US embassy cable - 04HANOI910

UNCLAS SECTION 01 OF 03 HANOI 000910 
 
SIPDIS 
 
STATE PLEASE PASS TO USTR JMCHALE AND EBRYAN 
STATE ALSO FOR EB/CIP AND EAP/BCLTV 
USDOC FOR 6500 AND 4431/MAC/AP/OPB/VLC/HPPHO 
GENEVA FOR USTR 
 
SENSITIVE BUT UNCLASSIFED - HANDLE ACCORDINGLY 
 
E.O. 12958:  N/A 
TAGS: ECPS, EINT, EINV, VM, SOE 
SUBJECT: MPT Describes Vietnam's Telecom Situation 
 
1.  (SBU) SUMMARY and Introduction.  On February 17, 2004, 
the Ministry of Post and Telematics (MPT) addressed a series 
of questions prepared and submitted in advance by Post on 
the following topics: services and licenses, 
interconnection, charges and dispute resolution, spectrum 
allocation, and regulation and relationship with SOEs.  Dr. 
Phan Tam, Deputy Director General of the Department of 
International Cooperation, led the GVN side, which also 
included of six other reps from MPT's Legal Affairs, Finance 
and Planning, Telecommunications, and Radio Frequencies 
departments.  Econcouns and Econoff attended the first 
formal discussion of Vietnam's telecommunications situation 
with MPT experts.  END SUMMARY AND INTRODUCTION. 
 
Services and Licenses 
--------------------- 
 
2.  (SBU) Dr. Tam said that all basic services described in 
the United Nation's International Telecommunications Union 
(ITU) and the WTO's classification system were available in 
Vietnam.  Currently, there are five types of licenses: a) 
network telecommunications, b) telecommunications services, 
c) network experiments on a trial basis, d) establishment of 
private networks, and e) telecommunications in exclusive 
economic zones and on the continental shelf.  Econcouns 
asked what type of license covered Internet connection.  Tam 
said that the network license (type a) covered basic 
Internet connection.  The services license (type b) covers 
value added and resale services that would include some 
forms of Internet access.  The private network license (type 
d) is for internal networks for private companies and is 
covered under Article 35 of the telecommunications 
ordinance. 
 
3.  (SBU) MPT must verify and approve all license 
applications.  For a network license, approval takes 90 days 
from submission of a complete application.  The approval 
process is not to exceed a period of 120 days.  For a 
services license, approval takes 60 days from complete 
submission, not to exceed 75 days.  Only state-owned Network 
Infrastructure Providers (NIPs) can apply for a network 
license.  For the other licenses, all businesses may apply 
as long as they operate in accord with the laws governing 
foreign investment.  Econcouns asked if there was any 
restriction placed on what type of State Owned Enterprise 
(SOE) could become an NIP.  Tam responded that there was no 
restriction as long as the SOE had infrastructure sufficient 
to perform the service. 
 
4.  (SBU) MPT said that six firms have licenses to provide 
network telecommunications: a) Vietnam Posts and 
Telecommunications Corporation (VNPT), b) Vietnam Electronic 
and Telecommunications Company (Vietel, operated by the 
Armed Forces), c) Electronic Telecom Company (ETC), d) 
Saigon Postel (SPT), e) Hanoi Telecom (Hannel), and f) Vina 
Shipping Electronic and Information Company (Vishipel). 
These companies are all wholly state-owned, except for SPT 
and Hannel, which are joint stock companies with majority 
state ownership.  Neither stock company is publicly listed. 
(COMMENT: While there is no monolithic monopoly and there is 
some competition, it is only between SOEs.  END COMMENT.) 
 
Interconnection 
--------------- 
 
5. (SBU) MPT defines interconnection as the provision of 
technical and communications services, by NIPs with 
essential facilities, to enterprises providing 
communications services to consumers and other enterprises. 
Costs are based on the agreement negotiated between the NIP 
and the Service Provider (SP).  The determination of 
interconnection points is based on negotiations between the 
NIP and the SP, but NIPs with essential facilities must 
provide for SPs to make connections under favorable 
conditions.  For local calls, interconnection is usually at 
the local exchange connection.  For long distance calls, 
interconnection normally is at the local tandem exchange or 
the long distance exchange.  For international calls, 
interconnection is usually at the international exchange 
station or the long distance exchange.  Interconnection for 
mobile calls can be at the local tandem exchange, the long 
distance exchange, or the mobile exchange. 
 
