competition review of the vietnamese …pdf.usaid.gov/pdf_docs/pnade784.pdf · viettel vietnam...

Vietnam Competitiveness Initiative

VNCI Policy Paper # 3

June 2005This publication was produced for review by the United States Agency for International Development (USAID). It was prepared by Nguyen Thanh Ha and Pham Quang Thanh of Vietbid Technology & Investment Consulting Center and Jacob Gullish of the VNCI with substantive technical input from John Davis of the USAID-funded STAR Vietnam Project.

COMPETITION REVIEW OF

THE VIETNAMESE TELECOM SECTOR

3

COMPETITION REVIEW OF

THE VIETNAMESE TELECOM SECTOR

Disclaimer

The authors' views expressed in this publication do not necessarily reflect the views of the United StatesAgency for International Development or the United States Government.

i

This report was prepared by Nguyen Thanh Ha and Pham Quang Thanh of Vietbid and Jacob Gullish of theVNCI, with substantive technical input from John Davis of the USAID-funded STAR project.

Following the completion of the first draft of the report, the results were disseminated at a public workshophosted by the Central Institute for Economic Management on 10 November 2004. Feedback from this workshopwas then incorporated into the final report.

VNCI would like to thank Huynh Thanh Tung of Saigon Postel, Nguyen Manh Bang of VP Telecom and the othermanagers of the surveyed firms for their responsiveness to our questions and inquiries. Other acknowledgementsinclude Steve Parker (STAR project) and Fred Burke (Baker and McKenzie) for their input and advice, and NgoThi Minh of Vietbid for data processing.This report also benefited from the guidance and support provided byDennis Zvinakis,Vietnam Country Manager of USAID.

All the remaining errors and omissions, and of course interpretations and opinions expressed in this report, arethe sole responsibility of VNCI.

** *

The Vietnam Competitiveness Initiative (VNCI) is an economic growth project funded by the United StatesAgency for International Development (USAID).VNCI is managed by Development Alternatives Inc (DAI).

The Asia Foundation is the principal subcontractor to DAI and is responsible for implementing the research andpolicy component of the VNCI project.The objective of this component is to improve the regulatoryenvironment for business, with a particular focus on regulations governing small and medium sized privatebusinesses.This is the third in a series of policy studies produced by The Asia Foundation under VNCI.

ACKNOWLEDGEMENTS

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CONTENTSAACCKKNNOOWWLLEEDDGGEEMMEENNTTSS .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..ii

AABBBBRREEVVIIAATTIIOONNSS .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..vv

IINNTTRROODDUUCCTTIIOONN .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..11

LLEEGGAALL AANNDD IINNSSTTIITTUUTTIIOONNAALL FFRRAAMMEEWWOORRKK .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..99MMiinniissttrriieess rreessppoonnssiibbllee ffoorr VViieettnnaamm’’ss TTeelleeccoommmmuunniiccaattiioonnss PPoolliiccyy .. .. .. .. .. .. .. ..99MMiinniissttrryy ooff PPoossttss aanndd TTeelleemmaattiiccss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..1100TTeelleeccoommmmuunniiccaattiioonnss ddeevveellooppmmeenntt ssttrraatteeggyy aanndd ppoolliiccyy .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..1100TTeelleeccoommmmuunniiccaattiioonnss llaaww .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..1111

Ordinance on Post and Telecommunications 2002 . . . . . . . . . . . . . . . . .11Decree 160 Provisions Regarding Competition: Decree onTelecommunications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

TTeelleeccoommmmuunniiccaattiioonnss rreegguullaattiioonnss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..1122Setting tariffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Interconnection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

IInntteerrnnaattiioonnaall ccoommmmiittmmeennttss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..1177

MMAARRKKEETT SSTTRRUUCCTTUURREE AANNDD OOWWNNEERRSSHHIIPP .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2211FFaacciilliittyy--bbaasseedd ooppeerraattoorrss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2211CCoommppeettiittiioonn ssttaattuuss iinn tthhee mmoobbiillee sseerrvviiccee mmaarrkkeett .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2222SSeerrvviiccee bbaasseedd ooppeerraattoorrss:: IInntteerrnneett SSeerrvviiccee PPrroovviiddeerrss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2233IInnffoorrmmaattiioonn TTeecchhnnoollooggyy EEnnaabblleedd SSeerrvviicceess ((IITTEESS)) .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2244PPrriivvaattee aanndd ffoorreeiiggnn iinnvveessttmmeenntt .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2266

Rationale for BCCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27Evaluating BCC performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

RReeggiioonnaall ccoommppaarriissoonnss ooff ffoorreeiiggnn iinnvveessttmmeenntt .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2299

TTHHEE DDOOMMIINNAANNTT RROOLLEE OOFF VVNNPPTT .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3311AAnnttii--CCoommppeettiittiivvee BBeehhaavviioorr .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3311CCoommppeettiittiioonn LLaaww IIssssuueess .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3333TThhee aarrgguummeenntt ffoorr pprriivvaattiizziinngg VVNNPPTT .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3344

RREESSUULLTTSS OOFF TTHHEE SSUURRVVEEYY OOFF TTEELLEECCOOMM SSEERRVVIICCEE UUSSEERRSS .. .. .. .. .. .. .. .. .. .. .. ..3377TThhee ssaammppllee .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3377UUttiilliizzaattiioonn ooff tteelleeccoomm sseerrvviicceess .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3388TTeelleeccoomm ccoossttss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3388SSeerrvviiccee qquuaalliittyy aasssseessssmmeenntt .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3399IImmppaacctt aasssseessssmmeenntt ooff iimmpprroovveedd sseerrvviicceess .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3399CCoonncclluussiioonnss ooff tthhee ssuurrvveeyy .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..4400

TTHHEE WWAAYY FFOORRWWAARRDD .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..4411RReeccoommmmeennddaattiioonnss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..4411VViieettnnaammeessee tteelleeccoomm ssttaakkeehhoollddeerr ccoonnffeerreennccee .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..4433

BBIIBBLLIIOOGGRRAAPPHHYY .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..4455

iv

LLIISSTT OOFF FFIIGGUURREESS

FFiigguurree 11:: PPeenneettrraattiioonn lleevveellss ffoorr tteelleeccoomm sseerrvviicceess iinn VViieettnnaamm .. .. .. .. .. .. .. .. .. .. .. ..44

FFiigguurree 22:: KKeeyy tteelleeccoommmmuunniiccaattiioonnss iinnddiiccaattoorrss ooff AASSEEAANN mmeemmbbeerr ccoouunnttrriieess 44

FFiigguurree 33:: AAllllooccaattiioonn ooff mmaajjoorr rreessppoonnssiibbiilliittiieess iinn tteelleeccoommmmuunniiccaattiioonnss ppoolliiccyy ..99

FFiigguurree 44:: RReecceenntt MMPPTT rreegguullaattiioonnss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..1133

FFiigguurree 55:: TTaarriiffffss ffoorr iinntteerrnnaattiioonnaall sseerrvviiccee iinn VViieettnnaamm .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..1144

FFiigguurree 66:: VViieettnnaamm--UUSS BBTTAA ffoorr ffoorreeiiggnn iinnvveessttmmeenntt iinn tteelleeccoommmmuunniiccaattiioonnss 1188

FFiigguurree 77 :: OOvveerrvviieeww ooff VViieettnnaamm’’ss iinntteerrnnaattiioonnaall ttrreeaattyy oobblliiggaattiioonnss .. .. .. .. .. .. .. ..1199

FFiigguurree 88:: CCoommppeettiittiioonn aammoonngg VViieettnnaamm’’ss FFBBOOss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2222

FFiigguurree 99:: VVNNPPTT oorrggaanniizzaattiioonnaall ssttrruuccttuurree .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2233

FFiigguurree 1100:: CCoommppeettiittiioonn iinn VViieettnnaamm’’ss mmoobbiillee sseeggmmeenntt .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2233

FFiigguurree 1111:: IInntteerrnneett ssuubbssccrriibbeerrss aanndd ddeennssiittyy iinn VViieettnnaamm.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2244

FFiigguurree 1122:: IISSPP mmaarrkkeett sshhaarree,, MMaarrcchh 22000033 –– JJuunnee 22000044.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2244

FFiigguurree 1133:: VViieettnnaamm iinntteerrnneett ccoonnnneeccttiivviittyy.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2255

FFiigguurree 1144:: CCoommppaarriissoonn ooff VViieettnnaamm ttoo rreeggiioonnaall IITTEESS ppllaayyeerrss .. .. .. .. .. .. .. .. .. .. .. .. ..2255

FFiigguurree 1155:: PPeerrmmiitttteedd ffoorrmm ooff ffoorreeiiggnn iinnvveessttmmeenntt iinn tteelleeccoomm bbyy ffoorreeiiggnnppaarrttiieess .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2266

FFiigguurree 1166:: VViieettnnaamm''ss BBCCCCss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..2288

FFiigguurree 1177:: RReeggiioonnaall ccoommppaarriissoonn ooff lliimmiittss oonn ffoorreeiiggnn oowwnneerrsshhiipp.. .. .. .. .. .. .. .. .. ..3300

FFiigguurree 1188:: TTeelleeccoommmmuunniiccaattiioonnss iissssuueess aaddddrreesssseedd vviiaa tthhee LLaaww oonnCCoommppeettiittiioonn .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3344

FFiigguurree 1199:: AAssiiaann pprriivvaattiizzaattiioonnss iinn tthhee 11999900ss.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3355

FFiigguurree 2200:: BBrreeaakkddoowwnn ooff ssaammppllee.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3377

FFiigguurree 2211:: LLeevveell ooff iimmppoorrttaannccee ooff tteelleeccoomm sseerrvviicceess aanndd pprroodduuccttss.. .. .. .. .. .. .. ..3377

FFiigguurree 2222:: TTeelleeccoomm ccoossttss aass aa ppeerrcceennttaaggee ooff ttoottaall ccoossttss .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3388

FFiigguurree 2233:: AAsssseessssiinngg tteelleeccoomm sseerrvviiccee pprriicceess.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3388

FFiigguurree 2244:: CCoonnnneeccttiioonn sseerrvviiccee qquuaalliittyy mmeeaassuurreess.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..3399

FFiigguurree 2255:: BBrreeaakkddoowwnn ffrreeqquueennccyy aanndd tteecchhnnoollooggyy aasssseessssmmeenntt.. .. .. .. .. .. .. .. .. .. .. ..4400

FFiigguurree 2266:: IImmppaacctt ooff iimmpprroovveedd sseerrvviicceess oonn eenntteerrpprriisseess.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..4400

FFiigguurree 2277:: TTeelleeccoomm’’ss bbeesstt aanndd wwoorrsstt pprraaccttiicceess.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..4422

FFiigguurree 2288:: AA rrooaaddmmaapp ffoorr cchhaannggee.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..4444

v

ABBREVIATIONS

ADB Asian Development BankBCC Business Cooperation ContractBPO Business Process OutsourcingBTA Bilateral Trade Agreement between the United States and VietnamCAGR Cumulative average growth rateCDMA Code Division Multiplexing ModulationCSO Community service obligations DGPT Directorate General of Post and TelecommunicationsDLD Domestic long distanceDSL Digital subscriber linesFBO Network or facility based operationsFCC US Federal Communications Commission FPT Fiber to the premiseGATS General Agreement on Trade in Services GIPI Global Internet Policy InitiativeGSM Global System for Mobile CommunicationsHT Hanoi TelecomICT Information and communication technology (ICT)ILD International long distanceIP Internet ProtocolIT Information technologyITES IT-enabled servicesITU International Telecommunications UnionIRR Internal rate of returnISP Internet service providerIXP Internet exchange providersLAN Local area networks MFO Most favored nationMP 3 Moving Picture Experts Group Layer-3MPT Ministry of Post and TelecommunicationsNGN Next generation networksNII National information infrastructureNIPTS National Institute of Post and Telecommunications StrategyPHS Personal Handy-phone SystemPTT Postal,Telephone and TelegraphRFID Radio frequency identificationSBO Service-based operationsSMS Short messaging serviceSOE State-owned enterprisesSPT Saigon Postal and TelecommunicationsTCP/IP Transmission control protocol/Internet protocolTSLRIC Total service, long-run incremental cost

VAS Value-added servicesViettel Vietnam Military Telecom CompanyVISHIPEL Vietnam Shipping Telecommunication CompanyVNCI Vietnam Competitiveness InitiativeVNPT Vietnam Post and TelecommunicationsVOD Video-on-demandVoIP Voice over IPVPN Virtual private networksWAN Wide area networksWiFi Wireless fidelityWiMax Worldwide interoperability for microwave accessWLL Wireless local loop WTO World Trade Organization

vi

Few eras in human historyhave experienced such rapidchange in the way societies

communicate and interact as thepresent time. Driven by dramaticimprovements in computing powerand broadband access to theInternet, recent advances incomputers and telecommunicationshave fundamentally changed theway we live. Access to moderntelecommunications is no longerviewed as a luxury but rather as aneconomic and social necessity.Every aspect of modern life has feltthis impact – telecommuting,telemedicine, online banking, onlineeducation and eGovernment areexamples of this digital age.

Convergent technologies –networks, products and servicesthat combine aspects oftelecommunications, computing,media and entertainment – havechanged the underlying nature ofthe telecom sector. Digitaltechnology is replacing analog,Internet Protocol (IP) is supplantingcircuit switching, and wirelesstechnology compliments, and insome cases substitutes, traditionalwireline networks.Telecomcompanies are reorganizing inorder to meet these changingtimes.Telephone providers areupgrading their facilities to nextgeneration networks (NGN), whichcombine voice, data, mobile andvideo services into a singleinterconnected platform. Carriersare quickly moving into the wirelessarea, deploying wireless in the local

loop (WLL) and mobile wirelessnetworks. In many cases, carriersare entering markets viapartnerships, acquiring importanttechnical expertise and capital. Incountries with limitedinfrastructure, wireless subscribersare surpassing wireline users; in2004, both Malaysia and Indiaentered this category.

Emergence of the Internet, and theexplosive growth in the sector thatcomes with it, is creating newthreats and opportunities fortraditional carriers. CompetitiveInternet service providers (ISPs)are offering dial-up access to theircustomers, while cable TVcompanies are bundling high speedInternet access over their coaxialvideo networks. Carriers areresponding by upgrading theircopper infrastructure with digitalsubscriber lines (DSL) to providehigh speed Internet access tocustomers, along with a variety ofvalue-added services (VAS)significantly outside the carriers’traditional services, notably, email,ecommerce, unified messaging andcontent services.

New innovations and competitiveforces will continue to convergetelecommunication networks withthe computing, media andentertainment industries, and willforce traditional telcos to deploycostly technology upgrades toremain competitive. In manyworldwide markets, newcompetitive carriers have entered

the market, some building theirown networks, some resellingservices provided by facility-basedoperators.Voiceover IP (VoIP)providers have emerged – notablyYahoo,Vonage and Skype –providing inexpensive voicecommunications and forcingtraditional operators to introducelower cost VoIP services of theirown, thus cannibalizing theirrevenue stream. Cable TVproviders are offering telephoneand Internet services, and soon willbundle mobile services on a resalebasis.Telephone carriers are likelyto respond with a video offering oftheir own, requiring fiber to thepremise (FTP), additional networkupgrades and partnerships withmedia and entertainmentcompanies.

Convergence has introduced othertechnologies that are disruptingtraditional telecom businessmodels.The Internet has forced TVand radio broadcasters, to developonline strategies, videobroadcasting and Internet radio.Satellite radio has attracted eightmillion subscribers – a technologyadoption rate faster that mobilephones. New services like Tivohave brought video-on-demand(VOD), and WiMax technology willtransmit video wirelessly. Smartcards and radio frequencyidentification (RFID) are emergingapplications which may furthertransform traditional methods ofcommunications and the businessmodels that support them.

COMPETITION REVIEW OF THE VIETNAMESE TELECOM SECTOR 1

INTRODUCTION

2 COMPETITION REVIEW OF THE VIETNAMESE TELECOM SECTOR

Advances in technology are centralto the telecom revolution, andunderstanding current and futuretechnology is primary to thechange management process.Toooften, governments and policy-makers are behind the curve,meaning that they addresstechnology issues only after theyimpact on the sector. As a case inpoint, look at the development ofthe Internet,VoIP and electroniccommerce: regulatory institutionshave been slow to adapt to theprofound technological andeconomic realities of theseadvances.

Of course, understanding andforecasting the currenttechnological revolution – and howit influences telecom networks,business models and socio-economic systems – is a dauntingtask. At the same time,understanding these trends iscritical to managing the reformprocess.Without presaging theultimate result of these innovations,several technological trends areemerging as influencing driverswithin the sector:

•• TTeecchhnnoollooggyy aaddooppttiioonn rraatteess::Compared to oldertechnologies, new telecomnetworks and services – such assatellite radio, cellular phones,computers and the Internet –have been quickly accepted bylarge segments of society, in partdue to advances intelecommunications itself.

•• GGrroowwtthh ooff wwiirreelleessss ssyysstteemmss:: Thecommercialization of variouswireless technologies such as 3rdand 4th generation (3G, 4G)cellular technology,WLL,broadband transmissions systems

such as broadband fixed wireless(WiFi) and WiWax, and RFID hasimpacted on the development oftelecom equipment, networksand services.

•• SSaatteelllliittee tteecchhnnoollooggyy:: New cost-effective satellite serviceproviders such as PanAmSat playan increasingly significant role inglobal communications networks.Satellite radio and the Internethave become importantsegments of these networks.

•• DDaattaa ccoommpprreessssiioonn tteecchhnnoollooggyy::Compression technologies suchas TCP/IP (Internet), CDMA(wireless), MP3 (on-line audio),free space optic lasers andwavelength division multiplexingnow allow higher data transferrates and impact on thearchitecture of telecom systemsand software.

