The Preston Gates Guide to
Telecommunications in Asia
2006 edition
Published in association with:
Preston Gates & Ellis LLP
Preston Gates Ellis & Rouvelas Meeds LLP
The Pacific Telecommunications Council
Ecological Considerations Affecting
Offshore Facilities
By Kenneth S. Weiner
Preston Gates & Ellis LLP
Perhaps you’ve seen the cartoon captioned ‘An Environmental Consideration’. It shows a
section of the Alaska oil pipeline in the shape of an antler, so caribou can migrate across
the pipeline route. In many communities today, it is common to find wireless cell towers
disguised as trees or other familiar shapes.
If there is any truth to the saying that the oceans are the last frontier, it should come
as no surprise that ecological factors are playing a growing role in the siting of offshore
telecommunications and utility facilities.
The regulatory climate has fundamentally changed from the days that cables were
surface-laid, left on the seafloor with little scrutiny and left alone long after the cable went
out of service.
One of the most vivid examples is the Pacific Crossing (PC-1) cable off the coast
of Washington State in the USA. Shortly after leaving Seattle and Puget Sound, PC 1
traverses the Olympic Coast National Marine Sanctuary as part of an approximately
14,000-mile loop with Japan and California.1 The PC-1 cable needed a variety of in-water
and cable landing construction permits, including a federal construction permit from the
US Army Corps of Engineers. The US National Oceanic and Atmospheric Administration
(NOAA), which administers the Olympic Coast National Marine Sanctuary, initially agreed
with the Corps’ environmental review and standard permit.
Shortly before the federal permit was to issue in 1999, the NOAA reversed course
and took the position that a more detailed environmental impact assessment was needed,
alternative routes had to be examined, and special permits were required with numerous
conditions. In contrast, just months before PC-1 was laid, Alaska United obtained permits
and installed a cable between Alaska and Washington states through the marine sanctuary
with virtually no special regulatory conditions. PC 1 was built and is operating under a set
of permits that reflect the changing regulatory climate for offshore facilities.
Much has changed since 2000. The regulatory climate for permitting and operating
offshore facilities around the world now routinely brings into play marine protected
areas and reserves, fishery management areas and concerns, aboriginal rights, and
environmental concerns about exposed cables in areas closer to shore.
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Proposed new facilities are not the only facilities affected. In a time of industry
consolidation and change – where mergers, acquisitions and reorganizations result in
the need to transfer existing authorizations – regulators and interested parties have
used these commercial transactions as an opportunity to revise original requirements to
address new areas of concern.
MARINE PROTECTED AREAS AND RESERVES
In the past few years, national and international commissions and studies on the oceans,
and influential findings by non-governmental organizations, have led to increasing awareness
and concern about the depletion of worldwide fishery resources. Unilateral, bilateral and
multilateral actions have reduced or closed areas to harvest because of threatened,
endangered or depleted species.
At first glance, these developments might seem to reduce the potential for conflict
between fishing activities and offshore facilities, such as submarine cables. In fact, a major
response has been to establish ‘marine protected areas’ so that critical fishery stocks
can re-establish themselves and help to restore the biological diversity and abundance.
There may also be important limitations or consultations required due to the designation
of a species as threatened or endangered, even where a marine protected area is not
involved.
Fish species can be very different and use the environment in very different ways.
Salmon species, for example, use a wide range of a watershed, from mountain streams
to spawn, to estuaries for rearing, and to oceans where they live for several years before
returning to spawn. By contrast, bottom fish, such as many species of rock fish, live in the
same place for decades. As is apparent by their name, rock fish inhabit rocky substrates
for both food and refuge.
Governmental authorities that establish environmental protected areas, reserves,
refuges, or sanctuaries understandably focus on the resource being protected – the fish
species. The public perceives these areas as national parks free from human interference.
In addition, some protected areas are established to limit or preclude specific industrial
uses, such as oil and gas drilling, due to concerns about their effects on fisheries or the
ecosystems.
Protected area boundaries may therefore be drawn on a large scale to address
multiple species or certain human activities. If well-designed and routed, offshore
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telecommunication facilities – whether for commercial broadband, as support for other
uses such as renewable or non-renewable energy facilities, scientific research, national
security, or other purposes – are probably among the less intrusive human activities in the
marine environment.
Video monitoring surveys of existing cables show very small disturbance, especially
compared with the impact of fishing activities such as trawling. Universities, fishery and
scientific agencies and organizations are employing cables and offshore monitoring and
research facilities. Growing interest in renewable energy resource projects in the marine
environment, such as projects to harness wind and wave energy, likewise depend on
submarine cables for communications and transmissions. However, both protected area
designations and their implementing management plans and regulations have generally not
addressed these kinds of uses in an informed or consistent fashion.
There is usually a separation between those personnel or consulting firms seeking
permits and authorizations, and the engineers who actually perform the work in a speciallydesignated marine environment or an area with threatened or endangered species.
This has led to problems because the engineers or contractors assume the terms and
requirements are standard industry practice. By contrast, the regulatory agency assumes
the permittee or contractor is aware of the agency’s expectations to take special care
beyond standard practice. The agency may well seek enforcement action, sanctions or
penalties as a result. Although this situation can be remedied by effective communication
at both the planning and construction stages, such communication is the exception rather
than the rule.
Sometimes, there is a confluence between the habitat protection and the facility
location. For example, cable routes generally prefer to avoid rocky substrates (where rock
fish live, for example) due to difficulties in installation, conflicts with bottom fishing activities
and the potential for cable damage. Still, seeking permission to locate and maintain offshore
facilities in a marine protected area, if allowed at all, will be a more complicated process
requiring greater attention to environmental protection concerns than in other areas.
FISHERIES MANAGEMENT AND HABITATS
Submarine cable routing and operations have long been sensitive to being snagged by
fishing gear, which is called ‘external aggression’ by the cable industry. The cost of repairing
a damaged cable, coupled with verifying and replacing lost or damaged fishing gear, has
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provided an incentive to minimize interaction with fishing activities.
Notwithstanding temporary or long-term closures of certain fisheries, the worldwide
depletion of estuarine and ocean fish has increased regulatory interaction between
developers and operators of offshore facilities, the fishing industry and governmental
agencies that regulate fishing.
Fishery openings have often become shorter or located in more limited geographic
areas, result in more intensive – sometimes even frantic – efforts to catch fish and
make the most of the opening. At the same time, traditional fishing patterns are changing
for several reasons, including global warming and changes in ocean currents and
temperatures, fishing for different species due to depletion of popular stocks, and fishing
in new areas than were historically fished.
In the past, fishers were often willing to avoid fishing in areas of offshore facilities in
exchange for agreements for gear compensation for unintentional interaction. As fishing
opportunities have become more limited, there seems to be growing concern by regulatory
agencies and the fishing industry about facilities that result in fishing exclusion areas.
Given these increased pressures and changing patterns, commercial fishers have
become more active and vocal in the siting of new facilities and in pressuring regulatory
and permitting agencies to require operators of offshore facilities to enter into fishing
agreements for enhanced compensation.
ABORIGINAL RIGHTS
The past decade has seen a marked shift in the assertion of traditional rights and treaty
rights by indigenous peoples and in the recognition and consultation with their nations by
federal governments around the world.
Most coastal indigenous peoples actively use the shorelines on which they live and
fish the adjacent waters, often at considerable distance offshore. Some of these societies
are subsistence cultures and depend on these coastal resources for their survival. In
addition, the US and other nations have entered into treaties with some of these nations,
many of which guarantee rights to fish, hunt or gather food in usual and accustomed areas
in exchange for ceding their lands. Within particular tribes, the fishing rights including
areas allotted to a particular family for fishing may be nearly immutable.
The depleted fisheries are likewise causing indigenous peoples to assert their rights
to protect their ability to fish. Unlike much of the commercial fishing industry, however,
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indigenous peoples tend to have a long-term multigenerational perspective and have
typically experienced a degradation of their rights over time. As a result, compensation for
a fishing exclusion due to the location of an offshore facility may not be viewed as a simple
commercial matter but a fundamental diminution of the right to fish in a traditional area. In
other words, it is not just a matter of money, but a more basic cultural and political issue.
These issues can be exceedingly complex, given the relationship between federal and
state regulatory agencies and indigenous peoples and the potential clash between federal
treaties with indigenous peoples and other international treaties.2
Furthermore, most offshore facilities involve a landfall. Many countries have strict
requirements involving disturbance of historical, archaeological and cultural sites, including
burial grounds. As noted above, many coastal areas have had historical use by indigenous
peoples, and facility siting typically involves cultural resource surveys and protective
protocols, as regulatory agencies and indigenous peoples have become more sensitive and
active in protecting these areas.
OPERATIONAL AND END-OF-SERVICE CONSIDERATIONS
Awareness of environmental conditions and potential fishing conflicts has traditionally
affected route sitings. As concern about fisheries and fishing habitats has grown, regulatory
agencies have been turning greater attention to operational considerations. Some of the
more common areas of increased regulation attention are summarized below.
Snagging has traditionally been focused on active fishing gear, because of concerns
for the integrity of the cable from external aggression. As attention has shifted to protection
and restoration of fisheries and fish habitat, concern is focusing on derelict gear or ‘ghost
nets’, where snagged or drifting fishing gear remains attached to offshore facilities. The
gear then snares fish and predators of the snared fish, which would be a particular issue
in marine protected areas. Permits have increasingly focused on monitoring surveys and
removal of derelict gear from the marine environment during the operational life of the
facility.
A related regulatory focus is on the disposition of offshore facilities at the end of their
useful life. Permits have increasingly required, at a minimum, a final survey and evaluation
of whether to abandon facilities in place or to remove them from the marine environment.
Although removal may entail short-term environmental disturbance, similar to their
installation, regulatory agencies, indigenous people and commercial fishing interests are
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showing increasing interest in their removal in order to eliminate the long-term potential
for fishing exclusion and derelict gear issues.
