A Comparative Guide to the Chile-United States Free Trade Agreement and the
Telecommunication services are covered under Chapter 13 of both the Chile-U.S. FTA and DR-CAFTA. The Chapters cover regulatory principles in telecommunication services, whereas the provisions in the Chapters on cross-border trade and investment govern market opening.
Both texts follow the same basic structure to the coverage of telecommunications services. They contain 17 Articles and two (Chile-U.S. FTA) and four (DR-CAFTA) Annexes. The main issues covered in each Chapter are described below.
Scope and Coverage: the telecommunications Chapter in DR-CAFTA does not apply to Costa Rica; instead the country undertook specific commitments set out in Annex 13. The Chapter in the Chile-U.S. FTA applies to measures adopted or maintained by a Party relating to a) access to and use of the public telecommunications network and services and b) obligations of major suppliers of public telecommunications services. DR-CAFTA uses identical language except that it does not apply to public telecommunications networks in (a) above and the obligation in (b) above is not limited to major suppliers, but instead it applies to suppliers of telecommunications services more broadly. Both Chapters also apply to (c) the provision of information services; and d) other measures relating to public telecommunication networks or services. Measures relating to broadcast or cable distribution of radio or television programming are excluded from coverage, except to ensure that enterprises operating broadcast stations and cable systems have continued access to and use of public telecommunications networks (Chile-U.S. FTA only) and services.
Access to and Use of Public Telecommunications Networks and Services: pursuant to Article 13.2 of both Agreements enterprises of another Party must have access to and use of any public telecommunications service, including leased circuits, offered in the territory of a Party or across its borders, on reasonable and non-discriminatory terms and conditions. Each Party shall also ensure that enterprises of another Party are able to use public telecommunications services for the movement of information contained in databases or stored in machine-readable form. Member countries to both Agreements are also permitted to take measures to (a) ensure the security and confidentiality of messages or (b) protect the privacy of non-public personal data of subscribers to public telecommunications services, as long as these measures are non-discriminatory. The only conditions that a Party may impose on access to and use of public telecommunications networks or services are those related to safeguarding the public services responsibilities of providers of public telecommunications networks or services, in particular those related to universal service, and to protect the technical integrity of public telecommunications networks or services. Such conditions may include: (a) a requirement to use specified technical interfaces and (b) a licensing, permit, registration, or notification procedure which is transparent and applications filed thereunder are processed expeditiously. DR-CAFTA clarifies that applications have to be filed in “accordance with the Party’s national law or regulation”.
Interconnection and Obligations of Major Suppliers: obligations relating to interconnection with suppliers of public telecommunication services and those relating to major suppliers are covered under Articles 13.3 and 13.4 of each FTA.
Interconnection: under both texts suppliers of public telecommunications services in the territory of a Party must be able to provide, directly or indirectly, interconnection with the suppliers of public telecommunications services of another Party (Chile-U.S. FTA Arts. 13.3.1 and 13.3.2 and DR-CAFTA Art.13.3.1). These suppliers must be required to “take reasonable steps” to protect the confidentiality of commercially sensitive information of, or relating to, suppliers and end-users of public telecommunications services and only use such information for the purposes of providing those services. The Chile-U.S. FTA clarifies that this is to be done in accordance with the Party’s domestic law. DR-CAFTA requires each Party to provide its telecommunications regulatory body the authority to require public telecommunications suppliers to file their interconnection contracts. Both Chapters also define (a) the general terms and conditions for interconnection between major suppliers and the facilities and equipment of suppliers of public telecommunications services; (b) options for interconnecting with major suppliers; (c) public availability of interconnection offers; (d) public availability of the procedures for interconnection; and (e) public availability of interconnection agreements with major suppliers (Chile-U.S. FTA Art.13.4.8 and DR-CAFTA Art.13.4.5). For a DR-CAFTA Party that does not have an existing commitment under GATS to ensure that a major supplier in its territory provides interconnection at cost-oriented rates, an equivalent obligation in DR-CAFTA becomes effective two years after the date of entry into force of the Agreement or January 1, 2007; whichever is earlier. The Agreement goes on to establish conditions for setting interconnection rates in the transition period (Annex 13.4.5).
