The Vietnam Telecommunications Sector - CUTS Geneva
CASE STUDYThe VietnamTelecommunications SectorGood Practices in Regulatory Reform in Relation toCompetition Policy & Law Issues
This study is published as part of the “Support to EnhanceDevelopment of Trade in Services Negotiations” initiative jointlyundertaken by ILEAP, CUTS International Geneva and the Universityof Sussex’s CARIS. It aims to contribute to the increased and moreeffective participation of Least Developed, Low and Lower-MiddleIncome Countries and their Regional Economic Communities inmultilateral, regional and bilateral services trade negotiations.The initiative promotes understanding among policy makers,regulators and negotiators about their services sectors and the rolethat trade negotiations can play in pursuing their strategic intereststherein.Author:Alice PhamPublished by:INTERNATIONAL LAWYERS ANDECONOMISTS AGAINST POVERTY (ILEAP)1240 Bay Street, Suite 600,Toronto, Ontario, CanadaTel: 1 416 309 2330Fax: 1 416 309 2331Email: tradeinservices@ileap-jeicp.orgWeb: www.ileap-jeicp.orgCUTS INTERNATIONAL, GENEVA37-39, Rue de Vermont1202 Geneva, SwitzerlandPh: 41.22.734.6080Fax: 41.22.734.3914Email: geneva@cuts.orgWeb: www.cuts-geneva.orgCENTRE FOR THE ANALYSIS OF REGIONALINTEGRATION AT SUSSEX (CARIS)University of SussexSussex House, Brighton, BN1 9RH, UnitedKingdomTel: 44 (0)1273 606755Email: information@sussex.ac.ukWeb: www.sussex.ac.uk/carisFunding supportThis publication should be cited as:PHAM A. (2015). ‘The Vietnam Telecommunications Sector: Good Practices in Regulatory Reform in Relation to CompetitionPolicy & Law Issues'. Toronto, Geneva and Brighton: ILEAP, CUTS International Geneva and CARIS.Cover image: Alex Steffler 2015.The material in this publication may be reproduced in whole or in part and in any form for education or non-profit uses,without special permission from the copyright holders, provided acknowledgment of the source is made. The publishers wouldappreciate receiving a copy of any publication, which uses this publication as a source. No use of this publication may bemade for resale or other commercial purposes without prior written permission of the copyright holders.2
Table of ContentsTable of ContentsAbbreviations. 2Foreword . 3Introduction . 4The History of Reforms . 6Market Structure . 14Fixed-line telephone services .14Mobile phone services .153G services .16Broadband Internet services .16The Regulatory Framework . 17The Competition Law 2004 (VCL) .17The Law on Telecommunications 2009 (LOT) .19Competition problems in the Vietnam telecom sector . 23Conclusions. 28Continuing reforms for better trade negotiations .28State dominance and the creation of an independent regulator .29Lessons learnt for other developing countries .301
CTVVNDWTOAssociation of South East Asia NationsBusiness Cooperation ContractBilateral Trade Agreement (between Vietnam and the US)Code-Division Multiple AccessElectricity Telecommunication Information Company (‘EVN Telecom’)Facilities-based operatorFinancing and Promoting Technology CompanyGeneral Agreement on Trade in ServicesGross Domestic ProductGlobal System for Mobile CommunicationsHo Chi Minh City Cable Television CompanyInternet Service ProviderInternational Telecommunications UnionInternet eXchange PointLaw on TelecommunicationsMinistry of Information and Communications (formerly the ‘MPT’)Multimedia Messaging ServiceMinistry of Industry and TradeMinistry of Post and Telecommunications (now called the ‘MIC’)Information Technology InstituteOver-the-topRecently Acceded Member (of the ‘WTO’)Saigontourist Cable TelevisionSmall and Medium-sized EnterpriseShort Message ServiceState-owned enterpriseSaigon Post and Telecommunications Company (also called ‘SaigonPostel’)Trade Policy ReviewTelecommunications Specialized Management AgencyVietnam Competition AuthorityVietnam Competition CouncilVietnam Competition LawVietnam Maritime Telecommunications CompanyMilitary Electronics and Telecommunications CompanyVoice over Internet ProtocolVietnam Post and Telecommunications CorporationVietnam TelevisionVietnam Cable TelevisionVietnamese dongWorld Trade Organisation2