With the boom-and-bust cycle in telecommunications, energy and other utility
sectors, regulatory agencies have found themselves seeking to ensure compliance with
their original authorizations in the midst of complex bankruptcies or corporate mergers
and reorganizations. As environmental requirements or stipulations increase or become
more specific, as discussed above, regulators have begun to seek financial assurances,
such as bonds and letters of credit, to reduce the risk that commitments made in the initial
planning, permitting and installation process will be met during operations and decades
hence at the end of service.
INTERACTION WITH RIGHT-OF-WAY APPROVALS
Traditionally, most right-of-way authorizations have focused on compensation issues for
easements or other forms of right-of-way. Rights-of-way are often obtained from public
agencies. With increasing awareness of the issues described above, as well as required
reviews or consultations with sister agencies, indigenous peoples, the public and public
agencies have increasingly sought to incorporate environmentally-protective conditions
and covenants into their right-of-way authorizations. Public right-of-way authorizations
become a hybrid of real property and regulatory authorizations. These authorizations are
not necessarily consistent with other permitting requirements for the same facility.
CAREFUL PROJECT PLANNING
Changes in the regulatory climate in recent years by no means preclude the cost-effective
siting and operation of offshore facilities.
A common human trait is to proceed with a new project in the same way as in the
past, until hurdles are encountered. This may not be the wisest course in the current
climate. Given the premium on speed in a highly-competitive business environment,
successful permits, installation, operation and maintenance requires greater awareness,
transparency and consultation with affected agencies and interests than in the past.
Experience demonstrates that it is easier to engage regulators and interested parties in
a rational discussion of appropriate methods and requirements if a well-articulated effort
has been made to design and operate facilities to anticipate ecological considerations.
These efforts have been most effective when a team of engineers, scientists, lawyers, and
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finance professionals are working together.
In addition, where facilities have a relatively long lead time, it may behoove developers,
operators, and associations to pay closer attention and participate in new designations
and regulations that could affect existing and new facilities.
Endnotes
1
There is no marine route around the sanctuary in US waters to enter Puget Sound. PC-1 is owned and
operated by Pacific Crossing (PCL) and PC Landing Corp, which are currently independent companies.
PCL and its affiliates were originally subsidiaries of Global Crossing and Asia Global Crossing, all of which
went through a period of bankruptcy and reorganization. Under the management of CXO, a US-based
crisis management firm, PCL and its affiliates emerged from bankruptcy in December 2005, after
successfully resolving a myriad of commercial and regulatory complexities.
2
See, for example, Art. 4 of the International Convention for the Protection of Submarine Cables (March
14 1884), 24 Stat. 989 (Dec. 1, 1886), 25 Stat. 1424, 25 Stat. 1425 (July 7, 1887), TS 380; the
Geneva Convention on the High Seas, Arts. 26.3 and 28 (April 29 1958), 13 U.S.T. 2312, T.I.A.S. 5200,
450 U.N.T.S. 82; the Geneva Convention on the Continental Shelf (April 29 1958), 15 U.S.T. 471, 499
U.N.T.S. 311, and the United Nations Convention on the Law of the Sea (December 10 1982), Arts. 33,
58.1, 79.1, 87.1(c), and 112.
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China
By Jiannan Zhang, Lenny Li and Susan Liu
Preston Gates & Ellis LLP
China continues to be the largest telecommunications market in the world for both fixedline and mobile-phone users, with 350 million fixed-line users and 388 million mobile phone
subscribers as at the end of November 2005. In addition, nearly 75 million households
have access to the internet. According to the China Internet Network Information Centre
(CNNIC), there were 111 million internet users as of the end of December 2005. While
maintaining China’s position as the world’s largest market, each of the component figures
has undergone at least double-digit growth in the past year.
Alongside this growth, China is determined to develop a world-class industry with
Chinese characteristics: it has made further strides in the development of its domestic
third-generation (3G) telecoms standard (TD-SCDMA) and is preparing to strengthen the
administration of short messaging services (SMS) and implement a personal real-name
registration system for mobile-phone users.
RECENT DEVELOPMENTS IN 3G SERVICES
It appears that China will issue its long-awaited 3G telecoms services licences this
year. Xinhua News Agency has reported that Minister Wang Xudong of the Ministry of
Information Industry (MII) stated at an internal meeting of MII officials that China would
“finish formulating policies for the development of 3G technology and business” in 2006.
An MII official confirmed this report, and Xinhua believes that the comments signal that 3G
in China will finally enter the operating stage in 2006.
The business climate is also suitable for the issuance of 3G licences in 2006.
In November 2005, Goldman Sachs published a report forecasting that the Chinese
government would issue 3G licences in the second half of 2006 and that the Chinese
telecoms industry would also be restructured around the same time to accommodate the
establishment and operation of 3G networks.
This prediction was based on two factors. First, China is entering into the final field
trial of its domestic 3G standard, TD-SCDMA. The trial, which is expected to last about six
months and focus on application development and testing, will serve as a dress rehearsal
of the full commercialization of an independent TD-SCDMA network. Second, both the
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Chinese government and telecoms carriers have indicated their desire to showcase
China’s 3G power during the Beijing Olympics in 2008. Judging by the experience of 3G
operators in other parts of the world, it generally takes 18 months to two years from the
time an operator receives its licence to establish its 3G network and launch its services.
Thus, the 3G licences will need to be issued in 2006 if they are to be in operation before
the 2008 Olympic Games.
CHINA’S DOMESTIC 3G STANDARD: TD-SCDMA
The Chinese government has long favoured the time division synchronous code division
multiple access (TD-SCDMA) standard over the European-developed wideband code
division multiple access (W-CDMA] standard and the US-developed CDMA2000
standard, because it combines the SCDMA technique developed by China Academy of
Telecommunications Technology (CATT) with the TD-CDMA method proposed by Siemens
and other manufacturers. The S in TD-SCDMA refers to the special synchronous mode,
which means that all radio base stations transmit and receive synchronously to prevent
feedback interference that is unavoidable with asynchronous radio methods.
The primary motivation for the Chinese government to support and develop the
TD-SCDMA standard is twofold. First, it allows domestic manufacturers such as Datang
Telecom to break the current monopoly enjoyed by foreign manufacturers in the area
of mobile-phone chips. Second, the Chinese domestic standard will also boost the
market share of Chinese telecoms equipment suppliers such as Huawei and ZTE against
established suppliers such as Nokia, Ericsson and Motorola.
Thus, the Chinese government wants to wait for the technologies associated with
the TD-SCDMA standard to mature before allowing 3G networks to operate in the Chinese
market.
POTENTIAL RESTRUCTURING OF THE TELECOMS INDUSTRY
In anticipation of 3G networks commencing operation in China, many industry experts believe
that the Chinese government will soon initiate another round of industry restructuring, in
an effort to ease the effects of competition among telecoms service providers and to
foster growth of China’s TD-SCDMA technology. This follows a restructuring in 2001 of
China Telecommunications Corporation (China Telecom), which led to the establishment of
China Netcom Communication Group (China Netcom).
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The most talked-about restructuring scenario is that of China United Communications
(China Unicom). Under this scenario, China Unicom would be broken up, with its GSM
network (or global system for mobile — the standard digital cellular phone service of
Europe, Japan, Australia) sold to China Telecom and its CDMA network merged with China
Netcom, while the largest mobile telecoms carrier and GSM network provider, China
Mobile Communications Group (China Mobile), would remain intact.
It is possible that one factor contributing to China’s delay in issuing 3G licences
is that the Chinese government is contemplating restructuring its telecoms industry.
After all, a lengthy transition period would be needed to accommodate such a change. If
a restructuring of China Unicom is carried out, it is likely that China will issue only three
3G licences, one each to China Mobile, China Telecom and China Netcom, and each for
a particular technology. China Mobile would probably be allowed to operate a W-CDMA
network, China Netcom is likely to be permitted to develop a CDMA 20001x network from
the CDMA network acquired through China Unicom, and China Telecom would be the likely
recipient of the TD-SCDMA franchise.
ADMINISTRATION OF SHORT MESSAGING SERVICE
The volume of SMS transmissions in China is staggering. According to statistics collected
and published by the MII, as of August 31 2005 there were approximately 190 billion
SMS’ transmitted during the past year in China. This figure is a 39.8% increase from the
volume generated in the same period the previous year and is well on its way to breaking
the annual transmission record (220 billion short messages) set in 2004. The heavy
SMS traffic also generated handsome revenues for service providers. Assuming service
providers charge users a minimum of Rmb0.10 for each SMS transmitted, then for the
first eight months of 2005 they collected approximately Rmb20 billion (US$2.5 billion) in
revenue from SMS’.
LEGAL DEVELOPMENTS
In contrast to the rapid increase in SMS usage, the development of Chinese laws regarding
the administration and regulation of this area is moving at a very slow pace. In fact, China
currently does not have any formal regulations governing SMS, perhaps because their
popularity was not foreseen by the Chinese regulatory authorities.
Due to the lack of regulations governing SMS use in China, some individuals and
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entities have tried to exploit these services to transmit unsolicited advertisements (similar
to ‘spam’ e-mails), fraudulent or deceptive information, obscene and pornographic content,
or to conduct illegal activities such as fraud.
On November 1 2005, a joint press conference was held in Beijing by the MII, the
Ministry of Public Security (MPS) and the China Banking Regulatory Commission (CBRC)
to announce concerted action from the three government departments to combat
transmission of illegal short messages and to strengthen SMS regulation in China. It
was announced that the MII had drafted the Regulations on the Administration of Short
Message Service, which would be promulgated soon, following a review and consultation
process involving the MII, MPS, CBRC and other relevant government authorities.
Although the exact content of the SMS regulations was not disclosed at the press
conference, representatives of the three government departments outlined the proposed
definition of illegal short messages and called for providers of basic telecoms services to
implement a ‘real-name’ registration system for all mobile phone users.