Treatment of Major Suppliers: under DR-CAFTA and the Chile-U.S. FTA major suppliers are required to accord suppliers of public telecommunications services of another Party non-discriminatory treatment. Such treatment is not qualified in the Chile-U.S. FTA, whereas in DR-CAFTA it should be no less favorable than that accorded to the major supplier’s subsidiaries, their affiliates, or any non-affiliated service supplier.
Competitive Safeguards: using similar language, both texts limit anti-competitive practices by major suppliers, such as anti-competitive cross-subsidization, using information obtained from competitors with anti-competitive results and not making available, on a timely basis, to suppliers of public telecommunications services, technical information about essential facilities and commercially relevant information.
Unbundling of Network Elements: major suppliers are required, under both texts, to provide suppliers of public telecommunications services of another other Party access to network elements, including leased circuit services, on an unbundled basis on terms and conditions and at cost-oriented rates that are reasonable and non-discriminatory for the supply of public telecommunications services. In addition, DR-CAFTA requires the terms, conditions and cost-oriented rates to be transparent. The Parties to both Agreements are free to determine which network elements may be required to be made available in their territories and the suppliers that may obtain such elements, as long as this is done in accordance with national law and regulations. The Chile-U.S. FTA further limits this provision by specifying the criteria that should be applied by the competent body in determining the network elements to be made available. It states that at a minimum a Party’s competent authority shall consider “whether access to such network elements as are proprietary in nature is necessary, and whether the failure to provide access to such network elements would impair the ability of suppliers to public telecommunications services of the other Party to provide the services they seek to offer; or other factors as established in national law or regulation, as that body construes these factors”.
Co-Location: under both Agreements major suppliers must provide to suppliers of public telecommunications services of another Party physical co-location of equipment necessary for interconnection on terms, conditions, and at cost-oriented rates that are reasonable and non-discriminatory (Chile-U.S. FTA Art.13.4.4 and DR-CAFTA Art.13.4.7). The texts differ, however, in that DR-CAFTA requires that the terms and conditions of supply also be transparent. Chile-U.S, on the other hand, stipulates that major suppliers must also provide to suppliers of public telecommunications services access to unbundled network elements on terms, conditions and at cost-oriented rates that are reasonable and non-discriminatory.
Resale: both texts (Chile-U.S. FTA Art.13.4.5 and DR-CAFTA Art.13.4.3) require their Parties to ensure that major suppliers in their territories offer for resale, at reasonable rates, to suppliers of public telecommunications services of another Party, public telecommunications services that such major suppliers provide at retail to end-users that are not suppliers of public telecommunication services. The texts differ in the conditions set out for satisfying the standard of reasonableness in this paragraph. In DR-CAFTA, wholesale rates set pursuant to a Party’s law and regulation satisfy the standard, whereas in the Chile-U.S. FTA rates that satisfy the standard include, but are not limited to, said wholesale rates. Both texts also require that major suppliers in their territories do not impose unreasonable or discriminatory conditions or limitations on the resale of such services. An equivalent obligation that applies to suppliers (as opposed to major suppliers) of telecommunications services is set out in a separate Article in DR-CAFTA (Art.13.3.2). In an Annex (13.4(5)(b)) to the Chile-U.S. FTA Chapter on Telecommunications, the U.S. establishes that a reseller that obtains at wholesale rates a telecommunications service that is available at retail only to a category of subscribers may be prohibited from offering such service to a different category of subscribers. In DR-CAFTA, this type of limitation may be imposed by all members to the Agreement (Footnote 7).