•• TThhee rriissee ooff nneettwwoorrkkiinngg:: Thecommercialization of theInternet, intranets and extranetschanges the organizationalstructure and hierarchy oftelecom networks. As thegrowth of local and wide areanetworks (LAN,WAN) andvirtual private networks (VPN)continues, the installation ofhome networking systems(combining a variety ofconsumer electronics) mayemerge as a major industry.

•• EElleeccttrroonniicc ccoommmmeerrccee:: A widevariety of products and servicesare available on-line,fundamentally altering traditionaladvertising, marketing, sales andcustomer care processes. Onlinesecurity, intellectual propertyrights and identity theft areemerging issues.

•• IIPP tteelleepphhoonnyy:: Circuit-switch voicesystems are migrating towardVoIP technology, impacting on

traditional equipmentmanufacturers and serviceproviders.

•• IInntteelllliiggeenntt nneettwwoorrkkss aannddssooffttwwaarree:: Network intelligence isdevolving to the edge of thesystem via Internet routers.Software is becoming smarterand more user-friendly, withvoice recognition systems likelybe a major future application.Optical recognition is maturing,and radio frequency technologyis emerging.

•• CCoonnvveerrggeennccee:: The bordersbetween computing, telecomand entertainment willincreasingly blur. New hybrid‘infocomm’ or ‘telematics’services are becomingincreasingly commercialized.Technical and regulatory barriersbetween sectors and serviceswill dissipate.

Of course, most of these trendsare interconnected and, in turn, willinfluence the types of technologies,architectures and services providedto the end-user. Rather than be anabsolute set of issues, these trendsare not exclusive of others.Nonetheless, they may provide astarting point from which decision-makers can further understandfuture technologies and craftappropriate telecom strategies.

Of equal import is the globalconsensus role thattelecommunications play infacilitating economic prosperity andsocial well-being.The telecomnetwork provides the foundationfor entire other sectors, frominformation technology to businessprocess outsourcing (BPO) andeCommerce. In addition to arobust underlying telecom

network, the inherent nature ofthese sectors requires privateinvestment, cross-borderpartnership and global commerce.

So what does this meanfor Vietnam?

Vietnam’s leadership understandsthe fundamental changes facing theglobal community and in the early1990s launched Doi Moi (literally‘change and newness’), a policyaimed at modernizing Vietnam’seconomy by introducingcompetition in multiple sectors.Prior to this time,Vietnam’stelecom sector was organizedaround the Postal,Telephone andTelegraph (PTT) model, where themonopoly government-owned PTTcompany was responsible for allaspects of postal service andtelecom – from policy andregulation to telephone operations,postal delivery, and so on. In 1993,limited competition and smallquantities of private investmentwere introduced into thetelecommunications sector, and themonopoly status of the VietnamPost and Telecommunications(VNPT) was ended. Furthermore,the government separated telecomoperations, which remained withthe VNPT, and created theDirectorate General of Post andTelecommunications (DGPT),which later become the Ministry ofPosts and Telecommunications(MPT). Recent new reports evensuggest VNPT plans to raise capitalfor its cellular subsidiary via a publicoffering, rather than extending itsBusiness Cooperation Contract(BCC) relationship with its currentforeign partners.

These actions have resulted inrapid development of Vietnam’stelecom sector over the lastdecade. In 1995,Vietnam had lessthan 1million land lines and only23,500 mobile connections. Onlyfour people in 1,000 had atelephone line.The network wasoutdated and the Internet had notyet reached the country.Today, thecountry has more than 5M landlines and 2.5M mobile users,increasing telephone density tonearly 5%. Nearly 2M people haveInternet accounts, and a datanetwork has been established in allcities and provinces to ensurecoverage of the entire country.Nearly 90% of the country’s ruralcommunities now haveconnectivity and new technologies,such as VOIP and WiFi, are usedincreasingly. But most importantly,network expansion and theintroduction of advanced servicescontinues apace.

Despite Vietnam’s impressive gainsin network expansion, introducingcompetition and reducing prices,the country remains well behindother countries in the region – andfar short of the country’s aggressiveobjectives for the telecom sector.Legal and institutional reformsaccount for much of the gains todate – improved regulations, limitedcompetition, private sector andforeign investment – but by globalstandards, the country’s telecomsector remains restrictive and onlysemi-transparent. In addition,though there is competition inmost telecom segments, most ofthe major players are state-ownedand there is cross ownershipbetween state-owned operators.

One noticeable aspect of Vietnam’stelecom sector is that it does nothave an independent regulatorybody and there is no seriousdiscourse about creating one.Internationally, an independentregulator is the accepted norm,with more than 100 countriessubscribing to this model.Thisstructure may prove useful forVietnam in the long run, in orderfor the country to cope withincreased competition, advancedtechnology, convergence issues andadditional stakeholders, e.g.consumers, associations ormanufacturers.

From a network perspective,Vietnam’s expansion is one of thefastest in the world, albeit from alow start point.The number ofmain telephone lines grew from 0.4per 100 inhabitants in 1995 to fivein 100 by 2003, at a cumulativeaverage growth rate (CAGR) of45%.The number of cellularsubscribers grew from 23,500 in1995 to 1,480,000 in June 2002with a CAGR of 80%.Teledensity isapproaching 10 telephone lines per100 inhabitants, a target set by theGovernment for 2005. By mostaccounts,Vietnam now has a fairlygood physical infrastructure.Internet penetration has alsogrown rapidly since 2000. Figure 1shows the growth in penetrationrates for fixed, cellular and Internetservices.

During 1998-2003, the averagegrowth of Vietnam’s network was26.8%, one of the highest in theregion, albeit from a low base. Ifthe growth continues,Vietnam ison target to reach 10 million linesinstalled by 2006, and a teledensity


rate of 30% within a decade.To acertain extent, however, the easygrowth is over (e.g. pent updemand in urban areas).To achievethis next stage of networkexpansion,Vietnam will need toinvest billions of dollars in smallercities and rural locations. AlthoughVietnam’s penetration rate is highby regional standards, even withrecent growth the country remainswell behind many developingcountries worldwide. Even if thecountry reaches its current targets,Vietnam will continue to lagbehind its regional competitors(see Figure 2).

Vietnam’s competitive environmentis also improving, although at a very


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01 rep sr

esu/se

niL

Cellular

Internet

Fixed

Figure 1: Penetration levels for telecom services in Vietnam

Source: ITU.

CCoouunnttrriieessPPooppuullaattiioonn ((MMiill

22000022))GGDDPP ppeerr ccaappiittaa

((UUSS$$ 22000011))FFiixxeedd lliinneetteelleeddeennssiittyy

MMoobbiilleetteelleeddeennssiittyy

TToottaall tteelleeddeennssiittyyIInntteerrnneett uusseerrss ppeerr1100,,000000 iinnhhaabbiittaannttss

Brunei Darussalam 0.358 12,447 25.95 46.8 72.75 1,023.00

Cambodia 13.79 254 0.28 2.54 2.82 21.76

Indonesia 212.11 1,002 (2003) 3.65 5.52 9.17 377.16

Lao PDR 5.53 324 1.57 3.64 5.21 27.11

Malaysia 24.53 3,684 18.30 41.30 59.60 3,196.00

Myanmar 48.98 148 0.61 0.03 0.64 2.07

The Philippines 79.48 913 4.17 10.36 23.53 437.60

Singapore 4.16 20,752 46.29 79.56 125.85 5,396.00

Thailand 61.89 1,874 10.51 26.04 36.54 775.61

Vietnam 81.25 406 4.84 2.02 6.86 184.62

ASEAN average - - 4,150 11.60 21.40 33.03 1,144.37

AAssiiaa aavveerraaggee -- -- 22,,229966 1111..9999 1122..4411 2244..44 558844..7755

Figure 2: Key telecommunications indicators of ASEAN member countries

Note: Countries above the ASEAN average are shaded.Source: ITU world telecom indicators, 2003.

measured pace. Following keyregulatory changes in the mid tolate 1990s, the dominant positionof the government ownedmonopoly,VNPT, was dismantled toa certain extent by the entry ofother state-owned players. ButVietnam must act decisively andquickly if the government seriouslyintends to reach and sustainregional norms oftelecommunications development.

Recent events however suggestthat Vietnam is firmly on the roadto liberalization. According toseveral governmentannouncements, the country ismoving forward with reforms, whileat the same time, competitiveplayers are moving forward withaggressive service rollouts and theintroduction of new technology.Take the following examples:

• A recent government decision(No. 58/2005/QD-TTg) wastaken to restructure VNPT into aparent-subsidiary consortiumcomprising a management boardto manage the parent and thecreation of separate post andtelecom subsidiaries.This action,expected to be implemented inthe fourth quarter of 2005,represents an important firststep in reorganizing VNPT.

• In mobile communications,Vietnam Military TelecomCompany (Viettel), a competitivegovernment-owned operator,launched services in October2004 and signed up 200,000subscribers in its first fourmonths of operations (a sign ofpent up demand).The companyplans to invest a furtherUS$50M to achieve 1.1 millioncustomers by October 2005.With several mobile operators

now competing for business,prices will fall and soon Vietnamwill have more mobilesubscribers than traditionalwireline subscribers.

• FPT Communications, the largestprivate ISP, ordered equipmentto introduce video streamingtechnology to its customers.

• Hanoi Telecom signed anagreement with HK-basedHutchison Telecommunicationsto invest US$656M to build aCDMA-based mobile network inHanoi.

These actions represent the trendand direction of Vietnam’sliberalization program.Theremainder of this report will focuson the overall competitiveenvironment and the status of keytelecommunication stakeholders.

Understanding the importance oftelecommunication and informationtechnology to the overall economyand well-being of its people, thegovernment of Vietnam has setaggressive targets in order torevamp these sectors, build itsNGN infrastructure, and introduceadvanced technology and servicesto consumers and businesses.Vietnam’s leadership alsounderstands the obstacles, namelythe existing gap between Vietnamand other countries, both in SouthEast Asia as well as with importanttrade partners.There is a growingrealization that the currentstructure of the country’s telecomsector – market dominance by astate-owned company, limitedprivate sector participation,persistent questions aboutregulatory transparency – is notconducive to meeting the country’saggressive targets. At the same

time, there is a growing realizationof the important role played by theprivate sector in importing capital,technology and expertise.

The purpose of this report is toprovide insight into the currentsituation of Vietnam’s telecomsector, placing a focus on recentregulatory changes, the status ofcompetition and the actionsrequired by the government toachieve its objectives for the sector.The report provides anintroduction to the current statusof the industry, highlights recentevents and their impact andreviews key structural elements –government, operators andconsumers. As a point of reference,where applicable, this reportprovides international and regionalcomparisons.The content of thisreport updates a previous versionpublished in December 2004.Thisreport does not intend to replacethe December version but ratherto supplement the debate andfocus on recent changes within thetelecom sector.

CChhaapptteerr 11 provides an introductionand background to the currentsituation of Vietnam’s telecomsector. In the early 1990s, theGovernment launched Doi Moi, apolicy aimed at modernizingVietnam’s economy by introducingcompetition in multiple sectors.Prior to this time,Vietnam’stelecom sector was organizedaround the PTT model, where themonopoly government-owned PPTcompany was responsible for allaspects of postal service andtelecommunications – policy,regulation and operations. In 1993,limited competition and small


quantities of private investmentwere introduced into the telecomsector, and the monopoly status ofthe PTT was officially ended,although the company remainsdominant even today.Thegovernment formed a ministry-level policy-making and regulatorybody, combining both functions intoa single agency. Limited amounts ofprivate and foreign investmentwere permitted via joint stockcompanies and businesscooperation contract (BCC)relationships with foreign partners.These actions resulted in rapidexpansion of Vietnam’s telecomsector, from less than 1M in 1995(four lines per 1,000 people) to7.5M today (five lines per 100people).The country’s network hasbeen upgraded and the Internet isgrowing rapidly. New VoIP and WiFiservices are available. However,despite Vietnam’s impressive gainsin innovation, network expansionand competition, the countryremains well behind othercountries in the region – and farshort of the country’s aggressiveobjectives for the telecom sector.Recent events, however, suggest thegovernment is committed tomoving forward with plans toreorganize the state-owned PTT,allow additional forms of privateand foreign investment and pushpolicies to liberalize the sector.

CChhaapptteerr 22 offers insight into thecurrent legal and institutionalframework of Vietnam’s telecomsector. Since 1993, the governmenthas decreed a series of important,fundamental changes to its legalenvironment. In 2001, thegovernment issued Vietnam’s newstrategy for the sector, highlighting

key milestones and objectives to2010 and a long-term vision to2020.To follow up on this strategy,the government issued asupporting ordinance and decreethat provided guidelines toimplementing government policy.Subsequently, additional decreesand decisions have providedimplementation details, and clarifiedlegal and regulatory positions.While Vietnam is moving in theright direction, the legal andregulatory reform process remainsincomplete.There are legitimateconcerns that Vietnam’s policiesinhibit true competition, and limitprivate sector and foreigninvestment.The government alsoneeds to strengthen and open thepolicy-making process, and initiatereforms to solidify transparencywithin the regulatory environment.Problems associated with Vietnam’sinterconnection are also discussed.These issues and others, such ascross-subsidies and adherence totreaties, are discussed in detail.

CChhaapptteerr 33 provides an overview ofthe current market structure andthe role of state ownership ofVietnam’s telecom operators.Whilecompetition has been introducedin some sectors, the state-ownedPTT continues to dominate themarket – controlling nearly 95% ofthe aggregate telecom market.ThePTT dominates every telecomsegment, and owns non-corebusinesses in the equipment,engineering, construction andconsulting fields. Many new marketentrants also have state-ownership,thus limiting the role of private andforeign operators.The companyalso retains non-telco assets in thetourism, printing and insurance

sectors.This dominant positioninhibits true competition andprevents potential competitorsfrom entering the market.

This section also reviews the roleof private and foreign investment inVietnam’s telecom sector, focusingon the role of BCCs and theimpact of Vietnam’s bilateral tradeagreement with the US whichstipulates the opening of Vietnam’smarket to US investment. Itprovides a regional perspective onthe role of private sector andforeign investment.To date,Vietnamese companies haveparticipated in 11 BCCs in orderto attract foreign investment andexpertise. Interestingly, the mostrecent BCC is structured more likea joint venture, and has provisionsto convert to that ownershipmodel once Vietnamese lawpermits it. As a reference, thechapter also provides a briefreview of the role of privatizationof state-owned telecom assets inthe region.

CChhaapptteerr 44 discusses the dominantrole of VNPT and explores theissue of anti-competitive behavior.The research provides anecdotalexamples of anti-competitivepractices commonly used by theVNPT to limit competition.Theseexamples include unfair allocationof network facilities, high prices foruse of network facilities, cross-subsidization, refusal of services,forced use of VNPT services andabuse of technical measures toblock competitors’ services.Thischapter also reviews the strategicrationale for privatization of VNPT.

CChhaapptteerr 55 provides the results ofthe market survey of telecom


users based on responses from 89Vietnamese companies.The surveycovered types of services used,quality and price.This sectionprovides details regarding thesurvey respondents, and makes thefollowing conclusions:

• Vietnam appears to have a well-run and reliable telecomnetwork that provides relativelyfast connections, but often slowtransmission speeds.

• Although new services areavailable, most firms continue tofocus their telecom use ontraditional telephony andInternet services, suggesting thatimportant platforms forinnovation are yet to beexploited.

• Most business concerns focus onthe relatively high prices ofVietnam’s telecom services. Pricereductions would lead tosubstantial increase in demandfor telecom services. A pricereduction of one-third wouldlikely lead to a 25-30%expansion of the telecommarket.

• Improved service delivery(including lower prices) wouldtranslate into improved firm levelcompetitiveness throughsignificantly higher turnover andrevenues, improved profitabilityand an increased rate ofinnovation.

CChhaapptteerr 66 offers a frameworkwhich can be used to moveforward, highlighting key areas foraction by the Vietnamesegovernment.Theserecommendations build onprevious work conducted by theWorld Bank and the VietnamCompetitiveness Initiative (VNCI),and focus on the need to build a

consensus for reform among thefollowing key stakeholders:

• Government – strategy, policyand regulation.

• Business – operators, vendorsand related businesses.

• Consumers and Civil Society –business and residential users,unions, trade groups, et al.

Specific recommendations aremade to improve the followingaspects of Vietnam’stelecommunications sector:

• Telecommunications Policy.

• Regulatory Transparency.

• Strengthen Vietnam’sinterconnection regime.

• Strengthen Vietnam’s licensingregime.

• Tariff rebalancing.

• VNPT reform.

Finally, the VNCI highlights the needto organize a Vietnamese TelecomStakeholder Conference, the aim ofwhich would be to bring togetherkey decision-makers andstakeholders to discuss importantissues associated with the ongoingreform and liberalization process.The conference would not onlycontribute to the debate but alsobuild a consensus of opinionamong intellectual leaders anddecision-makers which will assistVietnam to introduce a vibrant andcompetitive telecom environment.

Observers of Vietnam’s recenthistory are rightly optimistic aboutthe country’s recent economicperformance and its commitmentto reform.With economic growthof 7.7% in 2004, based in large parton liberalization across theeconomic spectrum, and an 8.5%target for 2005,Vietnam has a

bright future.The AsianDevelopment Bank (ADB)forecasts economic growth of 7.6%in 2005. However, there areconcerns about the pace of reformand strong regional competitors.The government reform processbegan in the early 1990s butimportant aspects of economicliberalization – including keyaspects within the telecom sector –remain incomplete.While theGovernment is moving in the rightdirection, 15 years into theliberalization process there areserious questions about the paceand depth of reform.

Vietnam has serious economic andcommercial competition frommajor economies, both developedand developing.Vietnamesecompanies, and foreign company’sdeciding to invest in the region,compete and compare Vietnam totechnology powerhouses likeSingapore,Taiwan, Japan and Korea.Vietnam also borders China andneighbors India – two emergingpowers with highly competitiveaspirations in the sectors ofmanufacturing, outsourcing andtechnology innovation. Otherregional players include Malaysia,Indonesia and the Philippines. All ofthese countries have highlyadvanced telecom frameworks.