ILLEGAL SHORT MESSAGES
The MII, MRS and CBRC have identified the following five types of short messages as illegal,
and which they are determined to prevent:
Messages with intent to defraud: These messages are usually sent under false pretences
(for example, to identify the sender as a bank, union-pay service centre or other financial
institution) and with the intent to defraud the public or personal property of others.
Messages containing illegal content: Messages under this category are those that
disseminate content such as pornography, obscenity, gambling, violence or terror, or
content that solicits or instructs criminal activities.
Messages that offer to sell illegal goods: Any message that offers to sell firearms,
ammunition, explosives, smuggled automobiles, narcotic drugs, hallucinogens, obscene
materials, counterfeit notes or receipts, or property known to have been obtained in a
manner constituting a criminal offence.
Messages containing deceptive information: These messages generally contain falsified
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information regarding lucky draw prizes, matchmaking personals and job recruitments, or
information regarding solicitation or arrangement of prostitution services.
Catch-all category: This broad category includes recurring messages that interfere with
the normal life of the recipient, and all other messages containing information prohibited
by the constitution, laws and regulations of the PRC.
The MPS has encouraged recipients of illegal short messages to call the “110” police
hotline to report such messages, and has promised to take swift and decisive action,
including termination of the offender’s mobile-phone services and criminal prosecution.
REAL-NAME REGISTRATION SYSTEM
During the November 2005 press conference, the MII, MPS and CBRC representatives
also urged providers of basic telecoms services to implement the real-name registration
system. If the system is implemented, all mobile-phone users in China will need to
register their personal identification information with the relevant service providers. The
government’s intent is quite clear: to enable the relevant authorities to trace the source
of illegal short messages. It is entirely possible that the establishment of such a system
is pencilled in as a requirement for SMS regulations to be successfully implemented. The
Chinese government appears to have taken the stance that such a system is the most
effective solution to combating illegal short messages.
The real-name registration system has generated considerable debate in China.
While some commentators have embraced the concept, others have raised concerns
regarding practicality and personal privacy.
System practicality
According to information released by the Telecommunications Research Institute of the
MII, the total number of mobile phone users in China reached 383 million at the end of
October 2005. Of this, only 183 million users are network subscribers and the remaining
200 million users are pre-paid. Unlike network subscribers, pre-paid users in China are
generally not required, and in practice do not file or register any personal identification
information with the basic mobile telecoms service providers because pre-paid SIM cards
are widely distributed through supermarkets, convenience stores and newspaper and
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magazine stands.
Thus, if the real-name registration system is implemented, more than half of China’s
current mobile-phone users will need to register for the first time with service providers. The
sheer size of the population presents a major challenge for the registration process, and
it is not known whether the basic mobile telecoms service providers have sufficient human
resources and operational capacity to carry out the registration process. Moreover, the
logistics involved in gathering, reporting and maintaining the information may be complex,
since the current distribution network for prepaid cards is so widespread.
On the other hand, the SMS regulations could provide a grace period to
accommodate registration of current pre-paid users. Nevertheless, the providers of basic
mobile telecoms services will face a daunting task if they are required to implement the
real-name registration system.
Personal privacy
This concern is centred on the privacy of registered information disclosed under the
real-name registration system. Since basic mobile telecoms service providers, and their
officers, employees or agents, will have direct access to registered personal identification
information through the registration process, there is a danger that such information
could be exploited or disclosed to a third party for commercial or personal gain.
In order to address this privacy concern, the SMS regulations should provide certain
provisions to restrict the use or disclosure of personal identification information collected
through the real-name registration system and require the basic mobile telecoms
service providers to establish satisfactory confidentiality standards for maintaining such
information.
Cost to service providers
China’s telecoms service providers are opposed to the real-name registration system due
to concerns over the associated costs. According to Xinhua, the proposal has sparked
protests from operators such as China Mobile and China Unicom, who have complained
that the shift will require a mountain of extra paperwork. The registration process could
turn out to be tedious and scare away potential users. Therefore, some observers doubt
it will be implemented in the near future because the service providers lack the financial
incentive to carry it out.
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On the other hand, with more than 50% of mobile-phone users using pre-paid SIM
cards with no personal registration, it is unlikely that SMS transmission can be regulated
without the establishment of the real-name registration system. It will be interesting to
watch as this issue develops.
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Hong Kong
By Christine Yam, Wendy Lo and Keith Lee
Preston Gates & Ellis LLP
To pave the way for fixed-mobile convergence (FMC) - the new industry buzzword
whereby mobile phones use fixed network technologies - Hong Kong’s Office of the
Telecommunications Authority (OFTA) issued a consultation paper on September 21
2005. It aimed to solicit views from the industry and other interested parties on the need
to revise the current separate fixed and mobile-carrier licensing regime, and to review the
different rights and obligations currently applied to fixed and mobile carriers.
Through public consultation, OFTA also sought to examine the impact of FMC on
the existing regulatory framework and network operators. By the end of the consultation
period in late November 2005, the authority had received nine submissions, including a
joint operator submission from 13 fixed-line, mobile and satellite operators.
THE CURRENT REGIME
At present, fixed and mobile telecommunications operations in Hong Kong are governed
by different regulatory and licensing regimes. Currently, the two major types of carrier
licences issued by OFTA are:
(i)
licences issued to fixed network operators that connect users via an access network
of copper wires and optical fibres under fixed telecoms network service (FTNS)
licences or fixed-carrier licences, and
(ii)
licences issued to mobile network operators that connect users by secondgeneration (2G) or third-generation (3G) wireless access networks under public
radiocommunications services (PRS) licences or mobile carrier licences.
Aside from the difference in network access, different rights and obligations are
granted and imposed on licensees. For example, only fixed carrier licensees are given right
of access to buildings, while mobile carrier licensees are given the right to use frequency
spectrum through spectrum auctions. Notwithstanding such differences, however, both
the fixed and mobile carrier licences have a basic validity period of 15 years from the date
of issue in line with the Telecommunication (Carrier Licences) Regulations.
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THE RATIONALE FOR A UNIFIED LICENSING REGIME
With the increasing use of broadband wireless access (BWA) and other new technologies,
voice, data and multimedia applications can now be delivered to users at fixed locations
or in motion by the same access network, serving both fixed-line and mobile users. In the
FMC environment, it has become increasingly difficult to classify a service as fixed-line or
mobile. Even if a network operator is capable of providing both fixed and mobile services
through advanced technologies, it is still required to obtain two different licences the under
current licensing restrictions. The sustainability of separate licensing frameworks for fixed
and mobile services is questionable in the FMC environment.
In December 2004, OFTA began conducting public consultations on the introduction
of BWA services, which are access technologies based on the use of high-capacity radio
links to deliver telecoms services, including broadband. It received 30 submissions to the
first consultation and OFTA responded by issuing a second consultation paper in August
2005. The BWA consultation and the government’s plan to launch an auction for six BWA
licences have made FMC more imminent.
As the Legislative Council is expected to pass the relevant BWA licensing legislation
by the end of 2006, OFTA finds it appropriate to launch a unified carrier licensing system
to unite the two separate regimes so that both fixed and mobile operators will be able to
operate with a single licence and be governed under a unified regime. The consultation
paper issued in September 2005 was aimed at examining the regulatory and licensing
framework in the FMC environment and soliciting views from existing operators and other
interested parties on a unified framework.
THE CONSULTATION PAPER
In the consultation paper, OFTA aimed to examine the following regulatory issues that may
need to be revised in the FMC environment:
(i)
the licensing regime;
(ii)
the different rights and obligations currently applied to fixed and mobile carriers;
(iii)
the interconnection charging arrangement between fixed and mobile services;
(iv)
the local access charge arrangement;
(v)
the fixed/mobile number portability, and
(vi)
the numbering plan.
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In short, the paper invited the public’s views primarily on the licensing regime and the
rights and obligations currently applied to fixed and mobile carriers, without proposing a
substantial policy on how to deal with the other issues. This has created much uncertainty
in the industry, as expressed in various submissions. In response, OFTA holds the view that
having separate consultations on the other issues would be more appropriate and would
make any proposed changes to the current regulatory framework more manageable.
The proposed unified licensing framework
The consultation paper proposes a unified carrier licence (UCL) to cover both mobile and
fixed telecoms services. Under the proposed UCL framework, a unified carrier licensee
may be allowed to provide the following services, subject to the scope of services proposed
in their applications:
(i)
fixed services;
(ii)
mobile services, or
(iii)
both fixed and mobile services.
In preparation for the unified scheme, the proposal is that new market entrants will
not be issued with the existing form of fixed carrier and mobile carrier licences. Existing
licensees would be permitted to continue to use their existing licences until they expire.
It is also proposed that each UCL shall be valid for 15 years (the same as in the current
licensing regime for both fixed and mobile licences) and there will be no limit as to the
number of UCLs in the market.
It is also proposed that an existing licensee may opt to convert their current licence
to a UCL for their existing scope of service, or a wider scope of services. This would be
on a preliminary voluntary basis and subject to the authority’s approval. The proposed
conversion arrangement is as follows:
(i)
an existing fixed or mobile licensee may surrender its licence in return for a UCL
where the scope of service remains the same and the validity of the converted
licence will be governed by the expiry date of the existing licence. Relevant conditions
under the existing licence will be transplanted to the UCL; or alternatively,
(ii)
an existing fixed or mobile licensee may surrender its licences in return for a UCL
with proposed changes of scope of service under the following two options:
a)
the licensee submits proposals only on the scope of service to be expanded
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(and not the existing services covered by the existing licence). The converted
licence, if approved, will have the same expiry date as the existing licence. Both
the applicable new conditions imposed by the UCL on the expanded service
and the relevant conditions under the existing licence will be transplanted to
the UCL, or
b)
the licensee submits a new application for the UCL on both existing and new
services to be provided. If approved, the licence will be valid for 15 years from
the date of issue. However, the validity period of the spectrum rights under the
existing licence will remain unchanged (ie: the UCL shall not affect the period
for which any spectrum has been assigned to a licensee under an existing
licence). Existing licence rights will not be transplanted to the new UCL, except
for some specific conditions that 3G licensees are currently subject to, but
irrelevant to other classes of licence. Examples of such conditions include:
terms for payment of the spectrum utilization fee, open network access
requirement, anti-avoidance provisions.