Number Portability and Dialing Party: both texts establish that major suppliers must provide number portability to the extent technically feasible and dialing party to suppliers of public telecommunications services of another Party under two different Articles -–13.4.6 and 13.4.7 in the Chile-U.S. FTA and 13.3.3 and 13.3.4 in DR-CAFTA. Number portability is to be provided on a timely basis, and on reasonable terms and conditions. El Salvador, Guatemala, Honduras, and Nicaragua may take into account the economic feasibility of providing number portability. Major suppliers must also afford suppliers of public telecommunications services of another Party non-discriminatory access to telephone numbers and related services with no unreasonable dialing delays.
Access to Rights-of-Way: DR-CAFTA incorporates an additional provision (Art.13.4.8) by which major suppliers have to afford to their poles, ducts, conduits, and rights-of-way to suppliers of public telecommunications services of another Party on terms, conditions and at rates that are reasonable and non-discriminatory. For El Salvador, this provision will apply when its law provides that poles, ducts, conducts, and rights-of-way constitute essential resources (Annex 13.4.8).
Except for the provisions on interconnection that are not related to major suppliers (i.e. (a) to (e) under interconnection above), none of the provisions above apply to suppliers of commercial mobile services in member countries to both Agreements (footnote to Art.13.4) or to rural telephone companies in the United States (Chile-U.S. FTA Annex 13.4(1) and DR-CAFTA Annex 13.3). Under both Agreements, a state regulatory authority in the United States may exempt a rural local exchange carrier from these obligations. El Salvador, Guatemala, Honduras, and Nicaragua may also designate and exempt a rural telephone company in its territory from such obligations, provided that the rural telephone company supplies public telecommunications services to fewer than two percent of the subscriber lines installed in the Party’s territory. These provisions do not preclude an authority of a Party member to either Agreement from imposing the above measures upon suppliers of commercial mobile services or on rural telephone companies.
Submarine Cable Systems: using different language both Chapters establish that providers of submarine cable systems must accord non-discriminatory treatment for access to such systems (Article 13.5). In DR-CAFTA, the treatment provided by operators of submarine cable systems must also be “reasonable”, although no definition is provided for this term. The obligation applies to a supplier authorized to operate submarine cable systems as a public telecommunications service in DR-CAFTA. In the Chile-U.S. FTA, on the other hand, the Parties are free to classify a submarine cable system within their territories as a public telecommunications service supplier and on that basis decide whether or not to apply the obligation.
Conditions for Supplying Information Services: using virtually identical language, both texts establish the information requirements that may not be imposed on an enterprise in a Party’s territory that it classifies as a supplier of information services and that supplies such services over facilities that it does not own (Art.13.6). Notwithstanding this provision, a Party is allowed to take appropriate action to remedy the anti-competitive behavior of an information service supplier or to promote competition or safeguard the interest of consumers.
Independent Regulatory Bodies and Government-Owned Telecommunications Suppliers: according to Article 13.7 in both Chapters the Parties commit to having an independent telecommunications regulatory body and to ensure that its decisions and procedures are impartial with respect to all interested persons. In addition, DR-CAFTA rules out discriminatory treatment in favor of government-owned suppliers of public telecommunications services or information services and its Parties commit to endeavor to ensure that their telecommunications regulatory body has adequate resources to carry out its functions.
Universal Service: Article 13.8 of both Chapters establishes that any universal service obligation maintained by a Party must be administered in a transparent, non-discriminatory, and competitively neutral manner and should not be more burdensome than necessary for the kind of universal service defined. Under the Chile-U.S. FTA the obligation also applies to universal service obligations that a Party adopts, thereby allowing the Parties to impose new such obligations.
Licenses and Other Authorizations: both texts permit that a Party requires a supplier of public telecommunications services to have a license to supply the service. DR-CAFTA also permits its Parties to require concession, permit, registration, or other type of authorization. Article 13.9 of both Chapters also lists the type of information that shall be made publicly available when a license or other type of authorization is required.