Charges and Dispute Resolution 
------------------------------ 
 
6.  (SBU) According to MPT, the basic principles governing 
charges are as follows: a) charges must comply with policies 
governing social-economic development and conform with 
international standards, b) charges must be based on actual 
costs that are in line with international standards, c) 
charges must be calculated in Vietnamese Dong. 
Interconnection costs have two basic components, the costs 
of setting up the interconnection and the actual connection. 
Therefore, charges for interconnection must be based on how 
and where the link was established as well as on the actual 
costs involved in establishing the connection.  There should 
also be no discrimination between companies offering similar 
services.  NIPs should also facilitate the provision of 
unbundled services from SPs with appropriate charges based 
on the actual costs of providing each service.  The costs 
shall be itemized by appropriate segment of service and 
shall be fairly and reasonably calculated in comparison with 
international and regional charges.  Charges may also take 
into account certain contributions to provide low-cost 
public services, mainly to rural areas. 
 
7.  (SBU) There are two types of disputes, those that happen 
during the negotiation process and those that happen during 
operations, according to MPT.  During a negotiation dispute, 
MPT will arbitrate, but if a party is unhappy with the 
decision the party can appeal to the Administrative court. 
However, the party must carry out MPT's decision in the 
meantime.  After the decision of the Administrative Court 
has been rendered, the party can appeal to the next level in 
accordance with the Litigation Procedural Law, but that will 
be the final appeal.  A dispute occurring during operations 
is handled in a similar fashion.  Econcouns asked about 
dispute resolution involving users of services and the 
company providing the service.  Tam replied that the 
contract would cover such a case and that the business 
contract law would apply if the dispute went to any court of 
law. 
 
Spectrum Allocation 
------------------- 
 
8.  (SBU) MPT is responsible for spectrum allocation.  The 
Prime Minister promulgates the national frequency plan. 
Regulations must comply with international standards set by 
the ITU.  MPT has detailed regulations on channel, 
bandwidth, and reuse.  Econoff asked if "reuse" meant that a 
company with a license could resell a portion of its 
allocation.  After several minutes of discussion in 
Vietnamese among the MPT attendees, Tam replied that "reuse" 
only referred to whether a company could use the frequency 
elsewhere in the country if there was too much interference 
in their present location.  If a company has excess 
bandwidth, the firm must allow the government to re-allocate 
it. 
 
9.  (SBU) Econcouns asked whether the GVN approached 
spectrum allocation in a similar fashion to land, where the 
GVN allows private ownership of land use rights, but not of 
the land.  Tam said that analogy was correct.  MPT does not 
have an auction process like the process in the U.S. 
Properly licensed companies can apply to receive a one-year 
license that is similar to a rental of the frequency.  MPT 
and the Ministry of Finance determine the fees.  Regulations 
are currently being drafted for fixed and wireless use of a 
local loop. 
 
Regulatory Regime and MPT's Relationship to SOEs 
--------------------------------------------- - 
 
10.  (SBU) MPT is the administrative office that regulates 
the telecommunications companies.  There is no business 
relationship between MPT and the SOEs.   SOEs operate under 
the enterprise law, and the Ministry of Finance controls the 
capital and financial aspects of the SOEs' operations.  MPT 
has about 550 employees nationwide.  About 150 staff is 
engaged in policy making in Hanoi.  Econcouns asked how the 
President of VNPT is selected. This question also caused 
quite a bit of conversation on the MPT side before Tam 
responded that the Prime Minister assigns the President and 
other officers of VNPT.  Other companies such as Vietel and 
Vishipel are controlled by other government entities 
(namely, the military and the maritime industry), which 
choose their own officers internally.  Stockholders of the 
two joint stock companies are involved in the selection 
process of their officers. 
 
Concluding Remarks 
------------------- 
 
11.  (SBU) Econcouns conveyed his concern that, although 
reform has begun, much remains to be done.  He also stressed 
the importance of this sector to maintaining Vietnam's 
robust economic growth.  To illustrate the benefits of 
liberalization, he cited the example of the Japan's decision 
to deregulate its mobile market as the springboard to 
Japan's spectacular cell phone market growth.  Tam responded 
with two points, first that Japan faced a great deal of 
difficulties on its path of reform, and that the GVN was 
very interested in increasing competition.  Both sides 
agreed on the value of continuing this dialogue. 
PORTER