The path for Vietnam is clear –reform the VNPT, create anindependent regulatory body,introduce real competition anddivest the government fromtelecom operations.The openquestion remains: when?


Vietnam has madeimportant fundamentalchanges to its legal

environment with the objective ofcreating a robust and competitivetelecom sector, which in turnprovides the foundation foreconomic growth for telecom andIT-enabled business. However,Vietnam’s reform process remainsincomplete.There are legitimateconcerns that the country’s policiesinhibit competition, and limitprivate sector and foreigninvestment. In terms oftransparency of regulations, thecurrent regulatory body doesn’tfully meet international norms ofindependence, and this effectslicensing, non-discriminatoryinterconnection and cross-subsidies

in tariffs. In addition,Vietnam isbehind schedule in implementing itsobligations under the bilateralagreement with the United States,namely access for US investors.These issues combined produceuncertainty and risk to new marketentrants and investors, which inturn limits network expansion, theintroduction of new services andoverall economic growth.

Liberalizing Vietnam’s telecomsector, however, is not a short-termproposition; rather the processrequires a long-term approach thatimpacts on three primarygovernment activities: developing astrategy and policy; providing thelegal foundation for action, forexample, through laws and

regulations; and ensuring efficientimplementation of a consistent andtransparent regulatory environmentthat will ensure effective policyimplementation and compliance.This chapter deals only with thepolicy aspects of governmentstrategy, legislation, policy,regulation, regional comparisonsand international commitments.

Ministries responsible forVietnam’sTelecommunicationsPolicy

As with most governments, settingpolicy for a complex sector liketelecommunications requires actionfrom multiple ministries andagencies. Given the complexity of


LEGAL AND INSTITUTIONALFRAMEWORK

AAggeennccyy RReessppoonnssiibbiilliittiieess

Deputy Prime Ministers (DPMs)Of the four DPMs, one holds the portfolio for telecom, one holds the portfolio for ICT, and oneholds the e-government portfolio.

Office of Government (OOG) This office serves as the PMs and DPMs secretariat and clearing house, and also coordinates inter-departmental policy and institutional initiatives. OOG runs the in-house e-government program,which focuses on building intra-departmental and provincial networks.

Ministry of Post and Telematics(MPT)

Sets policy for and regulates the telecom sector; representative of the State’s capital interests infacility-based operators, including the dominant VNPT.

Ministry of Trade (MoT) Sets policy and develops legislation and programs for e-commerce and trade.

Ministry of Science andTechnology (MOST)

Develops R&D programs for telecom and ICT; sets ICT standards.Was formerly the chief policyactor in ICT, but this role was changed with the creation of MPT.

Ministry of Planning andInvestment (MPI)

Ensures sufficient and timely investment is available for approved development in IT (defined broadlyto include telecom).

National Steering Committee onICT

Monitors implementation of the national IT plan (which covers telecom, ICT, and the ICT projects,functions and responsibilities of all ministries and agencies).

Figure 3:Allocation of major responsibilities in telecommunications policy

Source:World Bank.


the telecom sector and its impacton the entire economy,Vietnam’spolicy-making rightly includesmultiple organizations. Figure 3outlines the roles andresponsibilities of variousgovernment bodies in craftingnational policy.

Ministry of Posts andTelematics

Based on recent changes in thetelecom law, the MPT is theprimary driver of telecom strategy,policy and regulation.To emphasizeits role in developing the IT sector,the MPT recently changed its nameto the Ministry of Post andTelematics. Unlike many countriesthat have created an independent,autonomous regulatory body, theMPT is the state administration incharge of policy-making andregulatory matters in post, telecom,IT, electronics, the Internet, radiotransmission and emissiontechniques, radio-frequencymanagement, and nationalinformation infrastructure.The MPTmanages public services as well ashaving control over the state capital(for example, investment), onbehalf of government and asstipulated by laws and regulationsin post, telecommunication and ITenterprises. Its main functionsinclude:

PPoolliiccyy--mmaakkiinngg ffuunnccttiioonnss::

• Submit to government drafts oflaws, ordinances, regulations,strategies and developmentplans on posts, telecom and IT.

• Give guidance in implementationof laws, ordinances andregulations, as well asdevelopment strategies and

plans related to posts, telecomand IT.

• Conduct internationalcooperation activities in posts,telecom and IT.

RReegguullaattoorryy ffuunnccttiioonnss::

• Regulate access to and inter-connection between publicswitched telephone networks,and specialized and privatenetworks.

• Regulate the electronics and ITindustry development plan.

• Regulate charges and tariffs inthe fields of post, telecom and IT.

• Plan, assign and allocate theradio frequency spectrum.

• Control and monitor the radiofrequency spectrum and radioequipment; organize radio-frequency, satellite orbitregistration and coordination.

• Grant licenses in post, telecom,radio frequency and the Internet.

• Regulate the quality of post,telecom and IT networks, plants,products and services.

• Regulate numbering resources,codes and domain names.

• Inspect all activities and settle allregulatory breaches in the fieldsof post, telecom and IT1.

Telecommunicationsdevelopment strategyand policy

Issued by the Government in 2001,Vietnam’s Post andTelecommunications DevelopmentStrategy (the Strategy) lays outpolicy objectives through 2010 andprovides a long-term vision through2020.The underlying principles ofthe Strategy are quite liberal,

outlining the government’s objectiveof introducing competition andprivate sector ownership, andintegrating Vietnam into theincreasingly interconnected globalcommunity.The following Strategy excerptsemphasize the government’s clearcommitment to fundamental long-term liberalization of the country’stelecom sector:

•• SSttrraatteeggyy PPrriinncciippllee TTwwoo:: ‘To makefull use of all resources of thecountry, and to facilitate andmake conducive conditions forall economic sectors (in term ofownership) to participate in thedevelopment of post andtelecommunications in atransparent, competitive and fairenvironment administered by theState with an appropriatemechanism.’

•• SSttrraatteeggyy PPrriinncciippllee TThhrreeee:: ‘Toactively make internationalintegration and development inparallel with ensuring nationalsecurity and information security.’

The Strategy also sets strategicobjectives for the development ofthe sector, notably to:

• position the telecom industry asa leading sector that drives andenables overall economic growthin all regions of the country;

• issue policy and regulatorydocuments to facilitate IT-enabled services (ITES);

• develop a national informationinfrastructure (NII) to deployhigh-capacity communicationsand innovative technologythroughout the entire country;

• ensure the introduction of awide range of services;

• by the year 2010, increasetelephone and Internet

__________1. Source: MPT’s website


penetration rates to the regionalaverage;

• introduce competition, with atarget for competitive operatorsobtaining a 25-30% market shareby 2005, and 40-50% by the year2010; and

• reform tariffs to lower consumercosts in comparison withregional benchmarks.

This Strategy documentrepresented a distinct turning pointin the Vietnamese liberalizationprocess because it advocated adramatic change in policy. Inaddition to driving fundamentalstructural reform by thegovernment, the Strategy providesguidelines for new roles andresponsibilities and, mostimportantly, sets specific objectivesand targets to measure success. Asa first step in a long-term initiative,the Strategy was an importantcontribution to subsequent lawsand regulations.

The National Institute of Post andTelecommunications Strategy(NIPTS), an independent unit ofthe MPT, drafted a complementarystrategy for information andcommunication technology (ICT).The objectives, which included theexpansion of the telecom network,also included goals targeting the‘information sector’.The NIPTSgoals for telecom and ICT for theyear 2010 included the followingdetailed specific objectives:

• Achieve teledensity of 25-26lines per 100 people by 201, 28-30 total lines by 2020.

• Achieve a total teledensity byhousehold of 60% by 2010 and100% by 2020.

• Have 30% of all commercial

transactions occur online by2010.

Telecommunications law

Following the development ofVietnam’s new strategy to fostergrowth and development in itstelecom sector, the governmentmoved to codify these objectives inlaw. Accordingly, the governmenthas issued two legal rulings in thepast few years: the Ordinance onPost and Telecommunications (theOrdinance) and Decree 160Provisions Regarding Competition:Decree on Telecommunications(the Decree).Together, these lawsform the legal basis for the MPT’ssubsequent regulatory rulings,arbitration or legal actions.Thefollowing section highlights the keypolicy and regulatory issues dealtwith in these two laws2.

Ordinance on Post andTelecommunications 2002

The Ordinance was issued by theStanding Committee of theNational Assembly in 2002, sixmonths after publication of theStrategy.The law reiterates andreinforces the policy principlesoutlined in the Strategy, addingimportant implementation detailsand clarifications to thegovernment strategy. It alsooutlined specific mechanisms – forexample, policies and tools – thatcan be used by the regulator.Thesemechanisms include licensing,

market dominance,interconnection, co-location anduniversal service.The followingsummarizes the importantprinciples embodied in theOrdinance:

•• LLiicceennssiinngg:: The Ordinance definestwo types of licenses fortelecom enterprises, withdurations ranging from 10 yearsfor network services to 15 yearsfor service-based operations and25 years for international cablelandings:-- NNeettwwoorrkk oorr ffaacciilliittyy bbaasseedd

ooppeerraattiioonnss ((FFBBOO)):: An FBOowns and operates itstelecom network. FBOs sellservices directly to an end-user, or sell wholesale servicesto companies that resell itsservice. In Vietnam, FBOlicenses are only issued tostate-owned enterprises(SOEs), defined as anoperator owned by thegovernment, wholly or in part.The ordinance outlines theconcept of a ‘golden share’,which presents a share of thecompany that allows vetorights over certain corporatedecisions.

-- SSeerrvviiccee--bbaasseedd ooppeerraattiioonnss((SSBBOO)):: An SBO provides aservice that does not requirenetwork facilities, or leases ona wholesale basis networkfacilities from an SBO forresale to the end-user.Ownership in SBO licensees isopen to complete privatesector ownership.

•• MMaarrkkeett ddoommiinnaannccee:: Definesoperators with a dominantmarket share as those that havemore than 30% of the market ofa particular service.

__________2. It is important to note that these laws do not

adequately deal with three important policyissues: competition between multiple SOEs,possible privatization of SOEs and unbundlingof the local loop.Any action on these issues,or inaction, has important implications for thecountry’s telecommunications sector.

- Regulations may regulatedominant operators, e.g.,market share, pricing, servicequality, cost accounting, et al.

- Dominant carriers areprohibited from using anti-competitive practices, e.g.,cross subsidies, below costpricing, high wholesale rates,et al.

- Non-dominant operators settheir own prices, includingpromotional packages (whilethe regulatory can controldominant carrier pricing).

- Lower interconnection chargesapplied to non-dominant firmsalso provide new entrantswith some cost advantage.

•• IInntteerrccoonnnneeccttiioonn:: Stipulates thatall telecom enterprises have theright to ‘link their own networkto those of other telecomenterprises and shall be obligedto allow those other telecomenterprises to link and accesstheir own networks or servicessubject to fair and reasonableconditions’.- Mandates access and

interconnection points basedon economic and technicalfeasibility.

- Stipulates that interconnectionagreements be negotiatedbetween operators.

- Allows interconnectioncharges regulated by the MPT,using cost-based pricing.

- Defines co-location, an integralaspect of interconnection, as‘shared use of linking pointsand technical infrastructurefacilities via a linkingagreement between twosigned parties’.

•• TTaarriiffffss:: Enterprises are free todecide on charges for their own

services, except for chargesinvolving community service orinterconnection, and those fortelecom services with marketdominance.

•• UUnniivveerrssaall SSeerrvviicceess:: Establishedfund with contributions fromtelecom enterprises and othersources.

Decree 160 Provisions RegardingCompetition: Decree onTelecommunications

Building on the Strategy andOrdinance, both of which supportliberalization and competition,Decree 160 was issued by theGovernment in September, 2004.The specific additional details are asfollows:

•• MMaarrkkeett ddoommiinnaannccee:: Setsdominance at 30% of essentialfacilities. Defines essentialfacilities as local loops in ageographic area, domestic orinternational long-distancechannels and base radio stationsof the mobile network. Requiresdominant carriers to:- develop a master plan for

network investments accesspoints, interconnection andanticipated increases innetwork traffic;

- create favorable conditions forthe negotiation and executionof interconnection ofnetworks and services fortelecom companies in a fairand reasonable manner; and

- prepare and submit to MPTfor approval a MasterInterconnection Agreement, atemplate which will be madepublic and used by companiesrequesting interconnection.

•• IInntteerrccoonnnneeccttiioonn:: Reiterates keyaspects of Ordinance and

clarifies interconnection issues.- Reiterates that

interconnection charges shallbe based on cost, and arereasonably broken-downaccording to networkcomponents or serviceprocesses, withoutdiscrimination betweendifferent types of services.

- Elaborates the principle thatthe interconnection mustensure that users are free toselect any service providerthey want.

- Interconnection charge relatedto universal services must beclearly defined.

Telecommunicationsregulations

During the past year, the MPT hasissued a variety of rulings to clarifyits strategy, policy andadministrative procedures.Theserulings cover the full gamut of theMinistry’s remit, includingtelecommunications, post and ITsectors. Important issues addressedinclude the creation of the VietnamPublic Telecommunications Fund,clarification on tariff issues,equipment standards issues, thecreation of a technologydirectorate and several IT specificorders. Of particular note, in 2003,after a long delay, the MPT legalizedVoIP services, allowing the public tomake low-cost international calls.Figure 4 provides an overview ofrecent decisions with hyperlinks tothe detailed text:

Setting tariffs

MPT regulates tariffs on thoseoperators with a dominant market



RReegguullaattiioonn nnuummbbeerr DDaattee iissssuueedd SSuummmmaarryy

04/2004/TT-BBCVT 29/11/2004Provide sanctioning of administrative violations in post, telecom and radiofrequencies

191/2004/QD-TTg8/11/2004

Set up organization and operation of Vietnam Public Telecommunications Service Fund

41/2004/QD- BBCVT 5/10/2004 Promulgate regulation on telecom equipment standards

42/2004/QD-BBCVT 5/10/2004 Promulgate list of telecom equipment that requires standard conformity stamps

07/2004/CT-BBCVT 19/7/2004 Enhance management of public Internet agents

06/2004/CT-BBCVT 7/5/2004Clarify position on safety and security for post, telecommunication and Internetinformation

235/QD-TTg 2/3/2004Approve project on open-source software application and development of inVietnam, 2004-2008

101/2004/ND-CP25/2/2004

Establish provincial/municipal services of post and telematics in provinces andcentrally-run cities

16/BBCVT-KHTC 6/1/2004Price setting rules for enterprisesCost based tariffs

217/2003/QD-TTg 27/10/2003Outline dominance: telecom providers with less than 30% market share can settheir own prices

99/2003/ND-CP 28/8/2003 Promulgate the regulation on high-tech parks

148 /2003/QD-BBCVT 26/8/2003 Set provisional interconnection fees set and lowered from previous levels

75/2003/ND-CP 26/6/2003 Define organization and operation of MPT technology inspectorate

92/2003/QD-BBCVT 26/5/2003Promulgate regulation on Internet resource management and use, for example,domain names

47/2003/QD-BBCVT 20/3/2003Provide table of international telcos using the public switched telephone network(PSTN)

49/2003/QD-BBCVT 20/3/2003 Provide table of post-paid GSM mobile phone charges

53/2003/QD-BBCVT 20/3/2003 Regulates circuit charges applied to Internet exchange providers (IXPs) andInternet service providers (ISPs)

55/2003/QD-BBCVT 20/3/2003Promulgate tariff table of the international telecoms circuit leasing service appliedto IXPs for access

57/2003/QD-BBCVT20/3/2003

Issue of tariff of direct international Internet gate (IIG) installation and lease ofIXPs

90/2002/ND-CP 11/11/2002 Outline functions, tasks, power and organizational structure of MPT

43/2002/PL-UBTVQH10 1/10/2002Regulate telecom networks and services, licensing procedures and prices; definestypes of telecom services

33/2002/QD-TTg 8/2/2002 Approve the plan for Internet development for 2001-5

158/2001/QD- TTg 18/10/2001 Approve VNPT strategies through 2010 and 2020

Figure 4: Recent MPT regulations

share, whereas other operators areallowed to set their own tariffs.Tariffs in Vietnam are still cross-subsidized and are not aligned tocosts. In 2001, tariffs forinternational calls were among thehighest in the world, while localand national tariffs are relativelycheap in comparison with theregional average3.

Under a timetable to reducetelecom fees,VNPT has alreadyscaled back telephone charges ninetimes over the last four years.Mobile phone rates have recentlyundergone five consecutivereductions.The MPT introducedseveral provisions in 2002 and2003 to reduce tariffs and makethem comparable to those ofregional countries. As indicated inFigure 5, most international tariffswere reduced by 50%, and otherservices such as cellular, Internetand leased circuits were reducedfrom 10% to 30%.These actionsshould drive tariffs towards theirreal cost; however, a detailed tariffre-balancing process has yet to bedefined.

Despite the dramatic decrease intariffs, prices in Vietnam remain outof sync with regional and globalnorms. Since local and longdistance services are crosssubsidized, local prices are wellbelow ASEAN averages, forexample Singapore, whileinternational long distance calls arehigher.

A good barometer for tariffs is theUS Federal CommunicationsCommission (FCC) benchmarks forits international settlement policy.The FCC sets target settlementrates, which in turn are a keydeterminant of prices forinternational calls.The FCC dividescountries into four groups basedon economic development levelsas determined by information fromthe InternationalTelecommunications Union (ITU)

and World Bank. As such, thefollowing benchmark rates apply:

• Upper Income: 15¢.

• Upper Middle Income: 19¢.

• Lower Middle Income: 19¢.

• Lower Income: 23¢.

