1. Authors: Llewllyn Toulmin, Ph.D., Consultant; Peter Smith, Lead Telecommunications Policy Specialist.Contributors: Naomi Halewood, Hong Anh Tu.

Telecommunications SectorCurrent status and future paths

The World BankGlobal ICT Department1

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As Vietnam becomes richer it faces challenges in adapting its infrastructurepolicies and institutions. While the old challenges of providing basicservices to all remain, new challenges are emerging, such as accessing newsources of finance, refining planning processes, preparing for rapid urban-ization, improving the efficiency of infrastructure service providers,developing stronger institutions to encourage private finance of infrastruc-ture or direct private provision of infrastructure, and developing more tar-geted approaches to poverty alleviation.

This report on Telecommunications Strategy - Current Status and FuturePaths is one of six volumes dealing with Vietnam's Infrastructure Challenge.Other volumes deal with

Infrastructure Cross Sectoral Issues, Urban Development, Transport,Water Supply and Sanitation, and Electricity.

The work for these reports was carried out between 2004 and 2006 byWorld Bank staff and consultants. The reports have been revised to takeaccount of comments made by the Government in workshops during May15-17, 2006. The comments of numerous colleagues from the World Bank,the United Kingdom's Department for International Development Bank, theAsian Development Bank, and the Japan Bank for International Cooperationare gratefully acknowledged.

Vietnam’s infrastructure challenge

iii

I. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

II. Policy and Institutional Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Main Laws and Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5Allocation of Responsibilities for Policy-Making and Regulation . . . . . . . . . . . . . . . . . . . . . . . . .8

III. Market Structure and Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Steps Toward Liberalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Current Structure and State of Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Private Sector Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

IV. Investment and Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Revenue and Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21Potential New Areas of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

V. Sector Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Access to Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27Affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

VI. Main Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

Promoting Competition and Private Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31Developing Modern Regulatory Institutions and Processes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33Reforming and Restructuring VNPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35Increasing Rural Telecommunications Infrastructure and Access . . . . . . . . . . . . . . . . . . . . . . . .36Devising a Roadmap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37Revising the Current Telecommunications Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

VII. The Way Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

1. Promote Competition and Private Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .392. Develop Modern Regulatory Institutions and Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . .413. Reform of VNPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .424. Promote Extension of Rural Telecommunications Infrastructure and Access . . . . . . . . . .425. Develop and Publish a Telecommunications Development Policy Roadmap . . . . . . . . . .426. Begin Dialog on Drafting a New Telecommunications Law . . . . . . . . . . . . . . . . . . . . . . . . .43

Table of Contents

The Way Forward: Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43AnnexesAnnex 1. Excerpts from March 2005 Economist Intelligence Unit (EIU) Country report

on Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48Annex 2. Charts on the Growth of Telecommunications in Vietnam . . . . . . . . . . . . . . . . . . . . . . . .49Annex 3. SOE Status of Various Telecommunications Organizations as of December 2005 . . . . .50Annex 4. ISPs Licensed in Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51Annex 5. BCCs in Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52Annex 6. Reform of Laws for Investment and for Increasing FDI . . . . . . . . . . . . . . . . . . . . . . . . . . .53Annex 7. SMEs in Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56Annex 8. Decree on Telecommunications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57Annex 9. Decree on Spectrum Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85

End NotesConcessioning of ServicesQuality of ServiceFocus on Telecommunications

iv

ASEAN Association of South East Asian NationsBCC Business cooperation contractsBOT Build, operate and transferBTA Bi-lateral trade agreementDGPT Department General of Post and TelecommunicationsDPM Deputy Prime MinisterETC Electricity Telecommunication Company2

FPT Corporation for Financing and Promoting TechnologyGNI Gross national incomeHCMC Ho Chi Minh CityICT Information and communications technologiesIDRC International Development Research Centre (Canada)ISP Internet service providerIT Information technologyITU International Telecommunications UnionIXC Internet exchange carrierMOST Ministry of Science and TechnologyMOT Minstry of TradeMPI Ministry of Planning and InvestmentMPT Ministry of Posts and TelematicsNIPTS National Institute of Post and Telecommunications StrategyOOG Office of GovernmentOSP On-line service providerPTF Post and Telecommunications FinanceSME Small and medium sized enterprisesSOE State owned enterpriseSPT Saigon Post and TelecommunicationsVAS Value added servicesVDC Vietnam Data CorporationVEC Vietnam Electricity CorporationVIETTEL The Military Electronic and Telecommunication CompanyVIETSHIPTEL Vietnam Maritime Telecommunication CompanyVNPT Vietnam Post and Telecommunications CorporationVPS Vietnam Postal ServiceVTI Vietnam Telecommunications InternationalVP Telecom Viet Power Telecom, formerly ETCUSD United States dollarVOIP Voice over Internet ProtocolWB World BankWTO World Trade Organization

List of Acronyms

2. Source for this acronym: US Telecommunications Industry Association and interviews with ETC; this firm isnow called Viet Power Telecoms or VP Telecoms.

vi

ietnam’s telecommunications sector hascontinued to expand rapidly, primarilydue to mobile growth, and appears

poised to continue expanding in the future.With a population of just over 80 million (com-parable to Germany), Vietnam is one of themajor emerging markets of the ASEAN region.Over the past three years, Vietnam has sus-tained an average annual growth of about 42%in total teledensity.3 This figure is higher thanChina and is one of the highest in the world.The primary growth driver is mobile telecom-

munications, which has grown an average of53% each year over the last four years. Someforecasters estimate that Vietnam could reach atotal teledensity in excess of 50% as soon as theend of 2009.4 Total teledensity as of 2004 wasslightly ahead of India, somewhat behindIndonesia, but still less than half that of thePhilippines or Thailand. Figure 1 below showsthe total teledensity of Vietnam and otherselected Asian countries.

It is estimated that the 2005 figure for totalteledensity is about 19.9,5 almost even with

Indonesia. In terms of industry revenue

growth, Vietnam is currently one of thethree fastest growing communicationsmarkets in Asia, with estimated totalindustry revenues of $1. 88 billion in2005 and a forecast $5 billion by 2010.6

The Vietnamese market is still one ofthe smallest in Asia, however. (See thetable below.)

Since the launch of the Doi Moi (lit-erally “change and newness”) policy inthe early 1990s, Vietnam has beenimplementing a program to increasecompetition in many telecommunica-tions market segments, has ended themonopoly of the Vietnam Post andTelecommunications (VNPT), has intro-duced the Internet, has separated poli-

1

I. Overview

3 “Teledensity” refers to telephone lines per 100 population; here “total teledensity” is used to ensure that it is clearthat both mobile and fixed telephone lines are being included in the analysis.

4. See Business Monitor International (BMI), Vietnam Telecommunications Report, Q3 2005 5. BMI, ibid.6 Pyramid Research, Vietnam Country Outlook, September 2005

Source: Derived from ITU dataNote: Fixed line data for Thailand are from 2003

V

cy/regulation from operations, has begun toseparate post from telecoms, and has substan-tially reduced international and other prices. ABilateral Trade Agreement (BTA) with theUnited States is in force, which contains time-delimited targets for market opening and for-eign (US) investment. The government hasannounced its intention to accede to the WorldTrade Organization, and has begun studies onthe telecommunications portion of the neededWTO offers. Internet cafes and shops are flour-ishing in all cities and many towns, develop-ment plans in telecommunications and relatedareas have been drafted and adopted, and in2002 a new Ministry of Posts and Telematics(MPT) was created.

With respect to competition, the monopolyof VNPT has been ended in every line of busi-

ness, with actual or licensedcompetitors in place in Internet,paging, cellular, and even localservice provision. However,VNPT continues to dominatethe sector through high marketshare (estimated at 90 to 94% ofthe entire sector) and thoughmultiple ownerships in eachmarket segment. And much ofthe new entry is through otherstate owned enterprises (SOEs),the military, and through non-ownership business coopera-tion contracts (BCCs7), notthrough the ownership partici-pation of private entities.Figure 2 below provides a sum-mary view of the sector.

As shown in the chart, VNPTis active in each industry seg-ment, owns the two active carri-ers (Vinaphone and Mobiphone)

in the most rapidly growing segment, mobiletelephony, and has a partial ownership in SPT(Saigon Post and Telecommunications), a poten-tial major competitor active in most segments.Viettel, Viet Power Telecom (sometimes knownas VP Telecom, formerly ETC) and HanoiTelecom have been licensed in most industrysegments, and are emerging as potential nationalcompetitors to VNPT.

Other notable aspects of Vietnam telecom-munications include:

● Prices for international calling and leasedlines have dropped markedly, by about 70%in the last two years. These prices are nowabout 7% or more below regional averages,according to MPT and one independentanalysis. This is a major achievement.

2

Table 1: Telecom Market Size and Growth by Asian Country

Country 2004 Total Telecom

Revenue (US$m) 2005 Total Telecom

Revenue (US$m) Percent Growth

Australia 13,331 14,916 10.6%

China 70,881 78,936 10.2%

Hong Kong 5,836 6,236 6.4%

India 15,246 18,554 17.8%

Indonesia 8,519 10,213 16.6%

Japan 144,167 141,035 -2.2%

Malaysia 4,634 4,948 6.4%

New Zealand 2,787 2,903 4.0%

Philippines 4,079 4,581 10.9%

Singapore 3,978 4,015 0.9%

South Korea 25,963 26,749 2.9%

Taiwan 10,563 10,306 -2.5%

Thailand 5,621 6,255 10.1%

Vietnam 1,567 1,877 16.5%

Source: Pyramid Research

7. BCCs are schemes in which foreign companies finance capital investment and share in revenues, but have noownership share and no or limited management control. These are discussed at length in section III.

● The Internet got underway in Vietnam quiterecently, in November 1997, but has grownvery rapidly. There were an estimated 7.5million users as of the end of 2004 and 11.6million as of the end of 2005, a remarkableachievement. This is still a moderately lowpenetration rate of 14.3 percent, however,and penetration is largely limited to urbanareas.8

● Efficiency of the telecommunications sector,as measured in lines per employee, is quitelow by regional standards, and the afford-

ability of some telecommunications servicesis also poor.

● Voice over Internet Protocol (VOIP) is nowavailable on a limited basis in parts ofVietnam by dialing an additional number. Inother countries the cheap price of VOIP hashelped to lower prices substantially, and thiseffect is anticipated in Vietnam.

● Regulation is undertaken by MPT; there islittle discussion at this point of creating anindependent or quasi-independent regula-tor. However, MPT is obligated to modern-

3

8 . BMI, ibid.

4

ize its regulatory procedures under the BTA,and has begun consultations with somestakeholders, primarily SOEs and other min-istries. There has been little regulatorymovement to analyze and restrict potentiallyanti-competitive practices alleged against thedominant VNPT, such as delaying financialand technical interconnection with otherproviders, and maintaining high prices forcalls to nearby Thailand.

Despite Vietnam’s impressive progress inareas such as teledensity, price reductions andincreasing competition, the sector is still behindother countries in the region in many areas. Arecent rating of Asia-Pacific telecommunica-tions markets in terms of risk, maturity, poten-tial and regulation, ranked Vietnam 14th out of14 countries reviewed, behind Pakistan,Thailand and Indonesia.9

Vietnam was ranked 158 out of 167 inReporters Sans Frontieres 2005 Annual WorldWide Press Freedom Index, which partiallyreflects “the main obstacles to the free flow ofinformation on the Internet.”10

Progress is notably lagging in priority areassuch as:

● Increasing competition and private partici-pation in all segments by encouraging newprivate entrants, improving the interconnec-tion regime, and regulating prices in a pro-gressive way

● Developing modern, transparent regulatoryinstitutions and processes, including in thearea of spectrum management

● Reforming and restructuring VNPT, includ-ing by “equitization” (privatization)

● Increasing rural telecommunications infra-structure and access.

To make significant progress in these areas, itwill be necessary to create a roadmap for devel-opment through an open dialog with stakehold-ers, and to move toward drafting a new, moderntelecommunications law that will attractinvestors and protect consumers. Governmentaction to modernize the policy and regulatoryenvironment in these areas would accelerate andimprove the performance of the sector.

9. BMI, ibid.

Main Laws and Regulations

The main goals for developing the telecommu-nications sector in Vietnam are defined in the:

● Post and Telecommunications Ordinance of2002

● Decision 158/2001/QDTTG of October 18,2001, approving Vietnam Post and Telecommu-nications development strategy through 2010

and general approach through 2020● National Institute of Post and

Telecommunications Strategy (NIPTS) ICTstrategy, adopted by MPT in October 2005,which sets goals for telecommunications andICT for the year 2010 and 2020.

These and other key decisions affecting thetelecommunications sector are shown in thetable below.

5

II. Policy and Institutional Framework

Table 2: Major Decrees and Decisions in Telecommunications

Prime Ministerial Decision No. 99/1998/ND-CP

26 May 1998 Regulation of posts and telecommunications prices

Decision No. 81/2001/QD-TTg 24 May 2001 Action to implement Directive 58-CT/TW and step up the application and development of ICT in 2001-5

Decree No. 55/2001/ND-CP 23 August 2001 Management, provision, and use of Internet Services Decision 158/2001/QDTTG 18 October 2001 Approval of VNPT strategies through 2010 and 2020 PM Decision No. 33/2002/QD-TTg 8 February 2002 Approval of the plan for Internet development for 2001-5 Ordinance (Law) No. 43/2002 1 October 2002 Regulates telecom networks and services, licensing

procedures and prices; defines types of telecom services Decree No. 90/2002/ND-CP 11 November 2002 The functions, tasks, powers and organizational structure

of MPT Ministry of Posts and Telematics (MPT) Decision No. 148 /2003/QD-BBCVT

26 August 2003 Provisional interconnection fees set and lowered from previous levels

MPT Decision 217/2003QD-TTg 27 October 2003 Telecom providers with less than 30% market share can set their own prices

Document No. 16/BBCVT-KHTC 6 January 2004 Price setting rules for enterprises Cost based tariffs

Decree No. 24/2004/ND-CP 14 January 2004 Issuance of spectrum management regulations Decree No. 160/2004/ND-CP 3 September 2004 Issuance of telecom regulations MPT Reg. 191/2004/QD-TTg 8 November 2004 Created Vietnam Public Telecommunications Service Fund MPT Reg. 04/2004/TT-BBCVT 29 November

2004 Provides sanctions for violations of post, telecom and radio frequencies

Decision No. 58/2005/QD-TTg 23 March 2005 Approves VNPT experimental conglomerate Prime Minister’s Decision No. 246/2005/QD-TTg

6 October 2005 Approves ICT-IT development strategies through 2010 and 2020

Sources: World Bank interviews; USAID, Competition Review of the Vietnamese Telecom Sector, 2005

Strategic objectives under these plans anddecisions include to:

● Develop a national information infrastruc-ture with advanced technology, high capac-ity, high quality of service and nation-wideservice

● Build a telecommunications sector that is aleading sector in the economy, with anannual growth rate of 20-25%

● Reach penetration in “e-Vietnam” (e-com-merce, e-government, e-citizen access) com-parable to the regional ASEAN average by2010

Specific objectives detailed in the NIPTS planinclude:

● Reach a penetration of 32-42 total telephonelines per 100 population by 2010

● Reach 25-35 Internet users per 100 popula-tion by 2010, with 30% broadband access

● Achieve 10 PCs per 100 population by 2010.

The laws and decrees reflect a slow but on-going liberalization of the telecommunicationssector. This progress toward liberalization isnow being enhanced by three major factors: (1)comparisons by decision-makers with tradi-tional rival China, which is seen as being 5-10years ahead in terms of telecommunicationsand ICT development and inward investment;(2) comparisons with other ASEAN nations,and (3) the drive to accede to the World TradeOrganization (WTO) in the near future.

The most important and comprehensive ofthe above-listed laws and decrees was theTelecommunications Ordinance (law), whichtook effect on October 1, 2002, after approval bythe Standing Committee of the NationalAssembly. This 79-article ordinance continuesthe telecommunications reform process inVietnam, and is expected to encourage furtherprivate and foreign interest in the sector. Thisnew ordinance has many provisions, including:

● Enterprises from any economic sector areallowed to provide most telecommunica-tions and postal services, except "essential"ones such as construction, development andmanagement of the infrastructure such asthe "national axis [backbone] network, andinternational, mobile and local phone net-works," which will be undertaken by state-owned enterprises.

● Licenses for network establishment andservice provision have a maximum durationof 15 years, telecommunications service pro-vision licenses have a life of 10 years; andlicenses for telecommunications cables onthe continental shelf and in exclusive eco-nomic zones have a life of 25 years.

● Enterprises with a market share of morethan 30 percent are prohibited from usingtheir market power to hinder new entrants.

Decrees implementing the law have beenissued and cover:

● Postal administration● Telecommunications administration● Spectrum management.

Copies of the latter two decrees are attachedin the Annexes.

Specific other noteworthy reform measurestaken by the government in the last severalyears include:

● Creating the new MPT in place of DGPT, toset policy in and regulate “telematics”(telecommunications plus IT)

● Decreeing that post is separate from telecomin 2005, with a plan to actually separatefinancial and operational aspects of the twofunctions by or in 2007

● Passing a regulation in 2005 creating theVietnam Public Utility TelecommunicationsService Fund. This will serve as theUniversal Service Obligation (USO) mecha-nism for the country, and will be capitalized

6

at $31.5 million, with 40% contributed by thestate. The balance will come from enterpris-es operating in the sector. In future, 5% ofmobile revenues will go into the fund, alongwith 4% of long distance revenues and 3% ofdomestic long distance revenues.

