TELECOMMUNICATION SECTOR NEGOTIATIONS AT THE WTO: CASE STUDIES OF INDIA, SRI LANKA AND MALAYSIA INTRODUCTIONThe General Agreement on Trade in Services (the “GATS”) led to the creation of the WorldTrade Organization (the “WTO”). Telecommunication services are important not just becauseannual telecommunications revenues run into hundreds of billions of dollars a year and asignificant proportion of global GDP but also because they enable the supply of other types ofservices as well as the production of goods. As such, telecommunications services are vital toeconomic development of developing countries.This case seeks to provide a basic foundation for developing countries to approach thetelecommunications sector negotiations by studying the experience of some developing countriesin the Asian region, namely, India, Malaysia and Sri Lanka in the negotiations that led to theWTO Agreement on Basic Telecommunications.It also explains the framework of the GATS and major rules and principles in the context oftelecommunication sector and how telecommunication sector commitments have been integratedinto the framework of the GATS.The GATS Framework in the Context of the Telecommunications SectorUnder the “single undertaking” or “package” approach of the Uruguay Round of negotiations,each country had the option of either accepting the entire package of agreements that ultimatelybecame part of the Agreement Establishing the World Trade Agreement (the “WTOAgreement”) or of refusing to accept the package, in which case they remained completelyoutside the WTO.The major heads under which the regulatoryprinciples in the Reference Paper areelaborated are as follows: (i) Competitive Safeguards Members are required to prevent anti-competitive practices by major suppliers.
(ii) InterconnectionInterconnection is defined in the Reference Paper as linking a supplier to a PTTN in a mannerthat permits its customers to communicate with the customers of other networks and to obtainaccess to services provided by other suppliers. (iii) Universal ServiceMembers are permitted to define the type of universal service obligations that they desire solong as they are administered in a transparent, non-discriminatory and competitively neutralmanner and are not more burdensome than necessary to serve the objectives of universal serviceset by the Member (iv) Transparency of Licensing CriteriaMembers are required to make licensing criteria, the period of time to decide licenseapplications and the terms and conditions of individual licenses publicly available. An applicantis entitled to know the reasons for denial of a license. (v) Independent RegulatorsMembers are required to ensure that the regulator for basic telecommunication services iscompletely independent of any supplier of basic telecommunication services. (vi) Allocation of Scarce ResourcesThe procedures for allocating scarce resources such as frequency bandwidth, numbers and rightsof way are required to be carried out in an “objective, timely, transparent and non-discriminatorymanner”.
SRI LANKA (i) Background and Regulatory Framework.Until 1980, Sri Lanka’s domestic and international telecommunication services were under thePosts and Telecommunications Department in the Ministry of Posts and Telecommunications.The rapid changes in telecommunications worldwide both in terms of industry structure as wellas technology had an impaction Sri Lanka’s telecommunication sector as well. Consistent withthe perception that improvement in telecommunications services was important to increasingtele-density levels in Sri Lanka and hastening economic development generally, the Governmentof Sri Lanka decided to liberalize the telecom sector in the early 1980s. In 1996, the Sri LankaTelecommunication Corporation was converted into a fully government-owned company namedSri Lanka Telecom Limited (“Sri Lanka Telecom”) in 1996, the Sri Lanka TelecommunicationCorporation was converted into a fully government-owned company named Sri LankaTelecom Limited (“Sri Lanka Telecom”) (ii) Sri Lanka’s Commitments under the Agreement on Basic Telecommunications.Like many other developing countries, Sri Lanka also did not participate fully in the negotiationson telecommunications services during the Uruguay Round. Even at the end of the Round inMarrakesh, it was not a party to the Ministerial Decision on Negotiations on BasicTelecommunications. However, it subsequently did join the negotiations and was a signatory tothe Fourth Protocol to GATS, which concluded in February 1997.The regulatory measures existing in Sri Lanka in 1998 were as follows.Competitive SafeguardsSri Lanka Telecom had a monopoly in international telecommunications services till August2002 because of the 35% foreign shareholding of NTT in Sri Lanka Telecom.InterconnectionUnder the Telecommunications Act, TRCSL (Telecommunications Regulatory Commission ofSri Lanka) was authorized to determine interconnection charges among the networks of thedifferent service providers and Sri Lanka Telecom where they failed to agree among themselves.Sri Lanka Telecom was under an obligation to provide interconnection to other operators.
