Monopoly in the telecommunication sector – cases involving Vietnam

3.4 The State monopoly situation in Vietnam – some selected examples

3.4.2 Monopoly in the telecommunication sector – cases involving Vietnam

3.4.2.1 Overview of VNPT

The Vietnam Post and Telecommunications Group (VNPT) was established on January 9, 2006 in the restructuring of the Vietnam Posts and Telecommunications Corporation.

Until 1997 the Vietnam Post and Telecommunications Corporation (VNPT) was both a regulator and service provider in the telecom sector. Viet Nam Post and Telecommunications Corporation (currently VNPT) was established on April 24 1995 by Decree No.249/TTg of the Prime Minister. In 2006 Vietnam Post and Telecommunication Group (VNPT), one of the eight pilot state economic groups in Vietnam, was established

174 Vietnam Net, „Where to Buy Electricity?‟, above n 159.

175 EVN requires new participants to satisfy such conditions as that: power plants must operate under EVN power dispatch; investors are responsible for building power networks to connect to the national power system managed by EVN; they must accept the wholesale price offered by EVN with different rates based on seasonal conditions; they must negotiate with EVN regarding the date to bring power plants into operation in accordance with the national and regional schemes for power development, etc.

176 VN Express, „Tong Cong ty Dien luc Doc quyen Mua re, Ban dat‟ (2001) [Monopoly of EVN: Buy Low but Sell High] <http://vnexpress.net/SG/Kinh-doanh/2001/07/3B9B2DE2/>. Another example provides good evidence for that situation. In 1997, Oxbow, a US company, asked for permission to build a 650MW thermo power plant in Quang Ninh province and was supported strongly by such government leaders as the former Prime Minister Phan Van Khai ,and Deputy Prime Minister Nguyen Manh Cam. However, when dealing with EVN regarding the sale price, a very low level was demanded by EVN, at no more than UScent4/kWh. This then caused the abandonment of the US project because it would not make a profit. At that time the Vietnam Coal Corporation would only sell coal to the US investor at VND 400,000/tonne, while the retail price for the kind of coal needed was just VND 280,000/tonne. See Vietnam Net, „Want to Invest in Power?‟, above n 164; Tuan Vietnam, „Benh Cua Doc Quyen‟ above n 157.

89 by Decision 06/2006/QD-TTg of the Prime Minister.177 As VNPT is the network infrastructure provider, telecom service providers must interconnect with the VNPT network in order to provide their own telecomm service.178 Despite the division of regulatory functions and business activities, their role as representative of state capital in VNPT allows the Ministry of Posts and Telecommunications (MPT) to remain involved in the management of VNPT, especially through senior personnel appointments.179 VNPT has often been accused of abusing its dominant position. Allegations regarding anti-competitive behaviour by VNPT can be summarised as follows: unfair allocation of network facilities, imposition of high prices for use of network facilities, cross- subsidization, refusal of services, forced use of VNPT services and abuse of technical measures to block competitors‟ services.180

3.4.2.2 The dispute regarding interconnection between VNPT and Viettel

Viettel Corporation (Viettel) is a military-run enterprise belonging to the Ministry of Defence.181 Together with Saigon Postel (SPT),182 the emergence of Viettel marked a

177VNPT website <http://www.vnpt.com.vn/detail.asp?id=747&dataID=10722>. VNPT is the incumbent operator providing both telecom networks and services in Vietnam. In particular, VNPT is the only company authorised to hold control of the national back-bone system and the largest company providing a wide range of services, including fixed and mobile telephony, satellite TV, Internet, private leased circuit, frame relay and VOIP. See <http://point-topic.com/content/operatorSource/profiles2/vnpt.htm>. In light of the separation of policy and regulatory functions from the operational functions of VNPT, the Ministry of Post and Telematics (currently Ministry of Information and Communications) is responsible as the regulatory body. See CUTS, above n 152, 28.

178 USAID, Competition Review of the Vietnamese Telecom Sector (2005), 17

<http://pdf.usaid.gov/pdf_docs/Pnade784.pdf>; CUTS, above n 152, 28. Article 38 (1) of the Ordinance on Post and Telecommunication 2002 defines two kinds of enterprise providing telecomm services: network infrastructure providers and telecomm service providers. Network infrastructure providers are State owned enterprises or enterprises in which the State holds controlling shares or special shares, established in accordance with law to set up network infrastructure and to provide telecomm services. Telecomm service providers are Vietnamese enterprises from any economic sector, established in accordance with law to provide telecomm services. This position created a monopoly position prescribed in the Competition Law 2004. Article 12 states that an enterprise shall be considered to hold a monopolistic position if there is no enterprise competing for the goods and services dealt in by such enterprise on the relevant market.