Key rights and obligations under UCL
Network rollout: In the consultation paper, OFTA emphasized that it is necessary to ensure
UCLs are granted to applicants with genuine plans to invest in network infrastructure in
Hong Kong. Similar to existing licensing criteria, the authority will not consider granting
UCLs to applicants who intend to rely primarily on other carriers’ infrastructure to roll out
their network to provide services, or to those who intend to supply transmission facilities
primarily for themselves and their affiliated companies. The authority is also considering
incorporating the proposal for network rollout into the UCL as a binding commitment.
Frequency spectrum: OFTA has explained that the auction mechanism for the existing
frequency spectrum will remain, and that conditions regarding spectrum use will be
imposed on unified carrier licensees. For example, if an existing fixed carrier wishes to
provide mobile services, it will still have to gain right of access to the necessary spectrum.
Converting the existing mobile carrier licence to a UCL itself will not suffice. Also, in order
to monitor the use of frequency spectrum by unified carrier licensees, it is proposed that
OFTA will have the authority to withdraw frequency spectrum assigned to a licensee if it
has not been properly utilized.
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Access right: The consultation paper also mentions the right of access into buildings
provided to existing approved fixed carriers and wireless fixed telecommunications
network services (FTNS) operators. Under section 14(1) of the Telecommunications
Ordinance, these licensees are allowed access to common parts of buildings to install
telecoms lines and equipment to serve occupiers of the buildings. Under section 14(1A)
of the ordinance, mobile carriers are given access rights for the purpose of placing and
maintaining radiocommunications installations to provide radiocommunications service
to a public place, subject to a fee levied by a person having a lawful interest in the land
concerned.
OFTA has proposed that right of access to buildings under section 14(1) should
be granted to the unified carrier licensees on a case-by-case basis, and the authorized
unified carrier should be subject to the same coordination mechanism as the existing fixed
carriers. Unified carriers should also be granted right of access under section 14(1A),
subject to the prevailing fee arrangement based on commercial negotiations between the
unified carriers and the landlord.
Road opening rights: It is proposed in the consultation paper that the same licence
conditions that apply to existing fixed carriers and FTNS licensees be transplanted to the
UCL. For coordination purposes, all unified carriers should be subject to OFTA’s approval on
road opening works on a case-by-case basis, as per the coordination mechanism set out in
the Guidelines for Road Opening for Telecommunications/Broadcasting Operators. Mobile
carriers will not automatically be granted road opening rights. They will have to apply for
them and submit a proposal for the rollout of a network that needs road opening.
Regulation of tariffs and discounts: Currently, although a fixed carrier licensee is no longer
required to seek prior approval for its tariffs or discounts from OFTA, it may still be directed
to notify the authority of discounts to its published tariffs. The authority may take into
account whether the services would raise any competition concerns when it considers
whether to issue such direction. The current regulation is believed to reflect international
best practice and allow regulatory measures to be imposed proportionately, which is
thought to be conducive to further development in the telecoms industry led by market
forces and ultimately benefiting consumers. It is OFTA’s preliminary view that the UCL
should adopt the current tariff and discount regime.
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Other rights and obligations, including the requirement of any-to-any connectivity,
facilitation of number portability and directory services, were also mentioned in the
consultation paper.
Financial impact
The consultation paper proposes a basic annual licence fee of HK$1 million (US$128,890)
to be paid by a unified carrier licensee. A proposed unified annual customer connection fee
of HK$8 per connection (currently at HK$7 per fixed connection and HK$18 per mobile
station) and an annual levy of HK$3 per allocated number will be charged.
Other key issues
Various major operators have expressed their discontent as to the proposals in the FMC
consultation. They generally believe that OFTA should deal with the more fundamental and
practical issues that will arise once FMC emerges.
Interconnection charging arrangement: Under Section 36A of the Telecommunications
Ordinance, OFTA has the authority to determine interconnection terms, including any
technical, commercial and financial terms and conditions that it considers fair and
reasonable.
At present, the interconnection charges between fixed and mobile networks (fixedmobile interconnection) are calculated based on a mechanism called mobile-party-pays
(MPP), which means for every call made from a fixed line to a mobile phone, or from a mobile
phone to a fixed line, the mobile network operator pays the fixed-mobile interconnection
charge to the fixed network operator. Therefore, mobile network operators should have
fixed-mobile interconnection charges payable to fixed network operators included in the
charges to their mobile customers. While calls between two mobile networks are currently
not regulated, mobile operators negotiate their settlement arrangements commercially.
Under the proposed UCL regime, the existing regulation on the charging arrangement
for fixed-mobile interconnection will need to be changed. The current MPP system may no
longer be practical in the FMC environment as it will be impractical, if not impossible, to
define a call made by a mobile phone routed to a hub installed within a household and
attached to a fixed network as a mobile call or a fixed-line call, and vice-versa. A callingparty-pays (CPP) mechanism (which means for every call made from a fixed-line party or
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mobile party, the calling party’s network operator pays for the fixed-mobile interconnection
charge to the called party’s network operator) advocated by the mobile network operators
may make more practical sense.
However, any change to the existing arrangement on fixed-mobile interconnection
charges may trigger a redistribution of costs and benefits between fixed and mobile
network operators as well as benefits to the consumer. The industry suggested further
studies on this topic.
Fixed-mobile number portability: Currently, a fixed-line user can move his or her telephone
number that begins with 2, 3 and 8 from a fixed network to another fixed network. This
is known as operator number portability (ONP). Likewise, a mobile telecoms user can
request to move a mobile-phone number that begins with 6 and 9 from a mobile network
to another mobile network, in what is known as mobile number portability (MNP).
Technically, moving telephone numbers across mobile and fixed-line services is
possible by merging the separate platforms for ONP and MNP via a new integration
database. This is called fixed mobile number portability (FMNP). FMNP is not yet available
in Hong Kong, unlike in the US where it was implemented with the rules of “local number
portability” issued by the Federal Communications Commission in late 2003.
OFTA has not yet conducted a detailed study on the need for FMNP. While this is not
a focus of the consultation paper, the industry has submitted that when the FMC service is
introduced, a telecoms user may be assigned a single telephone number for access to both
fixed and mobile services, depending on his/her location. FMNP, which enables porting of
telephone numbers across fixed and mobile networks, may therefore become necessary.
The industry also noted that the current approach of deploying distributed databases is
unlikely to be sustainable. Implementing FMNP will, therefore, involve additional technical
and financial burdens on the industry.
Numbering plan: Under the current numbering plan, the numbering level is used to denote
the service type provided by the operators. Numbers 2, 3 and 8 are allocated for fixed
services, and 6 and 9 for mobile services. In the consultation, the industry noted that this
may not work in future as fixed and mobile services may have to share these numbers.
It requested that the Telecommunications Numbering Advisory Committee to assess this
practical operational issue.
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INDUSTRY FEEDBACK
In general, the industry thinks that it is inappropriate to study the FMC regulatory regime
prior to assessing more practical issues related to it. In the Joint Operators Submission, the
13 licensees who are responsible for more than 90% of the telecoms investments in Hong
Kong advocate a ‘policy first’ approach. Rather than commenting on revising regulatory
issues as discussed in the consultation paper, they commented on OFTA’s consultation
process. They said the content of the consultation paper was largely limited to issues
concerning the terms and conditions of the proposed UCL as OFTA is inviting the industry
to comment on a limited set of specified issues associated with the implementation of a
licence before the government deals with the substantive policy issues concerning FMC.
The licensees asked for consultations on policy issues before consultations on
implementation matters. They also requested that a broad spectrum policy review (SPR)
and a full consultation dealing with the substantive FMC issues (covering issues such as
use of public resources, fixed-mobile interconnection charging arrangements, numbering
plan and number portability) be concluded before finalizing consultations on FMC as well
as BWA.
The joint operators also said there is a clear inter-relationship between BWA, on the
one hand, and FMC and SPR on the other. The outcomes of the FMC consultation and SPR
will directly determine the rights and obligations of the BWA licensees, including spectrum
allocation, scope of use, tradeability, interference, interconnection, numbers, etc. The UCL
system is a question of form that can only be evaluated once the substantive FMC policy
issues are resolved.
Other network operators also said that it is premature to consider the format of a
converged licence before dealing with other relevant convergence issues such as number
portability, numbering plan and fixed-mobile interconnection charges. They urge OFTA to
settle fundamental issues before proceeding to discuss FMC licensing arrangements.
Further, local network operators believe that the maturity of the relevant technology
associated with BWA and FMC remains questionable. They do not find widely available
technologies and converged handsets applicable to accommodate both fixed and mobile
telecoms services. A unified licensing framework may not be feasible until technology
has matured sufficiently to enable full service mobility. Also, consumer demand for such
technologies and service remains unproven. The authority is, therefore, urged to deal with
the substantive issues of convergence before moving on to procedural and implementation
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issues such as licence format.
Some critics also referred to the proposed increase in licence fees for fixed-line
telecoms in the form of higher total cost per customer. Interconnection charges per line
under the UCL are HK$8 and the license fee per number is HK$3. These translate into a
total cost per customer of HK$11, which represents an increase of more than 50% from
the prevailing fee rates. Fixed-line providers may also be disadvantaged for the proposed
BWA licence. BWA makes it possible for fixed-line providers to provide services through
wireless networks to a larger area without deployment work inside buildings.
Under the new BWA licence, mobile services providers that win the bid for the new
licence will be issued a fixed-line provider licence, making them truly integrated. However,
fixed-line providers can only provide truly mobile services through BWA after 2008, which
may give mobile service operators the first-mover advantage. In summary, the industry felt
that the latest consultation was impractical.