ForewordForewordServices and services trade can play a central role inpromoting sustainable development, supportinginclusive economic growth, and reducing poverty inmodern economies. However, LDCs, LICs, and LMICscontinue to face challenges in catalysing or sustainingprogress across this diverse range of economicactivities. With respect to trade policy and relatednegotiations, services have become an increasinglyvisible feature of discussions –domestically,regionally, as well as at the bilateral and multilaterallevels.A number of challenges impacting services tradenegotiations and policy-making have been identifiedhowever. Many lack access to reliable services tradedata on which to base analysis and decision-making,and skills for processing and analysing existingservices trade data to underpin conclusions. Ineffectiveinteractions between stakeholders to support decisionmaking – within government, and between thegovernment and the private sector, civil society, andother non-state actors - is also a major challenge.With funding support from the UK Trade AdvocacyFund, a set of studies, toolkits and trainings aredeveloped to assist these countries in increasing theirparticipation in services trade. Target beneficiariesrange from negotiators, policymakers, regulators,statistical officers and various non-state actors.This case study analyses how the telecom sector beenliberalized and reformed in Vietnam. From having awholly government-owned monopoly to opening upthe market, the reform road has been and remainspaved with challenges. Results today are neverthelessencouraging, with prices having significantly dropped,wider choices for consumers, and private and foreignservice providers finding it easier to enter and thrive inthe industry.Against this backdrop, ILEAP, CUTS InternationalGeneva and the University of Sussex’s CARIS havepartnered to undertake a series of interventions thatseek to contribute to the increased and more effectiveparticipation of LDCs, LICs, LMICs and RECs inmultilateral, regional and bilateral services tradenegotiations.3
IntroductionRecent times have witnessed the liberalizationof the telecommunications sector in manydeveloping economies around the world,which ultimately resulted in significantexpansion of their telecommunicationsnetworks and improvements in performance.The supply of telecommunications serviceshas changed from monopoly- or governmentbased, to market- or competition-basedapproaches. The driving forces behind thisprocess have been: the emergence and rapid developmentof new technologies and services, suchas internet and wireless services, whichenables the entrance into the sector ofcompetitive service providers, the increasing recognition that aliberalized telecom market can producehigher growth, faster innovation, andbetter services, the need to attract private capital forexpansion of networks and introductionof new services, and strong developments of internationaltrade in telecom services.During the transition period from monopolisticto competitive telecom markets, governmentsaround the world have implemented a widerange of reforms, three fundamental onesbeing: the privatization of incumbentoperators, and providing them withbetter incentives to minimize costs andoperate more efficiently the introduction or injection ofcompetition into the sector, by openingup the market and allowing private andforeign participation, and the initiation and implementation ofregulatory reforms, in the direction ofimbibing competition principles intoregulations.While there is a growing consensus that all ofthese elements are desirable and ideally theyshould form inherent parts of a completereform package, not all governments haveimmediately and fully executed all of them.They did so at different paces and differentsequences, more often than not adopting agradual approach. There remained significantresistance and lobbying against reformsundertaken. Privatized incumbents andformer monopolists may, through use ofanticompetitive practices, erect a whole lot of‘invisible’ barriers, to entrench their controlover others or to stop new market entries. Theregulatory framework over the telecom sector,thus, in addition to regulations over price,quality, licensing, and other technical issues,etc, needs to also contain competition policyand law elements to ensure that majorsuppliers do not abuse their position. In thisrespect, important elements of competitionpolicy and law such as the notion of majorsuppliers, market dominance, and essentialfacilities, etc are to be introduced into telecomlawsandregulations.Furthermore,governments have also taken advantages oftrade negotiations, bilaterally, regionally ormultilaterally within the framework of theWorld Trade Organization (WTO), to lock-inmore liberal or far-reaching market-openingcommitments, to further speed up thisprocess.4