The FCC tracks operators thatdominate the market and arehence able to set rates aboveglobal norms.The FCC exemptsdominant carriers that negotiateprices below its benchmarks.Todate, 163 countries meet thesebenchmarks;Vietnam does not4.Classified as a low income country,the FCC’s target international tarifffor countries where the carrier hasmarket dominance is $0.23. InJanuary 2005, the FCC calculated


RReegguullaattiioonn nnuummbbeerr DDaattee iissssuueedd SSuummmmaarryy

55/2001/ND-CP 23/8/2001 Outlines management, provision and use of Internet services

81/2001/QD-TTg 24/5/2001Sets out action to implement Politburo Directive 58-CT/TW and step up theapplication and development of ICT 2001-5

DGPT Directive 01/2001/TCBD 4/1/2001Set implementation of Politburo Directive 58-CT/TW in the areas of post, telecomand IT

Politburo Directive 58-CT/TW 17/10/2000 Directs increased development of IT, telecom and related areas

99/1998/QD-TTg 26/5/1998 Promulgate regulation of posts and telecom prices

Decree No. 79/CP 19/6/1997 Promulgate administration of disputes in post, telecom and spectrum

Source: Djankov, S. et al, 2003. The Regulation of Entry, p. 47.

__________3. ITU, ‘Vietnam Internet Case Study’, March

2002.

Figure 5:Tariffs for international service in Vietnam, $US/minute

SSeerrvviiccee DDeecc.. 22000011 JJuullyy 22000022 JJaann.. 22000033 AApprriill 22000033

Calls to other ASEAN countries 1.70 – 2.30 1.50 – 1.70 1.30 – 1.40 0.90 – 1.30

Calls to Europe, USA, Australia 2.30 – 2.00 1.80 – 2.00 1.50 – 1.70 1.00 – 1.40

Calls to all internationaldestinations by VoIP

1.2 0.75

__________4. FCC Public Notice DA 04-1584, May 28, 2004

(updated international settlement policy) andFCC website.

the US/Vietnam rate at $1.19 perminute plus $2.00 per connection– well above FCC benchmarks andinternational norms.

Interconnection

Interconnection betweentelecommunications networks is aperquisite for an efficientcompetitive telecommunicationssector. Interconnection transfersthe transmission of voice, data andvideo communications from onenetwork provider to another,allowing traffic originating in onenetwork to be terminated onanother. For example, aninternational voice call originating inVietnam could interconnect withthe landline network whichtransfers the call to an internationalgateway. In turn, the call mayinterconnect with multipleinternational carriers before the callis terminated at its internationaldestination.The proper working ofinterconnecting allows seamlesscommunications for the end-user.

Interconnection promotesefficiencies in telecommunicationcarriers allowing operators toshare network assets; thus a carrierdoesn’t need to duplicate networkconstruction when the volume oftraffic doesn’t justify the expense. Innewly competitive markets, newentrants can provide serviceswithout the massive investmentsneeded to set up their ownnetwork backbone, local loop orother major facility. Interconnectionbetween competing networks isnow widely seen as a criticalmechanism for introducing marketforces into a monopolistictelecommunications environment.According to a recent report by

the Global Internet Policy Initiative(GIPI) Vietnam, a global non-governmental organization thatpromotes legal and policy reformwhich in turn supports a robustInternet environment,‘interconnection is the single mostimportant determinant of asuccessful transition frommonopoly to competitivetelecommunications markets’5.

The basis for Vietnam’sinterconnection regime is includedin the Ordinance, which deals withinterconnection by stipulating thatall telecom enterprises have theright to ‘link their own network tothose of other telecom enterprisesand shall be obliged to allow thoseother telecom enterprises to linkand access their own networks orservices subject to fair andreasonable conditions’. Providingaccess and interconnection attechnically and economicallyfeasible points is mandatory forservice providers that hold‘essential equipment and facilities’.The Ordinance also states thatinterconnection agreements are tobe negotiated between operatorswith interconnection chargesregulated by MPT.The keyregulations provide for thefollowing:

•• IInntteerrccoonnnneeccttiioonn rraatteess sshhoouulldd bbee‘‘ccoosstt--oorriieenntteedd’’:: The Ordinancestates that calculation ofinterconnection charges will bebased on ‘gia thanh’, whichmeans the cost of provision of aproduct.There is a provision thatallows carriers to include the

cost of the community serviceobligations (CSOs) in the costbaseline.While forming the basisfor Vietnam’s interconnectionregime, there are two areaswhere the Ordinance lackssufficient detail:- What is the precise definition

of cost? Although mostcountries define and calculatecost using a forward-looking,total service, long-runincremental cost (TSLRIC)method, the process inVietnam of costing networkservices is a complicated anddifficult task.

- What is the incremental tointerconnect chargesassociated with CSO?

•• PPaarrttiiaall uunnbbuunnddlliinngg ooff nneettwwoorrkkccoommppoonneennttss:: The Ordinanceprohibits unreasonable refusal tointerconnect by bottleneckfacility owners, providedinterconnection is economicallyand technically feasible. However,the interconnection regulationshave not prescribed sufficientunbundling, i.e. the access seekershould not be required to payfor interconnection or networkcomponents it does not need inorder to provide its service.

•• IInntteerrccoonnnneeccttiioonn aatt aallll ffeeaassiibblleeppooiinnttss iinn tthhee nneettwwoorrkk:: TheOrdinance appears to satisfy thisrequirement broadly, but there isno clear statement relating tothe requirement.

Co-location, a key enabler ofinterconnection, is also covered inthe Ordinance. Article 43(2)stipulates ‘shared use of linkingpoints and technical infrastructurefacilities via linking agreementbetween the two signed parties’. Ifan interconnection agreement


__________5. The report, ‘Promoting Internet Policy and

Regulatory Reform in Vietnam,AssessmentReport’, March 2004, Status ofTelecommunications Development in Vietnamis available at http://www.gipi-vn.org/

cannot be reached within a 45-daytime limit (a period set bysubsequent MPT regulations), theMPT can intervene in the process.The MPT’s decision can bechallenged via the AdministrativeCourts; however, there areseparate issues within the legalsystem that make this optionimpractical.

Further clarifications to Vietnam’sinterconnection regime areincluded in the MPT’s Decision148/2003/QD-BBCVT, dated 28August 2003, which specifies thatthe charges for interconnectionconsist of two parts: a)interconnection charges; and b)costs for establishing theinterconnection route.Interconnection charges aredetermined:

• on the basis of the cost ofinterconnection;

• with the principle of nodiscrimination between differentservices, between differenttelecom companies or betweenmembers of a telecomcompanies with other telecomcompanies;

• on the basis of rationalunbundling of networkcomponents or stages ofservices; and

• in comparison with the level ofinterconnection charges in othercountries in the region.

The Government furtherelaborated on the issue ofinterconnection charges in theDecision of the Prime Minister217/2003/QD-TTg, dated October2003, and Decree on Telecom160/2004/ND-CP, datedSeptember 2004, which addressed

the problem of interconnectioncomprehensively but did notchange the details specified in theprevious regulations. Despite theserulings, some potential problemswith Vietnam’s interconnectionregime remain, namely anti-competitive behavior relating tointerconnection, e.g., ‘technicalproblems’ and pricing constraints.Issues related to these twobehaviors are outlined below.

Technical reasons for delayinginterconnection

There are many technical reasonsthat can be used as excuses for notproviding fair interconnection.These ‘technical problems’ oftenresult in long delays tointerconnection. One recentexample involves S-Fone, a cellularupstart launched in mid-2003. Anessential requirement for a newmobile phone network is the abilityto connect messaging services withother incumbent cellular providers,Vinaphone and Mobifone.Theagreement between the newmarket entrant on the incumbentcalled for interconnection byDecember 2003, but it wasn’timplemented until mid-2004 – afull year after service started.During VNCI interviews, statementsfrom S-Fone management highlightthe difficulties of executinginterconnection:

“ Obviously, there are some technicalproblems in connecting differentnetworks, but they are not bigproblems.The real problem iswhether VNPT wants S-Fone to beconnected or not.”

“ Cityphone is not compatible butconnected quickly with VNPT

mobile networks, while it takes avery long time in the case of S-Fone. If VNPT has a cooperativeattitude, only 10 days are neededto settle everything.”

VNPT also is alleged to have usedtechnical reasons to denyinterconnection ‘at any technicallyfeasible point’.The most notableexample is the requirement ofVNPT that S-Fone be connectedwith VNPT mobile networks notdirectly through a tandem switch,but indirectly through a toll switch,which is managed by VNPT.Thishas forced S-Fone to pay anadditional 250 VND per minute.According to S-Fone, this extracharge costs the company morethan 1.4B VND in the last sixmonths of 2003, and 1B-2B VND in2004.These extra charges inhibitthe company’s competitiveness andprofitability. It is noteworthy thatMobifone, another cellularcompetitor, pays the same extracharges.

According to a manager from S-Fone, such indirect interconnectionvia a toll switch wasunderstandable and acceptable inthe earlier period ofinterconnection, when VNPT wasunfamiliar with the technical issuesof interconnecting a CDMA-basedto a GSM-based network.However, technical capability hasimproved but the situation hasremained unchanged.

In July 2004, S-Fone made arequest to MPT to intervene toforce VNPT to provide directinterconnection.The MPT repliedthat it was not able to consider asolution at least until the beginningof 2005. S-Fone subsequently



requested in September 2004 thatif the interconnection is still madevia a toll switch, then the extra tollinterconnection fee of 250 VNDper minute be waived for S-Fone.However, so far no reply has beenprovided by MPT or VNPT.According to the same manager:

“ VNPT really has everything relatingto telecommunicationsinfrastructure. New entities in thisindustry have to borrow or hirefacilities or infrastructure of VNPT.The problem is that it is alwaysdifficult to borrow or hire them.Sometimes it takes considerabletime and sometimes requires largefees. Even negotiation with VNPT isalso a controversialmatter....MobiFone and Vinaphoneare monopolists in Vietnam. Iunderstand that they do not wantus to interconnect with our SMS[short message service] services. Inmy opinion, if they are not willingto connect messaging services withS-Fone, MPT should intervene inthe arrangement and force VNPTto allow the interconnection ofmessages between MobiFone,Vinaphone and our network assoon as possible. If MPT had doneso, our messaging services wouldhave been connected within atmost six months6.”

CCoommmmeerrcciiaall//pprriicciinngg iissssuuee ooffiinntteerrccoonnnneeccttiioonn

Interconnection charges by VNPTare considered by other telecomcompanies as much too high, andrepresent 60-70% of thecompetitive carriers’ costs. Such

high-cost tariffs reduce the pricecompetition among telecomservices providers. One of theproblems leading to highinterconnection charges is that, sofar, such charges have not beencalculated on a ‘cost-based’ basis.Rather, interconnection charges areapproved by MPT based oninformation provided by VNPT.However, as the accounting systemof VNPT is not independent, it isnot possible to actually calculateinterconnection costs. Accordingly,interconnection costs may beoverestimated, and result in inflatedcharges for competitive carriers.

Another problem is that VNPTuses its dominant position toimpose an extra burden on theinterconnecting telecomcompanies. According to MPTDecision 148, the cost forestablishing and maintaining aninterconnection route betweentwo interconnecting networksshould be borne equally by eachnetwork. However, in reality inmany instances, provincial PTT newentrants bare the cost for extracable upgrades and other physicalfacilities. Since VNPT states that therequired infrastructure is notavailable, competitors have littleoption but to pay the entireexpense if these operators need tointerconnect their services.

As these examples suggest, despitethe obvious benefits ofinterconnection, implementing aprogressive and efficient‘interconnection regime’ is a verydifficult task that often gets miredin controversy and the details ofexecution. Disputes oninterconnection issues are common

in many countries, and Vietnam isno exception. Although liberal andcompetitive elements have beenintroduced to the institutional andregulatory regime governinginterconnection, there have beenmany complaints from competitivecarriers in Vietnam.While theVietnamese regulations governinginterconnection are favorable,some important regulationuncertainties remain and, notsurprisingly, there have beendifficulties in actually executinginterconnection agreementsbetween carriers.

Internationalcommitments

The regulatory framework justdescribed is generally consistentwith the requirements for avoidinganti-competitive actions provided inthe international agreements thatVietnam has signed to date. Inparticular, the Bilateral TradeAgreement between the UnitedStates and Vietnam (BTA), whichVietnam signed in July, 2000,incorporates key provisions oncompetition from the World TradeOrganization (WTO), GeneralAgreement on Trade in Services(GATS), the GATS Annex onTelecommunications and the WTOReference Paper on BasicTelecommunications (theReference Paper).

While the BTA includes, byreference, required actions withregard to international telecomaccords, the agreement has specificobjectives related to permitting USforeign investment in theVietnamese telecommunicationssector. Figure 6 outlines the level of

__________6. It is interesting to note that the short

messaging service (SMS) between S-Fone andViettel Mobile was interconnected afterseveral months, and direct interconnectionwas made via a tandem switch.

US investment during the courseof the BTA’s implementation(Vietnam’s internationalcommitments pertaining to theBTA and its referenced documents,as well as compliance andremediation actions, aresummarized in Figure 7).

Vietnam’s regulatory framework isalready consistent with many of theinternational commitments thatVietnam has made regarding thetelecom sector, and with those thatit is likely to make in the course ofWTO accession. At the same time,there are gaps that need to befilled by additional regulations andby the amendment of existingones.The recommendation of thisreport is that the Reference Paperbe the first point of focus as itopens the door to other WTObenefits.The Paper has a pro-competitive and telecom-specificcharacter and will help considerablytowards efforts to completeVietnam’s telecommunicationsregulatory framework.

The official policy and regulatorydocuments discussed in this

chapter are fairly open tocompetition, as well as to marketprinciples, and do notoveremphasize the need forcontrol by the State in the telecomsector. Completion of Vietnam’sregulatory framework in a pro-competitive manner should not bedifficult. However, despite theofficially stated policy, governmentauthorities have unofficiallyexpressed cautious opinions aboutthe level at which the sectorshould be opened to private andforeign participation, as well as the

appropriate level of control by theState.The opinions of State officialsindicate that the key issue is one ofmaintaining appropriate Statecontrol. Monopoly by the Stateover certain resources isinstrumental for State control, butdoes not seem to be a value that ispursued for its own sake. As aresult, completion of a regulatoryframework for Vietnam that willenhance competition in this sectormay not be as smooth as itappears at first sight.


PPhhaassee MMaarrkkeett sseeggmmeennttUUSS

iinnvveessttmmeennttTTiimmiinngg DDeeaaddlliinnee

0 All market segments 0% Upon BTA Dec 2001

I Value-added telecom services Up to 50%2 years afteragreement

Year end 2003

II Value-added Internet services Up to 50%3 years afteragreement

Year end 2004

IIIMobile, leased lines andsatellite services

Up to 49%4 years afteragreement

Year end 2005

IVFixed line services (includinglong-distance)

Up to 45%6 years afteragreement

Year end 2007

Figure 6:Vietnam-US BTA for foreign investment intelecommunications


TTrreeaattyy PPrroovviissiioonnPPrrooggrreessss ttoowwaarrddss

ccoommpplliiaanncceeAAccttiioonn ttaakkeenn//rreeqquuiirreedd

BBiillaatteerraall TTrraaddee AAggrreeeemmeenntt ((BBTTAA))

• Chapter III: Services• Chapter VI:

Transparency andthe Right to Appeal

• Chapter IV:Development ofInvestment Relations(supplemented byAnnex H and theExchange of Letters)

• Eliminate non-tariff barriers to U.S.exports, including telecom exports.

• Provide effective protection of U.S.intellectual property rights.

• Open Vietnam's market to U.S. serviceproviders, e.g., foreign investment.

• Create fair and transparent rules andregulations for U.S. investors.

• Vietnam hasimplemented someaspects of the BTA,but is currentlybehind schedule.

• Government has established workinggroup to coordinate efforts torevamp laws and regulations,however,Vietnam lacks technicalexpertise and resources.

• U.S. government providing technicalassistance to Vietnam for technicaladvice, training and materials tofacilitate reforms necessary to meetthe BTA's complex requirements.

TThhee GGAATTSS AAnnnneexx oonn TTeelleeccoommmmuunniiccaattiioonnss ((RReeffeerreennccee ttoo tthhee BBTTAA wwiitthh tthhee eexxcceeppttiioonn ooff PPaarraaggrraapphhss 66 aanndd 77))

• Paragraph 4 • Requires the development of atransparent regulatory framework, e.g.,publicly available information andnotification of standards, tariffs, licensing,et al.

• Arguably,Vietnam'sregulatory frameworkis consistent withthese conditions.

• Paragraph 5 • Requires access to the public network,e.g., interconnection and co-location.

• Lack of explicitreference to a non-discriminatoryinterconnection couldbe interpreted asnon-compliance byinternational norms.

• MTP should clarify its interconnectionpolicy, explicitly defining andpreventing non-discriminatorybehavior.

WWTTOO RReeffeerreennccee PPaappeerr oonn BBaassiicc TTeelleeccoommmmuunniiccaattiioonnss ((RReeffeerreenncceedd bbyy BBTTAA))

• Definitions • Align Vietnam's legal definitions toWTO definitions.

• Compliant, althoughsome differences indefinitions exist.

• Competitivesafeguards

• Cross-subsidization. • Vietnam had a policyfor cross-subsidization;current frameworkdoes not completelyeliminate it.

• Develop better cost accounting, e.g.,chart of accounts and cost allocation,to identify and eliminate subsidies.

• Misuse of information aboutcompetitors.

• Largely compliant, buthas narrow definitionof 'misuse'.

• Strengthen guidelines re: 'misuse' viagovernment decree or order.

• Withholding necessary technical andcommercial information.

• Compliant based onLaw on Competition.

• Clearly link telecom sector to VietnamCompetition Law.

• Interconnection • Detailed and technical criteria to meetglobal interconnections standards.

• Partially compliant,but missing keyaspects of connectionregime.

• Issue order re: interconnection costing and technical delays.

Figure 7 : Overview of Vietnam’s international treaty obligations


TTrreeaattyy PPrroovviissiioonnPPrrooggrreessss ttoowwaarrddss

ccoommpplliiaanncceeAAccttiioonn ttaakkeenn//rreeqquuiirreedd

WWTTOO RReeffeerreennccee PPaappeerr oonn BBaassiicc TTeelleeccoommmmuunniiccaattiioonnss ((RReeffeerreenncceedd bbyy BBTTAA)) ((ccoonnttiinnuueedd))

• Universal service • Right to define the kind of universalservice obligation (such obligations willnot be regarded as anti-competitive),provided transparent and neutraladministration.