179 CUTS, above n 152, 28.

180 USAID, above n 178, 31.

181 See Viettel website <www.viettel.com.vn>.

182 Saigon Post and Telecommunications Services Corporation (SPT).

90 turning point in breaking up the monopoly position of VNPT.183 As a new participant, Viettel launched a series of promotional programs to attract clients to its mobile service at a considerably lower price.184 However, Viettlel, as any other telecomm service provider, had to interconnect with the VNPT system to provide its services, such as mobiles, data transmission and internet. Besides, it had to connect to six transmitting stations before getting access to VNPT local stations.185

In 2004 Viettel and VNPT signed an agreement under which Viettel committed to paying a leasing fee for use of the national back-bone system, while VNPT had to ensure connection to the network.186 While its mobile phone subscription rate increased remarkably, only less than a half of the connection demands were provided by VNPT.187

183 When it first participated in the telecommunication market, Viettel started a competition with the monopoly VNPT by the introduction of a VoIP service at a lower price than that of VNPT. See Viettel website, „Cuoc Cach mang Viettel‟ (2009) [Viettel Presence Brings about a Revolution]

<http://www.viettel.com.vn/TinTuc/tabid/55/key/ViewArticleDetail/Cat/69/Art/8149/language/vi- VN/18/2/2009.viettel>. In 2004 Viettel joined the mobile market by offering a mobile service and became the fourth mobile provider after two VNPT subsidiaries and S-Fone. See Viettel website

<www.viettel.com.vn>.

184 Soon after it was established, Viettel became an emerging rival in the market, which had been shared between Vinaphone and Mobiphone, both in the VNPT system. Within a short period, Viettel rapidly expanded its market share from 0 to 13 per cent and had a large number of mobile clients, including those who shifted from Vinaphone and Mobiphone to Viettel. To fulfil its ambition to gain more market share, Viettel invested millions of USD to develop its infrastructure. With regard to its mobile network, it was reported that Viettel spent around VND 2 trillion (US$125 million). See Nguyen Viet Hung, „Presentation on Abuse of Dominant Position‟ (2005)

<http://www.jftc.go.jp/eacpf/05/APECTrainingCourseAugust2005/Group1/Nguyan_adp.pdf> ; Vietnam News, „Telecom Industry‟s Hostile Competition‟

<http://vietnamnews.vnagency.com.vn/showarticle.php?num=01BUS270905>; Viet Bao, „Viettel Co Nguy co Pha san Neu VNPT Khong Thao Nut Co chai‟ [Viettel is on the Erge of Bankcruptcy if VNPT Does not Resolve the bottle-neck Issue] (2005) <http://vietbao.vn/Kinh-te/Viettel-co-nguy-co-pha-san-neu-VNPT- khong-thao-nut-co-chai/45159811/87/>.

185 Viet Bao, „Ong Doc quyen VNPT Bi To cao‟ [The Monopolist, VNPT Has Been Denounced] (2005)

<http://vietbao.vn/Vi-tinh-Vien-thong/Ong-doc-quyen-VNPT-bi-to-cao/40085719/217/>.

186 According to this agreement, in case of any congestion problems arising between the two networks, if it wanted to increase connection capacity, Viettel was required to make a request to VNPT two weeks in advance. See Vietnam News, „Viettel Seeks End to VNPT Connection Dispute‟ (2005)

<http://vietnamnews.vnagency.com.vn/showarticle.php?num=05ECO290605>.

187 It was also noted that since 2002 VNPT never met its demands for connection capacity. In 2002, it was 38 per cent while it was 25 per cent in 2003 and 2004. In 2005 the demand was even met at only 17 per cent by VNPT. The point raised by Viettel was that connection jams only occurred when connecting from Viettel to VNPT networks and that 80 per cent of of its total calls were from Viettel to VNPT. See Viet Bao, „Viettel – VNPT: Khau chien Nay Lua‟ [Viettet – VNPT: Intense Dispute] (2005)

<http://vietbao.vn/Kinh-te/Viettel-VNPT-Khau-chien-nay-lua/70015728/87/>.