● Passing a law in 2005 allowing for electron-ic transactions, and preparing a draft law onICT with Korean donor support, scheduledto be issued in 2006

● Reducing prices on international calling,leased lines, Internet access and intercon-nection fees, to the point that MPT and atleast one independent analysis states that amarket basket of prices is about 7% belowregional averages11

● Signing a Bilateral Trade Agreement (BTA)with the United States in December 2001,which covers telecommunications, andwhich provides time-delineated marketopening and ownership measures for (US)investors over six years

● Recognizing the principles of “significantmarket power” and “asymmetric regula-tion” in recent pricing regulations, whichallow all service providers with less than30% market power to set their own prices

● Issuing licenses to new operators in theareas of basic services, international, mobile,Internet exchange providers (IXPs), Internetservice providers (ISPs), and other marketsegments.

7

Table 3: Allocation of Major Responsibilities in Telecommunications Policy

Deputy Prime Ministers (DPMs) Of the 4 Deputy PMs, one (the First Deputy Prime Minister) holds the portfolio for telecommunications, one holds the portfolio for ICT, and one holds the portfolio for e-government

Office of Government (OOG) This office serves as the PM’s and DPM’s secretariat and clearinghouse, 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 telecommunications sector; representative of the State’s capital interests in facility-based operators, including the dominant VNPT

Ministry of Trade (MoT) Sets policy and develops legislation and programs in the area of e-commerce and trade

Ministry of Science and Technology (MOST)

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

Ministry of Planning and Investment (MPI)

Ensures that sufficient and timely investment is available for approved development in IT (defined broadly to include telecommunications)

National Steering Committee on ICT Monitors implementation of the national IT plan (which covers telecommunications, ICT, and the ICT projects, functions and responsibilities of all ministries and agencies)

11. World Bank consultant Jose Monedero used ITU criteria and procedures in this analysis. Mondero, Revisionsto Telecom Prices Summary Report, December 2003. Price levels have continued to fall substantially since this detailedanalysis was undertaken. Price levels are discussed in more detail in section V, Sector Performance.

Allocation of Responsibilities forPolicy-making and regulation

The laws, decrees and decisions shown in thesection above allocate policy responsibilities inthe sector as shown in the exhibit below.

The key policy and regulatory functionsrelated to telecommunications are formallyassigned to the Ministry of Post and Telematics(MPT). Selected divisions of interest within thisimportant new ministry are shown in the figurebelow.

The MPT departments of telecommunica-tions and radio frequency shown in the organi-zation chart provide the regulatory function.There is no discussion at present about creatingan independent or quasi-independent telecom-munications regulator. However, MPT hastaken the initiative to modernize some of itsconsultative procedures, including:

● Announcing in December 2003 that it wouldundertake stakeholder consultations in draft-ing the new IT draft law, which is scheduled tobe submitted to the National Assembly by2007

● Holding a series of round table seminarswith stakeholders, sponsored by the UNDP,with the goal of developing a national ITand broadcasting strategy.

Furthermore, the Vietnam-US BTA includesby reference the WTO TelecommunicationsReference Paper, and hence requires changes inregulatory procedures. The BTA itself specifi-cally requires some changes in regulatory andmarket procedures, as follows:

● Making licensing criteria transparent(although the choosing of local partners inthe issuance of licenses may be exceptedfrom the transparency requirement)

● Allowing public comment regarding the for-

8

mulation of laws, regulations and adminis-trative procedures

● Eliminating discriminatory prices and feesover a 4 year period

● Prohibiting abuse of monopoly power.

While encouraging, these BTA measuresalone will not meet WTO accession require-

ments with respect to telecommunicationsrequirements. Also, the key areas of inter-connection, universal access and radio fre-quency management are not addressed inthe BTA, except by incorporating the WTOTelecommunications Reference Paper,which gives very brief (albeit important)guidance.

9

Steps Toward Liberalization

Evolution of the Sector. Until the late 1980s,the telecommunications sector in Vietnam wascharacterized by strict state regulations, monop-olistic market conditions, and tight control of allkinds of telecommunications services. The year1986 marked the beginning of the Doi Moireform programs, the gradual privatization(locally called “equitization”) of some state-owned enterprises (SOEs) in various sectors, thecorporatization of other SOEs, and the begin-ning of gradual liberalization in the telecommu-nications sector.

Until 1993 the Department General of Postsand Telecommunications (DGPT), a unit of gov-ernment, was the sole public telecommunica-tions provider in Vietnam. In that year, twoseparate organizations were created: DGPT wasmade the strategic, regulatory and developmentagency, and the newly created Vietnam Postand Telecommunications (VNPT) was given thestate monopoly for operating the nationaltelecommunications network. VNPT offeredand continues to offer all types of telecommuni-cations services, and is active in all 61 provincesand in all cities.

Also in 1993, the country’s first nationalinformation technology (IT) policy was devel-oped, and reflected the plans for graduallytransforming the entire economy into a marketeconomy, instead of a command one.12 This ITplan was codified in the landmark 1993

Resolution 49/CP on the Development ofInformation Technology.

In 1995 Vietnam joined ASEAN and wit-nessed the normalization of trade relations withthe United States. This normalization eventual-ly led in 2001 to signing a Bilateral TradeAgreement (BTA) between the two countries;this BTA has an important telecommunicationscomponent. In 1996 a national program wasinstituted to establish a modern ICT (informa-tion and communications technologies) infra-structure. DGPT Decree No. 109 of 1997 contin-ued the liberalization trend, with more competi-tors allowed to enter what was once a monop-oly market.

From 1997 to the present, more licenses in alllines of business have been issued, andincreased attention has been focused on thetelecommunications and related sectors. Thisattention has been driven by several factors:

● Liberalization of the laws governing smallbusiness formation have resulted in the cre-ation of over 25000 SMEs per year, one of thefew major areas of growth and job creation inthe economy. These new jobs are important,since millions of school-leavers each yearwill be emerging from the educational sys-tem and will require employment. Decision-makers recognize that these new small firmsneed to use telecommunications effectively,and that even more growth and jobs could becreated by increasing the ICT adoption rateamong SMEs. Upgrading of these firms in

11

III. Market Structure and Ownership

12. Note that “IT” in Vietnam policy usually reflects all of what most observers would now call information tech-nology, telecommunications, software/hardware industry, and internal computerization projects.

the ICT area is an excellent area for progressin poverty reduction; this has been recog-nized by inclusion of telecommunicationsand ICT in the World Bank’s poverty reduc-tion strategy for the country. 13

● Countries which Vietnam compares itself to,including China, Thailand and thePhilippines, are forging ahead in telecommu-nications and ICT.

● As part of its drive to participate in trade andthe regional and global economy, Vietnamrecognizes the need for good, effectivetelecommunications.

As a result of these factors, decision-makersin the Parliament, the Communist Party and inthe Government have identified telecommuni-cations as a leading economic sector.

Current Structure and State ofCompetition

Ownership and Market Structure. VNPTremains the dominant public telecommunica-tions provider, and participates in all activitiesin the sector. As the largest telecommunicationsprovider, VNPT is a conglomeration of divi-sions, SOEs (state-owned enterprises), jointstock companies, joint venture companies andother companies and units under one umbrellathat offers a full complement of telecommunica-tions services. The figure on the next pageshows the organizational chart for VNPT. Thisorganization structure includes the variousVNPT internal divisions, as well as numeroussubsidiary member units, including the nation-al network company (VTN), the data networkcompany (VDC), the international communica-tions company (VTI--with a BCC with Telstra,),61 provincial and city operating companies

(with several BCCs including Telstra, FranceTelecom, and NTT), design and constructioncompanies, research and training centers, afinance company, a hotel, a hospital, and vari-ous others.

VNPT also owns the two dominant cellularcompanies: Mobifone (which had a BCCarrangement with Comvick) and Vinaphone(holding contracts with Nokia). These two com-panies are part of VNPT’s Vietnam MobileTelecom Services division (VMS). In addition,VNPT has several paging companies (ABC,MCC, Phonelink, Polink, and SEPRO), and pay-phones (GPC, supplied by Sapura).

VNPT installed 1.148 million new fixed linesin 2004, in line with expectations, is estimated tohave installed about 1.3 million additional fixedlines in 2005, and is forecast to install about 1.75million in 2006. The result of this rapid growthis that fixed line penetration should pass 10% bythe end of 2006.14 If achieved, this will repre-sent significant progress.

It is estimated that VNPT retains about 90 to94% market share of the entire telecommunica-tions market. As shown in Figure 2 in SectionI, VNPT is active (and is dominant) in every lineof business and market segment.

Other players which are moving to enter allsegments include Viettel, an SOE owned by themilitary, Viet Power Telecom, a firm owned bythe electricity SOE, Hanoi Telecom, and SPT(Saigon Post and Telecommunications). Ofthese, SPT has the most complex ownership,being 87% owned by 11 government organiza-tions, including 18% by VNPT; with the remain-ing 13% being owned by individuals, privatecompanies, and staff. SPT retains about 2.6%market share of the entire telecommunicationsmarket, compared to 90-94% for VNPT.

Figure 4 below shows the structure and busi-

12

13. For more information on the growth of SMEs in Vietnam, see the Annex. 14. BMI, ibid.

ness areas of VNPT. According to press reports,VNPT is preparing to modernize, corporatize andequitize its structure in 2006. Reportedly, the cur-rent plan is for regional operations to be incorpo-rated into separate companies, with an overallholding company which will own shares in itssubordinate affiliates. This will allow forinvestors, including foreign investors, to purchaseshares, and for VNPT to raise needed capital.TeleGeography reports the moves as follows:15

The Vietnamese government has given thegreen light to a plan to establish a new state-owned telecoms group, the Vietnam Post andTelecommunications Group (VNPTG) in early2006. The new public entity will succeedVietnam Post and Telecommunications(VNPT), which has been working towards pri-

vatising 41 of its subsidiaries. To date, 26 ofthese units have been spun off and prepara-tions are under way for the remaining 15. Thenew group will retain a 50% stake in many ofVNPT’s fringe divisions including equipmentmanufacturing, software development, hard-ware installation, tourism, insurance and pro-vision of value added services.

State of Competition by Market Segment.Competition has increased substantially in theVietnam telecommunications market over thelast decade, considering that in 1993 the marketwas still a total monopoly in all market seg-ments. However, it should be noted that muchof the current competition in the telecommuni-cations sector in Vietnam has come from otherSOEs (and the armed forces) entering the mar-

13

15. See http://www.telegeography.com/cu/article.php?article_id=10221

ket, as they see the potential for profits anddiversification, rather than from the private sec-tor. A report by GIPI (the Global Internet PolicyInitiative) states that VNPT has actively tried toprevent the licensing of truly private competi-tors, thus limiting the “competition” to other

SOEs. The report also states that the “the delayin issuing SPT’s CDMA mobile service [license]is clearly an example of VNPT’s monopolisticpower.” GIPI concludes that VNPT has greaterpower than MPT to set prices, when the reverseis supposed to be true, and states that there is

14

Table 4: Summary of Market Segments, Leaders and Challengers

SSeeggmmeenntt LLeeaaddeerr CChhaalllleennggeerrss

Viettel National license SPT* National license Hanoi Telecom Hanoi license only

Fixed Local & Long Distance

VVNNPPTT** About 90% market share

Viet Power Telecom National license Viettel Owned by military Int’l Services VVTTII** Owned by VNPT;

BCC with Telstra Viet Power Telecom Formerly ETC Viet Power Telecom Formerly ETC;

Subsidiary of power company Int’l & Domestic Leased Lines

VVNNPPTT**

Viettel Owned by military

SPT* (“S-Fone”)

BCC with Korea SLD; CDMA technology; Forecast 10% share by 2010 Partially owned by VNPT; National license

VViinnaapphhoonnee**

43% mkt share 2005; est. to drop to 37% by 2010 Switch and related supply contract with Nokia; GSM technology; Owned by VNPT

Hanoi Telecom $656 million BCC with Hutchison for CDMA 3G; GSM technology now; Forecast 11+% share by 2010

Viet Power Telecom (VP Telecom)

Formerly ETC; CDMA technology; forecast 10% share by 2010

Mobile Services

MMoobbiiFFoonnee** 39% mkt share 2005; est. to drop to 37% by 2010; BCC with Comvik in process of being liquidated; GSM technology; Owned by VNPT; equitization planned

Viettel New agreement with Ericsson to provide GPRS-enabled network; Owned by military; GSM; Forecast 5% share by 2010, although over 500K additional subs in just 1st 6 months of 2005

Netnam SOE, Canadian assistance SPT* Partly owned by VNPT FPT Partly employee owned

ISPs (only major players shown)

VVDDCC** VDC=Vietnam Data Corporation; Owned by VNPT

Viettel Military Viet Power Telecom Very small share SPT* Very small share

IXCs (Internet Inter-exchange carriers)

VVDDCC** ditto

Hanoi Telecom Very small share OSPs (On-line service providers)

VVDDCC** ditto Ten minor players

Sources: World Bank interviews, Pyramid Research, 2005 Competitors in red (also indicated by an asterisk) are owned or partially owned by VNPT

almost no true private enterprise activity in thetelecommunications marketplace.16

VNPT retains a high degree of dominance inalmost every market segment, and has substan-tial multi-ownerships in many segments. Thesituation by segment is shown in Figure 2 inSection 1, is summarized in Table 4 below, andis described narratively below.

Fixed Local and Long Distance Services.VNPT dominates this market, with about 90%17

of the total 6.85 million fixed local lines in serv-ice.18 VNPT is partnering with Siemens in a$107 million effort to provide wireless in thelocal loop service in ten provinces in the centralregion. VNPT’s monopoly power has beenreduced, as licenses were issued over the lasttwo years for local and long distance service toViettel (a military SOE), SPT and Hanoi Telecom(in their respective cities only), and Viet PowerTelecom (a nationwide SOE under the electriccompany, sometimes known as VP Telecom).

As stated above, VNPT owns an 18% interestin SPT, in addition to being the dominant carri-er in this segment.

As described earlier, the Vietnam PublicUtility Telecommunications Service Fund willprovide funding for rural expansion of localservice in un-served or under-served areas.

International Services. VTI, an SOE subsidiaryof VNPT, was until recently the sole provider ofinternational services in Vietnam. VTI wasfounded in March 1990 and operates underDGPT decision 324/QD-TCBD of September 9,1996. VTI has gateway exchanges located inHanoi, Ho Chi Minh and Danang cities, linkedtogether by an SDH backbone; 6 satellite earthstations with 6 antennas working with Intelsat

and Intersputnik satellite systems; and two in-service submarine optical fiber cable systems(T-V-H and SEA-ME-WE 3) connecting withother submarine cable systems. VTI is alsoactive in the VSAT arena. VTI operates an all-digital system, and has about 1500 employees.VTI has a BCC with Telstra of Australia todevelop international voice and data net-works.19 VTI had been planning to launch asatellite, Vinasat-1, in the near future. But thelaunch has been delayed, reportedly until 2008.

On July 29, 2002, MPT issued licenses toViettel (an SOE under the military) and to VietPower Telecom to undertake switched interna-tional telephone services.

Voice over IP (VOIP) international servicesare in operation by VNPT, Viettel, SPT (as notedabove, partly owned by VNPT), Vishipel, VietPower Telecom and Hanoi Telecom.

Under the BTA, (US) foreign privateinvestors are supposed to be allowed to enterthe market for “satellite” services by the end of2005, with up to 49% ownership. (But see theBTA discussion below.)

International and Domestic Leased Lines.Regarding international and domestic leasedlines, the situation is as follows:● VNPT dominates the market and until

recently had a monopoly on leased lines● Currently Viet Power Telecom offers domes-

tic leased lines, and has been recently givena license for international leased lines. Thisservice is not yet operational

● Viettel also offers currently domestic leasedlines and now has a license for internationalleased lines. Due to increased competition, falling equip-

ment costs, and in response to government pol-

15

16. GIPI, “Promoting Internet Policy and Regulatory Reform in Vietnam: Status of TelecommunicationsDevelopment in Vietnam,” Assessment Report, March 2004.

17. World Bank interviews with NIPTS, December 2005.18. SPT, the only currently active competitor, has 23,000 fixed lines in the Saigon area. 19. For a list and brief description of all the BCCs in Vietnam, see the Annex.

icy changes, the dominant carrier VNPT hasbeen dropping prices substantially. For exam-ple, in May 2005 VNPT dropped its monthlytariffs for leasing international capacity by 20 to40%, and dropped its domestic rates by 10%.

Mobile Services. This market segment is thekey driver of sector expansion in Vietnam, withgrowth rates averaging 53% per year for thepast four years. Currently in Vietnam, competi-tion occurs primarily between two nationalmobile operators, both owned by VNPT as partof its Vietnam Mobile Telecom Services (VMS)division, and both using GSM technology. Theestimated 2005 market share of the 9.3 millionmobile subscribers is Vinaphone at 43% andMobifone at 39%, thus totaling 82% for VNPT.20

Pyramid Research forecasts that Vinaphone’smarket share will decline to about 37% by 2010,that Mobiphone will also decline to about 37%by 2010, and that other firms will rise from neg-ligible now to about 26% by 2010.

