At present, there are only four licensed integrated network operators in Taiwan: Chunghwa Telecom, Taiwan Fixed Network, Sparq and Eastern Broadband Telecom. An integrated network operator licensee may lawfully engage in a wide range of activities, including local, long-distance and international network business. However, there are significant barriers to entry for new licensees.

Foremost among these barriers is the requirement under the Taiwan Telecommunications Act that the opening and closing dates for acceptance of integrated network operator licence applications be announced by the Executive Yuan. Prior to this announcement, no applications for new integrated network operator licences may be accepted. In this respect, no window for such applications has opened since 2001.

Stringent regulatory entry requirements further impede market entry. Pursuant to existing regulations, the minimum paid-up capital requirement for applicants is NT$40 billion. The minimum system capacity requirements are no less daunting, and include a mandate that applicants provide, within the effective period of the network construction permit, a self-constructed local network with a system capacity of at least 1 million subscriber lines, subscriber ports or a combination of both. In light of saturated market conditions, these requirements may seem unattractive to potential new entrants.

The Directorate General of Telecommunications, a division of the Ministry of Transportation and Communications with authority over telecommunications matters, announced last year that barriers to entry for new integrated network operators would be significantly reduced. Pursuant to the plan announced by the directorate general, new integrated network licence applications were to be accepted starting in March 2003 by announcement of the Executive Yuan. Additionally, a bill amending the Taiwan Telecommunications Act was to be submitted to the Legislative Yuan, pursuant to which new applications for integrated network operator and other Type I telecommunications licences would be accepted on a fixed schedule twice a year.

Entry requirements were also to have been significantly relaxed by amending existing regulations. The minimum paid-up capital requirement was to be reduced to NT$16 billion, and the minimum capacity requirements likewise reduced by changes including reducing to 400,000 the number of required subscriber lines/ports.

Last month, however, the Directorate General of Telecommunications announced a complete shift in policy direction: none of the initiatives regarding integrated network operator licences will be implemented in the near future. This abrupt change in course apparently resulted from the ministry's refusal to accept the directorate general's plan of action. Thus, the directorate general no longer supports the creation of a window for the submission of new integrated network licence applications by March 2003, nor the amendment of the Taiwan Telecommunications Act to require that applications for all Type I licences be accepted twice-yearly on a fixed schedule. It will also not make any of the previously announced changes to regulations mentioned above in 2003.

While it has been announced that the authorities will consider afresh the liberalization of the integrated network operator licensing scheme next year, no commitments have been made in this regard.

For further information on this topic please contact Arthur Shay, William Edwards or David C Yeh at Shay & Partners by telephone (+886 2 8773 3600) or by fax (+886 2 8773 3611) or by email ([email protected] or [email protected] or [email protected]).