Regulatory AuthorityBy way of an amendment to the Telecommunications Act in 1996, all duties performed by theoffice of the Director General of Telecommunications were transferred to TRCSLPublic Availability of Licensing CriteriaLicenses are granted by the Minister of Mass Communications on the recommendation ofTRCSL. The TRCSL website contains certain broad guidelines on the application procedure andthe application form.Allocation and use of scarce resourcesOne of the duties of TRCSL was to ensure the conservation and proper utilization of the radiospectrum by operators and other organizations and individuals who need to use radiofrequencies. (iii) Subsequent Developments after 1998As it clear from the graph below, the telecommunications sector in Sri Lanka has had aconsistent growth since the 1990s. In 2002, it reached a figure of around 880,000 fixed telephonesubscribers and 930,000 mobile cellular telephones subscribers. Source: www.aptsec.org/satrc/fifth-satrc/presentations
MALAYSIA (i) Background and Regulatory FrameworkPrior to 1987, the telecommunications industry was highly regulated with services provided bythe telecommunications department of the government, Jabatan Telekom Malaysia (“JTM”).Initially, the Telecommunications Act of 1950 (the “Telecommunications Act”) was amended tomake JTM the regulatory authority in this sector. (ii) Malaysia’s Commitments under the Agreement on Basic Telecommunications.Malaysia also was not among the 15 countries that joined the NGBT at the end of the UruguayRound. Under the Agreement on Basic Telecommunications, Malaysia made commitments onmost basic telecom services and partially adopted the Reference Paper on regulatory principles.The additional commitments made by Malaysia pertain to the provision of a pro-competitiveregulatory framework with respect to interconnection and competition.The Reference Paper set out certain measures that would ensure the efficacy of its specificcommitments, which are discussed below.Competitive SafeguardsMalaysia committed to a regulatory body that would maintain fair competition among networkoperators and safeguard the interests of the consumers. The regulatory body was JTM, theregulatory agency for the telecommunications sector.Universal ServiceMalaysia committed to ensure that network operators contribute to certain universal serviceobligations, particularly the extension of services into rural and other underserved areas asstipulated in the licenses. Prior to 1999, TMB was the only network operator required to fulfilluniversal services obligations.Regulatory BodyMalaysia committed to exercising its functions with respect to the conduct oftelecommunications operators and the running of telecommunications services in Malaysia asprovided for under Section 3B of the Telecommunications Act. The regulatory body at this timewas JTM, which was a government department.
Public availability of licensing criteriaMalaysia committed to advising all network operators on the licensed status of other networkoperators including terms and conditions pertaining to the operator’s license which govern theright of the licensee to interconnect with other operators.Allocation and use of scarce resources:Malaysia made no commitments with respect to this section of the Reference Paper. (iii) Subsequent DevelopmentsAlmost simultaneously, in April 1999, the Malaysian government enacted two key statutes toregulate the telecommunications sector: the Communications and Multimedia Act 1998 (the“CMA”) and the Malaysian Communications and Multimedia Commission Act 1998 (the“CMCA”). While the CMA sets out the regulatory institutions involved and the structure
India (i) Background and Regulatory FrameworkThe Indian Telegraph Act of 1885 and the Wireless Telegraph Act of 1932 have provided thelegal basis for regulating the telecommunications sector in India. Until 1985, posts andtelecommunications were combined in one Posts and Telegraphs department run by the Ministryof Communications. A separate Department of Telecommunications (“DoT”) was establishedunder the Ministry of Communications and two public sector undertakings MahanagarTelephone Nigam Ltd. (“MTNL”) & Videsh Sanchar Nigam Limited (“VSNL”) were created.Under the New Economic Policy of 1991, however, India started its liberalization process intelecommunications by allowing private competition in value-added services in 1992 followedby opening up of cellular and basic services for local area to private competition. In 1994, theGovernment announced the National Telecom Policy (“NTP 1994”) which defined certainimportant objectives. License bidding process was and as a result, India was divided into 21Telecom circles. (ii) India’s Commitments under the WTO Agreement on Basic Telecommunications.India was among the first few countries that signed the GATS in 1994.a) India’s Specific CommitmentIndia’s Schedule of Specific Commitments lists across various sectors and sub-sectors in servicesinclude: Voice telephone services Wire-based services Circuit-switched data services, private-leased circuits and facsimile services Data and Message transmission services Cellular mobile services Long-distance & international services
(b) India’s Additional CommitmentsA brief description of India’s Schedule of Commitments, which basically details India’s positionvis-à-vis the regulatory measures, is as follows:Competitive SafeguardsAppropriate measures shall be maintained for the purpose of preventing service suppliers fromengaging in or continuing in anti-competitive practices. India did not accept the prohibitionagainst cross-subsidization.InterconnectionInterconnection with a major supplier will be ensured at any specified feasible point in thenetwork as indicated in the license.Universal serviceIt retained the right to define the kind of universal service obligation that it wished to maintainand that such obligations would not be regarded as anti-competitive, because they would beadministered in a transparent and non-discriminatory manner.Allocation and use of scarce resourcesAny procedures for the allocation and use of scarce resources, including frequencies, numbersand rights of way, would be carried out in an objective and timely manner.(c) MFN Exemptions listed by IndiaIndia has sought MFN exemption for measures including the application of different accountingrates for different operators/countries covered by international telecommunication servicesagreements between VSNL and various foreign operators and the countries to which the MFNexemptions applies are the countries covered by these agreements. (iii) Subsequent Developments.India had approached the negotiations at the WTO on various services sectors, especiallytelecommunications very cautiously and in a defensive manner.