Pyramid also estimates that mobile teleden-sity matched fixed teledensity at the end of 2004, with both at about 7.5% penetration, and thatthe recent CAGR21 in mobile of “almost 50%will moderate to around 21%.”22 Pyramid in2005 forecasts that mobile teledensity will reachabout 27% by 2010, more than twice the fixedteledensity at that point.23 BMI forecasts are

more optimistic, estimating that mobile teleden-sity will reach about 39.9% by the end of 2009.

Vinaphone has a reported growth rate of50,000 subscribers per month. Vinaphone spentabout $1.1 billion USD on expanding servicecoverage in 2003. Mobifone has received BCCinvestments of $456 million USD from Comvikof Sweden. Although Mobifone and Vinaphonehave a common parent, they seem to competefairly vigorously. Total mobile revenues for allfirms are estimated at about $1 billion for 2005,with only about 7.0% of this revenue comingfrom mobile data services. These figures areprojected to climb to about $2.9 billion and 8.7%in 2010.24

MPT and VNPT are eliminating theMobifone BCC arrangement with Comvik, andare reportedly changing to a new structure inwhich the government would retain 51% own-ership, and shares for the remaining 49% wouldbe sold to the public. A statement in April 2005by Deputy Prime Minister Tran Duc Laiannounced plans for the equitization ofMobifone and Vinaphone. Observers expectthat sale of shares in Mobifone will take lesstime, since the main obstacle was the legal endof the Comvik BCC in May 2005, while theVinaphone equitization will take longer, sincethe country’s local post offices have a share inthe ownership of this operator.25

16

20. NIPTS estimates that VNPT market share of mobile is 85% in December 2005, a figure close to the PyramidResearch estimate shown here. (World Bank interviews, December 2005.)

21. CAGR = compound annual growth rate.22.Pyramid Research, “Vietnam Country Outlook,” September 2005, and Pyramid Research, “Communications

Markets in Vietnam,” February 2004, www.pyramidresearch.com. PR anticipates that GSM technology will continueto dominate the market through 2010, with CDMA gaining less than 20% share, due to low demand for data usageand higher CAPEX requirements. Intensification of competition is also forecast, due to MPT allowing newcomers toundercut the prices of the two VNPT subsidiaries.

23. Thus the national goal set forth by NIPTS of “reaching total teledensity of 32-42 by the year 2010” is currentlyon track and would likely be achieved, barring unforeseen circumstances. One factor that might slow growth couldbe foreign investor reluctance to commit billions in an environment where ownership is not allowed; see the discus-sion later on the BTA, BCCs, and on investment and financing.

24. Pyramid Research, ibid. 25. World Markets Research Center, WMRC Country Report: Vietnam (Telecoms), October 2005.

Four other mobile operators have beenlicensed and are operational: SPT26 (usingCDMA technology) , Hanoi Telecom, VietPower Telecom (formerly ETC), and Viettel (anSOE under the military). SPT and its CDMAtechnology reportedly had difficulty in its firstfew months, due to high handset costs, lack ofhandset selection, and lack of SIM cards. As aresult, CDMA subscriber growth was “tepid”27

at first, although it may expand to as much asone third of subscribers by 2010.28 Military-owned Vittel reportedly had net subscriberadditions totaling 540,000 in the first half of2005, making it a potential threat to the top twocompetitors. Vinaphone, one of those top two,was reported by Pyramid Research to be set for“imminent privatization, within two years,”with Norway’s Telenor as the likely majorinvestor. Viet Power Telecom has allocated$200 million to a plan to reach two million cus-tomers with its CDMA 450 Mhz service.

Under the BTA, (US) foreign privateinvestors were to be allowed to enter the marketfor “mobile” services by the end of 2005, with upto 49% ownership. However, Vietnam appearsto be behind schedule in meeting those require-ments (see the later discussion of the BTA).

Regarding technological evolution, BMIstates that:29

It does not appear that Vietnam has a clear pol-icy towards the deployment of 3G [third gener-ation] networks, and – to the detriment of itslong term success – it is likely that permissionfor service launch will be done on an ad hocbasis. Hence in February 2005 HutchisonTelecom received a 15 year license to provideCDMA2000 services, which will include anupgrade to 3G as part of its BCC with Hanoi

Telecom. [But] it is unclear when the 3G tech-nology will be made available, and beyondthis, no concrete plans have been confirmed byother players, with Mobifone currently limit-ing its trials to 2.75 G technology.

In November 2005, Deputy Prime MinisterNguyen Tan Dung reportedly turned down arequest from broadcaster Vietnam Television toenter the lucrative mobile market. He reaf-firmed an earlier ruling that no more mobilelicenses would be issued, in order to ensure ahigh quality of service quality from the existingsix operators.

ISP and Other Internet Services. There arethree categories of Internet licenses in Vietnam:Internet exchange carriers (IXCs), which arewholesalers; Internet service providers (ISPs),which are retailers; and Internet online serviceproviders (OSPs), which provide content andinformation services.

IXCs. The market for Internet inter-exchangecarriers (IXCs) opened up in early May 2002when FPT (also an ISP) and Vietel were licensedas IXCs, in addition to the previous monopolyVietnam Data Corporation, a subsidiary ofVNPT. Since then Viet Power Telecom, SPT,and Hanoi Telecom have been licensed as IXCs.

ISPs. The ISP market is dominated by VNPT, uti-lizing its subsidiary VDC--Vietnam DataCorporation. It holds 57% of the market.30 Sixorganizations hold 99% of the market, and twoof the six (VNPT and FPT) control 76% of themarket. (See the exhibit below.)

FPT (the Corporation for Financing andPromoting Technology), the second-largest ISP,

17

26. As noted above, VNPT owns an 18% interest in SPT, in addition to owning the two dominant cellular carriers. 27. Pyramid Research, ibid. 28. Pyramid Research, ibid.29. BMI, ibid.30. This figure and the chart are for the end of 2004. World Bank interviews in December 2005 with NIPTS indi-

cate that VNPT still retained about “55 to 60% of the Internet market” at that point in time.

is a majority state-owned and minori-ty employee-owned share-basedcompany, which is active in comput-er distribution, training and software.

Netnam was created with assis-tance from Canada’s IDRC, is a state-owned enterprise owned by the gov-ernment Institute of InformationTechnology, and is used extensivelyby development agencies and profes-sional Vietnamese. It offers Internetdial-up, high speed connectivity, bul-letin boards, forums, file libraries,mirror sites, website creation, andbusiness solutions.

Liberalization in the ISP area hascurrently led to 16 firms being licensed,although not all are active.31 Four of these firms(Tham Tam, OCI, Viet Khang and NetworkTechnologies) are stock (private) companies.

Note that VNPT has ownership of the domi-nant ISP and partial ownership of the thirdlargest ISP, SPT.

OSPs. There are 11 Internet on-line serviceproviders (OSPs) licensed in Vietnam, namelyVDC (a subsidiary of VNPT), FPT, Netnam, SPT(partially owned by VNPT), Vietel, OCI, VietPower Telecom, Vishipel, Netsoft, Elinco, andTechcom.

Foreign (US) investment with up to 50 per-cent equity was to be allowed in Internet servic-es by the end of 2004 under the terms of the BTA(but see the discussion below). Private invest-ment in Internet services is permitted to reachthe 100 percent ownership level.

Private Sector Participation

Private sector participation in the telecommuni-cations sector is on-going and increasing. Thereis now private sector participation in the

mobile, Internet and paging lines of business,through BCC arrangements.

In December 2001 Vietnam and the UnitedStates signed a bilateral trade agreement (BTA)which provides for a substantial measure of for-eign private investment in the Vietnamesetelecommunications sector, on an orderedschedule over the next several years. The termsand timetable of this agreement are presented inthe table below. It is anticipated that thistimetable will be widened in scope to coverinvestors from all countries, as part of aVietnamese WTO telecommunications offer tobe forthcoming, perhaps in 2006.

In terms of the corporatization or privatiza-tion (“equitization”) of VNPT, the obvious can-didate, there has been little public discussion orconsultation regarding this option. However,there have been significant moves to begin carv-ing up portions of the company, especiallymobile, for possible private and foreign equityinvestment.

Up to the present, the only avenue for pri-vate foreign involvement in basic telecom net-works (other than the BTA provisions) has beenthrough business cooperation contract (BCC)

18

Source: World Bank interviews; USAID, ibid. Data from 2004.

31. USAID, 2005, ibid. See the Annex for a list of ISPs.

schemes, in which foreign companies financecapital investment and share in revenues, buthave no ownership share, and limited or nomanagement control.

In most cases such BCC schemes suffer fromvarious drawbacks which increase the cost ofcapital:

● Lack of ownership by the private investorand limits on management control have neg-ative consequences, such as increasedinvestor risk, reduction in the availability ofcapital, and reduction in the transfer of man-agement expertise to the firm. Also, sincethe BCCs de-link management from facinginvestor risks, incentives for effective, profit-oriented management are reduced.

● The negotiation process in time-consuming● The BCC arrangements were more attractive

when the investors had the security of amonopoly situation. With the gradual open-ing up of the telecom market (mainly to local

SOE competitors), there could be decreasinginterest among foreign investors in theseschemes.

Despite the problems with BCCs, it shouldbe noted that recent BCCs have been negotiatedwith provisions which will allow for conversionto ownership arrangements in the future, if per-mitted. Furthermore, the BCCs have been avery effective method for bringing external cap-ital and investment into the country. For exam-ple, the recent BCC between Hanoi Telecom andHutchinson is bringing in $656 million in exter-nal investment, a non-trivial sum.

Citing the fact that BCCs remain the onlyvehicle for investment, and an unsatisfactoryone, a recent USAID report stated that, “It isimportant to note that Vietnam is behind sched-ule in implementing the BTA.”32Vietnam ismoving to allow for equity investment inmobile and other lines of business, although acomparison of Vietnam with other Asian coun-

19

Table 5: Vietnam-US BTA for Foreign Investment in Telecommunications

PPhhaassee SSeeggmmeenntt ffoorreeiiggnn ((UUSS)) iinnvveessttmmeenntt DDaattee TTiimmeettaabbllee

0 All market segments 0% Upon BTA December 2001

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

By end of 2003

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

By end of 2004

III Mobile, leased lines and satellite services

Up to 49% 4 years after agreement

By end of 2005

IV Fixed line services (including long-distance)

Up to 49% 6 years after agreement

By end of 2007

32 USAID, Competition Review of the Vietnamese Telecom Sector, 2005, p. 26. This report also cited various tech-nical legal and regulatory changes that were required to keep the BTA on schedule. World Bank interviews in lateDecember 2005 with Vietnamese officials in charge of equitization confirmed that “foreign companies are not allowedmore than 30% ownership, especially in the telecoms sector.” These officials stated that two options are being consid-ered: 1. changing current BCCs into equitized companies; this would require a change in the foreign investment lawto increase the 30% ceiling;or 2. changing current BCCs into JVs, an option favored by the foreign investors. Thisoption would require changing various government decrees.

20

tries in terms of limits on foreign ownership showsthat Vietnam is lagging behind more progressivetelecom investment environments such as Singapore,and is even behind countries such as Indonesia, Laosand Cambodia. (See the table below.)

Looking to the end of this decade, it appearslikely that the dominance of VNPT in the mar-ket will be reduced. Non-VNPT entities arebeing encouraged to enter the market and makeit more competitive.

It also appears likely that the BCC approachwill be gradually replaced in the future by moreinvestor-oriented mechanisms, although individ-

ual BCCs may do well. The US BTA signals thegradual end of the BCCs. This will likely not bean overnight phenomenon, but rather a gradualtransition. (For example, the first non-VNPTBCC, with SPT, has a clause to convert the BCC to

a joint venture when Vietnamese law permits.) IfVietnam accedes to the WTO, then the minimumstandard will likely be imposition of the US BTAdeadlines and requirements on the entire sector—and of course the BTA allows for direct invest-ment. It appears likely that various BCCs will berenegotiated over time to allow for increasingdirect investment, ownership and control.

Table 6: Allowed Foreign Ownership of Telecoms, by Country

Brunei Not allowed Not allowed Cambodia 49%, with exceptions None Indonesia Non-ASEAN: 35%

ASEAN: 40% (with exceptions) JV (joint venture); JO (joint ownership); Regional concessions

Lao PDR Foreign JV partner provides at least 30% of the capital; no upper limit

JV or Wholly owned foreign entity

Malaysia 61% allowed for 1st 5 yrs, then 49% subsequently Through acquisition of shares in existing operators

Myanmar Not allowed Not allowed Philippines 40% No restriction Singapore 100% No restriction Thailand 49% Joint venture VViieettnnaamm Not allowed Only through BCCs Sources: USAID, ibid.; World Bank research; source for Thai figure: ITI: Thailand Telecoms Market Report, 4/2005

Country % of Foreign Capital Allowed Legal Forms Required/Allowed

Revenue and Financing

Vietnam remains one of the smallest communi-cations markets in Asia, with a total telecommu-nications revenue of about $1.88 billion in2005.33 This is largely due to having a relativelylow GDP per capita combined with a high ruralpopulation with little access to telecommunica-tions services.

However, in terms of 2004 to 2005 revenuegrowth, Vietnam, with a 16.5% increase, trailsonly Indonesia (at 16.6%) and India (17.8%) ingrowth in the Asia region.

Vietnam faces similar challenges to otherdeveloping countries in terms of financing sub-stantial network rollout. To achieve a target of35 lines per 100 population by 2010 from thecurrent level of about 19.9 per 100 (fixed plusmobile), will require about $240 million perpoint (800,000 lines per point (one percent tele-density) times about $300 per line34), or about$3.6 billion in total. The total investment budg-et for VNPT for 2003 was only about $313 mil-

lion USD, so this level of investment spreadover five years (2005-2010) would total about$1.6 billion, a shortfall of $2.0 billion from whatis required. And with VNPT’s main sources ofprofits -- highly priced leased lines and interna-tional calling -- being cut dramatically, there isa question of whether it would be able to evenmake these investment targets. VNPT as asource of financing is further weakened by itsinability to raise funds via bond or share offer-ings in private markets. Of course, the BCCsare generating hundreds of millions of dollarsin fixed and mobile investment within VNPTand its competitors. But it seems questionablethat billions of dollars of investment capitalcan be attracted, without allowing for equityparticipation.

Forecasts by Pyramid Research also bringrevenues and investments into question. PRforecasts that overall fixed communications rev-enues will be fairly flat from 2006 to 2010.35

The components of this forecast are:

● Declines in revenues from international

21

IV. Investment and Financing

33 Pyramid Research, ibid. 34 Total costs per line can be expected to be about $200 or even much less in urban areas, and mobile deployment

costs per line are very low, but in rural areas the cost per line (even for mobile) will be higher. Costs per line will like-ly decline during the period, although the rapidly falling costs for electronics are not as important a part of the totalcost as they once were. Also, it should be noted that the easy, pent-up demand is now being satisfied, and marketing,churn, and construction costs per line could rise as outreach to less motivated customers (with more choice) and tosmaller towns is required. The costs of the “core network,” including towers, rights of way, additional regional nodesto allow for administration, failure-tolerance, and to minimize backhaul requirements, will form a much larger part ofthe total expense, and hence will drive up the unit cost for the extensive rural deployments required in Vietnam toreach the bulk of the population. See www.srtelecom.com/imports/pdf/en/CDMA-Networks-ruralPB3.pdf. Notethat two of the recent BCCs in Vietnam, Cable & Wireless and France Telecom, had total average costs of roughly $900-1000 per line.

35. Pyramid Research, ibid.

22

long distance (ILD; outgoing), domesticlong distance (DLD) and data private cir-cuits

● Very slight increases in local servicerevenues

● Declines in revenue per line for residentialand business voice communications

● Increases in Internet revenues; but these arenot enough to overcome the ILD and DLDdeclines.

In line with these predictions, VNPT report-edly posted somewhat disappointing revenuesfor the first half of 2005, running about 8%below plan, on an annualized basis.

Thus the questions are raised, what growthand technology strategy will VNPT pursue, andwill the strategy be cost efficient and cost com-petitive? If the strategy is not highly competi-tive, financing may become a major issue.Financing sources are limited to retained earn-

ings, supply credits, debt financing, equityissuance, and donor assistance. Under its cur-rent structure, VNPT is unlikely to raise fundsthrough debt or equity issuance, and it appearslikely that retained earnings may come underpressure. Outside donor assistance from somesources is on-going but will likely be small com-pared to the need.

Continuing with the analysis of societalinvestment, the table below shows that Vietnamis spending a comparatively low percentage ofGDP on ICT. With a figure of 2.4%, Vietnamranks below all analyzed countries in theregion, and is even one percent behindIndonesia.36

To avoid future financing problems, it willbe important to attract private capital into thesector. This capital should be both domesticand foreign in order to meet the demand. Suchprivate capital will likely only be attracted bymajor improvements in the regulation andoperation of the sector, including:

● Restructuring and reforming VNPT● Encouraging and licensing truly private

operators● Moving away from BCCs (or renegotiating

them) to simple private ownership of facili-ties

● Making the official separation between thegovernment and the dominant carrier morereal in practice

● Eliminating the multiple player ownershipsof the dominant carrier

● Creating an effective regulatory regime forinterconnection, numbering and spectrummanagement

● Acceding to the WTO and meeting all itstelecommunications requirements.