• Undetermined asVietnam is currentlydeveloping its Universal Serviceinstitutional structuresand policies.

• Public availability oflicensing criteria

• Licensing criteria and time required toreach a decision, including the termsand conditions of individual licenses.

• Reasons for license denial made knownto the applicant upon request.

• Licensing criteria areincomplete and vague- no timelines forlicensing decisions.

• Terms and conditionsof individual licensesare not made public.

• Further development of the licensingcriteria in Vietnam's regulatoryframework for telecom would beappropriate.

• Independentregulators

• The regulatory body is separate from,and not accountable to, any supplier ofbasic telecom services.

• Decisions and procedures used byregulators shall be impartial withrespect to all market participants.

• Non-compliant, as therelationship betweenMPT and VNPTcontinues to be close.

• Substantial rotation ofpersonnel among thetwo agencies.

• Responsibilitiesoverlap, e.g., head ofMPT is also on VNPTboard.

• Independent regulatory body.• Privatization of VNPT.

• Allocation and useof scarce resources

• Any procedures for the allocation anduse of scarce resources will be carriedout in an objective, timely, transparent and non-discriminatory manner.

• Current state of allocated frequencybands will be made publicly available,but detailed identification of frequenciesallocated for specific government usesare not required.

• Since MPT's plans forthese resources havenot yet been released,it is unclear whetherthe other threecriteria (objective,timely andtransparent) will beobserved.

Competition in Vietnam’stelecom sector hasincreased substantially

since 1993 when there was anabsolute monopoly on allsegments of the industry. Despitethese changes, however, thetelecom structure remainsdominated by the state-ownedVNPT. According to the WorldBank, the VNPT retainsapproximately 94% of theaggregate market, includingoperations in all telecom segments:equipment, engineering,construction and consulting.Thecompany also retains non-telcoassets in the tourism, printing andinsurance sectors. Other carriershave entered the market, butoverall Vietnam lacks a trulycompetitive environment.

Facility-based operators

Vietnam has six FBOs that provideservices based on their ownnetwork infrastructure. Each ofthese operators is primarily state-owned and, except for VNPT, aregeographically focused or servicespecific.The following summarizesownership and services ofVietnam’s six FBO operators:

•• VViieettnnaamm PPoosstt aannddTTeelleeccoommmmuunniiccaattiioonnss ((VVNNPPTT)):: - Dominant state-owned

operator with operations in alltelecom segments, except formarine-based services.

- Complicated organizationalstructure including 61provincial and local PTTs, jointstock companies, joint venturecompanies, and other wholly-owned subsidiaries.

- Owns 18% of second-largestoperator in Ho Chi Minh City.

- Owns and operates nearly100% of total 5.4 million linesin service.

- Established VPN and WiFi in2003.

- Retains approximately 94% ofthe overall telecom market.

•• VViieettnnaamm MMiilliittaarryy TTeelleeccoommCCoommppaannyy ((VViieetttteell))::- 100% owned by the

Vietnamese military.- Received license in 1995 and

provides fixed local, domesticlong distance (DLD),International long distance(ILD), leased line, mobile andinternet services.

- Operates trunk radio networkin Hanoi.

- Operates IXP and offers retailaccess, e.g., ISP.

- Network largely based on IPprotocols, and beta testingVoIP services.

- Commenced mobile servicein October 2004.

•• SSaaiiggoonn PPoossttaall aannddTTeelleeccoommmmuunniiccaattiioonnss ((SSPPTT))::- Established in 1995 as a joint-

stock company.- Founding shareholders are

state-owned enterprises,

including 18% ownership byVNPT.

- Provides fixed local (Ho ChiMinh City only), DLD, ILD,mobile and VOIP services.

- Operates mobile joint venturewith a Korean consortiumusing CDMA technology.

- Operates around 40,000 landlines in Saigon as of June2004.

- Retains approximately 3% ofthe overall telecom market.

•• VViieettnnaamm EElleeccttrriicciittyy CCoorrppoorraattiioonn((EETTCC)):: - 100% owned by government-

owned electricity monopoly.- Provides fixed local, DLD, ILD,

leased line, mobile and VOIPservices.

- Actively developing networkinfrastructure and fixed leasedlines services.

- Preparing launch of VOIP andCDMA mobile services.

•• HHaannooii TTeelleeccoomm ((HHTT)):: - Only operator with private

investment, albeit limited.- Joint stock company

established by: High-tech andTelecom Union (56.25%)Hanoi Electronics (25%),Hanoi High-tech DevelopmentJoint Stock Company (6.25%),and Hanel Plastics Joint-StockCompany (12.5%).

- Provides fixed local (Hanoionly), DLD, ILD, mobile,internet and VOIP services.


MARKET STRUCTURE ANDOWNERSHIP

•• VViieettnnaamm SShhiippppiinnggTTeelleeccoommmmuunniiccaattiioonn CCoommppaannyy((VVIISSHHIIPPEELL)):: - 100% owned by the General

Corporation for MarineTransport.

- Provides marine (Inmarsat)services and radiocommunication services forships at seas.

The telecom segments service bythe six FBOs are summarized in

Figure 8, along with an assessmentof the segment’s level ofcompetition.

It is important to note that theVNPT is not a cohesive companyin line with western private sectorstandards. Rather the VNPT is acollection of regional andprovisional PTTs, SOEs, jointventures and ancillary businesses. Arecent government decision (No.58/2005/QD-TTg) intends to

restructure VNPT into a parent-subsidiary consortium comprisingof a management board to managethe parent and the creation ofseparate post and telecomsubsidiaries. Internationally, thecorporatization process is viewedas a prerequisite to privatization asit requires the PTT to operateusing international norms ofgovernance, finance andaccountability.The revamp,anticipated to begin in the fourthquarter of 2005, represents animportant first step in reorganizingVNPT. Figure 9 highlights thecomplexity of VNPT’s currentorganizational structure.

Competition status inthe mobile servicemarket

The state of competition in themobile service market is morerobust than that of fixed linemarkets. In Vietnam, six licenseshave been awarded in anincreasingly competitive market.While there remains crossownership, e.g.,VNPT ownsVinaphone and partly ownsMobifone, competition has resultedin a rapid increase in subscribers.According to a recent governmentstudy, there are some 5.5M mobilephone subscribers.The high level ofcompetition, which includes severalforeign investors, has resulted inprice decrees. One carrier, S-phone, recently cut connection feesby 50% and reduced itssubscription fees.The networkoperators use three competingtechnology standards: GSM, CDMAand Personal Handy-phone System(PHS). Figure 10 outlines the


SSeeggmmeenntt CCoommppeettiittiioonn VVNNPPTT VViieetttteellSSPPTT

((SSaaiiggoonn))EETTCC

HHTT((HHaannooii))

VVIISSHHIIPPEELL((MMaarriinnee))

Local Limited• VNPT

Dominance.• Geographic

competition.

DLD Limited• VNPT


competition.

ILD Limited • VNPT


competition.• Competition

via VOIP.

Mobile Competitive• JVs w/

foreignoperators.

LeasedLines

Limited• VNPT


competition.

Internet Competitive• Limited

bandwidth.• SBO

operators.

Figure 8: Competition among Vietnam’s FBOs

competitive makeup of Vietnam’smobile market.

Service based operators:Internet ServiceProviders

In addition to these six FBOlicensees, over a dozen other

companies have been grantedlicenses for value-added services,mostly ISPs. Of the 13 companieslicensed, few provide service.Among independent ISPs, FPTCommunications and Netnam areactive. FPT Communications isbacked by the large FPT group ofcompanies, while Netnam

pioneered the introduction of e-mail and Internet in Vietnam. Bothcompanies have a large number offaithful customers.

According to MPT statistics,Internet usage has grownsubstantially in recent years.Themost recent figures for July 2004show a market growing nearly 70%in terms of new subscriptions,reaching nearly 1.5 millionaccounts. In the early stages ofInternet development, it iscommon for multiple users toutilize a single account, e.g.,universities or businesses.Takingthis factor into account,Vietnamhad more than 5M Internet usersat the end of July 2004. BroadbandInternet access in Vietnam is notwidely available. Figure 11 outlinesthe rapid expansion from 2003 tomid-2004.

Another proxy for usage andgrowth of the Internet sector is theregistration of IP addresses anddomain names. According to theVietnam Internet InformationCenter, an MPT unit, the volume ofIP addresses increased by morethan 220%, from 134K inSeptember 2003 to 433K in June2005. Domain name registrationshave increased less dramatically:7%, from 4,300 to 4,600 over thesame period. Of these domainnames, .com.vn represents 82%,followed by .org.vn (5%), .edu.vn(5%), .gov.vn (3%), Loai.Khac (3%),and .net.vn (2%).This breakdownindicates the general use of localwebsites.

The Vietnamese Internet sectorremains dominated by FBO licenseholders and, like most segments,VNPT is the dominant player witha 57% market share.While VNPT


Figure 9:VNPT organizational structure

VVNNPPTT

6611 PPrroovviinncciiaall aanndd LLooccaall PPTTTTss

SSttaatteedd--oowwnneeddSSuubbssiiddiiaarriieess

BBBBCC--BBaasseeddVVeennttuurreess

OOtthheerr TTeelleeccoomm--rreellaatteedd CCoommppaanniieess

OOtthheerr LLiinneess ooffBBuussiinneessss

• Vietnam TelecomNational (VTN).

• Vietnam TelecomInternational (VTI).

• Vietnam DataCorporation (VDC).

• Vietnam TelecomServices Corp.(GPC).

• Vietnam MobileTelecom Services(VMS).

• VN-Telstra.• VN-Korea

Telecom.• Vina Daesung

Cable OpticalFiber Mfr.

• VN-Alcatel.• VN-Siemens.• VN-Fujitsu.• VN-NEC.• Etc.

• VN TelecomEquipment.

• P&T Construction.• P&T Finance.• Equipment

Installation.• Telecom

Manufacturing.

• Construction.• Tourism.• Consulting.• Import.• Insurance.• Engineering.• Printing.

CCoommppaannyy OOwwnneerr IInnvveessttmmeenntt TTeecchhnnoollooggyy SSuubbssccrriibbeerrss OOppeerraattiioonnaall

Vinaphone VNPT US$130M GSM 3.0M 1996

MobiFoneVNPT

ComvikUS$456M GSM 2.5M 1998

Viettel Viettel JV n/a GSM 250K 2004

S-PhoneSPT

SLD TelecomUS$230M CDMA 200K 2003

Cityphone VNPT n/a PHS n/a n/a

VP Telecom VPT US$630M CDMA n/a 2Q 05

HTHT

HutchisonUS$656M CDMA n/a 4Q 05

Figure 10: Competition in Vietnam’s mobile segment

Source: Saigon Times.

Source:VNPT website,World Bank,VNCI interviews.

lost some of its market share inMarch 2003 (from 65% to 57%),these gains accrued to other SOEsrather than independent ISPs,whose combined market shareremains nearly the same.Internationally, independent ISPslose ground as traditional telcosinitiate Internet services, bundledial-ups with landline services orbroadband services such as DSL.Cable TV operators also gain amarket share when they introducebroadband products. Futureinnovations such as mobile Internetaccess provide integrated carrierswith additional leverage over dial-

up ISPs.The breakout of Vietnam’sISP from March 2003 to June 2004is reflected in Figure 12.

One of the constraints to Vietnam’sInternet market (aside from simpleaccess to landlines) is internationalconnectivity. As of July 2004, theentire country had only 1038 Mbpsof connectivity, and VNPTcontrolled nearly 90% of the lines.In terms of destination points forthis connectivity, Hong Kong andSingapore accounted for 68% ofVietnam’s international access.Figure 13 provides details of carrierbandwidth and connectivity points.

Information TechnologyEnabled Services (ITES)

The government of Vietnamstrongly supports the developmentof the country’s IT industry.Thereform of the telecom sector willfundamentally impact on thesuccess of the government’s policy.An important aspect of its IT policyis to nurture Vietnam’s ITES sector.Like Internet access, ITEScompanies rely on the underlyingtelecom infrastructure to conductday-to-day business activities. SinceVietnam has stressed thedevelopment of this telecom-


Figure 11: Internet subscribers and density in Vietnam

Internet subscribers

632 852 1,0271,268

1,904

2,490

3,3323,821

4,7145,342

466

1,436

-

1,000

2,000

3,000

4,000

5,000

6,000

2Q 03 3Q03 4Q 03 1Q05 2Q05 Jul 04

)000( srebircs

bu

S

Subscribers

Users

Internet density

-

1,000

2,000

3,000

4,000

5,000

6,000

2Q 03 3Q03 4Q 03 1Q05 2Q05 Jul 04

)000( sreb ircsbuS

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

ytisneD tenr et nI

Users

% pop

ISP Carrier Market, March 2003 ISP Carrier Market, June 04

NETNAM29.820

6%

VIETEL7.7142%

SPT16.593

4%

FPT98.20521%

VNPT 303.877

65%

HANOITEL21

<1%

OCI,9.4802% SPT

99.7717%

VIETEL93.802

7%

OCI22.983

2%

HANOITEL3.306<1%

NETNAM104.927

7%

FPT288.456

20%

VNPT823.172

57%

Figure 12: ISP market share, March 2003 – June 2004

dependant sector, the followingoverview provides a perspective tounderstand this emerging industry.Sometimes referred to as IT-related, remote services orbusiness process outsourcing(BPO), ITES refers to serviceswhich:

• provide data entry, dataconversion, information/datadevelopment, processing andresponse;

• use IT in providing and/ortransmission of the service;

• do not require any softwareprogramming expertise and, inmost instances, do not requireany particular educationdiscipline other than on-the-jobtraining for service providers; and

• are sourced off-site from theend user, i.e. are ‘outsourced’.

Common ITES activities include:

• transcription;

• billing and collection;

• customer interaction centers;

• claims processing;

• content development;

• engineering support;

• administrative services;

• geographic information systems;

• human resource services;

• financial and accounting services;

• litigation and legal supportservices; and

• purchasing support.

In 2001, IDC estimated the globalITES industry to be worth US$7.1

billion.With anticipated growththrough 2006 of 11% CAGR, theITES industry is poised to increaseto US$1.2 trillion. At present, theITES market leaders are Ireland,India, Israel, Canada, the Philippinesand South Africa. However,Vietnamis viewed as one of several dozen


Figure 13:Vietnam internet connectivity

Internet Bandwidth by ISP

2

4

38

89

905

0 200 400 600 800 1000

ETC

SPT

VIETEL

FPT

VNPT

)sp

bM( ytivitce

nn

oC

Mbps

% of Market

87%

<1%

4%

9%

<1%

Internet Bandwidth by Country

1

2

4

155

175

314

387

0 100 200 300 400 500

Taiwan

Japan

Korea

China

USA

Singapore

HK

noitce

nn

oC f

o yrtn

uo

C

Mbps

% of Market

38%

15%

17%

30%

<1%

<1%

<1%

PPaarraammeetteerr VViieettnnaamm IInnddiiaa CChhiinnaa MMaallaayyssiiaa

Industry Size(US$M, 2000)

n/a 6,200 >1,000 n/a

IT employeecost (US$ peryear)

7,200 5,880 8,900 7,2000

Number ofCMM Level 5Certifications7

0 48 0 0

Positives • Strong Governmentsupport

• English• Quality• Project mgmt• New services• Strong diaspora

• Large pool ofIT gradstrained abroad

• StrongGovernmentsupport

Negatives • Poorinfrastructure

• Ordinaryinfrastructure

• Political risk

• Language skills• Project Mgmt

• Absence oflarge pool ofprogrammers

Figure 14: Comparison of Vietnam to regional ITES players

Source: IDC.

__________7. Capability Maturity Model, a quality certification based on the audited requirements of the Carnegie

Melon University.

second-tier destinations, and stronggovernment policy and actioncould improve the country’sprospect vis-à-vis stronginternational competitors. Figure 14highlights Vietnam’s positioncompared to leading ITESproviders in the region.

Private and foreigninvestment

When it comes to private andforeign investment in thetelecommunications sector,Vietnamhas a restrictive investment climate.While the country’s Law onForeign Investment permits bothjoint ventures and 100% foreign-owned enterprises8, neither areapplicable to thetelecommunications sector. Privatedomestic investment is permitted,but foreign investors can onlyinvest through a BCC.The BCC

model of investment is consideredless desirable than other forms byforeign investors for a variety ofreasons that will be discussed inthis section. In addition, assumingthat joint ventures will someday beallowed in the telecom sector,there is an open question as toif/how current BCCs can beconverted to joint ventures whenthat form becomes available.Whatis apparent, based on internationaltreaties and recent policyannouncements, is that Vietnam ismoving to open the telecom sectorto more private investment.

The BTA requires that Vietnamopen its telecom sector to UnitedStates investment, although thetreaty gives Vietnam time toimplement this change. It isimportant to note that Vietnam isbehind schedule in implementingthe BTA.Vietnam’s commitmentson market opening in telecomservices are set forth in threecategories, with a schedule thatallows for the ability to form a jointventure with certain equity sharesfor trade involving a commercial

presence in Vietnam. Figure 15shows Vietnam’s commitments ineach of these categories.

According to the ForeignInvestment Law and relatedregulations – especiallyGovernment Decree No.27/2003/ND-CP – the BCC is theonly form of foreign directinvestment in telecom services. Inthe past, BCCs have made asignificant contribution to thedevelopment of the telecom sectorin Vietnam, notably at importantjunctures, notably the developmentof international transmission lines,introduction of the first mobilephone system, introduction of thefirst CDMA mobile system, etc.BCCs have also enabled some ofthe leading international telecomcompanies to enter into Vietnammarkets, and make a foothold inthose markets.

