US embassy cable - 04TAIPEI3748

UNCLAS TAIPEI 003748 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC AND EAP/EP 
 
STATE PLEASE PASS AIT/W AND USTR 
 
USTR FOR SCOTT KI 
USDOC FOR 4430/ITA/MAC/AP/OPD/JKELLY 
 
E.O. 12958: N/A 
TAGS: EINV, ECON, TW 
SUBJECT: LUKEWARM RESPONSE FOR TAIWAN FIXED NETWORK LICENSES 
 
REF: TAIPEI 2900 
 
1.  (U) According to the Directorate General of 
Telecommunications (DGT), applications for fixed network 
licenses closed October 28, 2004.  DGT received no 
applications for comprehensive network service and only one 
for the local and long-distance land cable leased-circuit 
business from a cable television provider.  Despite the 
industry's lukewarm response, DGT repeated its commitment to 
offer licenses on a biannual schedule in March and September 
and to lower capital requirements for local, long-distance 
and international business licenses.  The next open season 
for fixed network license applications will be in March 
2005. 
 
2.  (U) There may be more interest in licenses for local, 
long-distance and international services in March. 
According to a DGT plan, a new formula will be used to 
calculate the minimum paid-in capital for the local call 
business.  For example, the minimum paid-in capital 
requirement for a local call license for Taipei city would, 
based on the population of the city, be just 1.2 billion NT 
dollars (USD 36.3 million).  Currently, companies interested 
in entering the Taiwan market must have paid-in capital of 
16 billion NT dollars (USD 484.8 million) and must serve the 
entire island.  For long-distance and international 
services, the minimum paid-in capital would be lowered to a 
flat standard of 2 billion NT dollars (USD 60.6 million). 
 
3.  (U) Comment: Liberalization of fixed network licensing 
requirements was a condition of Taiwan's WTO accession. 
Industry has criticized the biannual application process and 
Taiwan's lower, but still restrictive paid-in capital 
requirements.  The failure of this September's open season 
to generate any bids may in part be a reflection of an 
industry waiting for lower requirements.  But more likely, 
Taiwan's relatively small fixed network service market is 
not considered attractive to investors facing an 
overwhelmingly dominant state-owned competitor in Chunghwa 
Telecom (CHT).  The long awaited privatization of CHT, now 
predicted for early 2005, may alter the equation 
sufficiently to encourage more competition in the fixed 
network market in 2005.  End Comment. 
 
PAAL