36. Note that defining and measuring the concepts used in this table are difficult, definitions used across coun-tries may not be identical, and exact results should be used with caution. Also, “expenditures” are not the same as“investment,” and could reflect high expenditures on low-cost-per-unit goods. Gross comparisons between countriesmay be useful, however.

Table 7ICT Expenditures as a Share of GDP inSelected Countries

Country Name Percent of GDP

Singapore 10.5Malaysia 6.9Malaysia 5.8India 3.7Thailand 3.5Indonesia 3.4Vietnam 2.4

Source: World DevelopmentIndicatiors 2004, 2005Note: Data in italics are from 2002.

Potential new Areas of Investment

There are a number of new technologies whichpromise lower cost and more customer-orientedmethods for telecommunications access andservice in Vietnam. These include broadbandInternet access via wireline, WiMax and soft-ware-based VOIP; these are discussed below.

Broadband. Worldwide, the telecommunica-tions market is basically organizing around twomajor types of technologies: fixed broadbandand mobile narrowband. Vietnam, having start-ed very late on fixed broadband, is very farbehind the growth curve in this area, but isstarting to catch up. In mobile narrowband,Vietnam also began late but not as late as broad-band, and has had tremendous growth. Hencethis area is better developed. Both arenas offersignificant possibilities for investment.

Broadband Internet access via wireline inVietnam has a low penetration, but is expectedto grow rapidly due to high demand and recentprice wars. It is estimated that there are cur-rently (late 2005/early 2006) about 100,000ADSL (asymmetric digital subscriber line)broadband subscribers in Vietnam, with VNPTholding about 45% market share. Major com-petitors include FPT (with about 30,000 sub-scribers in mid-2005) and Viettel (10,000 sub-scribers), which are both undercutting VNPT’sprice substantially. This price war has led toextremely low prices, including just $37/monthfor residential customers of VNPT (down fromthe previous price of $68 per month), and onlyabout $2/month (sic) for a rock bottom ADSLpackage offered by FTP. This is one of the low-est prices in the world.37 TeleGeography fore-casts that the number of ADSL subscribers will

pass 200,000 by 2007, and states that supply isstill lagging demand.38

Viet Power Telecom and Vietnam Cable TVare partnering to offer broadband Internetaccess to cable TV customers, at very high datarates; this venture is in a nascent stage.

WiMAX. WiMAX is a new wireless standardbeing championed by Intel. It uses an antennaand two-way communications to replace back-haul or consumer communications. This newwireless standard is still in a formative phase ofdevelopment, but the following characteristicsare clear:

● 268mb/s in each direction, with realisticthroughput of 70mb/s

● 30 mile range (48 km)● Support for Voice over IP, multimedia, and

data.● Strong security features, including encryp-

tion.

WiMax will connect individual mobile usersand home broadband subscribers directly to theInternet, providing an alternative to the cableand asymmetric digital subscriber line (ADSL)offerings available now. WiMax is appropriatefor countries with large rural areas, where lay-ing fiber optic cables is very costly. Vietnam isreportedly looking into WiMax, and Singaporeis already conducting trials.

Software-based VOIP. Turning to internation-al service, software-based VOIP service has sub-stantial potential in Vietnam. An example ofthis type of service is Skype,39 which hasreceived considerable publicity recently. Skype(and other similar software packages) is free,downloadable software that enables users to

23

37. Thai News Service, “Tough ADSL Competition Keeps Prices Low in Vietnam,” 10 Oct 200538. See http://www.telegeography.com/cu/article.php?article_id=7544.39. See www.skype.com/ for more information.

24

make free calls anywhere in the world via themicrophones in their computers. Skype usesP2P (peer-to-peer) technology to connect toother Skype users. Quality of service reported-ly exceeds that of traditional land line phones.This service was launched in early 2004.Current penetration in Vietnam is apparentlyvery small, but over time this and other similar

services are expected to create further down-ward pressure on international calling rates inVietnam and elsewhere.

These and other new technologies wouldappear to be fruitful areas for attracting privateinvestment, with subsequent benefits for indi-vidual and corporate consumers, majorinvestors and individual shareholders.

Access to Services

Since the launch of the national economicreform process in the early 1990s, Vietnam hasvastly improved and expanded its telecommu-nication infrastructure, especially in the avail-ability of modern basic service and cellular serv-ices. From 1991 to 2005, the total number of linesin service in Vietnam grew from 100,000 to 16.2million (of which 6.9 million were fixed and 9.3million were mobile—note that mobile hasalready exceeded fixed). Total teledensityincreased from 0.1 to 19.9 per 100 residents dur-ing the period. Because of this rapid expansion,most of the telecommunications infrastructurewas built in the last decade. It is modern anddigital. The North-South cable backbone wasbuilt in 1995. Today all major and regionalurban centers have efficient telephone networkswith extensive penetration.

Penetration in rural areas is below about 3%according to the ITU, compared to the overallpenetration of 15 to 30% in the cities.40

According to BMI research, one third ofVietnam’s villages are in mountainous or otherareas difficult to reach with cheap telecommuni-cations solutions.41 Currently 8298 out of 8921communes in the country (about 93%) have atleast one fixed line telephone. More than 40provinces have 100% of their rural communespenetrated with one or more fixed line tele-phones. Copper cable is generally used, but indifficult locations such as remote areas, moun-tainous regions and islands, microwave point to

point, point to multi-point, and satellite solu-tions are used. Most of this rural network isunder the control and ownership of VNPT,although some other enterprises are preparingto enter the rural market. Cellular service isavailable in at least some locations in 61 of the61 provinces. Internet service has been provid-ed to some rural locations, based in communeand post offices. There are a few websites thatprovide information on rural agricultural pro-duction. Postal and newspaper distribution isrelatively high, with 85.4 percent of rural com-munes reached by daily newspaper delivery.The rural market is thus better off than it wasseveral years ago, but with only about 3% tele-density, this market is very much under-served.

Various donor assisted projects have beenput in place to ameliorate the rural situation.For example, in September 2005 VNPT andEricsson completed a JICA-funded project toinstall 140,000 phone lines in rural areas of the10 central provinces. The effort was supportedby a JICA low interest loan. Various other sim-ilar efforts are underway in rural areas, sup-ported by loans or grants from Sweden, Franceand other donors.

The government has recognized the ruralproblem and has passed a regulation creatingthe Vietnam Public Utility TelecommunicationsService Fund as a Universal Service Obligation(USO) mechanism to address the issue.Although the funding sources have been identi-fied, operational details of this mechanism arestill being worked out.

25

V. Sector Performance

40. Penetration figures by province are not available. 41. BMI, ibid.

The number of pay phones was reported at11,155 as of 26 December 2005, up from 10,703 atthe end of 2004.42 This is a low penetration rate,but the situation is mitigated in that many smallbusinesses in towns and rural areas allow cus-tomers and passersby to use their businessphones for a set fee.

As elsewhere in the region, the mobile mar-ket in Vietnam has enjoyed explosive growth.The number of subscribersincreased from 22,500 in1995 to an estimated 9.3 mil-lion by 2005, an averageannual increase in excess of80%. (Recent years haveaveraged about 53% annualgrowth.)

In the fixed line market,1.1 million lines wereinstalled in 2004, and anestimated 1.3 million in2005, a 20% increase over2004. Year on year growthrates in fixed lines haveaveraged over 20% for thepast three years, a remark-able achievement.

Vietnam’s 2004 totalteledensity of 12.3 placedit ahead of India (9.1), butleft it trailing behindregional neighbors andcompetitors Indonesia,China, Thailand andMalaysia, and Thailand.(See the chart below.)Note that the estimatesfor 2005 show Vietnamwith a fixed line teleden-sity of 8.4 and mobileteledensity of 11.5, for a

total of 19.9, another remarkable increaseover the previous year’s total of 12.3.

Vietnam only permanently connected to theInternet in November 1997, although it hadbeen involved in various networking activitiesfor five years before that. By year end 2003,according to the ITU, Vietnam had about 3.5million Internet users and a very small numberof hosts (see chart below). This user penetration

26

42. World Bank interviews with Vinaphone, December 2005.

Table 8. Total Teledensities (Lines per 100 Pop.) in Selected Countries

1995 2004Fixed Mobile Total Fixed Mobile Total

China 3.3 0.29 3.59 24.1 25.8 49.9

India 1.29 0.01 1.3 4.3 4.8 9.1

Indonesia 1.69 0.11 1.8 4.6 14.1 18.7

Malaysia 16.57 5 21.57 17.6 57.3 74.9

Philipines 2.05 0.72 2.77 4.1 38.7 42.8

Singapore 40.52 8.68 49.2 43 89.1 132.1

Thailand 6.06 2.26 8.32 10.6 42 52.6

Vietnam 1.05 0.03 1.08 6.98 5.3 12.3

Source: ITU; note that the fixed line figure for Thailand is from 2003

Table 9. Internet Use in Selected Countries

CCoouunnttrryy HHoossttss HHoossttss//1100 55 UUsseerrss UUsseerrss//110000

Inhabitants 103 Inhabitants

China 89,357 1 33,700 2.57 India 86,871 1 18,481 1.75 Indonesia 62,036 3 8,080 3.76 Malaysia 107,971 43 8,692 34.53 Philippines 27,996 3 3,500 4.40 Singapore 484,825 1,155 2,135 50.88 Thailand 103,700 17 6,031 9.65 VViieettnnaamm 334400 00 33,,550000 44..3300

Source: ITU 2004

was ahead of China, India and Indonesia, andslightly behind the Philippines. In terms of pene-tration, the Vietnam figure represents a low userpenetration of about 4%. However, growth esti-mates since 2003 show Vietnam reaching a figureof about 11.6 million users by the end of 2005, fora penetration of about 14.3 per 100 population.

The growth of the Internet market segmentwas hampered until 2002, due to a firewall thatstopped inbound traffic carrying any objection-able sexual or political material. Enforcement ofthe firewall policy was moved in that year fromthe government to the ISPs. The ISPs are stillreportedly required to block in-bound trafficfrom about 200 objectionable sites.

As mentioned earlier, broadband Internetaccess is still in the nascent stages, and is limit-ed to about 100,000 customers, despite highdemand. Viet Power Telecom was reported inDecember 2005 to be testing a mobile Internet

service with data rates of up to 156 kbps, for usein rural areas. This CDMA2000 technology willalso support VOIP telephony. Lack of broad-band access in urban and especially in ruralareas is a major limiting factor for Internetaccess and usefulness; changing this willrequire major investment.

Internet access is hampered by the low pen-etration of personal computers, reported at 1.6PCs per 100 population in 2004, and forecast at1.9 in 2005 and 5.3 by the end of 2009.43

Efficiency

On the basis of the most commonly used indicatorof efficiency (the number of telephone main linesper employee), Vietnam was lagging its regionalcomparators substantially. In each of the meas-ured years, Vietnam had the fewest lines peremployee, usually by a factor of two or more.

Comparing Vietnam to China (Vietnam’straditional comparator in the region),showed that China was about three timesas efficient on this measure. The figuresfor Vietnam are climbing, however,which is encouraging.

Pricing

Vietnam’s “market basket”44 for fixedline service prices is higher than China’sand India’s, but lower than other coun-tries in the region, while its market bas-ket of fees for mobile and Internet arestill high by regional standards. See thetable below.

27

43. BMI, ibid.44. A “market basket” is a group of prices for different goods, added together for comparative purposes. Here the

market basket for fixed line residential includes one fifth of the installation charge, the monthly subscription charge,and the cost of 15 peak and 15 non-peak local calls. The market basket for mobile is based on the pre-paid cost of 25mobile calls on the same network and other networks, with calls including some mobile to fixed calls made duringpeak, off-peak and weekends. Thirty text messages per month are also included. The market basket for Internetincludes 20 hours per month, with 10 at peak and 10 at off-peak times. Phone charges but not phone line rental chargesare included if applicable. All market baskets were developed by the World Bank, using comparable ITU or WorldBank figures.

Table 10: Telephone Main Lines per Employee

China 84.8 196.6 158.7 India 28.4 50.7 90.7 Indonesia 82.1 146.2 181.3 Malaysia 115.5 161.8 219.4 Philippines 72.5 176.7 256.7 Singapore 223.9 202.0 221.2 Thailand 99.6 144.4 197.9 VViieettnnaamm 1133..44 1166..77 4488.. 99 Source: ITU 2004, World Bank, 2005 2001 figures shown in italics. The Vietnam figure is for year end 2003, the latest figure available.

VNPT, in an effort to increase take-up oflandlines, launched a special promotion inDecember 2005 and January 2006, of a 30%reduction in the connection fee, and threemonths of free phone service, for customerswho signed up for at least six months. Businesscustomers who requested five or more linesreceived a 50% discount.

Tariff levels for two areas of key interest,

international outbound calling and internation-al leased lines fell dramatically during the peri-od of 2001 to the present, such that outboundcalling rates were at least 7% below the region-al average, according to VNPT and independ-ent analysis.45 Tariffs were lowered twice in2005 for mobile phones by VNPT, the marketleader.

The chart below shows that effective

28

Table 11: Market Price Baskets for Fixed, Mobile, and Internet Services in Various Asian Countries

Price basket for fixed line (US$ per month, residential)

Price basket for mobile (US$ per month)

Price basket for Internet (US$ per month)

China 3.56 3.70 10.14 India 3.21 3.25 8.74 Indonesia 6.15 4.58 22.26 Malaysia 8.69 5.59 8.42 Philippines 12.20 4.03 17.05 Singapore 6.67 5.72 11.04 Thailand 8.34 6.84 6.98 Vietnam 4.27 6.89 19.85

Source: World Bank and ITU data, World Bank methodology. Data from 2004.

Table 12: Evolution of International Telephone Service Charges (PSTN)

(all prices in USD) December

2001 July 2002 2003

April 2003 2005

Zone 1: ASEAN, China, Taiwan, Hong Kong, Macao, Republic of Korea and Japan

1.70 - 2.30 1.50 - 1.70 1.30 - 1.40 0.90 0.43-0.55

Zone 2: USA, Canada, Australia, New Zealand, Europe, North Korea, Cuba and India

2.30 - 2.00 1.80 - 2.00 1.50 - 1.70 1.00 0.43-0.55

Zone 3: The remainder 2.30 2.0 1.70 1.10 0.64 Decision Effective as of

Decision 897/2001/QD-BBCVT, October 30, 2001, DGPT December 2001 Decision 476/2002/QD-BBCVT, June 13, 2002, DGPT July 2002 Decision 25/2002/QD-BBCVT, Dec. 18, 2002, MPT January 2003 Decision 47/2003/QD-BBCVT, March 20, 2003, MPT April 2003 Decision 4088/2005/QD-GCTT August 03, 2005, VNPT September 2005

45. The independent analysis was done in December 2003, and prices have continued to fall since then.

29

September 2005 (the date of the most recentchange), outbound international calling rateshad dropped by more than 70% compared torates three years previously. This is a remark-able amount of change in a relatively shorttime.

VOIP services offered by VNPT and otherlicensed (and unlicensed) providers, offered atsubstantial discounts off of normal switchedtraffic, have helped to drive down the cost ofinternational and national long distance voiceand data communications, and to increase traf-fic volumes.

During the period between 2003 and 2005,charges for international private circuit leasingvia submarine cable decreased by about 70%(see the table below). Again, this is a remark-able amount of change in a short period. Dueto recent increased competition, dominantVNPT has been dropping prices substantially.For example, in May 2005 VNPT dropped itsmonthly tariffs for leasing international capaci-ty by 20 to 40%, and dropped its domestic ratesby 10%.

Under an MPT decision in 2003 (No.217/2003QD-TTg), all telecommunicationsservice providers with market shares of lessthan 30%, and thus deemed to have less than

“significant market power,” can set their ownprices without approval from MPT. This deci-sion covers all forms of telecommunicationsservices, including mobile and Internet. Thisapproach is a significant change from the previ-ous practice of MPT approving (and oftenrejecting) all price proposals. This new regula-tory approach has already led to substantialprice drops. But some critics have contendedthat the new “significant market power”approach is not transparent in its application,and will not aid startup telecommunicationsproviders.

Affordability

The monthly market price basket for fixed lineservice (described earlier) is about 9% of percapita GNI in Vietnam (see the table below).This is rather high by regional standards.

The market baskets for mobile and forInternet services are still very high byregional standards, with both shown as thehighest in the region. Hence although priceshave fallen substantially in recent years, theymay still require work. A modern, inde-pendent and comprehensive study of pricesis indicated.