IntroductionIn this case study, we would look at how thetelecom sector in Vietnam, a transitioneconomy in Southeast Asia, has beenliberalized and reformed, from having a whollygovernment-owned monopoly providing alltypes of basic telecommunications services inthe country, to opening up the market,embracing competition and increasinglyrelying on market rules and dynamics. Thereform road has not been smooth and is stillfaced with a lot of challenges, but is showingencouraging results: prices have significantlydropped, wider choices for consumers with awhole range of new, innovative productscoming into the market day in day out, andprivate and foreign service providers arefinding it easier to enter and thrive in theindustry.Those reforms have lifted the overallcompetitiveness of the telecom sector, makingit an example that is worth following for othersectors in Vietnam in terms of liberalizationand integration. In 2007, Vietnam wasclassified as the world’s second fastestgrowing telecom market by the InternationalTelecommunications Union (ITU). 1 Thetelecom sector in Vietnam is now considereda backbone industry of the overall economyand an enabler of development, contributingsignificantly to improving the lives of thepeople and increasing economic growth. Mostimportantly, Vietnam, within the context ofbilateral, regional and multilateral tradenegotiations, has also put in place a procompetitive regulatory framework, whichpromises more benefits to come in the future.1See, for example, the European Union (Economic &Commercial Counsellors) Green Book 2007 on Vietnam,availableforviewanddownloadat s/eu vietnam/greenbook 07 en.pdf , or Vietnam – AnInsight (01-30 June 2008) by Ernst & Young Vietnam,availableforviewanddownloadat www.stoxplus.com/download.asp?id 273 5
Section 1The History of ReformsVietnam has moved from the Soviet-stylecentrally-planned economic developmentmodel to building a market-based economysince 1986. Benefiting from those close-to30-years of economic reforms, theVietnamese economy has been hugely andpositively transformed. GDP has increasedfrom US 36.66 billion in 1986 to US 77.41billion in 2007 and US 171.39 billion in2013, thanks to impressive GDP growth ratesthat averaged 6.13% from 2000 until 2014.As of 2007, the revenue that comes from theprovision of telecommunications servicessuch as fixed-line, mobile, and data made up4.7% of total GDP of the country. With apopulation of more than 90 million people,60% of which is within the working age, thetelecom sector in Vietnam has huge potentialfor further development.The concept of competition was formallyintroduced in Vietnam in the year 2003, afterthe licensing of new service providers, thoughmore serious reforms with regards to openingup the Vietnamese telecom sector to foreigncompetition were only expected to happenfollowing the country’s accession to the WTOin 2007. However, in preparation, Vietnamhas, over the years, promulgated a number ofdecrees and regulations, most importantly theOrdinance on Post and Telecommunications2002 and guidance documents for itsimplementation. The Ministry of Post andTelecommunications (MPT– in 2007, thename is changed to the Ministry ofInformation and Communications - MIC) wasalso established in 2002, being responsiblefor the overall telecoms strategy and planningof the sector as well as regulating serviceprices. The MPT also has extensive datagathering, coordination and other functions toperform. Earlier, telecommunications serviceswere considered a public utility, thus whollyprovided by the Vietnam Post andTelecommunications General Corporation(now the VNPT Group) – a State-ownmonopoly.VNPT was essentially a self-regulatory bodywith regulation, policy, business managementand ownership mixed together. After thewhole Vietnam economy moved gradually tomarket approaches in 1986, VNPT continuedto retain its monopoly, managing all theinfrastructures as well as providing all types ofbasic telecommunications services inVietnam. In this initial period of reform,developments within the sector were few andslow, while service quality was hardlyimproved, and there was no true telecommarket. It can therefore be said that thetelecom market in Vietnam is relatively youngas compared to that of the world, with verylow starting point.The first landmark of telecom sector reformsin Vietnam was in 1995. In the face ofincreasing domestic demand and changes inkey sectors of the Vietnamese economy, theVietnamese government started to ion sector by creating twodomestic telecommunication companies: theMilitary Electronic and TelecommunicationCompany (Viettel – wholly owned by theMinistry of Defense), and Saigon Post andTelecommunication Company (SPT orSaigonPostel, 18% owned by VNPT). Thetelecoms sector started to show encouragingprogresses and consumer welfare was visiblyincreased (more choices, reduced prices),even though competition was still limited andonly happening amongst State-ownedenterprises (SOEs). VNPT remained in a near6