OFTA’S RESPONSE
MH Au, Hong Kong’s director-general of telecommunications, has addressed operators’
concerns in various public presentations and has reiterated that the authority will
commission consultants to propose a long-term sustainable and cost-effective solution
for operating in the FMC environment. He said issues such as FMNP, fixed-mobile
interconnection charges and fixed-mobile number portability arrangements were not
discussed in the consultation paper as it was felt that it would be more appropriate to
break relevant issues down into manageable blocks.
Au suggested that the length of assessments and consultations would depend
primarily on whether the industry could reach a balanced, practical consensus that is in
the interest of the long-term development of Hong Kong’s telecoms industry.
LOOKING AHEAD
Network operators in the UK and South Korea have already put FMC services and various
convergence-enabled handsets on trial. In Hong Kong, BWA and FMC discussions gained
momentum towards the last quarter of 2005, in line with technological advancement. A
future with minimal or even zero distinction between fixed-line and mobile-phone service is
envisioned, where users can enjoy truly complete worldwide mobility with a single phone
number, a single handset, a single phone bill and a single point of contact for customer
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service.
However, this evolution will be subject to a thorough review and consultation process
to ensure a balance between commercial interests and public need. This will take time to
resolve and may not be finalized by the end of 2006. Given the rapid change in technology
and the public appetite for better and ever more cost-effective and flexible services, the
regulators will need to apply more resources to address the issues in a relatively timely
manner.
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By James J.Y. Chen, David Chang and Linda Chang
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Under the supervision of Taiwan’s Ministry of Transportation and Communications (MOTC),
the directorate-general of telecommunications (DGT) has since 1996 gradually opened up
the telecoms service market and focused on establishing a fair market. As of June 2004,
Taiwan had 107 type I operators and 492 type II operators, compared with one type I
operator and 67 type II operators in June 1996. The number of type I operators reached
100 by November 2005, with type II operators at 591. Gross output value had reached
NT$12 billion (US$370 million) in the third quarter of 2005, up 21.7% from NT$9.8 billion
in the third quarter of 2004.
FIXED-LINED NETWORK SERVICES
In the area of fixed-lined network services, the rather slow development of last-mile wireless
broadband technology has meant the international call market remains highly competitive,
with service providers competing fiercely for enterprise subscribers. The number of
telephone subscribers rose by 114,000 in the year to October 2005, amounting to a
total of 13.63 million. That translates to a telephone penetration rate of approximately
59.91%.
However, the government and the industry are both working intensely on last-mile
broadband technology, or WiMAX, the standards-based wireless technology that provides
Figure 1: Development of Taiwan’s Telecoms Industry
(in NT$100mn)
Type
2004/Q3
2005/Q3
Growth Rate
Broadband networks
366
464
26.8%
Wireless telecommunications
621
737
18.7%
Total
987
1,201
21.7%
Source: IEK (2005/11)
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Figure 2: Growth of Taiwan’s Telecom Facilitie (in NT$100mn)
Type
2004/Q3
2005/Q3
Growth Rate
Wireless telecommunication (e.g.
mobile phone, WLAN)
621
737
18.7%
Local area network (e.g. LAN
switch, SOHO router)
163
186
14.1%
33
41
24.2%
Broadband access facility (e.g.
cable CPE, xDSL CPE)
111
177
95.5%
Phone, fax, cable modem
33
27
-18.2%
Others (e.g. optical transmission
equipment, electrical transmission
equipment, switchboards)
26
33
26.9%
987
1,201
21.7%
Broadband
IPSTB)
application
Total
(VoIP,
Source: IEK (2005/11)
high-throughput broadband connections over long distances.
In September 2005, the MOTC started issuing three kinds of licences: fixed-line local
networks, long-distance networks and international networks. On September 20 2005
it promulgated the revised Regulations Governing Fixed Network Telecommunications
Businesses, and from September 29 to October 31 2005, it accepted applications for
fixed-line network service licences. During that time, one company applied for a licence for
international network business.
THIRD-GENERATION MOBILE PHONE SERVICES
The second-generation (2G) mobile telecoms service market is now dominated by three
main players: Chunghwa Telecom, Taiwan Mobile and Far Eastone. Initially, subscribers
increased rapidly. In recent years, however, the number of 2G subscribers has been
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Figure 3: Taiwan’s Top 10 Telecom Products (in NT$100mn)
Position
Product
2004/Q3
Output Value
2005/Q3
Growth Rate
Market
Share
1
Mobile phone
314
6.9%
26.1%
2
WLAN
161
32.9%
13.4%
3
GPS
145
77.3%
12.1%
4
SOHO router
95
9.2%
7.9%
5
Cable CPE
94
261.5%
7.8%
6
xDSL CPE
85
2.4%
7.1%
7
LAN switch
78
18.2%
6.5%
8
Bluetooth
56
51.3%
4.7%
9
IP phone
21
11.0%
1.7%
10
VoIP gateway
13
160.0%
1.1%
1,062
–
88.4%
Top 10 total
Source: IEK (2005/11)
decreasing owing to a change in market trends. 2G service subscribers are expected to
gradually turn to third generation (3G) mobile telecoms services, which have video and
internet capability, resulting in rapid growth of the 3G business. As of October 2005, there
were 21.97 million mobile phone subscribers, or 1.15 million fewer than in October 2004.
The penetration rate was 96.58%.
BROADBAND TECHNOLOGY
According to web researcher Point Topic, as of the second quarter of 2005, Taiwan
ranked 11th in the world in the number of broadband subscribers (with approximately four
million).
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To promote broadband internet in line with the ‘e-Taiwan’ plan under the Executive
Yuan’s Challenge 2008 National Development Plan, the DGT aims to provide six million
people with access to broadband at home. The plan includes a short-term target of three
million broadband subscribers, a goal reached in 2003, and a final target of six million
subscribers, which should be reached by the end of 2007.
In view of the profound impact that the internet has on everyday life, the government
is gradually opening up the telecoms market and is focused on developing new broadband
technology. As a result, the internet penetration rate is growing sharply. According to
a report published by the Taiwan Network Information Center (TNIC) in July 2005, the
internet penetration rate of households in Taiwan had reached 68.34%, with broadband
penetration at 56.84%.
VOICE OVER INTERNET PROTOCOL
Thanks to the development of the internet and broadband technology, voice over internet
protocol (VoIP) services - which allow telephone connections via the Internet - is very likely
to completely replace the traditional phone system. The government and the industry
are working towards combining broadband technology with the traditional telephone
network to further enhance VoIP services. To that end, the MOTC has promulgated the
revised Type II Telecommunications Service Rules, the Regulations Governing Network
Interconnection among Telecommunications Enterprises and the Regulations Governing
Telecommunications Numbers.
The output value of VoIP gateways in the third quarter of 2005 amounted to
NT$13.61 million, 170% higher than the third quarter of 2004. As a result of increasing
market demand in Europe and the United States, Taiwan is expecting a continuous rise in
the gross output value of VoIP. For 2005, the total gross output value is estimated to be
NT$400 million, 114% higher than 2004.
NETWORK PENETRATION RATE
According to a survey conducted by the Institute for Information Industry, there were about
8.83 million local internet users at the end of 2003, with a penetration rate of 39%, up
from 22% at the end of 1999.
Another survey conducted by the TNIC in July 2004 estimated that 12.74 million
people, or 56.49% of the population, had access to the internet. Some 9.36 million of
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them, or 48.99% of the population, were broadband users. In addition, the survey indicated
that 4.86 million households, or 68.85%, were internet subscribers, of which some 3.49
million, or 49.97%, had broadband access.
According to the TNIC’s report published in July 2005, the northern part of Taiwan
has the highest network penetration rate, at approximately 76.71%. Rates in the southern
and central parts are 64.1% and 58.4% respectively. Eastern Taiwan accounts for
54.78%. Overall, network penetration seems to still leave a little to be desired, especially
the gap between different geographical areas, which can be a barrier to a comprehensive
network system. As a result, the DGT is now executing an “every village enjoys access
to broadband” campaign in the hope of making new broadband technology more easily
accessible to remote areas.
NATIONAL COMMUNICATIONS COMMISSION
Unlike the telecoms and media industry in the United States and the United Kingdom
(which are under the jurisdiction of the US Federal Communications Commission and the
Office of Communications of the United Kingdom respectively), the industry in Taiwan is
mainly under the jurisdiction of the Department of Posts and Telecommunications of the
MOTC, the DGT and the Government Information Office.
However, it is getting more difficult to clearly separate the telecoms industry from
the media industry, let alone to distinguish the different functions of the authorities.
Cross-cooperation among different enterprises is also more common. To avoid regulatory
overlap or inconsistency and to better enhance administrative efficiency, a single regulator
is needed; hence the birth of the National Communications Commission (NCC).
To push for the establishment of the NCC, the Executive Yuan set up the National
Communications Commission Preparatory Initiative Committee in February 2002, and
drafted the Communications Basic Law, which was promulgated on January 7 2004, and
the Organizational Statute of the National Communications Commission.
The Communications Basic Law provides the legal basis for the NCC as an institution,
and serves as the guiding principle for developing the communications and media industry.
It is also the basis for revising current laws related to communications infrastructure, such
as the Telecommunications Act and the Broadcasting Law. The Organizational Statute of
the National Communications Commission sets forth the NCC’s organizational structure
and operations, establishes the procedure for selecting commissioners and assures
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the independence of its policies, their implementation and the source of funding. Under
the statute, the NCC is governed by a panel of seven full-time commissioners, who are
nominated by the premier and appointed by the president. The term for a commission is
five years. However, three or four commissions will have an initial term of three years.
The NCC, set up in January 2006, is divided into five divisions responsible for the
content of transmission, operation management, comprehensive planning, technology
development and resource management.
The line between the communications industry and the media industry will further
blur owing to the development of technology and industrial integration. To accommodate
the change, regulatory reform is needed. Consumers and the industry as a whole will
benefit from legal and technological advances. Now that the NCC is to be set up soon,
Taiwan is seeing greater technological convergence and sounder development in the
communications industry.
