Overview (July 2001)

Introduction

Law 72 of 1989 issued by the Colombian Congress provides the General Framework for the Colombian Telecommunications Industry. According to Law 72 all telecommunications activities are public services under the control of the Colombian state and may be rendered directly by the government through national or territorial public entities, or by third public or private parties pursuant to the corresponding governmental authorization. This may be granted through concessions, licences or authorizations, depending on the activities or services to be developed. In general, the performance of all telecommunications activities requires the prior authorization of the Ministry of Communications. The rendering of any such activities without such authorization is considered unlawful.

Decree 1900 of 1990 issued by the Ministry of Communications provides the general regulations applicable to the telecommunications industry and was issued to supplement Law 72. According to Decree 1900 the telecommunications services are divided into the following sectors:

• basic services that are made up of (i) carrier services, which provide the necessary capacity for the transmission of signals between two or more defined points on the telecommunications network, and (ii) teleservices, which provide the complete capacity of communication between users (eg, wireless telecommunication, local, national and international long-distance fixed telephone services, and telex);
  
  
• diffusion services, which connect to various points simultaneously such as radio and television;
  
  
• telematic services, which allow the exchange of information between terminals with established protocols for open interconnection systems (eg, telefax, publifax, teletext, videotext and datafax), using the basic services as a support;
  
  
• value added services, which use the basic, telematic or diffusion services or any combination of these as a support in order to provide the complete capacity for the transmission and exchange of information, adding other facilities to the service or satisfying new specific telecommunication needs (eg, the access, transmission, treatment, deposit and recuperation of stored information, the electronic transfer of monies, and electronic mail). Only services that differ from the basic services can be considered as value added services;
  
  
• auxiliary aid services, which are linked to other public services in order to protect human life, national security or serve humanitarian interests (eg, radio help and security services, meteorology services, and air and sea navigation services); and
  
  
• special services, which are non-profit making services aimed at satisfying cultural or scientific necessities (eg, experimental radio services, amateur radio services, experimental services, and services related to cultural or scientific needs).

All of these activities, as well as certain other services, are regulated by specific regulatory decrees and resolutions the terms and conditions of which vary depending on the specific activities or services.

The development of certain telecommunications activities has been authorized by the Colombian government on an exclusive basis to national and foreign investors by granting the corresponding concessions (eg, national and international long-distance telecommunications services, private television and wireless communications). Pursuant to the general principle of free access to the rendering of telecommunications provided in Law 72 and Decree 1900 other services are non-exclusive and open to national and foreign investors. All that is required is the appropriate licence or government authorization. Services that the government authorizes on an exclusive basis are awarded by auction. Consequently, the price of such concessions is significantly higher than activities that are permitted on a non-exclusive basis.

The principal regulating entities of the telecommunications sector are the Ministry of Communications, the Telecommunications Regulatory Commission (in the case of fixed local, national and international long-distance services, which are considered to be residential public services)1 and the National Television Commission. The Superintendency of Public Services monitors the sector and has the power to impose penalties upon telecommunications companies developing domiciliary public services.

Other duties carried out by the Ministry of Communications include regulating the rendering and performance of each type of service, authorizing the telecommunications networks and granting rights for the use of frequencies.

Currently the Colombian Congress is discussing a bill that will enact a new general telecommunications law. It is expected that this law will extend the concept of telecommunications services in order to reflect recent and future expected services and technological developments in the industry.

Restrictions on Foreign Ownership

Foreign ownership is based on a general principle of the Colombian Constitution, which states that foreigners are entitled to the same treatment as Colombian residents. Foreign investment in the telecommunications sector is open to all national or foreign investors, with only two restrictions. First, foreign investors may own only up to 25% of radio broadcasting stations. Second, foreign investors may only own up to 15% of concessionaires of television programmes or zone television channels.(2)

Telecommunications activities must be developed by a company incorporated in Colombia regardless of whether its capital is owned by national private individuals or foreign investors. Consequently, it is impossible for foreign investors to develop telecommunications services without having a duly incorporated company in Colombia. For the specific case of auctions of telecommunications services, the terms of such auctions usually provide that foreign investors may participate directly without incorporating any companies, or may engage in consortiums or joint ventures with Colombian companies for this purpose. However, if they are awarded the right to exploit the corresponding service they will be required to incorporate a company.