The History of Reformsmonopoly position, being able to exercisesignificant control over the market, since allthe other companies (Viettel and SPT at thetime, and some others over the later years)had to depend on its infrastructures.telecom services. These were: VNPT, n Company (EVN Telecom),VietnamMaritimeTelecommunicationCompany (Vietshiptel), and Hanoi Telecom;amongst which only VNPT, Viettel and EVNTelecom were allowed to establish networksand provide international fixed-line telephoneservices. In 1997, five Internet ServiceProviders (ISPs) were also licensed, including:VNPT, Viettel, SPT, FPT and Netnam. Vietteland SPT were licensed to provide VoIP (Voiceover Internet Protocol) service in 2001 andthe Vietnam Equipment Technology andTrading Joint-Stock Company (ETC) waslicensed at a later date. Foreign serviceproviders with foreign ownership notexceeding 50 percent can provide valueadded services according to the Vietnam-USBilateral Trade Agreement (BTA) from 2003.The second landmark change came in 2003,when the monopoly of VNPT was officiallyremoved and competition was allowed withregards to all types of telecommunicationsservices. A governmental decree in October2003 and an official letter in January 2004gave telecom enterprises the freedom todetermine tariffs in the telecom service marketin which they were not dominant. Sometariffs, particularly those offered by VNPT –since it remained the incumbent in themarket, remained regulated. By then, therewere in total 6 companies, which werelicensed to establish network and provideTABLE 1S.No.1.2.3.4.5.6.7.8.9.10.VIETNAM’S MOBILE PENETRATION RATE DURING 1995-2014AS COMPARED WITH NEIGHBOURING COUNTRIESCountry/YearBrunei DarusalamCambodiaIndonesiaLao 9111158144147Source: International Telecommunication Union, World Telecommunication/ICT Development Report anddatabase 2)Table 1 shows clearly how the performance ofthe telecom sector in Vietnam has beenimproved over time, given the milestonesmentioned above. Up until 2005, beforeserious reforms were undertaken, the mobilepenetration rates of Vietnam were remarkablylow as compared to neighbouring countries.Breakthroughs could be observed after the2003-2004 change, when competition wasallowed, and then after 2007, when thecountry became a member of the WTO, thusembarking on overhauling its regulatoryframework. In 2014, Vietnam’s mobile7
penetration rate ranked No. 4 in the ASEANregion and No. 34 in the world.The third and most recent landmark came lastyear in 2014, when it was decided thatMobiFone, one of Vietnam’s three largestmobile network operators, would be separatedfrom its parent company - VNPT, which alsoowns Vinaphone – MobiFone’s rival in themarket and also a dominant service tisation. This was part of therestructuring scheme proposed by the Stateowned incumbent operator – VNPT – to theMIC (formerly the MPT), and was considereda landmark, since from then on, Statemonopoly on the telecom market in Vietnamwould be completely dismantled.According tothe Vietnam-USBTAcommitments, Vietnam allows US companiesto set up joint ventures with the Vietnamesepartners authorized to provide telecomservices. US companies have the right toestablish joint ventures, with a 50 percent capon US equity, to participate in value addedservices (such as e-mail, voice mail,electronic data, interchange, data processing)commencing from December 2003 and in thecase of internet services December 2004.Under the BTA, US companies are alsoallowed to set up joint ventures with amaximum equity share of 49 percent in basictelecom services (such as wireless services,certain data services, leased circuit) as well asin basic voice telephone services (fixed local,long distance and international).The opening up of the Vietnamese telecomsector to foreign participation was first markedby Vietnam’s agreed commitments under theVietnam-US BTA as of 2000. Prior to that,under the Vietnamese Investment Law of1992, foreign companies were allowed toprovide services to Vietnam’s telecom marketonly if they entered into a BusinessCooperation Contract (BCC). BCCs are costand revenue sharing agreements under whichthe foreign partner generally provides theneeded equipment and training for localoperators.8
The History of ReformsTABLE 2FOREIGN PARTICIPATION IN THE VIETNAMESE TELECOMS
perform. Earlier, telecommunications services were considered a public utility, thus wholly provided by the Vietnam Post and Telecommunications General Corporation (now the VNPT Group) – a State-own monopoly. VNPT was essentially a self-regulatory body with regulation, policy, business management and ownership mixed together.
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