91 As a result, it received a wave of complaints about its quality of service from clients.188 Viettel argued that this resulted from the limited interconnection with the VNPT network and the unwillingness of connection provision by VNPT.189

VNPT explained that its reluctance was due to the inadequacy of its ports, which were just enough for the maintenance of its own network and its current subscribers. However, Viettel proved that VNPT could provide more connection ports for them.190 It was claimed that there was actually discrimination against Viettel, which was faced with difficulties in developing their services so as to compete with those of VNPT. Besides, Viettel also blamed VNPT for causing difficulties for it in developing its client base in the provinces.191

The owners of Viettel, the Ministry of Defence, finally filed an official letter to the Prime Minister on June 25, 2005, accusing VNPT of discrimination against Viettel. This letter showed that the demand for Viettel‟s connections had not been fulfilled for five consecutive years and that this situation was becoming even worse. The letter noted that Viettel would go bankrupt if this problem remained,192 and requested emergency intervention to stop the situation in order to ensure the interests of about 700,000 Viettel clients.193

188 This also caused a decrease in new clients signing up for Viettel, due to the instability with the connections. As of July 2005 there were 700,000 subscribers to Viettel, while new sign-ups dropped to between 2,000-3,000 a day, well below the 6,000 a day in June. See Vietnam News, „Ministry Tells VNPT, Viettel to Make Up‟ (2005) <http://vietnamnews.vnagency.com.vn/showarticle.php?num=05ECO050705>.

189 Viettel claimed that during this time eight requests were made to VNPT to ask for an increase in connection capacity, but VNPT rejected them each time on the grounds that there was a lack of available ports to the central switchboards, along with a lack of funding for new circuit switchboards.

190 While it was only agreed to use a total of 100 E1 ports, of which only 20 ports were used for its mobile service, other companies were permitted to use more than needed. For example, FPT, another

telecommunication provider, could use 200 ports in peak time, which were used for providing internet service only and this company had returned 100 E1 ports to VNPT as redundant. See Viet Bao, „Mang 098 Nghen Mach: VNPT Can Ly, Dong Y Mo Cua Cho Viettel‟ [The Network 098 Congested: Running Out of Arguments, VNPT Agrees to Open More Connections] (2005) <http://vietbao.vn/Kinh-te/Mang-098-nghen- mach-VNPT-can-ly-dong-y-mo-cua-cho-Viettel/45160021/87/>.

191 Since participating in the market, Viettel had developed its system in almost all provinces and it was ready for connection with the system at VNPT provincial branches. However, Viettel complained that it had to negotiate with each province for the interconnection and this took several months, or even a year without success. See Viet Bao, „Cuoc Doi dau Viettel – VNPT Chua Co Hoi ket‟ [Confrontation between Viettel and VNPT: Still No End] (2005) <http://vietbao.vn/Kinh-te/Cuoc-dau-Viettel-VNPT-chua-co-hoi- ket/10916147/87/>.

192 Vietnam News, „Viettel Seeks End to VNPT Dispute‟, above n 186.

193 Viet Bao, „Viettel Co Nguy co Pha san‟, above n 184.

92 3.4.2.3 The dispute between VNPT and EVN Telecom

EVN Telecom, established in 1995, is a self-accounting company belonging to the Vietnam Electricity Group (EVN).194 EVN Telecom has recently joined the telecom market, offering a number of services.195 However, as in the Viettel case, EVN has been faced with interconnection conflicts with the network infrastructure provider VNPT.

In 2005 EVN introduced a SMS service allowing its clients to send SMS to other mobile subscribers such as Vinaphone and Mobiphone. However, after one year, while E-Mobile clients could connect to VNPT subscribers, this service only applied among subscribers to E-Com service (a wireless fixed telephone).196 EVN Telecom complained that the situation was due to the VNPT failure to open connection ports for the E-com SMS service network and blamed VNPT‟s failure for retarding the development of its service.197 This case was remarkably similar to a conflict between S-Fone and VNPT regarding SMS interconnection to the VNPT system in 2004.198

After asking the Ministry of Posts and Telecommunications (MPT) to request VNPT to open ports for the EVN SMS service and receiving no response from VNPT, EVN Telecom submitted an official letter to MPT to ask for a resolution of this dispute over connection ports between EVN and VNPT.199 Besides that, it complained that VNPT clients could not use the toll free service (1800 prefix) for any calls to the customer care service of EVN Telecom. This was due to VNPT not connecting its subscribers to the EVN Telecom service and asking EVN Telecom to pay 600 VND per minute for such

194 EVN Telecom website, <http://www.evntelecom.com.vn/main.aspx?MNU=1097&Style=1>.

195 In particular, services offered by EVN are E-Com (wireless fixed telephone), E-Phone (inner-province mobile calls) and E-Mobile (CDMA-based technology mobile). Since its mobile service (E-Mobile) is considered not to be able to compete with current mobile providers, E-Com has become the prominent service. This service has allowed EVN Telecom to attract around 100,000 clients within only 1 year after joining the telecom market in 2005. See VN Express, „EVN Telecom – Nan nhan moi cua VNPT‟ [EVN Telecom - New Victim of VNPT] (2006) <http://www.vnexpress.net/GL/Kinh-

doanh/2006/07/3B9EBA01/>.