Table 13: Evolution of Private International Circuit Leasing Charge

UUSSDD//mmoonntthh,, ZZoonnee 11 UUSSDD//mmoonntthh,, ZZoonnee 22

Decision 477/2002/QD-TCBD, June 13, 2002, DGPT

July 2002 $2824 $2824

Decision 26/2002/QD-BBCVT, Dec. 18, 2002, MPT

January 2003 $2400 $2400

Decision 54/2003/QD-BBCVT, March 20, 2003, MPT

April 2003 $1008--1440 $1080-1440

Decision 11/2005/QD-BBCVT April 28, 2005

May 2005 $$440044 --771144 $$440044 --771144

Source: World Bank interviews in 2004 and late 2005

30

Table 14: Month Market Price Baskets as a Percentage of GNI Per Capita

MMoonntthhllyy pprriiccee bbaasskkeett ffoorr ffiixxeedd lliinnee ((ppeerrcceenntt ooff GGNNII

ppeerr ccaappiittaa))

MMoonntthhllyy pprriiccee bbaasskkeett ffoorr mmoobbiillee ((ppeerrcceenntt ooff GGNNII

ppeerr ccaappiittaa))

MMoonntthhllyy pprriiccee bbaasskkeett ffoorr IInntteerrnneett ((ppeerrcceenntt ooff GGNNII

ppeerr ccaappiittaa))

GGNNII ppeerr ccaappiittaa,, AAttllaass MMeetthhoodd ((ccuurrrreenntt UUSS$$))

China 3.32 3.44 9.43 1290.00 India 6.21 6.29 16.92 620.00 Indonesia 6.48 4.82 23.43 1140.00 Malaysia 2.24 1.44 2.17 4650.00 Philippines 12.51 4.14 17.49 1170.00 Singapore 0.33 0.28 0.55 24220.00 Thailand 3.94 3.23 3.30 2540.00 VViieettnnaamm 99..3322 1155..0044 4433..3311 555500..0000

Sources: World Bank and ITU data, 2004

he priority substantive public policyissues for development of the telecommu-nications sector in Vietnam are:

1. Increasing competition and private partici-pation

2. Improving regulatory institutions andprocesses

3. Restructuring and reforming the dominantcarrier

4. Improving rural access to telecommunica-tions and information services.

Each of these priorities is related to the oth-ers: thus, competition is a powerful incentivefor excellent performance. Credible, transparentand effective regulatory institutions andprocesses support competition and investment.Restructuring and reforming the dominant car-rier will improve its competitiveness and thecompetitive nature of the market, and encour-age better customer service by all providers.And improved rural access depends on encour-aging regulations, investment, competition, tar-iffs, network interconnection, and the mosteffective use of scarce subsidy funds or othermechanisms. These priorities are discussed fur-ther below. The first four issues focus on sub-stantive areas; the last two focus on processesfor achieving progress.

Promoting Competition and PrivateParticipation

This complex area involves three main sub-issues: new entry, interconnection, and pricing.

New Entry. The government has been licens-

ing new providers in almost every segment,and has thus been increasing competition. Thisis laudable. However, there is no adoptedroadmap which reveals government plans forincreasing competition, private and foreigninvestment, other than the Vietnam-US BTA,which is limited to one country, is fairly narrowin scope, and is not on schedule. Such aroadmap could address the areas of using newtechnologies (such as broadband, fixed wirelessaccess, VOIP, advanced mobile technologies,etc.) to encourage external direct investmentand satisfy consumer demand. Discussion andadoption of such a roadmap would be useful indeveloping WTO telecommunications offers,part of the WTO accession process which is astated government goal for the near future.

Other issues related to new entry, competi-tion and private involvement include the issuesof the BCCs and the role of private involvementin the sector. The BCCs have fueled networkgrowth, and have brought in large externalinvestments, but are not really satisfactory,long-term mechanisms for bringing in privatecapital and expertise. Real private investment,ownership, risk-taking, and management ofenterprises are necessary to reap the benefits ofa market economy.

MPT’s adopted ICT Development Strategydocument of 6 October 2005 does not give pri-vate sector enterprise estimates or goals forfuture market shares, nor does it provide amethod for attracting private investment toachieve the strategy’s many laudable goals.Licensing new entrants is very helpful and ison-going, although experience in other coun-tries shows that many obstacles besides just

31

VI. Main Issues

T

licensing usually lie in the way of true competi-tion and private participation. Nor is it clearfrom the MPT plan or from current trends howmuch truly private investment will be attracted,versus investment from other SOEs and the mil-itary (which have dominated investment todate.) An on-going dialog between governmentand new and potential entrants is needed toencourage their participation.

Regarding licensing of new entrants, proce-dures for the award of licenses for majortelecommunications network and service opera-tors remain ill-defined and non-transparent,and there are at least some allegations that thedominant player has held up licenses for otherplayers. Licenses are issued to connected par-ties, including SOEs, without transparent stud-ies of the effects on the market, the qualifica-tions of the potential awardees, discussion ofpossible competitive bidding, the need to attractprivate investors, or other factors. Other coun-tries have moved to a class license approach forpublic telecommunications operators, and havecommissioned public studies of the effects of,say, issuing new mobile licenses. In non-contro-versial, highly competitive segments (such aspaging, ISP provision, etc.) many countries havemoved to simple registration of any newprovider, or even to just allowing anyone toperform the service without registration.

Interconnection. A key prerequisite for effec-tive competition in any telecommunicationssector is a transparently managed and non-dis-criminatory interconnection regime, underwhich major providers are obliged to providecost-reflective rates and are prohibited from

engaging in anti-competitive cross-subsidies.VNPT currently occupies a substantially domi-nant position in all market segments. Based onexperience in many other countries, as real com-petition develops, VNPT and other large play-ers may be tempted to use market and politicalpower to manipulate interconnection rates andterms to their advantage, rather than being sub-ject to a “level playing field,” or even to a field“tilted” against them (which might encouragenew private entrants). .

There is currently no transparent process toset or appeal interconnection disputes or rates,and the MPT is not well equipped to deal withthe emerging problems in this area. There are anumber of complaints surfacing regarding inter-connection slowdowns practiced by the domi-nant carrier. There is no cost analysis of intercon-nection rates and no modeling of costs based onexisting carriers or preferably on a model, effi-cient firm There is some progress in developinga “reference interconnection offer” (RIO), whichis one standard approach to dealing with thisproblem; this progress should be encouraged.

Experience in many liberalizing markets hasshown that interconnection rapidly emerges asthe most important regulatory issue. Henceimproving the quality and availability of infor-mation and regulation in this area is vital.

Pricing. MPT (and its predecessor DGPT) low-ered tariffs considerably over the last six years,and very considerably in the last three years.However, there is no transparency to theprocess, no published study or modeling ofunderlying costs, and no true rebalancing (inthat no below-cost prices have been raised).46

32

46. There has also been no discussion of “price capping.” Price capping in telecommunications usually allows forone or more factors in a formula, which is applied to current prices and future allowed changes. Factors typicallyinclude an inflation factor which allows prices to rise, and an “x” factor (a negative factor) for increased productivityand reduced equipment prices. This latter factor is typically much larger than the inflation factor, so that over timethe price levels in the sector are driven down towards (presumed) costs. Prices have been falling quickly enough inVietnam that this topic has not been raised. But if and when prices begin to level out, it will be important for MPT tobe familiar with this important regulatory tool.

Analysis of outgoing international callsshows that these rates, recently very highindeed, are now about 7% below regional aver-ages. This is a remarkable achievement.

There remains a need to analyze and moveaway from cross-subsidies which are hard to ana-lyze, inefficient, encourage inefficiency by marketplayers, and may subsidize the wrong parties orprograms. Subsidies likely currently run frominternational and domestic long distance to localservice. Creation of competitively neutral, trans-parent subsidies should be a high priority. Atransition plan can help plot the course from thecurrent situation to a more modern system.

MPT has agreed to focus on tariff approvalonly for firms with more than 30% marketshare, which is a step in the right directiontowards asymmetric regulation. However,there is no roadmap or agreed plan for movingtoward a modern tariff review process for thefirms with significant market power.

Finally, due to the drastic drops in pricesreported by MPT, it is not clear what the sourceof financing for the on-going rapid expansion ofthe sector will be. Will current tariff rates suf-fice? Will borrowing be feasible? Will BCCarrangements suffice, or will private investmentbe attracted through reform, to fill in the gaps?A forward-looking professional analysis ofthese questions could help MPT and stakehold-ers understand the implications of recent andpossible future regulatory actions.

Developing modern RegulatioryInstitutions and processes

Vietnam is implicitly endorsing the principleof regulatory independence from operatorswith its statement that it wishes to accede tothe WTO in the very near future, since acces-

sion will in practice require commitment to theReference Paper on Regulatory Principles forBasic Telecommunications Services,47 andsince Vietnam has already committed to thepaper by including it by reference in the BTA.An issue here is that although VNPT is nomi-nally separate from MPT, in fact MPT has therole of owning VNPT, 90 to 94% of which isdominated by VNPT. Other countries havehelped ameliorate this issue during a transitionphase by having the ownership function vest-ed in the ministry of finance or equivalentbody. This issue is under discussion andundertaking this separation of functionswould be a major step forward.

MPT was created by a decree in late 2002,and it seems unlikely that a new, separate regu-latory body will be created under or outside ofMPT in the near future. However, it wouldappear possible to create a two-step approach inwhich a “Regulatory Committee” could beformed in the near future within MPT, and thenthis could become the basis for a move to aRegulatory Authority at a later date.

In the meantime, following the WTO empha-sis on strengthening regulators,48 there areissues which should be addressed regarding thecapacity of MPT, and of improving its regulato-ry processes. Areas of concern include increasedtransparency and public and stakeholder input,possible predatory practices in the market, andimproved regulatory processes in tariff review,interconnection, licensing, and spectrum man-agement.

In the long term, a separate regulator wouldbe useful in Vietnam, as it has proved useful inover 100 other countries around the world.There is widespread agreement that an ideal reg-ulator should have the following characteristics:

33

47. Technically, under WTO accession, what is required is that Vietnam would negotiate a schedule of commit-ments with its major trading partners, then submit these. In practice, the Reference Paper has been key.

48. Specifically, the Telecommunications Regulatory Reference Paper and GATS Articles III and VI.

● Neutral, fair, reasonable, impartial andobjective in its dealings with all parties

● Transparent in its procedures, following theprinciples of providing notice, listening toall parties, making decisions based on thefacts, issuing decisions that explain the prin-ciples used, and providing for appeals

● Highly competent in key areas, but willingand able to contract out for specific expertise

● Composed of a modest-sized staff that is notbureaucratic

● Staffed with personnel who are well trained,and often cross-trained in key disciplinessuch as economics, policy analysis, account-ing, regulation, engineering and law.

● Possessed of a sound source of revenue thatprovides adequate funding for staff com-pensation and institutional facilities

● Undertakes regulation in conformance withthe WTO Telecommunications RegulatoryReference Paper49

● Undertakes licensing and regulating mar-kets in a manner consistent with GATSArticles VI, VIII and IX.

It should be noted that creating a separateregulatory body does not necessarily mean thatthe supervising ministry gives up its role in set-ting broad sector policy or even making deci-sions on particular important issues. The exam-ple of the Telecommunications RegulatoryAuthority of India (TRAI) is useful here. TRAIand its relevant ministry each have legislativeauthority, with the ministry’s major responsibil-ity being in the important area of licensingmajor new entrants. In areas such as licensing,

where the ministry still retains ultimate author-ity, it can use TRAI to elicit public commentsand develop recommendations—but the min-istry is not bound by those recommendations.In this way, the ministry has the benefit of a fullconsultative process which takes in the consid-erations of all stakeholders, while still allowingthe ministry a broad scope of power.

Other possible regulatory organizationalapproaches include that of Malaysia, in whichthe regulatory body uses the “layer regulatoryapproach.” In this approach, each layer in thecommunications stack (content layer, applica-tions layer, service layer, facilities layer) iseither regulated, unregulated or partially regu-lated. Some analysts feel that this approachtends to break down “technology silos” andmake regulation (and service) more responsiveto end users.

The regulatory approach and structureshould not be simply limited to telecommunica-tions, but should cover the broad range of tech-nologies that are converging in the ICT arena.

There are various specialized areas of regu-latory process improvement which werealready discussed earlier, namely licensing,pricing and interconnection. One importantremaining area is spectrum management.

Particular attention needs to be given tomanaging the use of the radio spectrum.Implementation of improved management andlicensing arrangements has the potential to opti-mize the economic benefit of this scarceresource, while also possibly generating sub-stantial revenues. In most developing coun-

34

49 Under the Reference Paper, key minimum concepts include: a) prevention of anti-competitive practices bymajor suppliers; (b) transparent, non-discriminatory, and cost-oriented provision of interconnection by major suppli-ers, including either publication of interconnection agreements or resort to a 'reference interconnection offer' bindingthe service provider, and dispute resolution mechanisms; (c) transparent, non-discriminatory and competitively neu-tral universal service obligations; (d) public availability of licensing conditions and criteria; (e) independence of regu-latory bodies from service suppliers; and (f) objective, timely, transparent and non-discriminatory procedures for theallocation and use of scarce resources (such as radio frequencies, numbering ranges and rights of way).

tries, the government “hoards” radio spectrum-- retaining an excessive amount for its own use,but actually not using it much. This is not effi-cient, and with the growth of mobile and wire-less, considerable reallocations are often neededfrom government to private use. Automatedspectrum monitoring, and computerization ofspectrum management processes, are importantareas for improvement in the management ofthis important public resource. Key sub-issueswithin spectrum management include:

● Adequate allocations for mobile GSM,CDMA and other wireless growth

● Bands for new services, and possible com-pensation for parties who are forced to leavebands

● Unlicensed bands● Appropriate pricing for scarce spectrum

allocated to commercial use● Transition path to mobile 3G ● Potential for rural service ● Timeliness of regulation● Computerized monitoring of licensed bands

to prevent “piracy,” interference, and unau-thorized use

● Adequate funding and authority to regulatethe spectrum using a modern approach.

Reforming and Restructuring VNPT

VNPT is currently an SOE and a conglomerateof divisions, dependent SOEs, subsidiary stockcompanies, non-profit divisions, and other com-panies. The MPT plan for this area states that,“MPT will focus on enterprise reform, introduc-ing the corporation model to VNPT....” Trulycorporatizing VNPT, and creating “arms-

length,”50 corporatized subsidiaries, would be amajor step forward. However, it is not clearthat comprehensive plans are in place on howto move forward in this area, although there arepress reports and government announcementsthat the area is being addressed, and there havebeen announcements that VNPT’s Mobifonewill be partially equitized.

The multiple ownerships of VNPT and dom-inance in the sector are quite striking, especiallyin the cellular arena. Although observers andcustomers report that VNPT subsidiaries docompete against each other in the same lines ofbusiness, the current structure raises questionsabout whether competition is in fact inhibited.

The challenge of attracting telecom invest-ments to support economic growth in a contextwhere international tariffs are rapidly decreas-ing, thereby eliminating a major source of rev-enues for the dominant player and potentiallicensees, is a challenge Vietnam has in commonwith many developing countries. The challengeis compounded by the (partial) natural monop-oly nature of telecom infrastructure (particular-ly in access infrastructure), and this challengerequires designing detailed market transitionmechanisms.

Thus, the main challenge will clearly be tomanage a transition in market structure thatallows for increased public and private invest-ment in the sector. Given the current marketstructure, this will initially be an exercise in cor-porate restructuring of VNPT (perhaps viacarve-outs or spin offs). This restructuringwould need to be accompanied by policies andregulations that reinforce the underlying goalsof the corporate restructuring (e.g., tariff setting,

35

50. An “arms-length” subsidiary refers to an entity which has a separate accounting system and which pays mar-ket-based prices to its parent for goods and services. Such a subsidiary can still be under the full control of the par-ent, and subject to its policy and operational direction. But the “arms-length” nature of the financial relationshipmeans that the subsidiary cannot give or receive hidden subsidies, and is thus much more amenable to privatization,because its accounting statements are clear and transparent.

including retail, wholesale and interconnectiontariffs). This will put a heavy premium on insti-tutional capacity to manage transition and gov-ernance, implying that capacity building at theministry level will be a key feasibility factormoving forward.

VNPT is currently heavily involved in themanufacturing of equipment such as consumertelephone sets and other retail and wholesalecommunications items, for its own internal useand for external sale. In other countries it hasbeen found that such involvement by the oper-ator in equipment supply is inefficient and pro-vides out of date and costly technologies.Getting VNPT out of this business will almostcertainly be necessary to improve its efficiencyand attractiveness to investors.

VNPT has not separated its postal opera-tions from its telecommunications operations,although it has been announced that the twoentities have been decreed as separate andthat operational separation is under way.VNPT is heavily involved in the postal bank-ing (giro) business. Virtually all telecommu-nications monopolies (or former monopolies)seeking outside investment have fully sepa-rated telecommunications from postal busi-nesses, since the latter are usually money-los-ing, low technology, and highly labor-inten-sive -- the opposite of the telecommunicationsbusiness.

VNPT, like most telecommunicationsmonopolies or former monopolies, likely takesits customers somewhat for granted. In a com-petitive marketplace this approach mustchange, and the monopoly must become cus-tomer-oriented and demand-driven.

Increasing Rural TelecommunicationsInfrastructure and access

The number of telephone lines per 100 peopleshows a large variation between the large cities

and rural areas of Vietnam, where the problemof thousands of un-served or under-served vil-lages needs to be addressed. New methodsneed to be devised to encourage existingproviders to enter rural areas, and to create newapproaches where private capital clearly willnot work. Vietnam is moving to create a univer-sal service institution which will help amelio-rate this problem; this effort should be encour-aged and international best practices incorpo-rated into its operation.

Similarly, Internet access is still low nation-wide and is virtually non-existent in ruralareas. New approaches are needed to bringInternet information to the rural areas wherethe large majority of the population lives. Theseapproaches could either be direct or throughintermediaries. Broadband access to theInternet is currently completely absent in ruralVietnam.

