANTELCO Paraguay Mr Victor Alcides Bogado, Engineer President CONATEL Paraguay Dr Jorge Kunigami President OSIPTEL Peru Dr Carols Valdez Unit of concessions chief Ministry of Transport, communications, housing and construction Peru Dr Ernesto Dehl Sosa Director National address of Communications Uruguay Acknowledgements PURC would like to thank Nortel Networks and itFlorida.com for co-sponsoring the LAFC, and infoDev for its support of the LAFC and this online forum PURC would also like to thank Dr Luis Gutierrez, Victoria Saiz, and Eileen Pun of the for their technical and translation assistance Additional information on the LAFC and its supporters can be found at http://bear.cba.ufl.edu/centers/purc/LAFC/lafcmain.html Questions regarding the forum should be addressed to Mark A Jamison, jamisoma@ufl.edu