However, the BCC model ofinvestment has some obviousdrawbacks and limitations asdiscussed below, such as restrictingequity participation andmanagement control.This in turnhas made foreign investors lesscomfortable, and the lack offlexibility negatively impacts onmarket efficiency.The limitations ofthe BCC as a mechanism governingforeign investment will likely inhibitincentives to future foreigninvestment, when large capitaloutlays are required for the nextgeneration of technology andservices.This chapter will presentthe main constraints of the BCCforms of investment, the benefits ofalternative investment forms, andmake initial recommendations tocreate a more favorable and


CCaatteeggoorryy CCoommmmiittmmeenntt

Value-added services including email, voice-mail, electronic data interchange (EDI),value-added facsimile services, code andprotocol conversion and on-lineinformation and data processing.

• Dec 2003 for JVs with maximum 50%U.S. capital contribution.

• Dec 2004 for Internet services for JVswith maximum 50% U.S. capitalcontribution.

Basic telecom services including packet-switch, circuit switch, telex, telegraph,facsimile, private leased circuit, radio-basedservices including cellular, mobile, satellite.


Voice telephone services including local,long-distance and international.


Figure 15: Permitted form of foreign investment in telecom by foreignparties

__________8. The restriction is found in the so-called

‘conditional list’ attached to the implementingregulations for the Law on Foreign Investment,Decree 27/2003/ND-CP amending Decree24/2000/ND-CP on the DetailedImplementing Regulations for the Law onForeign Investment (March 19, 2003).


liberalized environment for foreigntelecom companies to operate inVietnam.

Rationale for BCCs

A BCC is a form of investment inwhich a Vietnamese and a foreignpartner agree to carry on aninvestment activity without creatinga new company.The obligationsand the rights of the two sides areset out in a contract. One or bothparties may contribute fixed orworking capital but the division ofprofits will be what is agreed uponrather than being in the sameproportion as the capitalcontributions. In the case of atelecom BCC, the Vietnameseparty will usually contribute accessto the networks and some workingcapital while the foreign partnercontributes money for new fixedcapital that becomes the propertyof the Vietnamese partner at theend of the project. Managementcontrol of the network remainswith the Vietnamese party.

In the past, BCCs as a form offoreign investment created someimportant advantages for managersof the telecom sector in Vietnam.These contracts helped to addresssecurity and sovereignty concerns,which were essential considerationsfor the government. In addition, thetelecom industry in the 1980s anduntil late 1990s was fullymonopolized by the state-ownedVNPT, which wanted to exert itsinfluence on the denial of anyinvestment which would weaken itsmanagement control.VNPTmanagement and manygovernment officials perceived thatVietnam in general, and thetelecom sector in particular,

needed to have capital andtechnology only and thateverything pertaining to aninvestment could be conducted bythe government. Management andoperational expertise did not figurehigh in the minds of those officialsand business leaders. Sogovernment officials opted for theBCC model in order to:• attract investment capital

required for networkdevelopment and modernization;

• bring expertise and newtechnology, e.g., CDMA, card-phone technology;

• acquire management expertiseand business practices; and

• train human resources.

For foreign investors, there was noother option at the time. However,it was acceptable to some extent,because a BCC ensured anadequate internal rate of return(IRR) on their investment while theVietnamese partner,VNPT, enjoyeda dominant monopoly positionwith little likelihood of newcomersemerging to compete for cash-flows. Foreign companies hencehad to take it or leave it. Despitethe positive achievements of BCCsfor Vietnam generally, and theirfinancial success for both thedomestic and the foreign parties,there are many limitations inherentin the BCC form.The most notableones for foreign investors are:

• Structural limitations:- No clear legal entity limits

ability to mortgage assets ortab capital markets.

- Strict limit of scope for BCC,e.g., one market segment orgeographic location.

• Management limitations:- Limited management control

and responsibility in operationand services.

- Difficulty in focusing on thecustomer as few resourcesearmarked for marketing.

- Transfer of skills lower thanwhat might be with equityparticipation.

• Financial limitations:- Foreign investor will receive

no long-term asset value fromtheir investment.

- High transaction costs due toseparate managementapproval processes of thepartners.

- Focus on short terminvestment for quick return,with no long term incentivesfor investors to invest inmodern technology orreinvestment over the life ofthe project.

- The short duration can limitthe time available to recoupthe investment.

- High rate of depreciationdrives cost of service higher.

Vietnam current has numerousoperating BCCs focused oninternational telecom networks, amobile system and a local networkwith many types of services, frombasic to value added. Each contractis different in scope and detail.Nine of these BCCs are enteredinto with VNPT, and only one ofthe BCCs is signed with a non-VNPT company. Figure 16 outlinespresent and past BCCs andprovides key deal and contractinformation.


Source:VNPT website,World Bank,VNCI research.

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1. VNPTTelstraAustralia(Australia)

1998C 6 US$237M Development of international telecomnetwork and services

• Original BCC signed 1988• Three contract extensions

2. VNPTComvik(Sweden)

1995 10 US$127.8M Development of the nationwidemobile phone network and services

• Constructed first GSMnetwork

• Recently terminated

3. VNPTVoiceInternational(Australia)

9 US$ 725K Development and exploitation ofpaging services in HCMC

• Contract extended from 5 to9 years

4. VNPTSapuraSDN-BHD(Malaysia)

1993 8 US$3.8M Development and exploitation of thepublic card phone services in HCMarea

• VNPT contributed US$1.6M

5. VNPTWorldcorpHolding(Singapore)

1995 5 US$842K Development and exploitation ofyellow page services

• VNPT contributed US$2.3M

6. VNPTKoreaTelecom (SouthKorea)

1996 10 US$40M Development of network in HaiPhong city and Hai Duong, Hung Yenand Quang Ninh provinces

• BCC signed 2 years earlier

7. VNPTNipponTelegraph andTelephone (Japan)

1997 15 US$40M Development of network in theNortheast of Hanoi area. Constructionof 240,000 new telephone lines

• Project IRR estimated at 12-24%, with a 47/53(NTT/VNPT) profit share

• Realized on 50% of plannedexpansion

8. VNPTFranceTelecom (France)

1997 15 US$467M Development of internal network ofthe east of HCMC. Construction of540,000 new telephone lines

9. VNPTCable &Wireless (UK)

1997 15 US$207M Development of telephone network inthe east of Hanoi city. Construction of250,000 new telephone lines

10. SPTS-Telecom(South Korea)

2003 n/a US$230 Development and exploitation ofCDMA mobile phone network andservice

• First non-VNPT BCC• Has clause to convert into

joint venture when Vietnamlaw permits

11. Hanoi TelecomHutchinsonTelecom (HK)

2005 15 US$656M Build a CDMA mobile phone networkin Hanoi

Figure 16:Vietnam's BCCS

Evaluating BCC performance

BCCs in Vietnam have had mixedsuccess.The BCC between VNPTand Telstra was the first in Vietnam.

It has been satisfactory for bothsides, because the need forinternational lines in Vietnam atthat time was huge and, due to thehigh tariff imposed on international

calls by VNPT, the income forTelstra was positive.

Later on, another BCC betweenVNPT with Comvik International

was workable, as it brought intoplace the first mobile phonenetwork in Vietnam. Similar tointernational calls, the mobilephone tariff had also been set highby VNPT and the government ofVietnam, and therefore Comvik’sincome from the BCC wasconsidered to be acceptable. Inboth of these BCCs,VNPTbenefited considerably from boththe capital and technologicalcontribution of the foreignpartners. Recently the VNPTdecided against renewing its BCCwith Comvik, which may increasethe risk, and hence cost, of futureBCC deals.

The fate of other BCCs with VNPTin the less lucrative area of localfixed telephone networks has beenless satisfactory.The existing BCCsare those with NTT (Japan) for theHanoi area, French Telecom forHCMC area, and KT (Korea) forHai Phong, Quang Ninh, HaiDuong and Hung Yen areas. Capitalinvestments made by foreignpartners in those BCCs have beensubstantial and were thereforeaccordingly acknowledged by theVietnamese side. However, thetechnology and know-howcontribution of the foreignpartners were not highlyacknowledged by some localtelecom officials, claiming thatVietnam had already mastered thetechnology for local telephonenetworks. More importantly, as thetariff for local calls was set fairlylow by VNPT and the government,the income stream for investorshas not been satisfactory.There is alot of tension between VNPT’sforeign partners about the IRR

level applied when business plansare prepared each year.

Many managers of foreign investorsinvolved with these BCCs believethat substantial change in the formof investment should be introducedif Vietnam wants to obtain aqualitative investment in the sectorin the future. According to aformer manager of Telstra, a newform of investment is neededbecause the prevailing BCC systemdoes not accord with global trends.According to Comvik International,the BCC with VNPT is successfulbut the overall financialperformance has not met Comvik’sexpectations because ofweaknesses in the BCC system andtaxation changes. Similarly, a KoreaTelecom manager said: “Ourexperience and achievement has uswanting to make additionalinvestments but in a climate morefavorable to FDI enterprises.TheBCC system is not suitable tocommercial sectors –such as theInternet – which are developingvery rapidly and need marketcompetitiveness.To encourage thedevelopment of these sectors,foreign enterprises should beallowed to share corporateownership and to participatedirectly in the operation of thebusiness.”These comments explainto a certain extent recent newsabout VNPT’s plan to raise capitalfor its mobile operations via apublic offering rather than anextension of its BCC.

In the future, the capital cost forinvestment in telecom projects willlikely be greater but the expectedmargins will be lower due to morecompetition.Thus, if the BCC form

continues to be used, it is likely thatVietnam will only be able to attractlow quality investors. A betteralternative would be for Vietnam toexpand the types of foreigninvestment allowed to UnitedStates investors according to therequirements of the BTA.

Vietnam agreed in its BTA with theUnited States on a timetable forpermitting joint ventures with U.S.investments in the telecom sector.It is likely that a similarcommitment will be made to othercountries in the course ofVietnam’s accession to the WTO.Some countries may already enjoythe benefit of the same timetablebecause of most favored nation(MFN) clauses in their trade and/orinvestment treaties with Vietnam. Inany case it seems likely that theVietnamese Government willeventually publish regulations thatwill permit investors from allcountries to enter JVs in telecomon a timetable similar to thatpermitted for U.S. investors.Whencombined with the recenttermination of its cellular BCC withComvik, it appears governmentpolicy, market forces and financialpressure is pushing Vietnamesecompanies toward more commonforms of joint ventures.

Regional comparisons offoreign investment

The degree of liberalization of thetraditional fixed-line voice servicesub-market is commonly used as alitmus test of whether the overallmarket is open to competition. Interms of the number of suppliers,monopoly or duopoly structuresstill dominate ASEAN fixed-line


voice services markets. Only thePhilippines, Malaysia and Vietnamhave a competitive marketstructure (as defined as havingmore than three operatorscompeting with the incumbentPTOs). However, unlike most otherASEAN countries,Vietnam restrictsequity participation by foreigninvestors, as outlined in Figure 17.


CCoouunnttrriieess %% ooff ffoorreeiiggnn ccaappiittaall aalllloowweedd LLeeggaall ffoorrmmss rreeqquuiirreedd

Brunei Darussalam Not allowed n.a.

Cambodia 49 (with exception) None

IndonesiaNon-ASEAN: 35 ASEAN: 40(with exception)

JV, JO, CM

Lao PDRForeign equity not less than 30for JV

JV or foreign-owned company

Malaysia61 allowed for the first 5 years;49 subsequently

Through acquisition of sharesexisting operators

Myanmar Not allowed Not allowed

The Philippines 40 No restriction

Singapore 100 No restriction

Thailand 20 JV

Vietnam Not allowed Only through BCC

Figure 17: Regional comparison of limits on foreign ownership

The introduction ofcompetition into thetelecommunications sector

is a relatively new phenomenon,largely driven by the breakup ofAT&T in the USA in 1984.Previously, telecommunications wasviewed as a utility or ‘naturalmonopoly’. In many countries, bothdeveloped and developing, thismonopoly was state-owned. Duringthe 1980s and 1990s, however, thelandscape changed significantly ascountry after country adopted anew model based on privatesector ownership and competition.In almost all countries, the mobilesector became a driver forcompetition, not only with othermobile operators, but with landlineoperators as well.These newnetworks also required large sumsof capitol, ushering in a wave ofnew operators, joint ventures andother new business modelsdependant on private sectorinvestment.

Policy-makers and regulatorymeasures quickly released thenatural advantage that incumbentoperators had to impact on themarket and inhibit competition.When the incumbent is state-owned, there is a potential bias,both perceived and real. After all,one branch of governmentoverseeing another may createproblems and, in many cases, therewas a history of sharedresponsibility and overlappingpersonnel.When the operator wasprivate or privatized, the company

maintained a dominant position, interms of network infrastructureand market share, which in turnallowed the company to participatein anti-competitive activities. Inresponse, the internationalcommunity developed the GATSAnnex on Telecom and theReference Paper to provideminimum standards to prevent aformer operator creating amonopoly, and any new entrantswho achieve large market sharesfrom using their positions toengage in anti-competitivepractices. In principle,Vietnam hasagreed to these standards.

VNPT’s dominant position inVietnam’s telecom sector isunquestionable, with the WorldBank estimating that the companyholds 94% of the aggregate market– well above the 30% thresholdoutlined by the MPT.Thiscontinuing control of essentialfacilities and its overwhelming shareof multiple segments have led toquestions about whether the VNPTis inhibiting competition and, hence,impacting on network expansion,service quality and the introductionof advanced services.The historicalrelationship between the MPT andthe VNPT adds to the debate forthe need for a fundamentalrestructuring of VNPT and theestablishment of a powerful,independent regulator.

Such questioning has beenaccompanied by allegations fromother service suppliers of anti-competitive practices by VNPT. It is

beyond the scope of this report toinvestigate these allegations.However, it serves the purpose offocusing attention on the need toreview the position of VNPT inmaking an assessment ofcompetition in the telecom sectorand the impact of the type andlevel of competition on the sector’sfuture development. Many of thecomplaints against VNPT have beeninvestigated and settled by MPT.However, there are indications thatsome of these practices arecontinuing.The particularallegations made about anti-competitive practices by VNPTinclude:

• unfair allocation of networkfacilities;

• high prices for use of networkfacilities;

• cross-subsidization;

• refusal of services; and

• forced use of VNPT services; and

• abuse of technical measures toblock competitors’ services.

Anti-competitivebehavior

Unfair allocation of networkfacilities

Due to its incumbent status, theVNPT owns most of Vietnam’stelecommunications network, and isthe only operator with widespreadgeographic coverage. Given thissituation, competitive operatorsmust interconnect with VNPT tooffer a variety of services used forlong haul traffic (also known as


THE DOMINANT ROLE OF VNPT

backbone or trunk services) andlocal access, not to mention accessto VNPT’s subsidiary networks inthe mobile, data and Internetspaces. According to industryexperts,VNPT frequently cites thelack of network capacity as thereason for denying interconnectionfor new telecom companies, or formeeting only small parts of theirrequests. In practice, these actionsstifle competition, and in turn inhibitthe development of the sector.

Viettel’s experience provides anexample. In accordance with theinterconnection agreementbetween the two parties,Viettelsubmitted a request forinterconnection three months inadvance so that VNPT couldprepare plans for investing andupgrading its network. On 30October 2002,Viettel submitted anofficial dispatch to VNPT to givenotice of its plan to open VoIPnetworks in 21 provinces and torequest increased interconnectioncapacity for 17 provinces in 2003.However, the result was that VNPTonly agreed to allow Viettel toopen the network in nineprovinces. It is one thing if theVNPT truly does not have networkcapacity. However, there areindications that the VNPT hassufficient capacity for its ownoperations while rationing thesame access to its competitors.

High prices for use ofnetwork facilities

VNPT has been alleged to chargeunreasonable prices for use of itsnetwork facilities, and due to itsdominant position in themarketplace, competitors have nooption but to purchase these

overpriced services. One glaringexample involves the schedule ofcharges for leased lines tocompanies outside VNPT. Onecompany has to lease internationallines from VTI, a VNPT subsidiary, ata price four times higher than thelevel at which VTI leases the linesfrom foreign companies. Similarly,another company has alsocomplained that the charge byVNPT on its leased lines accountsfor 79.9% of the lease line fee, andis four times higher than the levelsof other countries in the region9.Since the new entrants cannotlease international fiber optic cable,the dominant carrier,VNPT,extracts a 300% margin from itscompetitors.

Cross-subsidization

Cross subsidies take excess profitfrom one service, e.g., internationalleased lines, to provide anotherservice, e.g., local service, at levelsbelow cost.When a competitor ispaying for a service that isoverpriced, e.g., international leasedlines, that company and its usersare subsidizing users of the belowcost service, e.g., local service.Thispractice expressly contradictsgovernment regulations, outlined inDecision 217/2003/QD-TTGwhere the ‘interconnection fee oftelecom companies isdetermined...without differentiationbetween telecom companies andbetween members of telecomcompanies with other telecomcompanies’.That means that alltelecom companies should have topay the interconnection feesstipulated by MPT.

However,VNPT is not able toaccurately calculate cost-basedinterconnection because thecompany does not have a separateaccounting system or adequatefinancial processes for severalsubsidiaries involved in cross-subsidization. For example,VNPT’smobile and Internet subsidiarieslack an independent costaccounting and do not pay VNPTinterconnection fees.Thesepractices distort the market andallow the dominant carrier to havea significant competitive advantage.

Refusal of services

There have been many casesreported of VNPT refusing toprovide services to marketcompetitors, notably Viettel andSPT. According to the regulations,the dominant operator mustprovide every available service inits network to customers of theinterconnecting new operators. Inone example,VNPT temporarilyrefused to provide value-addedservices, toll free (800 services)and paid toll (900 services) toViettel’s subscribers.There areother instances where VNPTrefused to provide competitorswith certain licensed directoryservices.

Forced use of VNPT services

Using the power of the dominantservice provider and networkinfrastructure operator, there arecases where VNPT subsidiariesforced distributors to sell onlyVNPT services. One typicalexample is provided by NetSoft, anICT company operating under theauspices of the Ho Chi Minh CityPTT.The memorandum states that


__________9. ‘Phong Lan Enterprises are in big trouble

because of high leased line fees’,VnExpress, 31March, 2004.