Source: TRAIIndia’s regulatory standards that are currently in place are higher than its commitments madewhile signing the Agreement on Basic Telecommunications and now its regulatory standardseither satisfy or are very close to the standards set out in the Reference Paper.Competitive SafeguardsCompetitive safeguards are established to prevent anti-competitive behavior, and specificmention is made of cross-subsidization practices, and the misuse of information. In practice, bothmarket structure as well as TRAI oversight provides effective safeguards against cross-subsidization.InterconnectionIndia has not agreed to apply a non-discriminatory interconnection regime, in practice,nondiscrimination is one of the principles of the interconnection regime that has been specifiedby TRAI.
Universal serviceNTP 1999 states that the government is committed to providing access to basic telecom servicesfor all at affordable and reasonable prices. The government also sought to achieve universalservice obligations like providing voice and low speed data services to the remaining 290,000uncovered villages by 2002, achieving internet access for all district headquarters by the year2000, and achieving telephone on demand in urban and rural areas by 2002.Moreover,TRAI is empowered to ensure effective compliance of universal service obligations.Public availability of licensing criteriaIndia is also working towards further reforms in its telecom sector in the licensing area in orderto make procedures more transparent and less cumbersome.Regulatory AuthorityNTP 1999 expressly states that the government is committed to a strong and independentregulator with comprehensive powers and clear authority to effectively perform its functions. Inan effort to separate the service provider from the policy-maker and licensor, the Department ofTelecom Services (DTS) was created in 1999.Allocation and use of scarce resourcesNTP 1999 proposed to review spectrum utilization from time to time keeping in view theemerging scenario of spectrum availability, optimal use of spectrum, requirements of market,competition and other interest of public.
Network status as on 31st august 2003Comparative Evaluation of Negotiating Strategies.The three WTO Members whose negotiation strategies have been analyzed are very different intheir characteristics. India is a geographically large, heavily populated, relatively low incomecountry that offers enormous potential to its trading partners. Malaysia, at the other extreme, is arelatively small, middle income country, which even at the time of the negotiations could beconsidered an attractive market despite the unfavorable economic conditions in 1997-98. SriLanka, on the other hand, by most standards is a small low-income developing country thatscores high on human development indicators but not very high on per capita GDP. All threeMembers appear to have started their domestic reform programmes during the 1980s thoughMalaysia was, by any measure, the fastest to liberalize its telecommunications market. Viewed interms of the ambitiousness of autonomous reform programmes, India is clearly not in the samecategory as Malaysia but is clearly far more ambitious than Sri Lanka.
ConclusionThis paper has presented a broad overview of negotiations in the area of telecommunicationsservices both from a historical and a conceptual standpoint. What emerges from the analysis isthat most developing country Members have tended to approach telecommunicationsnegotiations defensively. They have generally made commitments based on their ownautonomous development strategies for the telecommunications sector. This is perhaps a wisechoice because basic telecommunications is characterized worldwide by economies of scale andlarge oligopolistic firms. Thus, developing country Members may well find that their flexibilityis compromised if they make liberalization commitments that they find are inconsistentsubsequently with their national interests. In the Round, however, they are likely to find that theirflexibility in making commitments could be considerably diminished if they limit theircommitments in advance because this is not a single sector negotiation like the Agreement onBasic Telecommunications in which they have something to offer but nothing to request. TheDoha Round is a multi-sectoral negotiation that will extend across many crucial areas fromagricultural subsidies to anti-dumping. If developing country Members build coalitions withother developing country Members on important issues in order to gain the necessary leverage,the Doha Development Round could still live up to its name.