Experience in other countries has shownthat private industry can be encouraged at noor low cost to enter rural markets, and that the“frontier” for private investment can bepushed back. Usually this requires the reduc-tion of restrictive government rules and regu-lations. Beyond some point, private investmentwill not normally go to commercially unattrac-tive locations, and then creative approachescan be used, such as negative bidding auctions,output based aid, the deployment of NGOs,the bundling of attractive and unattractiveareas in licenses (with enforced rollout targetsin the unattractive areas), reduction of risk forinvestors, encouragement of private coopera-tives, low interest lending, using the govern-ment as a model user via procurement to drivethe rollout of infrastructure, etc.

Having discussed the four major substantiveissues, we now turn briefly to the two process-related issues: devising a roadmap and revisingthe current telecommunications law.

36

37

Devising a roadmap

Currently there is no roadmap for change in allof the above areas which has been discussedopenly and agreed upon. Plans and decrees tendto be engineering documents or penetrationgoals, not well-thought-out mechanisms usingpolicy changes that reflect international bestpractice. There is a need for more policy plan-ning and linking processes and policy changes toanticipated results. The NIPTS ICT policy is astep in the right direction, but it too needs morefocus on how to achieve laudable goals.

Revising the current Telecommuni-cations Law

The current telecommunications ordinance (law)is relatively recent and has many progressive fea-tures. But it is not a modern telecommunicationslaw that recognizes the interests of consumers,mandates modern regulatory procedures,encourages private entry and competition, andencourages investors. Nor is the law (or itsimplementing decrees) consistent with the BTAor the WTO.

The next section shows the way forward inmoving to address these issues.

he challenge now facing government is toestablish an effective policy and regulato-ry environment conducive to the contin-

ued growth of telecommunications, in order tooptimize the performance of the sector in urbanand rural areas and to the mobilization of privatecapital and expertise to properly manage thetelecommunications firms in the sector.

Four main substantive priorities emerge. Thefirst priority is to intensify and entrench pro-competitive policies for the sector, to reap theproven benefits of market competition. Thesepriorities include encouraging new entry,improving the interconnection regime, andincreasing the transparency and cost-orientationof pricing. The second priority is to supportthese pro-competitive policies by establishinghighly credible, transparent and effective regu-latory processes within MPT in the short run, sothat these processes can be migrated to a non-ministerial regulatory institution in the long run.The third priority is to reform and restructureVNPT, using internal management change andexternal forces such as equitization. The fourthpriority, for geographic areas that are not well-served by the market, is to adopt and implementa set of policies and programs that will system-atically address inadequate access to telecom-munications services, and more broadly to infor-mation services, in the thousands of villages andrural areas in Vietnam.

In addition to the four substantive reformpriorities, there are two process-oriented areas,dealing with a roadmap for reform, and withrevising the current telecommunications law.

Vietnam has done an excellent job of increas-

ing its teledensity very rapidly indeed, from avery low base. Yet many countries have stum-bled in managing the transition, when it comesto the difficult decision to let market forces takeover under state regulation, instead of statecommand. It is not yet clear if, when and howVietnam will deal with this challenge. A moredetailed approach to address this area is dis-cussed below.

1. Promote Competition and PrivateParticipation

There are two separate but related goals for thisarea. One is to create competition because com-petition provides positive incentives forincreased productivity and responsiveness tocustomer needs. The second is to facilitate mul-tiple channels for investment in order to meetinvestment needs and meet performance targets.

To fulfill these goals, it is important todevelop and publish a plan for eliminating themultiple-ownerships that the dominant carriercurrently possesses in every market segment,especially mobile telephony. This plan orroadmap should also specify: the policy andregulatory steps that will be undertaken to sub-stantially increase broadband penetration inurban and rural areas, attract truly privateinvestment; how to implement simple andtransparent processes for competitive newentry; how to reduce anti-competitive conduct;and how new and innovative telecommunica-tions technologies will be encouraged and notobstructed by the government. A clear vision ofa future industry structure needs to be devised

VII. The Way Forward

T

and disseminated. This structure would have anumber of viable operators, each totally inde-pendent of each other, and all subject to impar-tial regulation.

Another way to help achieve the goals is toidentify what is required to accede to the WTOin the telecommunications area. In the compet-itive arena, this will at least entail developing acredible telecommunications offer(s). Withoutspecifying particular trade negotiation posi-tions, it would appear that a credible offerwould need to address issues such as: openingof various market segments to foreign participa-tion; possibly increasing private ownershipabove 50% in at least some market segments;setting realistic time deadlines for proposedchanges, and meeting the TelecommunicationsReference Paper requirements which werealready agreed to under the BTA, and which arelikely to be key in WTO accession.

A third related way to promote competitionis to continue to implement the pro-competitivemarket opening and investment provisions ofthe Vietnam-US BTA. Apparent lack of compli-ance with this agreement is not a good signal.Implementation of these BTA agreement obliga-tions will positively affect the market, and willreduce investment risks and costs for the expan-sion of telecom networks in Vietnam.

Another key element of achieving competi-tion and private entry is licensing. Licensing isan important threshold issue in this area. Thegovernment should initiate a comprehensivereview of its current policies and practices forawarding licenses. The objective should be tomove to a class licensing system that will stream-line and clarify licensing procedures. A second,related, objective should be to increase trans-parency in the licensing process. Another objec-

tive is to ensure economically optimal use ofscarce resources. Properly implemented,improved policies and practices could generatesubstantial non-tax and tax revenues for the Statebudget. It is recommended that such a review becompleted before any new licenses are issued forradio-based services. The review should analyzehow to attract truly private investment to obtainlicenses, in addition to the SOE investmentwhich has been very prevalent to date.

Interconnection is a very important andchallenging area of improving competition andprivate entry. Enforcement of a credible andequitable network interconnection regime iscritical to facilitate new entry as well as to pro-vide incentives for existing operators to makeinvestments. Currently the situation vis-a-visinterconnection difficulties is not clear, but thesigns are that monopolistic abuse is likely. Astudy of this area should be undertaken, identi-fying carrier complaints, the effects of domi-nance, abuses if any, and ways to meet theWTO’s very specific requirements in this area.(These latter include interconnection “at anyfeasible point...cost-oriented, ... transparent,...reasonable... timely... sufficiently unbun-dled...non-discriminatory....”) Vietnam is veryfar from meeting these requirements at thispoint.

Features of a modern interconnection regulato-ry regime including publication of ReferenceInterconnection Offers (RIOs)51 by dominant oper-ators, and publication of time-bound interconnec-tion dispute settlement procedures. Vietnam doesnot have these important features now.

Turning to the pricing aspects of promotingcompetition—until recently the Government pol-icy has been to announce cuts in tariffs, drivinginternational, long distance and leased line rates

40

51. An RIO is a detailed document that is publicly available, which presents the dominant carriers’ technical andfinancial requirements for interconnection. The RIO is reviewed by the regulator and smaller operators for reason-ableness before it is published, and dominant carriers are then obliged to accept any interconnection that meets theRIO requirements.

down toward and even below regional norms.Very recently the government took the positivestep of freeing firms to set their own prices, unlessthey possessed significant market power.

However, regulation in pricing is now enter-ing a much more technically difficult phase.Very soon the government regulators will needto wrestle with the difficult concepts of possiblecollusion on prices, possible application of infla-tion-linked “price cap” type formulas for maxi-mum tariffs, dominant carrier abuses of pricing,and analysis of the costs underlying prices. Stepsto address these issues should include: undertak-ing a comprehensive study to ascertain if indeedprices in all market segments have reached or arebelow regional norms or other appropriate lev-els; developing and publishing a plan for movingto a modern tariff-setting regime (including pro-cedures, training, development of in-house orcontracted out capacity, appeals of regulatorydecisions, etc.); and undertaking a study of theneeded sources of financing for continuedgrowth in the sector. A special focus on raterebalancing, to bring tariffs in line with underly-ing costs, is key here.

Note that a powerful argument can be madethat Vietnam should be able to achieve priceswhich are noticeably lower than regional normsor international benchmarks. This is becausenew operators (as in Vietnam) can use the latest,lowest-cost technologies to achieve high servicequality and high penetration, at substantiallylower prices than neighboring countries inwhich capital investment took place as recentlyas a few years ago.

2. Develop modern RegulatoryInstitutions and processes

The government should act quickly to establisheffective regulatory processes that will meet thetests of the current BTA, GATS, WTO accessionand international best practices. These practicesshould be transparent, impartial and modern,

and should allow input from all parties interest-ed in a particular case or dispute.

A specific study should be undertaken onwhat role a non-ministerial telecommunicationsregulatory body should play, what it shouldlook like, how it could meet WTO requirements,what legal changes would be needed to createit, what its charter should be, the role of the reg-ulator versus that of the ministry, and how thenew modern procedures could be migrated intothis body. Such a study would allow a dialog tobegin on the future of regulatory institutions inthe sector.

The government should consider the usefulIndian TRAI model discussed earlier, whichallows for broad public consultation by the reg-ulator but allows the ministry to retain the ulti-mate decision-making authority in selectedareas. The Malaysian, Singaporean, and otherprogressive regulatory models should be stud-ied and carefully considered.

MPT should investigate and act on a plan tocreate a Regulatory Committee within theMinistry; with the goal of having this Committeebecome the basis of a later RegulatoryAuthority. This Committee and the subsequentAuthority, following best international practice,should not be limited just to telecommunicationsregulation, but should address all convergingtechnologies in the ICT arena.

In the area of specialized regulatory process-es, the government should undertake a compre-hensive review of radio spectrum policies andprocedures. The radio spectrum review shouldtake into account the WTO Reference Paperrequirements, which include: “The current stateof allocated frequency bands will be made pub-licly available...” [except government use neednot]; and “any procedures for the allocation anduse of scarce resources, including frequencies,numbers and rights of way, will be carried outin an objective, timely, transparent and non-dis-criminatory manner....” As part of the reviewprocess, a forum for dialog between govern-

41

ment and commercial users of spectrum shouldbe created, and annual meetings held.

3. Reform of VNPT

This area partly overlaps with the first area, inthat promoting competition naturally impliesthe reform and restructuring of VNPT. Specificareas for reform include:

● Elimination of multiple ownerships in spe-cific market segments

● Corporatization as a share-based entity ofVNPT itself, and of VNPT’s SOE subsidiarieswhich are amenable to corporatization

● Transitioning from BCCs to JVs, to acceler-ate delivery in selected VNPT service areas

● Creation of “arms-length” relationships (asdescribed earlier) between the parent VNPTand its various subsidiaries, with the possi-ble end result in the near-medium term ofVNPT being a holding company of variouscorporatized enties readily amenable toequitization (privatization)

● Analysis and assessment of the complexVNPT organization to see if some simplifica-tion and streamlining could increase VNPT’sability to be more customer-oriented, bettermanage its operations, and create investorinterest.

● Separation of VNPT’s telecommunicationsequipment manufacturing business from itsoperator business

● Follow through on the separation of VNPT’spostal and postal giro businesses from itstelecommunications businesses.

4. Promote Extension of RuralTelecommunications infrastructureand access

The government should undertake a review ofthe situation with regard to rural telecommuni-cations and Internet, focusing on ways to har-

ness market forces, NGOs, cooperatives, lend-ing to private entities, small businesses, andother creative methods, using proven interna-tional models. This review should also identifyinternationally proven methods for increasingpenetration in remote areas where the privatemarket may not work, using transparently bidsubsidies as part of an output based aid initia-tive, where they are absolutely necessary, andapply these methods to rural Vietnam.

The review should also take into accountWTO Reference Paper requirements in this area,which state that although WTO members mayundertake any universal service obligation (USO)regime that they like, the USO scheme must be“administered in a transparent, non-discrimina-tory and competitively neutral manner...that isnot more burdensome than necessary....” Thenew planned universal service mechanism forVietnam should be designed with this require-ment, and international best practices, in mind.

The government should undertake a studyof a limited government-based approach inwhich government uses its power as a majorpurchaser of telecommunications services andinfrastructure. In this approach, the govern-ment would invite tenders to build out ruralservices and/or infrastructure, but would notlimit itself to using just one provider or suppli-er. Thus market forces would be utilized todecrease costs and increase speed of rollout.This study should also address the topic of pol-icy measures that will increase broadband pen-etration in rural areas.

There are two important but more process-oriented reforms required to move the sectorforward, as follows.

5. Develop and Publish aTelecommunications Developmentpolycy Roadmap

Plans and roadmaps to date have focused onpenetration levels and technologies, and have

42

always been internally developed. Here theconcept is to develop a policy roadmap that willtake the points above, elaborate them, and pub-lish them for written and other feedback, beforethe roadmap is finalized. This will allow thefirst transparent stakeholder and public inputinto the sector, at a critical juncture in its devel-opment. It could also prove to be a useful inputto a WTO accession package.

6. Begin dialog on Drafting a newTelecommunications Law

The new telecommunications ordinance of2002 was a major step forward in terms ofincreasing competition and recognizing the

key role that telecommunications and telemat-ics play in the economy. But it is far frombeing a modern telecommunications law thatthe WTO, international best practice, orinvestors would recognize as a model. A dia-log needs to begin, starting with a study, with-in the government, and between the govern-ment, stakeholders, the public, donors andexperts on the nature of a future, new telecom-munications law.

The way forward: Summary

The table below provides a summary of the rec-ommended short and long term steps for mov-ing the sector forward.

43

Table 15: The Way Forward

((00--22 yyeeaarrss)) ((uupp ttoo 55 yyeeaarrss))

1. Promote competition and private participation

Develop and publish plan for: eliminating multiple ownerships by the dominant carrier, encouraging new enterprises, and attracting private investment, implementing simple and transparent processes for authorization of competitive new entry, reducing anti-competitive conduct, increasing broadband penetration in urban and rural areas, and increasing new, innovative technologies Develop WTO accession package in the area of market access commitments Continue to implement the pro-competitive elements of the Vietnam-US BTA Initiate comprehensive review of licensing procedures, with focus on class licensing for public telecommunications operators, increasing revenue, increasing transparency, and increasing private investment

Implement plan specifics, monitor targets, publish results Accede to WTO, implement offers made Finish implementing BTA Implement findings of the licensing review Create class licensing system

44

Table 15 : The Way Forward (Continue)

interconnection problems and practices Establish and implement a modern interconnection regulatory regime including publication of RIOs by dominant operators, and publication of time-bound interconnection dispute settlement procedures. Analyze WTO requirements in this area, apply to Vietnam Undertake a comprehensive study of price levels, with a focus on rebalancing. Examine reasonableness of price levels given that very low cost, recent technologies are available Undertake rate rebalancing in line with study; examine actual or probable cross-subsidies Develop and publish a plan for moving to a modern tariff-setting and review regime Develop a plan to transition from BCCs to JVs, to accelerate delivery and efficiency in selected service areas Undertake study of future financing needs of the sector

Move toward cost-based interconnection Accede to WTO, implement requirements in thisarea Adjust prices where study indicates Continue rate rebalancing in line with study findings. Re-examine the question via regular additional study Implement plan, moving towards cost-based tariffs Take results and act on them Implement plan Take results and act on them. Monitor results and publish them

2. Develop modern regulatory institutions and processes

Establish regulatory processes that will meet GATS and WTO requirements, focusing on transparency and impartiality Launch study and begin dialog on long term plan for a non-ministerial regulatory body, study India (TRAI), Malaysia, Singapore and other relevant examples Establish a “Regulatory Committee” which will avowedly be the basis for the future regulatory body Study transfer of VNPT ownership responsibility from MPT to other appropriate state agency. Initiate review of policies and practices in spectrum management, taking in to account WTO requirements Create forum for discussion of commercial concerns in the area of spectrum management

Implement and improve regulatory processes andcapacity Continue dialog, move toward creating new Regulatory Authority based on the Regulatory Committee and on international best practices Undertake transfer of VNPT from MPT to otherstate agency. Ensure MPT impartiality Implement WTO and world best practice in these areas Continue forum meetings, take forum advice intoaccount in formulating spectrum policy .

