US embassy cable - 05QUITO1673

UNCLAS QUITO 001673 
 
SIPDIS 
 
DEPT FOR EB/CIP - TFINTON 
USTR FOR JONATHAN MCHALE 
USTR FOR PAUL NEUREITER 
 
E.O. 12958: N/A 
TAGS: ECPS, ETRD, EINV, ECON, EC, XR 
SUBJECT: LICENSING CONDITIONS IN ECUADOR'S TELECOMS SECTOR 
 
REF: SECSTATE 114687 
 
1.  Per reftel, Commercial Specialist and Econ Officer met 
with acting President of the National Telecommunications 
Council Antonio Arroyo on July 11 to discuss licensing 
conditions in the Ecuadorian telecommunications sector.  The 
following information also reflects discussions with other 
telecommunications officials. 
 
2.  Arroyo explained that the GOE only imposes licensing 
fees to local fixed telephony.  Although no regulations 
currently exist for national and international telephony, 
Arroyo claims that such regulations will be issued later in 
the year.  Two levels of fees exist, both of which are 
charged quarterly and only once the concessionaire starts 
operations.  The first - 0.5% of gross sales - is charged to 
cover concession rights and administrative costs to include 
concession contract administration, registry, and regulatory 
activities.  The second - 1% of gross sales - is used to 
fund the development of rural telecommunications.  Fees are 
charged based on gross sales and do not reflect the 
geographical scope of the license, the type of service, or 
whether the licensee offers a facilities-based or non- 
facilities-based service. 
 
3.  The GOE imposes a performance guarantee for each 
contract concession, irrespective of geographical scope. 
Each new contract, even for an existing licensee, requires a 
new guarantee.  The performance guarantee is in force during 
the duration of the concession (15 years) and an additional 
90 days thereafter.  The present amount of the performance 
guarantee is $100,000 for local facilities-based service 
providers and $1,000,000 for non-facilities-based service 
providers.  Arroyo indicated that this admittedly arbitrary 
figure might change, with proposed regulations stipulating 
an amount equivalent to 100% of the proposed investment. 
The guarantee issuer, depending on the type of guarantee, 
charges the following costs: 2% annually for a stand-by 
letter of credit, 4% annually for a bank guarantee, and 4% 
annually for an insurance policy.  Note that no 
capitalization or bonding requirements currently exist for 
national and international telephony. 
 
4.  According to Arroyo, specific build-out requirements do 
not exist.  However, as part of the licensing review 
process, the investor is required to present a minimum five- 
year investment plan. 
 
HERBERT