Allocation and Use of Scarce Resources: according to Article 13.10 of both Chapters, each Party shall administer its procedures for allocating and using scarce telecommunications resources, including frequencies, numbers, and rights of way, in an objective, timely, transparent, and non-discriminatory manner. The provision in the Chile-U.S. FTA further establishes that the Parties must also make publicly available the current state of allocated frequency bands, but shall not be required to provide detailed identification of frequencies allocated for specific uses. In DR-CAFTA, the latter provision also applies but limited to frequencies allocated for specific government uses. Each Party retains the right to exercise (Chile-U.S. FTA)/establish and apply (DR-CAFTA) its spectrum and frequency management policies, provided that this is done in a manner that is consistent with the provisions of the Agreement.
Enforcement: competent authorities must have the authority to enforce the Party’s measures relating to the obligations set out in Articles 13.2 through 13.5 and to impose effective sanctions (Article 13.11).
Resolution of Domestic Telecommunications Disputes: the procedures for resolving domestic telecommunications disputes are set out in Article 13.12 of both Chapters. The Articles cover three main issues: Recourse to Telecommunications Regulatory Bodies, Reconsideration and Judicial Review. These supplement two Articles – Administrative Proceedings and Review and Appeal- in the Chapter on Transparency of each Agreement. Two main differences between texts can be highlighted. First, in the resolution of disputes regarding interconnection Agreements between suppliers of public telecommunications services of the other Party and a major supplier of a Party, the former are to be given recourse to a national telecommunications regulatory body or other relevant body under the Chile-U.S. FTA text. DR-CAFTA guarantees recourse to a telecommunications regulatory body more broadly, meaning, for instance, that for the U.S. this body may be a state regulatory authority. Second, under “Juridical Review” in the Chile-U.S. FTA text, any enterprise aggrieved by a determination or decision of the national telecommunications regulatory body or other relevant body may obtain judicial review of such determination or decision by an impartial and independent judicial authority. In DR-CAFTA, this provision applies both when an enterprise has been aggrieved or when its interests are adversely affected by a determination or decision of the Party’s telecommunications regulatory body. No definition is provided for the term “adversely affected” in DR-CAFTA.
Transparency: Article 13.13 of both Agreements spells out the types of measures relating to access and use of public telecommunications services that each Party shall make publicly available. Both Articles list measures relating to (a) tariffs and other terms and conditions of service; (b) technical interfaces; (c) bodies responsible for preparing, amending and adopting standards-related measures affecting access and use; (d) conditions for attaching terminal or other equipment to the public telecommunications network; and (e) notification, permit, registration, or licensing requirements. DR-CAFTA incorporates an additional measure dealing with procedures relating to judicial and other adjudicatory proceedings. Subject to Articles 18.2 (Publication) and 18.3 (Notification and Provision of Information), DR-CAFTA also requires (a) the prompt publication (or otherwise make publicly available) of rulemakings of a Party’s telecommunications regulatory body and end-user tariffs filed with its telecommunications regulatory body and that (b) interested persons be provided with adequate advance public notice of, and the opportunity to comment on, any rulemaking that its telecommunications regulatory body proposes.
Flexibility in the Choice of Technologies: using slightly different language, Article 13.14 of both telecommunications Chapters, impede their Parties from preventing suppliers of public telecommunications services from having the flexibility to choose the technologies that they use to supply their services, including commercial mobile wireless services. The language used in the Chile-U.S. FTA makes this a “best-endeavors” clause, whereas if such impediments are imposed under DR-CAFTA they must conform to legitimate public policy interests.