AMENDMENTS TO THE TELECOMMUNICATIONS ACT
The Telecommunications Act was significantly revised in 1996 in the hope of further
liberalizing the telecoms market. This paved the way for market liberalization, thereby
breaking the monopoly in the market. Subsequently, mobile phone, radio paging and
mobile data services were opened to the private sector in 1997. This was followed by
satellite communications in 1998, cable leasing and 1,900 megahertz (MHz) digital lowpower cordless phone services in 1999, fixed networking and international submarine
cable leased-circuit services in 2000 and international simple resale (ISR) and 3G mobile
telecoms in 2001.
According to the current Telecommunications Act, telecoms enterprises are classified
into type I and type II. Type I enterprises install telecoms line facilities and equipment to
provide related services. These include network transmission facilities connecting sending
and receiving terminals, switching facilities to be integrated with network transmission
facilities and auxiliary facilities. Type II telecoms enterprises are those other than type I.
Type I telecoms services used to be considered highly related to public welfare and
indispensable to everyday life, while type II services were intended for enterprises’ specific
use. However, it is getting more difficult to tell these two kinds of enterprises apart as
a result of technological development and business convergence. For example, type II
telecoms services are now playing an important role in daily life.
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Figure 4: Market Entry Mechanism
Type I
Type II
Special permission
Current
Structure
Permission
To be examined:
– business scope
– business area
– type of telecoms
– telecoms facilities
– financial structure
– technology capability
– fees & calculation
– personnel
– business operation date
Approximately 1-2 months
for examination
Special permission
To be examined:
– business scope
– business area
– type of telecoms
Amended
Structure
To be examined:
– business scope
– business area
– type of telecoms
– telecoms facilities
Approximately 15 days
for examination
Basically, permission will be
granted upon submission of
complete application materials
– telecoms facilities & network structure
– compliance with the law
– restriction on foreign investment
Approximately 15 days for examination
Right of way, use of scarce resources shall be applied for to the
competent authority
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Figure 5: Market Exit Mechanism
Type I
Type II
Approval
Current
Structure
Ex-post report
To be examined:
– The competent authority’s approval is used as the mechanism
to ensure notice to the consumers and the business transfer to
other enterprises.
There are consumer
protection-related
provisions
There is no consumer
protection-related
provision
All telecoms enterprises
Notice to the consumer and report to the competent authority
Amended
Structure
Notice
– mail
– e-mail
– refunding pre-payment
– personal data protection
There is consumer protection-related provision
Therefore, the DGT is considering abolishing the distinction between telecoms
services, lowering the entry barrier and streamlining the licensing procedure, so as to
encourage fair competition and accelerate network penetration nationwide. The DGT is
also proposing a new supervisory system. Under this, the competent authority will basically
adopt an ex-post regulatory framework. Ex-ante regulation will mainly be imposed on the big
players, or the leading enterprises, in the market. As to the market exit mechanism, the
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DGT will, in principle, grant enterprises the freedom to exit the market. However, to protect
consumer welfare, the DGT will also impose the duty of disclosure on enterprises.
Aside from the above-mentioned principles that guide the future amendments to
the Telecommunications Act, amendments will be made on the basis of Taiwan’s promises
made on entry to the World Trade Organization in 2002.
FIBRE TO THE HOME
The market need for broadband services is growing rapidly. Broadband infrastructure
has an important impact on a country’s digital development and, ultimately, its economy.
The state of a country’s broadband network indicates its competitiveness. Taiwan is now
ranked second in the world in broadband penetration rates, preceded only by South Korea.
To further develop Taiwan’s competitiveness, the government and the industry have worked
out several plans aimed at increasing broadband subscribers from 150,000 in 2004
to 2.8 million in 2008, and the gross output value of telecoms and media services from
NT$600 billion in 2004 to NT$900 billion in 2008.
The government implemented the e-Taiwan plan in 2002, which includes eGovernment, e-Life, e-Commerce and e-Traffic. According to the Institute for Information
Industry, the number of broadband subscribers in Taiwan had reached 3.08 million as of
March 2004. Asymmetric digital subscriber line (ADSL) services (a type of high speed
internet connection) continue to dominate the broadband market, accounting for 90% of
broadband services in Taiwan, with xDSL (the technology that enables ordinary voice-grade
copper telephone wires to also carry high-speed data traffic) subscribers numbering 2.7
million.
Cable modem accounts for the remaining 10%, with 380,000 subscribers. xDSL is
now the dominant form of broadband in Taiwan. The main bandwidth is 2M/128K and the
maximum bandwidth is 8M/256K, both relatively small compared with countries such as
Japan and Korea.
To catch up with countries that have more advanced telecoms industries and to
lower internet service fees and improve the overall quality of broadband infrastructure, the
government has implemented a three-step plan for broadband development in Taiwan:
Step One, the preparation period, 2004-2005:
(i)
set up details of the plan and the internet infrastructure;
(ii)
implement model network applications and conduct experiments, and
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(iii)
implement a sound legal environment.
Step Two, the implementation period, 2006-2007:
(i)
further develop the M-Taiwan plan and start to provide business services, and
(ii)
increase the number of households using FTTH to 2.06 million.
Step Three, the maturity period, 2008-2010
(i)
accomplish the M-Taiwan plan and establish the follow-up infrastructure;
(ii)
increase the number of households using FTTH to 4.2 million, and
(iii)
broaden the bandwidth for enterprise use to 1 gigabits per second (Gbps) and for
household use to 100 megabits per second (Mbps).
Generally speaking, internet service providers (ISPs) now face the following
challenges or difficulties:
(i)
the cost to develop the FTTH network is still high and it is thus difficult to speed up
development;
(ii)
(iii)
FTTH falls into the definition of the ‘telecommunications industry’ under the
Telecommunications Act, so ISPs must meet certain legal requirements to enter the
market, which, to some extent, is a barrier to a competitive market, and
the ‘right of way’ of different administrative areas will be involved when the network
layout plan is implemented, interrupting network construction.
In view of the difficulties, ISPs hope that the government will further open up the
market for FTTH services. To that end, they urge that certain legal barriers be lifted to
ensure fair competition. It is foreseeable that Taiwan will see tangible growth in FTTH
services thanks to the joint efforts of the government and ISPs.
WORLDWIDE INTEROPERABILITY FOR MICROWAVE ACCESS
Worldwide interoperability for microwave access (WiMAX), the ‘last mile’ wireless solution,
was originally designed as an alternative or substitute for DSL or cable modem broadband.
It represents the next evolution in broadband wireless technology, meaning it does not
need line of sight and allows downloads at a higher speed. In addition, more competition
among broadband service providers means lower prices for consumers.
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According to the DGT, WiMAX-related technologies are expected to come into full
blossom in 2007. The Industrial Development Bureau of the Ministry of Economic Affairs
has devoted NT$1.8 billion to promote and sponsor the development of last-mile wireless
solutions, with the aim of realizing its goal of creating “mobile cities” and increasing WiMAX
coverage.
In order to draw a line between WiMAX and 3G service, the DGT appeared to have
intended to limit WiMAX’s application to voice service. WiMAX was to thus focus on data
and image transmission, which is why it is categorized as a type II service in the telecoms
industry and is accordingly subject to a lower capital requirement.
However, the DGT has since made it clear that it was not its intention to restrict
the development of WiMAX, including a WiMAX VoIP service. According to the DGT, the
blueprint for WiMAX development in Taiwan, drawn up by the National Information and
Communications Initiative Committee of the Executive Yuan in September 2005, will be the
guiding principle. It states that WiMAX and 3G services are complementary rather than
mutually exclusive. The DGT’s general policy is to allow free and fair competition between
WiMAX and 3G service providers.
ALREADY A LEADING PLAYER
The facts show that Taiwan is among the top players in this digital world. According to the
International Telecommunication Union’s report published in June 2005, Taiwan’s Digital
Opportunity Index places it 7th in the world and 4th in Asia. As to affordability and coverage,
Taiwan is second only to Hong Kong. In infrastructure, it is outranked only by Singapore,
Denmark, Japan and Sweden. Joint efforts from the government and the industry, along
with further liberalization of the market, mean that Taiwan’s telecoms industry has great
potential.
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By Martin L. Stern and Megan H. Troy
Preston Gates Ellis & Rouvelas Meeds LLP
2005 marked the beginning of substantive regulation of voice over internet protocol (VoIP)
services in the United States. The initial stages of this regulation have focused primarily on
ensuring public safety - delivery of calls to emergency service operators (enhanced 911 or
E911) and assisting law enforcement performing surveillance (under the Communications
Assistance for Law Enforcement Act, or CALEA) - for VoIP services that most closely
resemble traditional telephony.
The Federal Communications Commission (FCC) extended certain public safety and
E911 obligations to providers of interconnected VoIP services (i.e., those services that
enable end-user customers to receive from and terminate calls to the traditional circuitswitched network), such as VoIP offerings provided by traditional telecoms and cable
carriers, as well as internet service providers (ISPs) and standalone VoIP providers like
Vonage. The FCC also extended certain law enforcement access obligations to providers
of interconnected VoIP services.
In addition, driven by various developments in communications and technology,
including increasing consumer and regulatory attention to VoIP and by the challenge the
internet poses to the existing telecoms regulatory framework, Congress has introduced
several bills that could affect both VoIP and broadband providers. While it is too early to tell
which, if any, of these bills is likely to become law, US law appears to be headed in a certain
direction in relation to the E911 requirements imposed by the FCC.
VOIP
VoIP involves placing voice calls over data networks using internet protocol (IP), rather
than establishing a dedicated circuit between parties, as in traditional circuit-switched
telephony. Among other things, this allows for the more efficient use of bandwidth.
VoIP is a software-defined function delivered on top of the internet and yet, to the
end-user, it can appear identical to traditional telephony. Because VoIP service providers
typically employ the same technologies and transmission methods as ISPs, at least in
part, their service straddles the line between an internet application and a regulated
communications service.