There are numerous foreign telecommunications companies involved in the Colombian market, including Bell South, Telefónica de España and AT&T Latin America.

Licences, Authorizations and Concessions

All companies developing telecommunications activities in Colombian territory, except for certain specific cases such as private telecommunications networks, require a licence or authorization from the Ministry of Communications. Such licences or authorizations must be in force at all times and a consideration must be paid to the ministry for the exploitation of such licences. The value of the licences granted may vary considerably depending on the service to be provided. Value added services licences, which are not granted on an exclusive basis, are not expensive (approximately $3,000) and may be obtained by any company with the necessary experience as well as appropriate financial and technical capabilities. However, concessions such as those for cellular telephony or national and international long-distance service are far more valuable.

Licence and Concession Fees

Decree 2041/1998, as amended, sets out the fees that must be paid by authorized licensees for the exploitation of their licence. This is different from the original fee that must be paid for obtaining the licence or concession. As a general rule, the fee is based on the net annual income received by the licensee from its telecommunications activities, usually at a rate of 3%. However, certain telecommunications services such as long-distance services or cellular telephony services provide different fees in their concession agreements. Generally, all fees must be liquidated and paid on a quarterly basis.

For telecommunications services that have access to or use the electromagnetic spectrum, the corresponding licensee or concessionaire will also have to pay an annual fee that is calculated pursuant to certain formulae provided by the relevant regulations.

New Telecommunications Services

Since 1994, when cellular telephone concessions were awarded, the number of users has increased from 69,795 to 1.9 million in 1999: an increase of 87.2% each year. This figures far exceeds the initial projections of both companies and the government (initial calculations were of around 250,000 subscribed users in the first five years). As a result of this situation and in order to increase competition within the Colombian wireless telecommunications market, the Colombian Congress enacted Law 555 on February 2 2000. This sets forth the general framework for the provision of Personal Communication Services (PCS) in Colombia.

During the third quarter of 2000 the government set up a special advisory team in order to regulate the provisions of Law 555 and establish auction mechanisms as well as specific terms and conditions under which the concessions would be granted, including a proposed start-up date. The Colombian government has now publicly announced that it is expecting to launch the PCS process in July or August 2001.

Pursuant to the terms of Law 555 the government will grant one concession for each of the three areas of Colombia (eg, the Atlantic Coast or north region, the west region and the east region). These areas are identical to those currently existing for mobile phone concessionaires. Any participant may bid for a concession in one or more regions.

The concessions will be opened to public bidding and they will be awarded through public auctions. Licences will be granted for a term of 10 years. This may be extended for an identical or lesser term upon request before the eighth year of the initial concession. Such extension will be charged by the Colombian government. The exclusivity for the granting of the initial PCS concessions will be three years, after which the government may open for bidding new concessions and any interested investors may participate without restriction.

Recent Developments

On June 14 2001 the Colombian Congress approved the Fourth Protocol annex to the General Agreement for the Trade of Services in which the international commitments entered into by Colombia regarding the telecommunications industry are established. This decision will open up the Colombian market of international long-distance carriers. The government is currently in the process of preparing the corresponding regulations.

The Colombian Congress continues to study and debate the bill of law by means of which a new legal framework for the telecommunications industry will be adopted in order to provide a more flexible legislation for this continuously developing industry.

For further information on this topic please contact Alejandro Linares Cantillo or José Luis Suarez Parra at Gomez Pinzon & Asociados by telephone (+571 310 7055 or +571 310 5066) or by fax (+571 310 6646 or +571 310 6657) or by e-mail ([email protected] or [email protected]). The Gomez Pinzon & Asociados web site can be accessed at www.gomezpinzon.com .

Endnotes

(1) Residential public services or residential public utility services are those expressly established in Law 142 of 1994, which are subject to special regulations due to their nature and interest for all inhabitants of the Colombian territory. Such regulations basically relate to the companies that render such services, but also include provisions and obligations regarding granting subsidies to low income users, regulated tariff schemes and other relevant issues not applicable to other companies which do not provide these types of services. Fixed local, national and international long-distance telecommunications services are considered residential public services and are thus subject to this special regime.

(2) The Colombian Congress has recently approved a bill of law that increases the permitted level of foreign investment participation in any television concessionaire to 40%. This bill is awaiting presidential approval in order to become law.

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