Forbearance: the Parties to both Agreements recognize the importance of relying on market forces to achieve wide choices in the supply of telecommunications services. To this end, each Party may forbear from applying regulation to a telecommunications service that the Party classifies as public telecommunications service if its telecommunications regulatory body determines that: enforcement of such regulation is not necessary to prevent unreasonable or discriminatory practices, as well as the protection of consumers, and forbearance is consistent with the public interest (Art.13.15). The main difference between texts is that the Chile-U.S. FTA, but not DR-CAFTA, specifies that forbearance needs are to be provided for under the domestic law.
Specific Commitments of Costa Rica on Telecommunications Services
Costa Rica undertook specific commitments related to regulatory principles on telecommunications in place of the obligations established in Chapter 13 of DR-CAFTA. It also undertook specific commitments with respect to market access. These are summarized below.
New legal framework for the telecommunications incumbent provider: Costa Rica committed to enact a new legal framework to strengthen the Instituto Costarricense de Electricidad (ICE) no later than December 31, 2004.
Selective and Gradual Market Opening:
· Market Access Standstill: Costa Rica will allow service providers of other DR-CAFTA member countries to supply telecommunications services on terms and conditions that are no less favorable than those established by or granted pursuant to its legislation in force on January 27, 2003.
· Gradual and Selective Opening of Certain Telecommunications Services: Costa Rica committed to allow telecommunications services providers of other DR-CAFTA member countries, on a non-discriminatory basis, to compete to supply, directly to the customer, telecommunications services in its territory such as: (i) Private network services, no later than January 1, 2006; (ii) Internet services, no later than January 1, 2006; and (iii) Mobile wireless services, no later than January 1, 2007. This provision also applies to any other telecommunications service that Costa Rica may decide to allow in the future.
Regulatory Principles: Costa Rica committed to having in force a new regulatory framework on telecommunications services by January 1, 2006, that will conform, but will not be limited to, the following provisions:
· Universal Service: Costa Rica’s commitment regarding universal service differs from Article 13.8 of DR-CAFTA in that Costa Rica explicitly acknowledges its right to define the kind of universal service obligations it wishes to maintain. Costa Rica, as well as the other DR-CAFTA members commit to administer universal service obligations in a transparent, non-discriminatory, and competitively neutral manner and cannot be more burdensome than necessary for the kind of universal service defined.
· Independence of the Regulatory Authority: in line with Article 13.7, Costa Rica commits to establish or maintain an independent regulatory authority for telecommunications services and to ensure that its decisions and procedures are impartial with respect to all market participants. In order to ensure the independence of the regulator, Costa Rica utilizes a very general language compared to that used in Article 13.7. In particular, Costa Rica requires that the competent domestic authority be separate from and not accountable to any supplier of telecommunications services. Meanwhile, Article 13.7 stipulates that a Party ensures that its telecommunications regulatory body does not hold a financial interest or maintain an operating role in any supplier, nor to ensure that any financial interest that it holds in a supplier of public telecommunications services does not influence the decisions and procedures of its telecommunications regulatory body. Costa Rica also does not schedule commitments to rule out discriminatory treatment in favor of government-owned suppliers of public telecommunications services or information services and to endeavor to ensure that its telecommunications regulatory body has adequate resources to carry out its functions. Consistent with Article 13.11 (Enforcement), Costa Rica commits to authorize its telecommunications regulatory authority to impose effective sanctions to enforce domestic measures relating to the obligations set out in the Annex.
· Transparency: Costa Rica committed to making publicly available applicable procedures for interconnection to a major supplier; either its interconnection Agreements or referenced interconnection offers; all licensing or authorization criteria and procedures, required for telecommunications services suppliers; and the terms and conditions of all licenses or authorization issued. This provision combines some, but not all, elements in Articles 13.4.5, 13.9 and 13.13.
· Allocation and Use of Scarce Resources: using similar language to that found in Article 13.10 of the main text of the Agreement, Costa Rica commits to administer its procedures for the allocation and use of limited resources, including frequencies, numbers, and rights of way, in an objective, timely, transparent, and non-discriminatory manner by a competent domestic authority. As opposed to the other DR-CAFTA members, Costa Rica does not bind a commitment to make publicly available the current state of allocated frequency bands. With respect to licensing, Costa Rica establishes that licenses for use of spectrum shall be issued directly to the service providers, in accordance to its law.