196 EVN Telecom received complaints from its clients for not being able to send SMS from wireless fixed- telephone services (E-com) to subscribers of two mobile VNPT service providers, as advertised.

197 Vietnam News, „VNPT Gives More Access to EVN Telecom‟ (2006)

<http://vietnamnews.vnagency.com.vn/showarticle.php?num=03BUS120706>.

198 In 2003, S-Fone, a joint venture between Saigon Postel Corporation and Korea SK telecom, wanted to connect to the VNPT system to launch its messaging service. Its proposal to interconnect was delayed many times by VNPT. VNPT cited many technical problems to explain its delay, while S-Fone complained that this situation was caused because VNPT did not want it to be connected. See USAID, above n 178, 16-17.

199 Vietnam News, „VNPT Gives More Access‟, above n 197.

93 calls.200 But even after EVN Telecom finally agreed to this requirement, VNPT still delayed opening the connection for EVN Telecom.201 In response to these accusations, VNPT pleaded a number of technical problems to explain their behaviour.202 It claimed that its hesitance was due to its taking care to avoid offering a low quality service.203 As EVN claimed, they faced unwilling cooperation by VNPT when negotiating a connection to the VNPT system.204 As with Viettel, EVN Telecom had to undertake negotiations with VNPT provincial branches. It took EVN Telecom several months to negotiate with each VNPT provincial branch where they wanted to connect two networks.205 VNPT declared that they would only open a connection for EVN Telecom if a connection jam existed and EVN Telecom could show evidence for the jam.206 After the direction of MPT regarding the opening of connection ports, the jam situation still existed, because VNPT only opened more ports to EVN Telecom as soon as a connection

200 VNPT also argued that a toll free 1800 service would be definitely free of charges for customers, but the company that provided that service would have to pay VNPT according to the agreement concluded between the two sides. The charge applied for EVN Telecom would be reasonable if EVN Telecom offered this service to its customers, including those who are VNPT subscribers. See Doi song Phap Luat, „Ket noi EVN Telecom – VNPT: EVN Telecom Chua Thuc hien Dung Thoa thuan Ket noi‟ [Connection between EVN Tel and VNPT: EVN Tel Has not Implemented Connection Agreement Correctly] (2006)

<http://www.doisongphapluat.com.vn/Story/thuongmaitoancau/2006/7/1035.html>.

201 Dan Tri, „EVN Telecom: Nan nhan Ket noi Moi‟ [EVN Telecom - New Connection Victim] (2006)

<http://dantri.com.vn/c76/s76-127856/evn-telecom-nan-nhan-ket-noi-moi.htm>.

202 For example, in terms of SMS connection between two operators, VNPT explained that there were no specific articles regarding SMS connection from EVN Telecom fixed line telephone to VNPT mobile phone subscribers mentioned in the agreement for connection signed by VNPT and EVN Telecom. VNPT also stressed that it had tried to launch its own similar service, but the result was not as successful as expected.

203 Doi song Phap Luat, above n 200.

204 While similar negotiations were undertaken quickly with other providers such as Viettel and Saigon Postel (SPT), it took them nearly 3 years to deal with VNPT, but EVN Telecom‟s demands were not satisfied adequately. See Viet Bao, „Dam phan EVN Telecom – VNPT: Moi Ngay Chi Sua Mot Chu‟ [EVN Telecom - VNPT Negotiation: One Word Corrected per Day] (2006) <http://vietbao.vn/Kinh-te/Dam-phan- EVN-Telecom-VNPT-Moi-ngay-chi-sua-1-chu/45201381/87/>.

205 Ibid. In the case of the Bac Giang VNPT branch in 2005, the negotiation was unsuccessful as the EVN Telecom negotiation offer was delayed many times. As a result, EVN Telecom could not launch its service there. Until mid-2006 there were still nearly 20 provinces where EVN could not connect to the VNPT system. See Lao dong, „Mau thuan Ket noi Giua EVN va VNPT: Mot Lan nua Lai Nong‟ [Connection Conflict between EVN and VNPT: Hot Again] (2006)

<http://www1.laodong.com.vn/pls/bld/display$.htnoidung(337,161436)>.

206 In fact, when the jam situation occurred, instead of opening 200 ports as requested by EVN Telecom, VNPT just opened 8, causing continuing connection jams for EVN Telecom in some provinces. For example, in Thanh Hoa province, after submitting their report with statistical data about the connection jams, in July 2006 there was only one port opened for EVN Telecom, while the number of needed ports as requested was 11. See Lao dong, above n 205; Viet Bao, above n 204.

94 jam occurred.207 That caused many difficulties and disadvantages for EVN Telecom in developing their services as a newcomer in the telecommunication market.