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Table 15 : The Way Forward (Continue)

cellular Corporatize VNPT, create “arms length” relationship with subsidiaries Assess VNPT organization and “equitize” some of its subsidiaries, allowing foreign investment and ensuring they are customer-oriented. Make VNPT into an SOE holding company of equitized and non-equitized organizations Plan separation of equipment manufacturing units from the operator portion of VNPT Complete the separation of post and postal banking from the telecommunications portion of VNPT

segments Finish corporatizing all VNPT SOE subsidiaries Equitize (privatize) almost all remaining VNPT subsidiaries. Ensure all subsidiaries are customer-oriented. Attract private investment into equitized entities Execute separation of equipment manufacturing

4. Promote extension of rural telecoms infrastructure and access

Undertake a review of methods to harness market forces to better serve rural areas, and of Universal Service Obligation mechanisms where required. Take WTO requirements into account. Include a focus on broadband Internet access for rural areas in the review Undertake study of government approach in which govt invites tenders to build rural services and/or infrastructure, but does not limit itself to using just one provider

Implement market force findings, as well as selected USO schemes, while meeting WTO requirements. Implement, monitor and publish results of broadband recommendations Undertake government procurement of rural services and infrastructure (under a universal service program) in which competing multiple providers are utilized

5. Develop and publish telecom development policy roadmap

Develop a policy roadmap that elaborates and reflects the above areas; solicit and incorporate stakeholder and public comments

Implement roadmap on agreed time delimited schedule Input roadmap into WTO accession package

6. Begin dialog on a new telecom law

Commission study on international best practices in this area Begin internal and public dialog on shape and nature of a new law

Draft and submit new telecommunications law in line with revised sector roadmap

47

Annex 1. Excerpts from March 2005 Economist Intelligence Unit (EIU) country report on VietnamAnnex 2. Charts on the Growth of Telecommunications in Vietnam Annex 3. SOE Status of Various Telecommunications OrganizationsAnnex 4. ISPs Licensed in VietnamAnnex 5. BCCs in VietnamAnnex 6. Reform of Laws for Investment and for Increasing FDIAnnex 7. SMEs in VietnamAnnex 8. Decree on TelecommunicationsAnnex 9. Decree on Spectrum Management

List of Annexes

48

Country Briefing for Vietnam fromthe Economist Intelligence unit

CURRENT RATINGSOverall Country Assessment: COverall Score: 57Infrastructure Assessment: DInfrastructure Score: 78

(A-E scale, E = very risky; 0-100 scale, 100 =most risky)

Resources and infrastructure: Transport,communications and the Internet

Vietnam’s telecommunications industry hasbeen growing rapidly, second only to that inChina in recent years, according to theInternational Telecommunication Union, aGeneva-based industry co-ordinating body. In2004 there were 9.7m telephones, with 5.2mmain lines and 4.5m mobile phones. This repre-sented 11.7 phones per 100 people, up from only2.2 in 1997. Although the monopoly previouslyenjoyed by the state-owned Vietnam Post andTelecommunications Corporation (VNPT) hasended, with five new telecoms service providersin, or about to enter, the market, VNPT remainsdominant. Rising competition has forced

VNPT’s mobile-phone provider, Vinaphone, toseek out subscribers more actively and toreduce tariffs. Despite falling prices, interna-tional telephone calls continue to be among themost expensive in the world. The government ishoping to launch a US$300m telecoms satellite,which could be in orbit as early as 2007.

Full Internet services became available inmid-1998 in both Hanoi and Ho Chi Minh City.Internet usage remains expensive, and in 2004there were just 3.7m Internet users, equivalentto 4.5 users per 100 people. Usage rates are wellbelow those found in Thailand and Malaysia.The dominant Internet service providers arestate-owned. Vietnam DatacommunicationsCompany (VDC) controls 54% of the market,followed by Corporation for Financing andPromoting Technology (FPT), which controlsabout one-quarter of the market. A governmentfirewall blocks access to some pornographicand politically sensitive sites abroad, but alsolimits bandwidth and makes confidential busi-ness transactions difficult. In an effort to boostinvestment in the information technology sec-tor, the government is allowing a few firms toavoid the firewall.

Source: EIU, Country Profile - Main report: September 7th 2005

Annex 1. Excerpts from March 2005 Economist Intelligence Unit (EIU)

Country Report on Vietnam

49

Annex 2.Charts on the Growth of Telecommunications in Vietnam

(source for all charts: ITU)

50

Annex 3.SOE Status of Various Telecommunications Organizations

as of December 2005

aa jjooiinntt ssttoocckk ccoommppaannyy))

VNPT Yes VTI (Int’l, under VNPT) Yes VDC (data, under VNPT) Yes GPC (mobile cellular etc., under VNPT) Yes Reported plan in 2006

to become a JV VMS (VN Mobile Services, under VNPT) Yes Vinaphone Yes Mobiphone Yes VTN (VN Basic Telecom Network) Yes VP Telecom (was Electricity Telecom Co.:ETC) Yes SPT (Saigon Post and Telecom) Yes Viettel Yes FPT Yes Vishipel (VN Ship Telephone) Yes Netnam Yes Hanoi Telecom Yes

Source: World Bank interviews with NIPTS in December 2005

Organization State owned enterprise? (NOT Joint Stock Company?

a joint stoct company)

51

There were reportedly 16 ISPs licensed inVietnam as of December 2005; these are shownbelow. Addresses are provided for the lesser

known organizations. Under current law, ISPlicensing is open to and unlimited for Vietnameseprivate individuals and private firms.

Annex 4.ISPs Licensed in Vietnam

1 Tham Tam Stock company 154 Truong Cong dinh, Vung Tau, Ba Ria Vung Tau Province

2 OCI Joint stock Company No. 123 Truong Dinh, District 3, HCMC 3 Viet Khang Joint stock Company No. 47 Apt. B12B Ngoc Khanh street, Ba Dinh district,

Hanoi 4 District No. 10 Electronic Company No. 376 Dien Bien Phu street, HCMC 5 Technology Investment and Development

Company, Ltd No. 117- D1 Trung Tu living quarter, Dong Da District, Hanoi, Vietnam

6 Network Technology Joint stock Company No. 16 Pham Dinh Toai street, District 3, HCMC 7 Electronic, chemical and information Co. Defense Ministry, 18 Lang Ha street, Ba Dinh district,

Hanoi 8 Electric Telecom Company (ETC--recently

changed to Viet Power Telecom or VP Telecom) No. 5D Nghi Tam Street, Tay Ho District, Hanoi

9 Hanoi Telecom Company No. 02 Chua Boc Street, Trung Tu living quarter, Dong Da district, Hanoi

10 Army Electronic and Telecommunication (Vietel) No. 01 Giang Van Minh, Hanoi 11 VDC 12 SPT 13 Netnam 14 FPT 15 Vishipel 16 Netshoft (Ho Chi Minh City Post and

Telecommunications Information Company)

No. Name of ISPs Address

There have been 11 BCCs in Vietnam, as shownin the table below.

Note that the VNPT website provides a some-what different list. Five of the 11 BCCs have been

completed. The list below is derived from WorldBank interviews in Vietnam in December 2005,and the USAID 2005 Competition Review of theVietnamese Telecom Sector.

52

Annex 5.BCCs in Vietnam

1. VNPT/VTI Telstra, Australia Development of international telecommunications network and services

Signing date: 1998 Contractual term: 6 years. Finished.

2. VNPT-GSM Comvik/Kinnevik, Sweden

Development of the nationwide mobile phone network and services

Contractual term: 10 years (02/06/1994-19/05/05). Investment: US$ 127.8 M. Finished.

3. VNPT Voice International Australia

Development and exploitation of paging services in HCMC

Contractual term: 9 years. Investment: US$ 725,000. Finished.

4. VNPT Sapura SDN-BHD Malaysia

Development and exploitation of the public card phone services in HCM area.

Effective date: 06 Oct. 1993. Contractual term: 8 years Sapura’s share is $3,751,000; VNPTs’ $1,615,000. Finished.

5. VNPT Worldcorp Holding Singapore

Development and exploitation of yellow page services

Contractual date: 5 years. Signing date: 12/12/94. Effective date 17/06/95. Foreign investment: US$ 842,000. Finished.

6. VNPT Korea Telecom Development of internal network in Haiphong city and the provinces of Hai Duong, Hung Yen and Quang Ninh

Contractual term: 10 years. Signing date 20/08/94. Effective date: 27/04/96. Foreign investment: US$ 40M. To be completed soon.

7. VNPT Nippon Telegraph and Telephone (NTT), Japan

Development of internal network in the Northeast of Hanoi area. Construction of 240,000 new telephone lines

Contractual term: 15 years. Signing date: 23/07/1997. Foreign investment: US$ 194.4 million. Underway.

8. VNPT France Telecom (France)

Development of internal network of the east of HCMC. Contruction of 540,000 new telephone lines

Contractual term: 15 years. Signing date: 25/07/97. License issuance on 11/97/ Foreign investment US$ 467M. Underway.

9. VNPT Cable & Wireless (UK)

Development of telephone network in the east of Hanoi city. Construction of 250,000 new telephone lines

Contractual term: 15 years. Signing date: 28/07/97. Foreign investment: US$ 207 million. This BCC does not exist any more.

10. SPT S-Telecom (Korea) Development and exploitation of mobile phone network and service

First non-VNPT BCC; began in 2000. Contractual term: 15 years. Has clause to convert to a joint venture when Vietnam law permits. Foreign investment: US$230M Underway.

11. Hanoi Telecom

Hutchison Telecom Build a CDMA network in Hanoi

Foreign injection of $656 million. Announced in 2005.

# VN Partner(s) Foreign Partner(s) Services Offered/Purpose Notes

This annex provides a discussion of the Law onForeign Investment, which governs investmentin the telecommunications and other arenas.The discussion proceeds with various questionsand answers, as provided by researchers andrespondents in Vietnam. The responses werereviewed with Vietnamese officials inDecember 2005 by the World Bank Hanoi officefor currency and accuracy.

1. What is the date of the current Law onForeign Investment?

The Law on Foreign Investment was passedon November 12, 1996. There have been vari-ous subsequent amendments and re-issuancesculminating in the most recent on June 9, 2000.

2. What topics does the law cover?The law governs a wide range of issues,

including the forms of direct capital investment,procedures for licensing foreign investment,management of foreign - invested enterprises,capital contributions, personnel matters, taxation,accounting, foreign exchange and liquidation.

3. Is there any discussion now on changingthe law?

Certain shortcomings have been identifiedregarding the law on foreign investment andthe legal framework governing enterprises in alleconomics sectors. These include the following:

● The forms of investment, establishment proce-dures and incentives vary significantly amongthe three major laws: the Law on ForeignInvestment, the Enterprise Law and the Lawon Promotion of Domestic Investment.

● Regarding incentives, foreign-invested enter-prises claim that preferential tax rates are

more favorable for domestic than foreignenterprises. The government states that com-mon levels of corporate income tax, fees,services will soon applied to both kinds ofenterprises.

● There are some specific differences betweenthe VN - US BTA and the Law on ForeignInvestment of Vietnam in areas such as capi-tal contribution, national treatment, mostfavored nation, forms of enterprise, and prin-ciples of management and labor.

4. What is the status of change in these areas? Many pieces of legislation are being pre-

pared for submission to the National Assemblyover the next two years, to provide a commonlegal framework for both domestic and foreigninvestment. A common framework for both theLaw on Foreign Investment and Law onPromotion Domestic Investment shall create acommon legal base for the business activities ofall economics sectors, according to a spokesmanfor MPI’s legislation department. However, it isunlikely there could be a single Code or Lawgoverning the business of all economic sectors.

Foreign investors are currently subject tohigher prices for certain services, though theseforms of discrimination are gradually beingabolished as Vietnam moves closer to nationaltreatment of foreign investors, as required theVietnam - US BTA and ultimately the WTO. InMarch 2003, the Government further liberalizedthe foreign investment law (Decree 27 amend-ing Decree 24), moving forward a registration(vs. licensing) regime and making the process of

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Annex 6.Reform of Laws for Investment and for Increasing FDI

registration and licensing more transparent.Furthermore, in April 2003, the Prime Ministerlifted the compulsory sale of foreign currencyfor both foreign and domestic enterprises.

5. Currently, what are the vehicles for invest-ment for foreigners operating in Vietnam?

At present, two main possibilities are opento foreign investors in Vietnam. They mayinvest under the Law on Foreign Investment orthe Law on Promotion of Domestic Investment.Forms of investment under the Law on ForeignInvestment are well known, while those underthe Law on Promotion of Domestic Investmenthave remained vague to some extent.

6. What reforms have been made in theseareas?

Two major reforms have been undertaken inthese two areas:

● Circular 73/2003/TT-BTC dated July 31,2003 was issued by the Prime Minister pro-viding guidance for the implementation ofthe regulation on capital contribution and thepurchase of shares by foreign investors inVietnamese enterprises set forth underDecision 36/2003/QD-TTg dated March 11,2003. The main changes introduced byDecision 36 are the enlargement of the defini-tion of Vietnamese enterprises entitled toreceive capital contribution by, or to sellshares to, foreign investors and the clarifica-tion of the term “foreign investors” that wasnot properly defined under the Law onPromotion of Domestic Investment.However, several new related issues havearisen, such as the possibility of convertinglocal enterprises into foreign invested enter-prises and the reverse, when rates of capitalcontribution of foreign partners change.

● Though both the Law on Foreign Investmentand Law on Promotion of DomesticInvestment govern foreign investment, eachintroduces difference tax structures. This has

caused confusion. On June 17, 2003, TheCorporate Income Tax rates under these twoLaws were harmonized at 28 percent, takingeffect January 1, 2004 (instead of 32 percentand 25 percent respectively.)

7. How is more investment being encour-aged in telecommunications and IT?

Vietnam promulgated its first ForeignInvestment Law in 1987 following doi moi policymade by Sixth Party Congress in December1986. Recognizing that Vietnam would have tocompete with other nations in absorbing foreigninvestment, the 1987 Law established a remark-ably liberal regime for foreign investment inVietnam. Since 1987, this Law has been revisedfor several times, and most recently in 2000, tomove closer into conformity with the principleof national treatment.

Before the Bilateral Trade Agreement (BTA)between Vietnam and the US, under the law offoreign investment, in the field of internationaland domestic telecommunications, it was notallowed to have direct or joint-venture invest-ment. However, a decree clarifying the law wasissued which allows foreign investment intelecommunications and IT through BusinessCooperation Contracts (BCCs).

After the BTA was signed, a roadmap forchange was drawn up. However, the law of for-eign investment has not yet been amended to bein line with the US-Vietnam BTA.

The amended Law on Foreign Investment,effective July 1, 2000, aims to make Vietnammore attractive and friendly to FDI enterprises.The most important amendment grants foreignenterprises the right to mortgage their land-use rights. This power gives foreign enterpris-es the ability to borrow from foreign banksusing the assets and property of their compa-nies as collateral. Previously, only Vietnamesebanks had the statutory authority to forecloseon land and property. This change is important

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55

to foreign firms that wish to invest in theVietnamese economy because it creates a newmeans of financing through which capital maybe raised.

The government also sought to aid FDI (for-eign direct investment) enterprises by passingamendments to the Law on Foreign Investmentthat: (1) allow the government to provide loanguarantees; (2) allow FDI enterprises to decidefor themselves whether to set up reserve fundsand to determine their size; (3) reduce the prof-it-remittance tax; (4) allow the remaining valueof land-use rights contributed by the jointVietnamese business party to be subject to liqui-dation; and (5) allow FDI enterprises to deter-mine for themselves the forms of their invest-ments and the reorganization of their capitalstructures.

Other amendments to the Law on ForeignInvestment sought to minimize much of the redtape that burdens enterprises, such as govern-mental restrictions and procedures that aremore burdensome in Vietnam than in other for-eign investment areas. For example, the statuteno longer requires unanimous approval by thejoint venture's management board for changesaffecting the corporation, but rather, it merelyrequires consensus decision-making.

Moreover, some categories of FDI enterprises,especially those that export over half of theirproduction, no longer will be required to obtaininvestment licenses but will only be required toregister the enterprise. Thus, private firms donot have to secure "onerous governmentapprovals" before they are able to invest legallyas foreign companies in the Vietnamese mar-ket. An additional amendment allows enter-prises to purchase foreign currencies from com-mercial banks to cover their current transac-tions. Finally, whereas in the past an enterpriseusually bore the burden and expense of sitework and obtaining land-use rights, it is nowthe responsibility of either the Vietnamese part-ner in the joint venture or the local people'scommittee to complete these tasks.

While FDI enterprises have welcomed thesechanges, many argue that the changes are dilut-ed and insubstantial, especially considering thatonly twenty-three of the seventy-five proposedamendments were passed. Foreign investorsgenerally view these changes as a positive steptoward alleviating the day-to-day headachesfaced by all foreign businesses in Vietnam.Furthermore, these changes help reduce theburdensome taxes that foreign investors mustpay in order to maintain a presence in Vietnam.

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Small and medium sized enterprises (SMEs) area major focus of economic, job and IT develop-ment in Vietnam. Various figures on SME cre-ation have been used, so a researcher inVietnam was asked to clarify this matter. Theresult was as follows:

Question: The figure of “14000 new SMEswere created” has been cited. Was this a onetime figure? How many SMEs are beinglaunched each year now?

Answer: The “14000 newly created SMEs fig-ure” is the approximate number of enterprisesestablished in year 2000, the first year after thenew Law on Enterprises of 1999 took effect. Theresponse to the new Law on Enterprises of 1999that abolished hundreds of needless licensesand permits for doing business has been quiteimpressive. During nine years prior to theimplementation of this Law, only 30,000 enter-prises were established nationwide, whileunder the new law, by August 2003, 71,500firms were established, according to the VN

Economic Times (of September 29, 2003). As ofDecember 2004, the number of registered SMEswas about 172,800 and the number of opera-tional SMEs was about 92,416.

It is estimated that SMEs create 49% of non-agricultural jobs in rural areas and 25-26% of thenational labor force.

Among the new enterprises establishedunder the Law on Enterprises of 1999, morethan 90 percent are SMEs. These SMEs are gen-erally of poor experience, low competitiveness,and vulnerable, according to analysts of theproblem. They are generally not knowledge-able about IT, the Internet, marketing, foreignmarkets or trade. However, they do offer themost hope for job creation, and in fact have beena major engine for job growth in the last threeyears.

(Sources: World Bank Hanoi Office interviews in 2004 andin December 2005 with GSO, MPI and other governmentsources; VN Economic Times.)

Annex 7. SMEs in Vietnam

THE GOVERNMENT

Pursuant to the December 25, 2001 Law onOrganization of the Government;

Pursuant to the May 25, 2002 Post andTelecommunications Ordinance;

At the proposal of the Post and TelematicsMinister,

DECREES:

CHAPTER I

GENERAL PROVISIONS

Article 1.- Scope of regulation1. This Decree details the implementation of a

number of articles on telecommunications of thePost and Telecommunications Ordinance, whichwas passed on May 25, 2002 by the StandingCommittee of the National Assembly.

