FAQs: E-Commerce and Telecommunications
Telecommunications
Q.
What is the present regulatory framework of telecommunications?
A.
The telecommunications market in Thailand is a government
monopoly operated by two state enterprises--the Telephone Organization of Thailand
("TOT"), which is responsible for the domestic market and neighboring countries,
and the Communications Authority of Thailand ("CAT"), which is responsible for
all international services, including telephone, Internet and postal services.
In practice, however, there is an overlap of responsibilities, resulting in competition
between the two state enterprises in certain telecommunications sectors (such
as mobile telephones, data communication, and paging services).
The
two state enterprises fall under the direct control of the Ministry of Transport
and Communications ("MOTC"), which oversees frequency management and allocation
through its Post and Telegraph Department ("PTD"). PTD is also responsible for
satellites and acts as Thailand's representative in international forums relating
to postal and telecommunications services.
Q.
Are private entities allowed to provide telecommunications services?
A. Presently,
besides the PTD, telecommunication services are provided exclusively through the
CAT and TOT. However, since the late 1980s, private companies have been permitted
to operate within the Thai telecom market by entering into joint ventures with
the relevant state enterprises, or by obtaining expensive concessions from one
of the state enterprises in the form of Build-Transfer-Operate Contracts ("BTO")
as opposed to the normal Build-Operate-Transfer Contracts. Presently, private
firms build and operate concession networks over a specified period of time and
share their revenue with the TOT, CAT or PTD. Ownership in such networks are transferred
to the state enterprises immediately after completion of construction and installation,
as Thai law does not allow private ownership of telecommunications infrastructure.
The
TOT, CAT, and PTD have given BTO concessions to a number of large local companies,
many of them forming joint ventures with foreign telecom companies. Licenses have
also been issued to private companies for telecommunications services.
Q. When and how will the sector be liberalized?
A.
To conform with WTO requirements, which stipulate
that the Thai telecom market must be fully liberalized by the year 2006, the Thai
government on November 4, 1997 approved a "Master Plan for Telecommunications
Development".
The
Master Plan provides for the privatization of the TOT and CAT, the conversion
of existing concessions into licenses, the opening up of the telecom market to
competition through a step-by-step liberalization process, and the establishment
of an independent and impartial regulatory body, the National Telecommunications
Commission ("NTC"), along the principles set forth by the WTO.
With
the implementation of the Master Plan, the Thai telecom market will be developed
from a government monopoly into a regulated, liberalized market with a number
of operators licensed by the NTC regulator. The NTC will establish rules and regulations
on competitive practices concerning such matters as qualifications, licenses,
operating conditions, fees, tariff structures, and consumer rights.
Due
in part to the local economic downturn and workers' resistance to privatization,
the implementation of the Master Plan was delayed. Recent positive actions from
the government include the adoption of the Trade Competition Act (1999), which
can be used to prevent formation of monopolies and reduce unfair practices, and
the State-Enterprise Corporatization Act (1999), which empowers the government
to transform state enterprises into limited companies.
The
Cabinet approval of a conversion framework (proposed by the Thailand Development
Research Institute) for concessions was another crucial step towards the privatization
and liberalization of the sector. The proposed framework allows companies to convert
their concessions into licenses by compensating the state enterprises. An ad hoc
committee was established with the responsibility to overview and establish the
conditions for conversion. The framework has been criticized by some companies
that claim it would reduce their competitiveness in the liberalized market. Companies
had until May 31, 2000 to submit their demand for conversion. At the time of writing,
the conversion process is still ongoing.
The
Organization of Frequency Wave Allocation and Supervision of Radio Broadcasting,
Television and Telecommunications Enterprise Act has been passed by the Parliament
and became effective in March 2000. The Act provides for the creation of the NTC
and a new National Broadcasting Commission ("NBC") to replace the existing NBC.
In addition to the NTC's role as a regulatory body (see previous explanation),
the two commissions will be responsible for frequency allocation, cross-media
ownership, content, and ethics. Recently, the MOTC issued guidelines for Internet
deregulation. At present, Internet Service Providers ("ISPs") must obtain licenses
from the CAT, which in turn is given a 35 percent interest in providers' shares
(including a 3 percent interest for its employees). The proposed liberalization
of Internet services, if accepted, would help promote the development of Internet
services in Thailand and will represent a major achievement toward liberalization.
In order to achieve the objectives, privatize CAT and TOT, and liberalize the
sector on time, the government must still make changes to existing law. But there
is still hope that the sector will be liberalized by 2006. In liberalizing the
telecommunications industry, Thailand will permit domestic and foreign private
businesses to apply for licenses to operate telecommunications services. However,
foreign private companies may do so only by entering into joint ventures with
Thai companies. It is hoped that foreign companies will be entitled to apply for
licenses without the need to enter into joint ventures with Thai companies by
2006, when full liberalization of the telecommunications market should begin.
Q. How
will the TOT and CAT be privatized?
A.
According to the Master Plan, the TOT and CAT shall be privatized as follows:
-
The MOTC will set up a holding company for the TOT and CAT.
- The
TOT and CAT will be transformed into TOT Co., Ltd., CAT Telecommunication Co.,
Ltd., and CAT Postal Co., Ltd. A holding company (state enterprise) will hold
their shares.
- TOT Co., Ltd. and CAT Telecommunication
Co., Ltd. will continue their operations as presently conducted.
- TOT Co., Ltd. and CAT Telecommunication
Co., Ltd. will allow interested strategic partners to hold a
maximum of 25 percent of each company, private investors to
hold a maximum of 22 percent (not more than 5 percent per investor)
and employees at least 3 percent.
- The TOT and CAT companies will then
become public companies, with the state continuing to hold a
minimum of 30 percent of the shares. Prior to the end of 2006,
foreign strategic partners and private investors together will
only be permitted to directly or indirectly hold a certain percentage
of the shares (around 20 to 25 percent).
- CAT Postal Co., Ltd.'s equity will be
held by the state until it is ready to be privatized (this date
has not yet been determined).
(Updated
July 12, 2001)
The
above is intended to provide general information only. The contents
do not constitute legal advice and should not be relied upon as
such. If legal advice or other expert assistance is required,
the services of competent professionals should be sought.
For
further information, please contact Mr.
John Fotiadis, Commercial Department (john.f@tillekeandgibbins.com).