· Regulated Interconnection: Costa Rica committed to ensuring that public telecommunications services suppliers of another Party are provided interconnection with a major supplier in a timely fashion, under non-discriminatory terms, conditions, and cost-oriented rates that are transparent, reasonable, and having regard to economic feasibility. This obligation replicates part of the language in Article 13.4.5(iv) and omits the requirement that interconnection rates be provided “sufficiently unbundled so that the supplier need not pay for network components or facilities that it does not require for the service to be provided”. Costa Rica also does not commit to other general terms and conditions for interconnection between major suppliers and the facilities and equipment of suppliers of public telecommunications services found in item (a) of Article 13.4.5, as well as to items (b) to (e) of said Article (see subsection Interconnection above). Costa Rica’s commitment regarding regulated interconnection also establishes that a service supplier requesting interconnection with a major supplier has recourse to an independent domestic body, which may be the regulatory authority referred to above, to resolve disputes regarding appropriate terms, conditions, and rates for interconnection within a reasonable time. This commitment replicates part of the provision “Recourse to Telecommunications Regulatory Bodies” of Article 13.12, and omits any reference to “Reconsideration”, “Judicial Review” in said Article and to “Administrative Proceedings” and Review and Appeal” contained in Chapter 18 on Transparency.
· Access to and Use of the Network: Costa Rica’s commitment on access and use of the network replicates most of the language found in Article 13.2.1 to 13.2.4. A visible difference between the texts is that the measures that Costa Rica may take – to ensure the security and confidentiality of messages; or protect the privacy of non-public personal data of subscribers to public telecommunications services - and that limit access to and use of the network, are not made subject to a non-discrimination requirement. Costa Rica also excluded text found in Article 13.2.5(b) allowing Parties to impose conditions on access to and use of public telecommunications networks or services necessary to protect the technical integrity of public telecommunications network or services. An indicative list of conditions was also excluded from Costa Rica’s commitment.
· Provision of Information Services: the commitment of Costa Rica with respect to the provision of information services replicates the language in Article 13.6 (Conditions for the Supply of Information Services) of DR-CAFTA. A significant difference between the two texts is that although both establish that a Party may take action to remedy anti-competitive practices of a supplier of information services or to promote competition or safeguard the interests of consumers, the text in Article 13.6 limits such actions to require the supplier of information services to (a) supply such services to the public generally; (b) cost-justify its rates for such services; (c) file a tariff for such services; (d) interconnect its networks with any particular customer for the supply of such services; or (e) conform with any particular standard or technical regulation for interconnection other than for interconnection to a public telecommunications network. Costa Rica, on the other hand, reserves the right to take any action to remedy anti-competitive practices of a supplier of information services or to promote competition or safeguard the interests of consumers.
· Competition: using similar language to that found in Article 13.4.2 (Competitive Safeguards), Costa Rica commits to maintaining appropriate measures for the purpose of preventing suppliers who, alone or together, are a major supplier from engaging in anti-competitive practices. The commitment further provides an indicative list of anti-competitive practices, which is more limited than that found in Article 13.4.2.
· Flexibility in the Choice of Technologies: Costa Rica commits to not prevent suppliers of public telecommunications services from having the flexibility to choose their technologies. The text used is identical to that in Article 13.14 of DR-CAFTA, except that Costa Rica does not explicitly state that the obligation applies to the supply of commercial mobile wireless services. Moreover, a definition of public telecommunications services is not provided and hence it is not possible to determine a priori whether or not commercial mobile wireless services are covered by the commitment.
· Costa Rica did not schedule specific commitments relating to resale, number portability, dialing party, unbundling of network elements, co-location, access to rights-of-way and forbearance.