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Some argue that VoIP should be similarly treated as an information service under
the Communications Act of 1934 (Act) and remain free of common carrier regulation,
including the payment of access charges and universal service funding fees. Others
contend, however, that at least some varieties of VoIP are telecommunications services
under the Act and should be regulated accordingly because these services are often
indistinguishable from basic voice service to the end user and use partly the same
technology and networks as traditional voice service.
Over the past few years, the FCC has started to address the appropriate regulatory
framework for VoIP services, resolving some preliminaries but leaving some tougher issues
unresolved at present. For example, the FCC concluded that computer-to-computer VoIP
services are not regulated telecoms services, but rather information services. In contrast,
a carrier merely using IP transport in a portion of its network does not transform what is
otherwise a basic telecoms service into an unregulated information service for which no
access charges or universal service payments are required.
The FCC also determined, in a decision that is currently on appeal, that however
VoIP is regulated, it is an interstate service subject to FCC jurisdiction, rather than an
intrastate service subject to the jurisdiction and regulation of the various state public utility
commissions.
As to the really thorny regulatory issues, in March 2004, the FCC initiated a
comprehensive rule-making proceeding to examine the proper regulatory treatment of
IP-enabled services, including VoIP. That proceeding raised questions regarding the proper
classification of various IP-enabled services, jurisdiction and application of various types of
regulation to IP-enabled services.
The FCC avoided making any initial determinations as to the proper definition of VoIP
services, their statutory classification, or the specific regulatory obligations of VoIP service
providers. It sought comment on the need to establish different regulatory classes of VoIP
services and the manner in which VoIP classes could be defined and distinguished.
While acknowledging that IP-enabled services may not fit cleanly within any of the
current regulatory regimes, the FCC also solicited comment on the proper statutory
classification (ie: telecoms versus information services) of each category of VoIP services.
Finally, the FCC asked commenters to address the jurisdictional nature of VoIP services
and, more generally, sought input on the proper role of state regulation.
While broader classification issues and other regulatory questions raised in the
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March 2004 Notice of Proposed Rulemaking (NPRM) remain unresolved, including
intercarrier compensation and universal service issues, in two separate proceedings over
the past year, the FCC did extend to interconnected VoIP providers certain 911 and law
enforcement obligations traditionally imposed on telecoms providers.
VOIP E911 ORDER
On May 19 2005, the FCC adopted an order imposing E911 obligations on interconnected
VoIP providers, known as the IP-Enabled Services and E911 Requirements for IP-Enabled
Service Providers, First Report and Order and Notice of Proposed Rulemaking (VoIP E911
Order). The decision came in the wake of several highly publicized incidents in which VoIP
subscribers were unable to reach emergency services by dialling 911. The VoIP E911
Order imposed ambitious requirements on certain interconnected VoIP service providers,
reflecting the FCC’s view that VoIP providers’ opportunity to provide and profit from new
services “brings with it the responsibility to ensure that public safety is protected”.
The requirements imposed by the VoIP E911 Order are threefold: covered providers
must provide E911 service which includes transmission of accurate call-back number and
location to the Public Safety Answering Point (PSAP), collect location information from
customers and provide customers with the ability to change the registered location. These
mandates were required to be satisfied by November 28 2005, which was 120 days after
the effective date of the order. In addition by July 29 2005, providers were also required
to notify customers of limitations in their E911 service.
Many inside and outside the VoIP industry, including various members of Congress,
seriously questioned the technical feasibility of the November 28 2005 deadline. For
example, in the wireless context, E911 has taken several years to implement and multiple
wireless carriers still have not achieved full E911 capability. Indeed, the sheer volume of
waivers filed with the FCC over implementation of the deadline, as well as court challenges
to the rules, indicate the compliance issues and exposure the industry faces.
911 SERVICES
Background
“Basic” 911 refers to the capability to deliver a 911 call to the PSAP serving the location
from which the 911 call is placed. PSAPs are the physical locations where emergency calls
are received and then routed to the proper emergency service provider. In addition to the
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Basic 911 functions, “Enhanced” 911 (E911) services include the ability to deliver the calling
party’s call-back number and location information to the PSAP.
Traditional telephone companies are required to implement E911 capabilities. In
extending compliance to interconnected VoIP providers, the FCC reasoned that since VoIP
can be a substitute for traditional telephone services, it should also face similar obligations:
“The record clearly indicates, however, that consumers expect that VoIP services that are
interconnected with the PSTN [public switched telephone network] will function in some
ways like a ‘regular telephone’ service.”
E911 covered services
The FCC’s E911 obligations apply to interconnected VoIP service providers.
An interconnected VoIP service:
(i)
enables real-time, two-way communications;
(ii)
requires a broadband connection from the user’s location;
(iii)
requires IP-compatible customer premises equipment, and
(iv)
permits users generally to receive calls that originate on the public switched
telephone network and to terminate calls to the public switched telephone network.
Explicitly not covered by the FCC’s obligations are services such as instant
messaging or internet gaming that do not allow PSTN connections. In addition, the FCC’s
E911 requirements do not extend to separate services that allow connections only to or
from the PSTN, even if those separate services may be combined.
E911 obligations
The VoIP E911 Order outlines three principal requirements for interconnected VoIP service
providers.
(i)
E911 service: As of November 28 2005, “interconnected VoIP service providers
must transmit all 911 calls, as well as call-back information and the caller’s
‘registered location’ for each call” to the appropriate PSAP, designated statewide
default answering point or appropriate local emergency authority. This is a standard,
not optional, feature. However, this requirement only applies to 911 calls placed by
end-users whose registered location is in a geographic area served by a wireline
E911 network, including a selective router. Further, if a PSAP, designated state default
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answering point or appropriate local emergency authority is not capable of receiving
and processing automatic numbering information (ANI) or location information, the
VoIP service provider is not required to provide ANI or location information.
(ii)
Registered location requirement: As of November 28 2005, interconnected
VoIP service providers must obtain location information from their customers.
Specifically, providers must obtain from each customer, prior to the initiation of
service, the physical location at which the VoIP service will first be used and provide
end-users with one or more methods of updating their registered location. At least
one method of updating registered location information must require the use of
only the customer premise equipment (the CPE, or, for example, the telephone set)
necessary to access the interconnected VoIP service, and each method must allow
an end user to update the registered location at will and in a timely manner.
(iii)
Customer notification: Interconnected VoIP service providers must advise each
subscriber, both new and existing, “of the circumstances under which E911 service
may not be available through the interconnected VoIP service or may be in some way
limited by comparison to traditional E911 service”. They must also “obtain and keep
a record” of each subscriber’s acknowledgment “of having received and understood”
the advisory described. Finally, interconnected VoIP service providers are required to
distribute to new and existing subscribers warning stickers or other labels explaining
that E911 service may be limited or not available and instruct subscribers to place
these near the equipment used for interconnected VoIP service.
Initially, interconnected VoIP providers were required to notify all customers of
any limitations of their 911 service offerings and to obtain express acknowledgements
from them that they had received and understood those limitations by July 29 2005, the
effective date of the VoIP E911 Order.
The FCC stated that it expected a VoIP provider to discontinue service to any
customer that did not respond. However, in response to concerns from the industry,
public safety officials and Congress, the FCC’s Enforcement Bureau extended the deadline
for enforcing this requirement and agreed not to initiate enforcement action against
VoIP providers that filed certain reports regarding their notification efforts until October
31 2005. The FCC explained that it would not seek enforcement against providers that
obtained acknowledgments from 90% or more of their subscribers (although providers
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are expected to continue to seek the remaining acknowledgments).
Means of providing E911 service
The FCC did not specify how interconnected VoIP providers must provide the required E911
service, explaining they could do so “by interconnecting indirectly through a third party such
as a local exchange carrier (LEC), interconnecting directly with the wireline E911 network,
or through any other solution”. The FCC noted that LECs were already required to provide
access to 911 databases and facilities to telecoms carriers, but did not require LECs to
extend that access to interconnected VoIP providers.
Liability protection
The FCC did not extend the liability protection applicable to wireless and wireline carriers
regarding providing 911/E911 service to interconnected VoIP providers, concluding that
without congressional action, it lacked authority to grant such relief.
NPRM on E911 service
The FCC’s VoIP E911 Order was accompanied by a notice of proposed rulemaking (NPRM)
that asked a series of questions about additional steps to ensure the availability of
ubiquitous and reliable E911 service. Chief among these were questions about achieving
automatic location information for portable VoIP services, including whether all terminal
adapters or other equipment used in providing interconnected VoIP services sold as of
June 1 2006 should be capable of automatically providing location information.
The FCC tentatively concluded that services that allow a connection either to or
from the PSTN should be covered by the new E911 requirements “if a user can combine
those separate offerings or can use them simultaneously or in immediate succession”.
The FCC also asked more generally whether other VoIP services should be subject to E911
requirements.
The FCC also asked a series of questions about performance standards for updating
location information; obligations on providers in areas not served by a selective router; how
use of wireless broadband connections should impact applicability of the rules, including
whether wireless interconnected VoIP should be subject to commercial mobile radio service
(CMRS) rules; whether VoIP providers should be required to create redundancies in the 911
system; and the need for additional or more restrictive customer notification requirements.
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Waiver requests
It remains unclear the extent to which the FCC will pursue enforcement actions against
VoIP providers that continue to serve existing customers, or market to and serve new
customers where fully-compliant E911 service is unavailable. In other sectors, for example
involving wireless and telecoms relay services, the FCC has granted providers numerous
extensions and waivers of E911 obligations due to the technical infeasibility of complying
with the new requirements in a timely fashion. In the VoIP context, the FCC chairman
has signalled a “zero tolerance” approach for VoIP E911 non-compliance, turning over
administration of the VoIP rules to the FCC’s Enforcement Bureau.