‘from 1 March 2002, NetSoftagents must commit to sales ofpre-paid VNN Internet (such asVNN 1260-P, Fone VNN, etc) andcommit to minimum sales of400,000 VND/month, otherwisethe agent’s ADSL connection shallbe cut off ’.This decision is seen asunfair by many agents, particularlybecause the NetSoft commissionfee is about 6% to 8%, lower thanthe 15% to 25% commissionsoffered by other ISPs.VNPT’smaster contract with agents alsostipulates that ‘NetSoft agents shallnot act as agents for any Internetservices providers other thanVNN’10. Given VNPT’s marketdominance, these commercialarrangements are clearly anti-competitive.

Abuse of technical measuresto block competitors’services

One of the most frequentcomplaints about VNPT is that itsprovincial subsidiaries, the provincialPTTs, use technical measures todrive VoIP traffic over to VNPT’snetwork.The PTT engage in apractice called ‘turn off the trunkside’ to block telephone callsthrough the VOIP networks ofViettel and SPT. In such cases,customers can only make callsthrough VNPT’s VoIP network11.

There are also instances where alocal PTT has punished largecorporate clients that select VNPTcompetitors or refuse to purchasevalue added services. If thecontract was refused, these

companies had problems in makingand receiving telephone calls, aswell as in obtaining repair servicesfrom the local PTT12 .

Competition Law Issues

Many of the allegations justdescribed against VNPT and theprovincial PTT companies, if true,would amount to violations of theLaw on Competition recentlyadopted by the National Assembly.One of the most importantaspects of the new law is that it iswritten to apply to SOEs as well asprivate enterprises.The conduct ofVNPT and the provincial PTTs,therefore, could be the subject of acompetition case to be investigatedby the competition enforcementagency that will be based at theMinistry of Trade. Such a case couldbe initiated either by a person ororganization whose interests wereharmed by the alleged competitionlaw violation or by theCompetition AdministrationAuthority, a new agency to beestablished within the MOT. Afinding that a violation of the Lawon Competition did occur couldlead to:

a) The imposition of one or moresanctions against the violatorincluding monetary fines,revocation of permits andlicenses and ‘handling measures’that seek to cancel or unwind anillegal agreement or transaction;and

b) Payment of compensation fordamages to an individual,organization or the State that isharmed by the violation13.

The Competition Council, anotheragency to be established under theLaw on Competition will decidewhether a violation exists and onthe penalty, and has considerablediscretion regarding the remedy forthe violation and any penalty.Thereis also the possibility of an appealto higher administrative authoritiesand to the courts and, because thestandard for review of the initialdecision is set out clearly in thelaw, it seems that some exercise ofdiscretion by these appeal agenciesmay be possible.The likelihood thatVNPT or any of the provincialPTTs will be sanctioned for allegedmisconduct, if proven, may dependon the Government’s policy oncompetition and the degree ofseparation between VNPT (or thePTT involved) and the governmentauthorities handling the appeal.

Most of the anti-competitiveconduct that VNPT and theprovincial PTT companies arealleged to have engaged in falls inthe category of abuse ofdominance, i.e. conduct that ispossible because of those parties’dominant positions in the relevantmarkets. Six types of abuse ofdominance are prohibited in thecurrent draft law, and much of theconduct alleged appears to fallwithin one or more of the types ofconduct that will be prohibited.Figure 18 reviews the alleged anti-


__________10. ‘A competition going through a blind alley’,

Thanh Nien Online, 28 July, 2004.11. Hoang Ly, ‘Competition according to ‘jungle’

laws’,Thanh Nien Online, 13 September, 2004.

__________12. After many similar occurrences, in June 2004,

MPT arranged an investigation of Khanh Hoaprovincial PTT, and made VNPT sign a memowith Viettel, committing not to take suchactions again. However, in spite of the memo, ithas been reported that such activities stilloccur, and in August 2004, the Ministry ofDefence had a meeting with MPT, requestingMPT intervention to solve the problemcompletely.

__________13. Law on Competition,Arts. 116 and 117, states

that the fine is limited to a maximum of 10%of the sales revenue of the violator for thefinancial year preceding the year in which thatact is conducted.

competitive practices of VNPT andprovincial PTTs and links to theabuse of dominance prohibited inArticle 13 of the Law onCompetition.

As the above discussion of possibleapplications of the Law onCompetition to thetelecommunications sectorindicates, the standard competitionlaw issues in the category of abuseof dominance can be expected tobe important in the sector. As thetelecommunications sectordevelops and attracts more

companies of various competitivecapacities, this importance will likelyincrease and the other categoriesof competition law, agreements forrestriction of competition, mergersand acquisitions, and unfaircompetitive acts will becomeimportant as well. Because of theimportance of competition lawissues to the regulation of thesector, some countries assign thefunction of enforcing competitionlaw in the sector to theindependent telecommunicationsregulatory agency rather than (orin addition to) the general

competition law agency.Vietnam’sLaw on Competition so far makesno such assignment, perhapsbecause, as yet, there is noseparate regulatory body fortelecommunications. However, theactivity of the Competition Councilin enforcing the Law onCompetition fortelecommunications couldcontribute to the design of a newregulatory agency fortelecommunications that could beassigned to enforce some aspectsof competition law in the sector inthe future.

The argument forprivatizing VNPT

There is a global consensus amongopinion-leaders that privatizationand competition provide economicand social benefits to society,particularly in thetelecommunications sector.Sometimes called equitisation,capitalization or divestiture, theprivatization consensus is apparentin many countries in Asia wheregovernments are pressing toliberalize their economies andreform the public sector, withemphasis on structural reformswithin the telecommunicationssector.While regulatory reforms,privatization and the introductionof competition gain momentumworldwide, each country mustpursue a strategy and pace ofchange most appropriate to itssocio-economic and politicalsituation.The overarching trend,however, is clear : the region’sgovernments are executingambitious initiatives to reform theirtelecommunications sectors andultimately improve the economic


Figure 18:Telecommunications issues addressed via the Law onCompetition

AAlllleeggeedd ccoonndduucctt TTyyppee ooff pprroohhiibbiitteedd aabbuussee ooff ddoommiinnaannccee

High prices ofinfrastructureservices

Price squeeze:2. Impose unreasonable purchase or sale prices for goods and

services or fix the minimum re-sale prices, thus causing damageto customers.

Cross-subsidization Predatory pricing, price discrimination:1. Sell goods at prices below the cost price (including the

production cost and circulation costs) in order to precludecompetitors, except for special cases provided for by theGovernment.

4. Apply different commercial terms to different enterprises withrespect to the same transactions, hence placing thoseenterprises in an unequal position in terms of competition.

Refusal of services Refusal to deal:6. Hinder market access by new competitors.

Unfair allocation ofnetwork facilities

Refusal to deal:6. Hinder market access by new competitors.

Forced use of VNPTservices

Tying:5. Impose on another enterprise conditions for entering into a

contract for the purchase or sale of goods or services, orcompel another enterprise to accept obligations that are notdirectly relevant to the subject matter of the [concerned]contract.

Abuse of technicalmeasures to blockcompetitors services

Limiting markets, refusal to deal:3. Restrict production [or] distribution, limit market[s], or hinder

technical and technological development, thus causing damageto customers.

6. Hinder market access by new competitors.

and social well-being of theirpopulations. As decision-makerscontinue along the path ofinstitutional capacity building,privatization or the licensing of newservice providers, the liberalizationprocess is likely to providetremendous opportunity for theprivate sector to invest intelecommunications infrastructureas well as modernize and improveaccess to advancedtelecommunications technologyand information services.

VNPT’s recent announcement ofits intent to sell to the public a49% share in its mobile subsidiarysuggests that it is an appropriatetime for Vietnam to discuss anoverall policy on privatization.Recent history suggests this policyis in fact overdue. During 1996alone, there were more than 110telecom privatizations transactionsin nearly 70 different countries. In1997, there were an additional 17privatization transactions, raising

more than US$40 million. In 1998,Brazil privatized its state-ownedoperator, receiving an incredibleUS$19 billion in bids. Of allprivatizations in 1997 and 1998, thetelecommunications sectorrepresented one-quarter of thetransactions. More recently, Indiaprivatized in the late 1990s, raisingnearly $1B through public offerings,and Pakistan is selling a 26% inPTCL worth around $750 million.Thailand intends to sell-off twotelecom SOEs (and recentlyrecreated an independentregulatory as a prelude). In fact, inrecent years more than 50governments have transferredownership and control of state-owned telecommunicationsproviders to the private sector,raising more than US$200 billion –a trend that is unlikely to ebb inthe near future. Figure 19 providesan overview of recentprivatizations in the region.

Internationally, the benefits ofprivatization are convincing.Statistical data from recentprivatizations strongly suggests thatthe introduction of private sectorcapital and management results innetwork expansion, increasedteledensity, higher levels ofinvestment and the introduction ofadvanced technology. However,privatization in some countries hasproduced more benefits than inothers. For example, in terms ofthe relationship of privatization andannual investment in the telecomsector, empirical data points outthat annual investment increases inthe post-privatization environment.In Mexico, annual investment nearlydoubled in the second yearfollowing privatization, while inPeru, annual investment nearlytripled in the first year alone. InMalaysia, annual investmentincreased three-fold during thefourth year of post-privatization. Interms of raising teledensity and/or


YYeeaarr CCoouunnttrryy CCoommppaannyy %% ssoolldd SSaallee aammoouunntt FFiinnaanncciiaall nnootteess PPuurrcchhaasseerr((ss))

1999 India VSNL 10.0 US$ 104 M Public offering Local/Foreign

1997 India MTNL 8.5 US$ 359 M Public offer Various

1997 India VSNL US$ 448 M Public offer Foreign investor

1997 China China Telecom HK 25.0 US$ 3,933 M ADRs Various

1997 Kazakhstan Kazakhtelekom 40.0 US$ 370 M Private sale Foreign investor

1997 Russia Svyazinvest 25.0 US$ 1,875 M Private sale Local investor

1997 Sri Lanka Sri Lanka Telecom 35.0 US$ 225 M Tender Foreign investor

1991 Turkey Turk Kablo 38.0 US$ 11 M Direct sale Foreign investor

TToottaall UUSS$$ 77,,332244 MM

Figure 19:Asian privatizations in the 1990s

Source:World Bank,VNCI research.


increasing telecommunicationsaccess, similar discrepancies arise;privatization has a positive impact,but the relative benefit varies fromcountry to country.

In addition to a rapid roll-out ofthe network, internationalexperience suggests thatprivatization also results inincreased revenues for the mainlineoperator, higher revenue per lineand improved operational efficiencyas measured by the number ofemployees per line. In simple

terms, on average, privatizationsworldwide have improved theefficiency of the mainline operator,and dramatically increased capitalexpenditure and teledensity.

By learning from these internationalexperiences,Vietnam can developprivatization and liberalization plansthat meets the country’s overallneeds. It is important to note thatmuch of the technical, legal andbusiness expertise within thetelecom industry resides within theprivate sector; this planning process

permits the government to tap intothis information, experience andanalysis. In this way, severalcompeting interests may providedifference analyses, studies andrecommendations. Privatization,albeit an important first step,should be seen however as onlyone of the initial policies ofliberalization, and must ultimatelybe linked to regulatory reform andthe introduction of competitivemarket forces.

This chapter draws upon theresults of a survey oftelecom users to outline a

number of key demand sidefeatures of the Vietnamese telecomsector. As discussed below, therewere 89 firms (from a total sampleof 150) providing writtenresponses to our mail-out surveyfocusing on the following keyissues:

• The current state of utilization oftelecom services by enterpriseusers.

• The quality of telecom servicesand products currently availablein the market.

• The relationship between priceand the amount and type oftelecom services consumed.

• The likely behavior of telecomusers if telecom services aresubstantially improved.

The sample

Figure 20 provides a breakdown ofthe sample by location, industry,ownership and size.The sample isnot intended to be representativeof all firms in Vietnam. However anumber of key criteria were usedin selecting firms to be surveyed:

• First, we focused on firms withtelecom intensive inputs, such asICT, banking and other services.Only 12% of the sample werefrom manufacturing.

• Second, in line with VNCI’s focuson building the competitivenessof small to medium sized

domestically owned privatefirms, we limited the number ofstate-owned and foreigninvested firms to about one-thirdof the sample.

• Third, we tried to leverage as

much as possible from theexisting networks of the VNCIclusters. For this reason, weincluded 30 firms from the VNCIsoftware/ICT Clusters in bothHanoi and HCMC, and 14 joint-


RESULTS OF THE SURVEY OFTELECOM SERVICE USERS

BByy llooccaattiioonn BByy iinndduussttrryy BByy oowwnneerrsshhiipp BByy ssiizzee ((ssttaaffff))

Hanoi 72%HCMC 25%Other 3%

ICT 37%Other services 36%Manufacturing 15%Banking 12%

Private 66%SOE 20%FDI 14%

less than 100 58%100 to 300 20%300 to 500 11%more than 500 11%

110000%% 110000%% 110000%% 110000%%

Figure 20: Breakdown of sample

SSeerrvviiccee AAllll eenntteerrpprriisseess IITT BBaannkkiinngg SSeerrvviicceess MMaannuuffaaccttuurriinngg

Fixed telephone 1.19 1.24 1.1 1.22 1.08

Internet access 1.48 1.4 1.67 1.5 1.5

Mobile telephone 1.52 1.64 1.78 1.45 1.23

ADSL Internetaccess

1.87 1.38 2 1.86 3.09

Dial-up Internetaccess

2.96 3.58 2.6 2.94 1.89

Leased line3.39 3.59 2.75 3.2 3.78

Data transfer 3.44 3.93 2.22 3.05 4

VoIP 3.95 3.93 3.89 3.84 4.33

Frame relay 4.14 4.24 3.25 4.56 3.9

WiFi Internetaccess

4.15 3.95 4.71 4.31 4

1800 service 4.16 4.41 4.17 4.24 3.5

Figure 21: Level of importance of telecom services and products

Where: 1 = very important/frequently used, 2 = important/generally used, 3 = normal importance anduse, 4 = less important/less used, and 5 = not at all important/never used


stock commercial banksassociated with the bankingcomponent of VNCI.

Utilization of telecomservices

As presented in Figure 21, varioustelecom services and productswere ranked by level ofimportance to enterprise users.The overall result indicates a lowlevel of utilization of telecomservices in the surveyedenterprises, even those from theICT sector. It appears that‘traditional’ telecom services suchas fixed line telephony, cellulartelephony and Internet were themost important services across allsectors (in particular tomanufacturers), with the leastimportant/least used being theWiFi access, frame relay and tollfree services.

The survey asked a follow upquestion: what was the primaryreason for not using new telecomservices/products? Respondentshad the choice of one of threeanswers: 1) the service is not yetavailable; 2) there is no perceivedcommercial use of the service; and3) the high price of the service.The overriding response was 2),suggesting a number of advancedfeatures and services are notperceived to add value.This couldbe due to a lack of customerunderstanding and/or poor producteducation and marketing.

Telecom costs

Telecom related servicesaccounted for approximately 5% ofthe total operational expenses ofsurveyed enterprises in the survey

sample. Enterprises in banking andthe financial sector reported ahigher telecom to total expenseratio of 5-10%, whilst formanufacturing this ratio was

typically under 5%.The results areoutlined in Figure 22.

Service price levels were very highaccording to the surveyed users.

Figure 22:Telecom costs as a percentage of total costs

Telecom costs

All firms

ICT

Banking

Other services

Manufacturing

1 1.5 2 2.5

Note the averages in the above graph are drawn from the following aggregate responses:1 = telecom costs / total costs are less than 5%;2 = telecom costs / total costs are greater than 5% but less than 10%;3 = telecom costs / total costs are greater than 10% but less than 15%; and,4 = telecom costs / total costs are greater than 15%.

AAllll eenntteerrpprriisseess IITT BBaannkkiinnggOOtthheerrsseerrvviiccee

MMaannuuffaaccttuurriinngg

Fixed line telephone 2.06 2.19 2.25 1.82 2.33

International call 1.48 1.47 1.60 1.35 1.69

Provincial call 1.77 1.87 1.73 1.81 1.45

Local loop call 2.38 2.63 2.50 2.11 2.25

Cellular phone 1.62 1.71 1.91 1.48 1.46

Internet dial upaccess

1.98 2.05 1.70 2.08 2.00

ADSL access 2.37 2.29 2.00 2.39 2.89

WIFI 2.54 2.15 1.33 3.20 4.33

VOIP 2.84 2.62 3.00 2.77 4.00

Leased line 1.63 1.43 1.22 1.88 2.38

Data transfer 2.03 1.76 1.57 2.40 3.50

Figure 23:Assessing telecom service prices

Where: 1 = too high; 2 = high; 3 = normal; and 4 = low.

This perception was strong for ILD,DLD, Internet dial-up services,cellular telephone calls and leasedline services. Fixed line localtelephone calls, ADSL and VoIPwere perceived to be morereasonably priced.These findingswere consistent across all industrygroups, and are summarized inFigure 23.

Firms were also asked how theywould respond to 10%, 20%, 30%and 40% reductions in serviceprices.We found that, to varyingdegrees, firms were sensitive tochanges in telecom prices (that is, areduction of telecom prices thatwould lead to a significant increasein the demand for telecomservices).This is what economistsrefer to as ‘price elastic’.Thecalculated price elasticity ofdemand ranged from -0.57 to -0.66, with an average for the entiresample of -0.63 (manufacturinghaving the lowest elasticity).Thismeans that for every 10%reduction in price, demand fortelecom services should expand byaround 6%. In this way a price cutof about one third will lead to an

expanded market for telecom by25-30%.

Service qualityassessment

Firms were also surveyed abouttheir views on service quality basedon four criteria: connection times,transmission speed, reliability ofservices (frequency of breakdown)and technology deployed. Averageresponses for connection times andtransmission speeds aresummarized in Figure 24.