The Enforcement Bureau, in a series of public notices, indicated that it expected
companies to cease marketing non-compliant services to new customers after the
November 28 2005 effective date. The implication was that companies offering noncompliant service to new customers would face enforcement action and associated
monetary fines known as forfeiture penalties. While the Enforcement Bureau did not
require VoIP providers to disconnect existing customers that do not have E911 service
available where good faith efforts are being made to comply with the rules, it also to date
has not indicated that such providers would be granted amnesty for existing customers.
In reports filed with the Enforcement Bureau, VoIP providers have indicated various
degrees of compliance with the new rules, though it would appear that no provider has
achieved 100% compliance, since there are rather significant holes in the availability of
connections between VoIP gateway providers and the 911 wireline network.
The result is that many providers are rolling out creative interim solutions for
providing 911 capabilities for their customers as additional PSAPs are connected to VoIP
networks. At the same time, numerous providers have filed waiver petitions with the FCC
to allow them to continue to provide service to existing customers and to roll out service to
new customers where fully-compliant E911 service is not available. At the time of writing,
all of these waiver petitions remain pending. All that is known is that the Enforcement
Bureau is reviewing the petitions and the information underlying them. How or when they
will be resolved remains uncertain.
COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT
In 1994, Congress enacted the Communications Assistance for Law Enforcement
Act (CALEA) to preserve the ability of law enforcement officials to conduct electronic
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surveillance effectively and efficiently, despite the deployment of new digital and wireless
technologies that have altered the character of such surveillance.
Law enforcement was concerned that digital transmission and encryption would
make it more difficult to obtain useful information. Accordingly, CALEA requires telecoms
carriers to modify their equipment, facilities and services, where possible, to enable
law enforcement agencies, operating with proper legal authority, to intercept individual
telephone calls and to obtain certain “call-identifying information”.
NOTICE OF PROPOSED RULEMAKING
CALEA expressly applies only to telecommunications services, not to information services
such as internet access. However, with the rapid rollout of VoIP, law enforcement agencies
became concerned that, because VoIP providers had not previously been made subject to
CALEA, VoIP calls would not be tappable.
The Department of Justice, the Federal Bureau of Investigation, and the Drug
Enforcement Agency (DOJ/FBI/DEA) lobbied the FCC heavily to extend CALEA to VoIP
and, in 2004, jointly petitioned the FCC for an expedited rulemaking, seeking, among other
things, an FCC decision that broadband access and broadband telephony be subject to
CALEA. In response, the FCC initiated a proceeding to consider VoIP providers’ obligations
under CALEA.
In its NPRM, the FCC tentatively concluded that providers of managed VoIP and
facilities-based providers of broadband internet access service (whether provided on
a wholesale or retail basis) would be subject to CALEA. This tentative conclusion was
based on determinations that telecoms carriers are more broadly defined in CALEA, and
that broadband internet access services and managed VoIP services are substantial
replacements for local telephone exchange service within the meaning of CALEA.
The FCC also tentatively concluded that call-identifying information in packet networks
is reasonably available when the information is accessible without significantly modifying a
network.
In delineating covered VoIP services, the CALEA NPRM essentially proposed
adopting definitions suggested by the DOJ/FBI/DEA, thereby extending CALEA’s coverage
to “managed” or “mediated” VoIP services. These services were ones “that offer voice
communications’ calling capability whereby the VoIP provider acts as a mediator to manage
the communication between its end points and to provide call set-up,...switching, addressing
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or routing functions for the user”. Not included were peer-to-peer VoIP services, defined
as “disintermediated communications that are set up and managed by the end-user via its
customer premises equipment or personal computer”.
The CALEA NPRM proposed few tentative conclusions regarding the scope of
broadband and VoIP providers’ CALEA obligations. The FCC recognized that “[p]acket
technologies are fundamentally different from the circuit switched technologies that
were the primary focus of the commission’s earlier decisions on CALEA”. The FCC thus
sought comment on whether it needed to clarify the meaning of the term “call-identifying
information” for broadband access and VoIP services.
It also invited comment on the tentative conclusion that information is not
“reasonably” available to broadband access and VoIP providers if the information is only
available by significantly modifying a network. In seeking comment on this issue, the FCC
recognized that content and call-identifying information may be available from different
entities involved in providing and transmitting a VoIP service and sought comment on the
appropriate CALEA obligations.
BROADBAND INTERNET ACCESS AND VOIP
On September 23 2005, the FCC released its First Report and Order and Further Notice
of Proposed Rulemaking addressing CALEA’s application to broadband internet access
and VoIP. The FCC concluded that providers of two specific types of internet service were
subject to CALEA: namely, facilities-based broadband internet access (whether provided
over wireline, cable modem, wireless, satellite, or utility power line), and interconnected
VoIP. The FCC concluded that CALEA should be extended to these services because they
can replace traditional telecoms services already subject to CALEA and are not information
services.
First, the FCC found that an offering substantially replaces local exchange service if it
is a substitute for plain old telephone service (POTS). POTS is the traditional local exchange
service, which supports local calling and also provides access to long-distance service and
the internet. Accordingly, the FCC concluded that broadband internet access is subject
to CALEA because the service could be used to replace dial-up Internet access, which
traditionally is provided via POTS. Likewise, interconnected VoIP providers replace POTS
because, like local exchange carriers, these providers can receive and terminate calls via
the PSTN. Accordingly, interconnected VoIP is subject to CALEA, in contrast to peer-to-peer
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VoIP services that are only available to a limited, pre-defined circle of people.
Second, the FCC also concluded that broadband internet access and managed
VoIP are not information services for the purposes of CALEA, and hence are outside its
purview because they provide switching, routing or transmission conduit functions, just like
telecoms services traditionally covered by CALEA.
The FCC said that its previous findings that broadband internet access and other
services are information services under the Communications Act did not control the
classification of these services under CALEA. The FCC reasoned that CALEA was intended
to cover entities that originate, terminate or direct communications. Thus, in order to fulfil
the statute’s purpose, the exemption from CALEA for information services must be read
narrowly.
The FCC declined to use the concepts of “managed” or “mediated” VoIP to define
VoIP services subject to CALEA. Instead, it ruled that CALEA applied to interconnected VoIP
services, a term first defined in the commission’s VoIP E911 Order. The FCC made clear
that any future expansion of this definition in other contexts, such as E911, would apply
to CALEA as well. CALEA obligations extend to all interconnected VoIP capable of two-way
interconnection with the PSTN. Accordingly, IP-to-IP, IP-to-PSTN or PSTN-to-IP calls made
using a covered service are also subject to CALEA.
Another order, to be released “in the coming months,” will cover the actual
capabilities covered providers will have to offer, along with other issues including
“compliance extensions and exemptions, cost recovery, identification of future services and
entities subject to CALEA, and enforcement”. By taking this approach, the FCC sought to
guarantee that newly covered providers become involved in the development of standards
for CALEA capabilities and compliance. Despite the absence of defined obligations, the FCC
set a compliance deadline of 18 months from the effective date of the order.
The FCC also issued a further NPRM seeking comment on whether there are
managed VoIP services not covered by the order that should be covered by CALEA. In
addition, it sought more information about whether certain classes or categories of
facilities-based broadband internet access providers, notably small and rural providers
and providers of broadband networks for educational and research institutions, should be
exempt from CALEA.
What is clear from this order is that in addition to 911 obligations, VoIP providers will
face the same basic CALEA obligations currently imposed on traditional phone companies.
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The exact contours of those requirements in the VoIP context remain under development
and VoIP providers will not know for some months the impact of those obligations on their
businesses.
CONGRESSIONAL ACTION
Mirroring the increased profile of VoIP issues at the FCC, federal lawmakers have
demonstrated a growing interest in VoIP services and have conducted hearings to evaluate
the need for statutory and regulatory solutions.
Last year, the US Senate Commerce Committee unanimously passed VoIP 911
legislation, S. 1063, that among other things:
(i)
authorizes the FCC to adopt VoIP E911 regulations and requires the FCC to establish
a reasonable period to come into compliance;
(ii)
ensures that VoIP providers have access to E911 components controlled by third
parties, which the FCC E911 Order failed to do;
(iii)
provides liability protection for VoIP providers and public safety groups in connection
with providing VoIP 911 services, which is currently enjoyed by traditional phone
companies and wireless providers;
(iv)
provides for a waiver process for VoIP providers to continue to provide service to
customers even where E911 service is unavailable.
The bill’s proponents were unsuccessful in having the full United States Senate pass
the legislation before the end of the first session at the end of 2005, and it is expected to
be taken up by the full Senate sometime in 2006. Similar legislation in the United States
House of Representatives, however, remains stalled. Passage of legislation by both houses
of Congress is a prerequisite to enacting the bill into law.
A WORKABLE FUTURE
In many ways, VoIP came of age in 2005. The number of companies offering VoIP, as well
as customer penetration of VoIP services, has skyrocketed. At the same time, on the
heels of some high-profile failings of 911 access by VoIP users, a public safety-minded
FCC chairman pushed through the FCC’s rather aggressive E911 requirements for VoIP
providers and indicated a “take no prisoners” approach to enforcement.
Also in 2005, VoIP providers were made subject to obligations to incorporate wiretap
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capabilities into their networks, which are imposed on telecoms carriers under the FCC’s
CALEA regulations. As a result, what had previously been a largely unregulated industry
comprised of companies such as broadband providers and ISPs, which prided themselves
in being free from regulation, has found itself subject to a slew of new requirements and
potential compliance exposure.
At the same time, the extent to which VoIP providers will be subject to other
requirements typically reserved for regulated phone companies, such as the payment
of access charges and contribution to the Universal Service Fund, remains unresolved.
Some fear that the E911 and CALEA requirements are just the first in a series of steps
that, from a regulatory standpoint, may render VoIP providers almost indistinguishable
from traditional telecoms carriers. That said, VoIP penetration in the US continues
unabated—a testament to the significance and disruptive power of the technology as a
low-cost, competitive alternative to traditional phone service. Stay tuned.
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