Most respondents reportsatisfactory connection times, withthe possible exception of localconnections.The overall assessmentof transmission speed for thevarious telecom services is ‘normalto slow’. Respondents perceivedthe Internet to be particularly slow.Responses on breakdownfrequency suggests reliable networkconnections. As expected, the mostproblematic areas in terms ofbreakdowns are mobile, dialup andADSL services, but even these onlyhappen occasionally. Figure 25outlines the survey results on

breakdown frequency andtechnology used.

The general assessment of the levelof technology used is that it isrelatively new and up to date,although not state of the art. Apreliminary assessment of thequality of telecom services, usingthe above figures, is essentiallypositive.Telecom users perceivethat they have access to a relativelymodern telecom system thatprovides reliable and fastconnections, but with relatively lowtransmission speeds.

Impact assessment ofimproved services

Firms were asked what would bethe likely impact upon theirbusinesses if telecom services weresubstantially improved (i.e.delivered in best practice mannerin terms of quality, price andservices available).The results, assummarized in Figure 26, showedthat there would be a significantincrease in revenue, laborproductivity, profitability and therate of innovation. Unsurprisingly


Figure 24: Connection service quality measures

Connection times

1 2 3 4 5

International connection

Provincial connection

Local connection

Mobile telephone

Data transfer

Connection to Internet

Transmission speed

1 2 3 4 5

Internet dial-up

ADSL

WIFI

VOIP

Leased Line

Data transfer

Where: 1 = very fast; 2 = fast; 3 = normal; 4 = slow; and, 5 = very slow.


the strongest impacts would be inthe IT and banking industries.

Conclusions of thesurvey

A number of interesting points canbe drawn from this survey ofbusiness users:

• Vietnam appears to have a well-run and reliable telecomnetwork that provides relativelyfast connections, but often slowtransmission speeds.

• Although new services areavailable, most firms continue tofocus their telecom use ontraditional telephony andInternet services, suggesting thatimportant platforms forinnovation are yet to beexploited.

• Most business concerns focus onthe relatively high prices ofVietnam’s telecom services. Pricereductions would lead tosubstantial increase in demandfor telecom services. A pricereduction of one-third would

likely lead to a 25-30%expansion of the telecommarket.

• Improved service delivery(including lower prices) wouldtranslate into improved firm levelcompetitiveness throughsignificantly higher turnover andrevenues, improved profitabilityand an increased rate ofinnovation.

Figure 26: Impact of improved services on enterprises

AAllll eenntteerrpprriisseess

IITT BBaannkkiinnggOOtthheerr sseerrvviiccee

MMaannuuffaaccttuurriinngg

Increased turnover 6% 8.5% 6.5% 4% 5.5%

Increased laborproductivity

7.5% 8.5% 6% 7% 7%

Cost reduction 4% 5% 4% 4% 4%

Increase in profits 6% 7.5% 6% 5% 4%

Increased technologyinnovation

7.5% 8.5% 8.5% 5.5%6.5%

Figure 25: Breakdown frequency and technology assessment

Breakdown frequency

1 2 3 4 5

Fixed line

Mobile telephone

Dial up

ADSL

WIFI

VOIP

Leased Line

Data transfer

Technology used

1 2 3 4 5

Fixed line

Cellular phone

Internet dial-up

ADSL

WIFI

VOIP

Leased Line

Data transfer

Where: 1 = never; 2 = sometimes; 3 = normal; Where: 1 = cutting edge technology; 2 = relatively new;4 = often; and 5 = very often. 3 = neutral; 4 = old; and 5 = very backward.

The path for Vietnam tomove forward with itsprocess to liberalize the

telecommunications sector isstraight-forward. Globally, there is aclear bias toward competition andregulatory transparency, including aprimary role for private investment– both domestic and international.Vietnamese decision-makersunderstand this, and have agreed tomeet a variety of criteriaembedded in Vietnam’s bilateraltreaty with the United States, andby reference, international normsassociated with GATS and WTO.First and foremost,Vietnam mustmove aggressively to institutetransparency in its telecom strategyand regulatory policy.The countrymust also fundamentally revampthe VNPT through a series ofreorganizations that will ultimatelyresult in private sector investment.The government must alsocontend with other SOEsoperating in the telecom space.

The importance of theliberalization process cannot beunderestimated, as success orfailure will influence Vietnam’sability to economically compete inregional and global markets.Theinability to build out its networkinfrastructure, for example, directlyimpacts all export related businessas well as the IT and ITESsegments. Only with ubiquitousaccess, both urban and rural, tocutting edge technologies atcompetitive prices can Vietnam’sDoi Moi policy succeed in bring

prosperity to all segments of thepopulation.

But change is rarely an easyprocess, and often requires long-term focus and commitments.Change also requires choices thatnegatively impact on powerful andvested interests.Therefore, buildingsocietal consensus is key toimplementing and sustainingchange. Indeed, even whenconsensus is reached, people andorganizations have honestdifferences on how to achievecommon goals.Therefore, publicdiscussion and fact-based decision-making are primary in order toensure success.

In this chapter, the VNCI proposescommonsense recommendationsbased on trends in both Vietnam aswell as international norms. It isimportant to note thatrecommendations build onprevious works conducted by theWorld Bank, GIPI, the Governmentof Vietnam and the VNCI. In orderto build societal consensus aroundthese recommendations, the VNCIputs forward best and worstpractices from around the regionand world, and ties these practicesto various stakeholders in a vibrant,competitive telecommunicationsenvironment:

• Government – strategy, policyand regulation;

• Business – operators, vendorsand related businesses;

• Consumers and Civil Society –

business and residential users,unions, trade groups, et al.

Implementing change is a difficult,technical process, particularly ifthere is a lack of consensus amongkey decision-makers andstakeholders.Therefore it isimportant to understand theimportant role each of thesegroups has in the liberalizationprocess, and learn from the bestand worst practices around theworld. Figure 27 highlights the roleeach stakeholder plays –government, business and civilsociety – and provides aframework for developing aconsensus for action.

Recommendations

The VNCI has identified significantgaps between objectives laid out bythe government of Vietnam andthe realities of its telecom sector.Policy-makers have stressed thatcompetition is a key objective forthe government.While Vietnam hasintroduced some competition, itremains geographically isolated andservice specific. In addition, allcompetitive players include stateinvestment and/or cross ownershipof the dominant player,VNPT.Modernizing and reforming thedominant VNPT is primary to thesuccess of Vietnam’s liberalizationprogram. Other important featuresof competition include a cost-effectively handle mechanism todisputes in a timely manner. Basedon Vietnam’s new competition law,


THE WAY FORWARD


Figure 27:Telecom’s best and worst practices

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Government Policy-making. • Multi-sector policydevelopment, e.g., telecom, IT,trade and education.

• Conflicting policies amongdifferent ministries.

• Multinational policy14.

Regulation. • Single, independent regulatoryagency for convergencesectors, e.g., telecoms, IT,media.

• Self financed.• Technology neutral standards• Robust data gathering and

analysis.

• Separate regulators atnational, state and municipallevel, e.g., USA.

• Technology/service favoritism.• Burdensome regulation

• Multinational regulation.• Self regulation and multi-sector

competition' commission15.• Universal licensing16.• Use consultants to capture

sector expertise.

Jurisprudence(JudicialReview).

• Specialized court for telecomsection with sectorexperience and expertise17.

• Multiple legal forums for legalreview.

• Jurisdiction shopping.

• Required independentmechanism for bindingarbitration or need for courtaction.

Business Operators. • Access to private/foreigninvestment.

• Converged service providers.• Transparent governance to

prevent improper accounting,and anti-competitive practices.

• State-owned monopolies.• Restrictive licensing.• Barriers to convergence

operations, e.g., restrictions onCATV operators.

• Cooperatives or municipally-owned operators in rural areasto introduce service and drivecompetitive.

• VoIP and other convergenceoperators.

Financialinstitutions.

• Access to multiple financiers,e.g., equity, corporate loans,bonds, etc.

• Excessive limits on private andforeign investors.

• Framework for small businessloans,VC, angel investment, etc.

Vendors(hardware,software,services).

• Open access to alltechnologies.

• State support to developdomestic technology.

• Force vendors to producespecific technologies (raisesprices).

• Partnerships betweenoperators and academia forR&R, training.

Ancillarybusinesses(ITES, BPOs).

• Multiple ancillary players drivevibrant market.

• Government support fortelecom dependant industries,ITES, BPOs.

• Divest non-core SOE assets,e.g., construction.

__________14. Regional policy-making and regulations in the EU and the SADC harmonize policy and regulation, creating a consistent environment for business to deploy

new services.15. In Australia, the Communications Authority is responsible for regulating telecom, including promoting industry self-regulation. However competition issues

within the telecom sector are handled by the Competition and Consumer Commission, which is responsible for enforcing telecom related provisions of theTrade Practices Act.

16. In 2004, India introduced a universal licenses regime, integrating all telecom services – basic, LD, mobile, paging, satellite TV and VAS – into a single license withcommon cost, structure, and obligations, e.g., universal service payments.This simplifies licensing, and hence is seen as a mechanism to introduce competition.

17. In 2000, India created the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to adjudicate disputes between a licensor and a licensee, betweentwo or more service providers, or between a service provider and group of consumers, and to hear and dispose of appeals against any direction, decision ororder of the regulator.


the Competition Commission mayplay an important (yet undefined)role in managing anti-competitivebehavior.

Secondly, while the government hasmade important and notablestrides in improving the regulatoryenvironment to meet internationalnorms,Vietnam needs to create aseparate and autonomousregulatory function outside of theMPT. Other weaknesses in thecurrent regulatory environmentinclude the need to establish acost-based tariff andinterconnection regime, the lack ofwhich results in cross-subsidies andhigh prices on some essentialservices.The licensing process alsolacks sufficient procedures, publicinformation and communications.These factors provide an additionalobstacle to attracting marketentrants and competitiveoperators.

Lastly, and most importantly, thegovernment needs to buildconsensus for change from allstakeholders and segments aroundprivatization.This process involvesbetter public access to sectorinformation and governmentcoordination for non-governmentactors within civil society, notablyconsumer groups and tradeassociations.This includes a role forstakeholders currently precludedfrom Vietnam’s sector – privateinvestors, foreign investors, financialinstitutions and internationalorganizations.

The VNCI recommendations,outlined in Figure 28, are meant tobe forward looking, targeting thesuccessful achievement of Vietnam’ssector goals. But let’s be perfectlyclear.Vietnam has initiated thereform process, but significantadditional action is required.

Vietnamese telecomstakeholder conference

Realizing that these issues arecomplex and difficult to address, theVNCI suggests the organization of aVietnamese Telecom StakeholderConference, sponsored by leadingstakeholders and decision-makers ingovernment, business and theprivate sector.This model was verysuccessful with USAID’s SouthernAfrican RegionalTelecommunications Restructuring(RTR) Program. In several countries,USAID brought together keytelecom stakeholders fromgovernment, business and the civilsociety to engage in a fact-baseddiscussion with national, regionaland international experts on topicsranging from investmentopportunities, specific regulatoryissues, e.g., licensing and universalservice, and privatization.The forumallowed honest discussion of the

SSttaakkeehhoollddeerr RRoollee BBeesstt pprraaccttiicceess WWoorrsstt pprraaccttiicceess IInnnnoovvaattiioonnss

Civil Society Consumers(businessresidential)

• Consumer/business groups toprotect and inform the public.

Unions • Proactively and positivelyimpact reform.

• Stakeholder forums to educateunions and involve them in thepolicy process.

Associations • Multiple trade groups foroperators, ISPs, consumers,etc.

• Initial government support forthe creation of theseassociations, e.g., Indian ESC18.

• Support on entrepreneurs andVC19.

Academia • Government grants foracademic research, i.e.,WhitePapers, studies.

• Government funding for tech.training, R&D.

• Industry sponsored R&D andacademia products, programs,and training.

__________18. The Electronics and Computer Software Promotion Council (ECS) is a quasi-government agency of the Ministry of Communications including the telecom,

computer, ITES, BPO, electronics industry.The ECS sponsors research and analysis, organizes trade events, supports Indian trade associations, and tracks results.19. Competition Review of the Telecom Sector in Vietnam.

issues, opportunities for concernsto be raised among variousstakeholders and, most importantly,allowed for the development of aconsensus for change.

The Vietnamese TelecomStakeholder Conference could setup similar discussions between

stakeholders to address the issuesand actions to move forward.Invited participants should includethe widest array of decision-makersand interested parties, includingVietnamese government officials,regional regulators from India, thePhilippines,Thailand, etc., businesspeople, the media, international

organizations such as the WorldBank, ADB, USAID, etc. Forexample,Vietnamese policy-makerscould discuss when Vietnam canbegin the consensus-buildingprocess required to aggressivelydrive forward with thetelecommunications reformprocess.


RReeccoommmmeennddaattiioonn AAccttiioonn

TelecommunicationsPolicy

• Allow foreign private sector ownership in the telecom sector.• Require that industry submit market information on a regular basis, e.g., every three months, with more

detailed annual analysis.• Draft and publish a quarterly telecom report that maps industry trends and actions to government objectives.• Create quasi-ministerial commission to develop civil society associations and organizations, e.g., ISP association,

consumer group, trade publications, et al.• Introduce a specialized court to deal with telecom and IT issues.• Initiate process to revamp telecommunications law (inclusive of the recommendations in this table).

RegulatoryTransparency

• Create independent regulator separate from MPT.• Improve public availability of information by consistently updating regulator's public website, including policies,

procedures and online complaints.• Develop a code of conduct for regulatory employees, including restrictions on gifts, and revolving door

employment.• Eliminate dual role between VNPT and MPT employees.

Strengthen Vietnam'sinterconnectionregime

• Issue additional interconnection guidelines that:- explicitly defines non-discriminatory behavior ;- strengthens guidelines re: 'misuse' of information;- defines reasonable interconnection costs and delays of service; and,- sets out administrative policy to prevent and rectify such behavior, e.g., mandatory arbitration, investigative

process and fines.• Develop a cost accounting policy, e.g., chart of accounts and cost allocation, to identify and eliminate subsidies

that:- use industry best practices;- define costs, and determine cost methods and calculation;- outlines accounting practices and guidelines; and- taps private sector and international expertise, e.g., consultants.

• Clarify role of the Competition Commission in the telecom sectors as it pertains to Vietnam's newcompetition law.

Strengthen Vienam'slicensing regime

• Further development of the licensing criteria.• Introduce concept of universal licenses to increase competition.

Tariff rebalancing • Based on a cost account policy, initiate process to rebalance tariffs and eliminate cross subsidies.

VNPT reform • Reorganize VNPT through a series of radical changes in structure, management and accountability:- Create separate accounting for different businesses;- Prepare and issue a type of 'code of ethics' and rules for its subsidiaries, especially provincial/district PTTs,

about what anti-competitive actions they must not take, especially in relation to essential competitive issuessuch as interconnection, etc;

- Spin-off non-core assets; and- Sell-off cross ownership in competitors.

• Privatize VNPT along geographical lines and/or lines of business, e.g., multiple operators to increase competition.• Privatize other state-owned telecom operators.

Figure 28:A roadmap for change


ASEAN Secretariat, Liberalization and Harmonization of the Telecommunication Sector in ASEAN Countries, 2004.

‘A competition going through a blind alley’, Thanh Nien Online, 28 July, 2004.

C. Qiang, A Comparative Study of Market Separation and Regulatory Responsibility in China, Spain, Brazil and the U.S,World Bank memo, 2004.

Government of Vietnam, Development Strategy until the year 2010 and the Orientation until the year 2020.

Government of Vietnam, 2001. Decision 158 on Post and Telecommunications.

Government of Vietnam, 2004. Decree 160 on Telecommunications.

Hoang Ly, ‘Competition According to ‘Jungle’ Laws’,Thanh Nien Online, 13 September, 2004.

Intven, Hank and Tetrault, McCarthy (2000). Telecommunications Regulation Handbook, The World Bank,Washington, DC.

International Telecommunication Union (2002). Trend in Telecommunication Reform. Geneva.

ITU, Vietnam Internet Case Study, Geneva, 2002.

Ministry of Post and Telecom, 2003. Decision 148/2003/QD-BBCVT on Telecom Tariffs.

Ministry of Post and Telecom Website, www.mpt.gov.vn.

Phong Lan, ‘Enterprises Are In Big Trouble Because of High Leased Lines Fees’,VnExpress, 31 March, 2004.

Prime Minister’s Office, 2003. Decision 217/2003/QD-TTg on Regulations of Telecom Charges and Tariffs.

Standing Committee of the National Assembly of Vietnam, Ordinance on Post and Telecommunications, 2002.

‘Vinaphone, MobiFone Violate Interconnection Charges Regulations’. VnExpress, 19 April, 2004.

BIBLIOGRAPHY

The Asia Foundation is a non-profit, non-governmental organization committed to the development of a peaceful, prosperous, and open Asia-Pacific region. The Foundation supports programs in Asia that help improve governance and law, economic reform and development, women's participation, and international relations. Drawing on 50 years of experience in Asia, the Foundation collaborates with private and public partners to support leadership and institutional development, exchanges, and policy research. With a network of 17 offices throughout Asia, an office in Washington, D.C., and its headquarters in San Francisco, the Foundation addresses these issues on both a country and regional level.

Development Alternatives, Inc. (DAI) is a global consulting firm providing social and economic development solutions to governments, communities, and companies with projects in developing and transitioning countries. Founded in 1970 and headquartered in the Washington, DC area, DAI now includes companies in Brazil, South Africa, Palestine, and the United Kingdom. DAI's 1,600 employees work in 75 countries. Clients include global development agencies, international lending institutions, global corporations, and host country governments.

U.S. Agency for International DevelopmentRegional Development Mission - Asia

USAID/Vietnam Program OfficeTung Shing Square Tower Building, 15th Floor, 2 Ngo Quyen Street

Hanoi, VietnamTel : (84-4) 935-1260Fax: (84-4) 935-1176www.usaid.gov

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