2. The management, provision and use ofInternet services shall comply with the provi-sions of the Government's Decree No.55/2001/NDCP of August 23, 2001 and the rele-vant provisions of this Decree.

Article 2.- Subjects of application1. This Decree applies to Vietnamese organi-

zations and individuals; foreign organizationsand individuals engaged in telecommunications

activities in Vietnam in the establishment oftelecommunication networks; provision and useof telecommunication services; manufacture,export and import of telecommunication equip-ment; construction and installation of telecom-munication works.

2. Where the international agreements whichVietnam has signed or acceded to containtelecommunication provisions different fromthose of this Decree, such international agree-ments shall apply.

Article 3.- Assurance of safety for telecommu-nication networks and information security

1. Telecommunication networks constitute anational information infrastructure, must beprotected and must not be infringed upon. Localadministrations, people's armed force units andtelecommunication enterprises shall have tocoordinate with one another in safely protectingpublic telecommunication networks. Owners ofprivate-use telecommunication networks, own-ers of special-use telecommunication networks,telecommunications service agents and serviceusers shall have to protect their telecommunica-tion networks and terminal equipment, activelyparticipate in protecting public telecommunica-tion networks, and at the same time notifytelecommunication enterprises or competentState bodies of acts that destroy or infringe uponpublic telecommunication networks.

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Annex 8Decree on Telecommunications

(Unofficial Translation)

THE GOVERNMENT DECREE No. 160/2004/ND-CP OF SEPTEMBER 3, 2004DETAILING THE IMPLEMENTATION OF A NUMBER OF ARTICLES ON

TELECOMMUNICATIONS OF THE POST AND TELECOMMUNICATIONS ORDINANCE

2. In the process of participating in telecom-munications activities, agencies, organizationsand individuals shall have to assure safety fortelecommunication networks and informationsecurity, submit to the management, inspection,examination by competent State bodies andcomply with their telecommunication networksafety and information security assurancerequests.

3. In emergency cases prescribed by theemergency state legislation, part or whole oftelecommunication networks may be mobilizedfor service under decisions of competent Statebodies.

4. At the requests of competent State bodies,telecommunication enterprises shall have toarrange locations, telecommunication networkaccess points as well as other technical and pro-fessional conditions for such bodies to controland assure information security.

5. Telecommunication enterprises shall coor-dinate with professional units of the PublicSecurity Ministry in urgently preventing andstopping the provision of services in cases ofusing telecommunication and Internet servicesto instigate violence and riots, infringing uponnational security and opposing the State of theSocialist Republic of Vietnam.

6. The Post and Telematics Ministry shallcoordinate with the Public Security Ministryand concerned agencies in guiding the assur-ance of telecommunication network safety andinformation security in telecommunicationactivities.

Article 4.- Assurance of confidentiality1. Agencies, organizations and individuals

engaged in telecommunication activities mustcomply with the legislation on State secret pro-tection and take responsibility before law forthe information contents they put into, storeand transmit in telecommunication networks.

2. Information classified as State secret mustbe encoded according to law provisions oncipher if it is to be transmitted on telecommuni-

cation networks. The use of encoding tech-niques to assure confidentiality in commercialand civil transactions must comply with lawprovisions.

3. Confidentiality for all organizations andindividuals' private information transmitted viatelecommunication networks shall be assuredaccording to law provisions. It is strictly prohibit-ed to eavesdrop or secretly record information ontelecommunication networks; steal or illegallyuse passwords and cipher keys as well as privateinformation of organizations and individuals.

4. Telecommunication enterprises shall haveto assure confidentiality for private informationrelated to telecommunications service users,including their names, addresses, callers' num-bers and called numbers, call time and otherprivate information which users have providedwhen entering into contracts with the enterpris-es, except for the following cases:

a/ Telecommunication service users agreeon the supply of the above-said information;

b/ Telecommunication enterprises havereached written mutual agreements on the shar-ing of information on telecommunication serv-ice users that violate telecommunication legisla-tion in order to prevent acts of shirking contrac-tual obligations;

c/ Telecommunication enterprises havereached written mutual agreements on the shar-ing and supply of information on telecommuni-cation service users in service of the calculationof charges, printing of bills and collection ofcharges from customers;

d/ Upon requests of competent State bodiesaccording to law provisions.

5. The control of information ontelecommunication networks and Internet mustbe conducted by competent State bodies accord-ing to law provisions. Telecommunicationenterprises, owners of private-use telecommu-nication networks, telecommunication serviceagents and users shall have to closely collabo-rate with, and fully supply relevant information

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to, competent State bodies so that the latter candetect, stop and handle acts of abusing telecom-munication networks to carry out terrorist activ-ities, infringe upon national security or socialorder and safety.

CHAPTER IITELECOMMUNICATION NETWORKS

AND SERVICES

SECTION 1

TERMINAL EQUIPMENT AND INTRANETS

Article 5.- Subscriber terminal equipmentand intranets

1. Subscriber terminal equipment meanusers' fixed or mobile terminal equipment con-nected to public telecommunication networksthrough the end points of public telecommuni-cation networks.

2. Subscriber terminal equipment are catego-rized as follows:

a/ Single-line subscriber terminal equip-ment are terminal equipment which do nothave the circuit-switching or call-connectingfunction, including: fixed telephone equipment,mobile telephone equipment, fax equipment,paging equipment, modems, wireless Internetaccess terminal equipment, computers, equip-ment having the combined functions of theabove-said equipment;

b/ Multi-line subscriber terminal equipmentare terminal equipment which have the circuit-switching, call-connecting function, includingPABX switchboards, wireless Internet accessportal equipment and equipment with the callconnecting function;

c/ Other subscriber terminal equipment asprescribed by the Post and Telematics Ministry.

3. Subscriber terminal equipment on the listof those subject to standard conformity certifica-tion, subscriber terminal equipment whichtransmit radio waves must comply with the reg-ulations on standard conformity certification

and on radio frequency and transmitter man-agement and use if they are to be used on pub-lic telecommunication networks.

4. Intranet means a telecommunicationequipment system established by an organiza-tion or individual (hereinafter called intranetowner) at a premises with a specified addressand scope which the intranet owner has the fullright to lawfully use for ensuring internal com-munication among the intranet members.Where the intranet owner is an individual, theintranet members shall be members of thehousehold of which the intranet owner is thehead or is a person authorized by the householdhead according to law provisions. Where theintranet owner is an organization, the networkmembership shall be determined according tothe operation charter and legal document(s)prescribing the organizational structure andapparatus of such organization or to other rele-vant regulations.

5. Intranets are categorized into wireintranets (telecommunication equipment arelinked together by telecommunication cables)and wireless intranets (radio equipment arelinked together by radio waves or radio wavescombined with telecommunication cables).

Article 6.- Positions of end points of publictelecommunication networks

1. End points of public telecommunicationnetworks are physical connection pointsbelonging to the telecommunication networks,which satisfy technical standards to ensure theconnection of service users' terminal equipmentto the telecommunication networks.

2. End points of public telecommunicationnetworks serve as a dividing line between theeconomic and technical responsibilities oftelecommunication enterprises and those ofservice users. The scope from the end points tothe users' side falls under the users' responsi-bility. The scope from the end points to theenterprises' side falls under the enterprises'responsibility.

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3. Where telecommunication networks areused to provide telecommunication services forusers via local loops (subscriber lines or trunklines), unless it is otherwise agreed upon in thecontracts between telecommunication enter-prises and service users, the positions of endpoints of public telecommunication networksshall be determined to be on the subscriberside, which are:

a/ The last cable boxes installed in the sub-scribers' homes; or

b/ The subscriber line boxes or wire-connection slates of transmission equipmentinstalled in the subscribers' homes if the condi-tion stated at Point a above is not satisfied; or

c/The sockets for plugging the first sub-scriber terminal equipment (closest to the users)in the subscriber's homes, if the conditions stat-ed at Points a and b above are not satisfied.

4. Where telecommunication networks areused to provide telecommunication services forusers via satellite equipment (including trans-mitters or transreceivers) or base radio stations,or wireless Internet access portal equipment oftelecommunication enterprises, if it is not other-wise agreed upon in the contracts betweentelecommunication enterprises and serviceusers, the positions of the end points of publictelecommunication networks shall be deter-mined to be on the, subscriber side, being theantennas of the satellite equipment or antennasof the base radio stations or antennas of thewireless Internet access portal equipment.

Article 7.- Equipment, design, installation,maintenance, repair and connection of sub-scriber terminal equipment, intranets

1. Service users may purchase by themselvessubscriber terminal equipment or hire themfrom telecommunication enterprises; maymaintain, repair by themselves subscriber ter-minal equipment or intranets belonging to theirproperties or hire other organizations or indi-viduals to do this work.

2. Service users may design and install by

themselves subscriber terminal equipment orintranets within their premises up to the endpoints of public telecommunication networks orhire other organizations or individuals to dothis work. The design and installation of sub-scriber terminal equipment and intranets mustfollow the State's procedures and rules and thePost and Telematics Ministry's regulations onconstruction and installation of telecommunica-tion network facilities and telecommunicationequipment.

3. The connection of subscriber terminalequipment and intranets to public telecommu-nication networks shall be effected by telecom-munication enterprises under contracts signedwith service users.

4. When connecting subscriber terminalequipment and intranets to publictelecommunication networks, telecommunica-tion enterprises may refuse to connect andrequest service users to remedy problems ifthey detect and have sufficient grounds to makeconclusions that the installation of subscriberterminal equipment or intranets:

a/ Fails to satisfy technical standards pre-scribed by the Post and Telematics Ministry; or

b/ Causes unsafety to public telecommuni-cation networks, telecommunication enterprisesand service users; or

c/ Fails to ensure the service use purposesaccording to telecommunication regulations orthe terms of the telecommunication service pro-vision and use contracts.

5. For subscriber terminal equipment andintranets connected to exclusively leased chan-nels, VSAT earth satellite station or Internet,telecommunication service users must use sub-scriber terminal equipment or intranets strictlyfor the right purposes stated in the telecommu-nication service provision and use contracts.They must not use or allow others to use sub-scriber terminal equipment or intranets for for-warding by any mode (automatic or manual)calls from terminal equipment they do not own

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or terminal equipment outside their intranetsvia exclusively leased channels, VSAT earthsatellite station, Internet and vice versa (in bothincoming and outgoing directions).

SECTION 2

TELECOMMUNICATION NETWORKS

Article 8.- Public telecommunication net-works

1. Public telecommunication networksinclude:

a/ Fixed telecommunication networks:- Fixed earth telecommunication networks; - Fixed satellite telecommunication net-

works. b/ Mobile telecommunication networks:- Mobile earth telecommunication networks; - Mobile satellite telecommunication net-

works.c/ Other public telecommunication net-

works prescribed by the Post and TelematicsMinistry.

2. Management and operation of publictelecommunication networks.

a/ The Post and Telematics Ministry:- To formulate and promulgate or submit to

the Prime Minister for approval telecommuni-cation development strategies and plannings,including plannings on telecommunication net-works and information resources;

- To submit to the Prime Minister for decisionthe establishment or cancellation of telecom-munication relations with foreign countries;

- To decide to close or open domestic long-distance telecommunication directions in serv-ice of public-utility, security and defense tasksafter consulting the Public Security Ministryand the Defense Ministry.

b/ Ministries, branches, local administra-tions at all levels and the Post and TelematicsMinistry shall have to coordinate with oneanother to ensure that:

- The planning, design and construction of

urban centers, residential areas, industrialparks, export-processing zones, high-techparks, new economic zones and other publicfacilities include the planning on such telecom-munication works as telecommunication cen-ters, public service points, antenna masts, cableculverts and tanks, in-house cable lines, etc.

- Viba transmission lines, optical-fiber cablesand copper cables are constructed along roads,bridges, culverts, pavements, streets or powerlines;

- Other public and welfare constructionworks do not affect or obstruct the operation oftelecommunication network works which havebeen constructed as planned.

c/ Organizations or telecommunicationenterprises, when establishing and operatingtelecommunication networks, must:

- Observe development plans and planningsalready approved by competent State bodies;

- Have telecommunication licenses grantedby the Post and Telematics Ministry under theprovisions of this Decree;

- Have information resource allocation deci-sions (if any) of the Post and TelematicsMinistry;

- Observe branch standards, Vietnamesestandards and international standards on con-struction and installation of telecommunicationnetworks and works, promulgated or publi-cized by competent State bodies for compulsoryapplication;

- Not cause harms to the environment andother socio-economic activities.

Article 9.- Local loops1. Local loops constitute part of public

telecommunication networks, including sub-scriber lines and trunk lines that connect localswitchboards of telecommunication enterprisesto service users' subscriber terminal equipment.

2. Subscriber lines are wire or wireless trans-mission lines connecting local switchboards oftelecommunication enterprises to users' single-line subscriber terminal equipment.

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3. Trunk lines are wire or wireless transmis-sion lines connecting local switchboards oftelecommunication enterprises to users' multi-line subscriber terminal equipment. According totechnical standards, trunk lines are categorizedinto subscriber, analog and digital trunk lines.

Article 10.- National telecommunicationbackbone systems

1. National telecommunication backbonesystems constitute part of public telecommuni-cation networks, including domestic and inter-national long-distance transmission lines andinternational communication portals, which areof special importance to the operation of thewhole national telecommunication network anddirectly affect the national socio-economicdevelopment and assurance of national securityand defense.

2. The Post and Telematics Ministry per-forms the function of State management overthe national telecommunication backbone sys-tems through mechanisms, policies and regula-tions on licensing, interconnection oftelecommunication networks; interconnectionstandards, quality and charges, channel lease;common use of national communication infra-structures.

3. Only network infrastructure-operatingenterprises which have licenses for establish-ment of domestic or international long-distancepublic fixed telecommunication networks canestablish national telecommunication backbonesystems and deal in the domestic or internation-al long-distance channel lease service.

4. Network infrastructure-operating enter-prises which only have licenses for establish-ment of public mobile telecommunication net-works may establish local and domestic long-distance transmission lines for connectingtogether the equipment systems belonging totheir networks but must neither use these trans-mission lines for providing the channel leaseservice nor establish international communica-tion portals.

5. Other telecommunication enterprisesmust not establish national telecommunicationbackbone systems but may lease domestic andinternational long-distance channels for estab-lishing telecommunication networks and pro-viding telecommunication services strictlyaccording to their licenses.

Article 11.- Broadcasting1. Broadcasting means the transmission of

codes, signals, data, scripts, sounds, images andother forms of information by cable lines, radiowaves, optic means and other electromagneticmeans.

2. The Post and Telematics Ministry per-forms the function of State management overbroadcasting nationwide:

a/ To submit to the Prime Minister for prom-ulgation national broadcasting developmentstrategies and plannings; organize and directthe implementation of such strategies and plan-nings after they are approved by the PrimeMinister;

b/ To promulgate legal documents onlicensing, frequencies, standards, quality andtariffs for performing the State management inthe broadcasting domain;

c/ To organize the inspection, supervision andhandling of law violations in broadcasting; assumethe prime responsibility for, and coordinate withthe Defense Ministry and the Public SecurityMinistry in, inspecting and controlling the broad-casting in service of defense and security.

3. Before being submitted to the PrimeMinister for approval, socio-economic develop-ment plannings related to broadcasting must beevaluated by the Post and Telematics Ministryto ensure that they are in line with the strate-gies, plannings and law provisions on broad-casting.

Article 12. - Private-use telecommunicationnetworks

1. Private-use telecommunication networksare the ones established by private-use telecom-munication network owners to ensure commu-

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nication among network members, includingtwo or more telecommunication equipmentinstalled in different places with specifiedaddresses and scopes on the Vietnamese territo-ry, which the network members have the fullright to lawfully use and are connected togethervia public telecommunication networks ortransmission lines leased or constructed by thenetwork owners themselves.

2. Private-use telecommunication networkowners are Vietnamese agencies, organizations orenterprises or foreign agencies or organizationsthat operate on the Vietnamese territory and arelicensed to establish privateuse telecommunica-tion networks according to regulations. Networkmembers are members of the agencies, organiza-tions or enterprises licensed to establish the net-works. Membership is determined according tothe operation charters and legal documents defin-ing the organizational structures and apparatusesof such agencies, organizations or enterprises orto other relevant regulations.

3. Based on the transmission modes used fornetwork establishment, private-use telecommu-nication networks are categorized into wire pri-vate-use networks (telecommunication equip-ment are linked together by telecommunicationcables), wireless private-use networks (telecom-munication equipment are linked together byradio waves or radio waves combined withtelecommunications cables).

4. Private-use telecommunication networksthat require network establishment licensesinclude:

a/ Private-use telecommunication networksthe members of which are Vietnamese agencies,organizations or enterprises or foreign agenciesor organizations that lawfully operate inVietnam, carry activities of similar nature or forsimilar purposes and are associated under theiroperation charters or legal documents definingthe common organizational structure or com-mon association forms and activities for theirmembers.

b/ Wire private-use telecommunication net-works which have transmission lines built bytheir owners themselves;

c/ Wireless fixed satellite and mobile satel-lite private-use 'telecommunication networks,excluding satellite private-use networks inmobile maritime, mobile aeronautical, broad-casting (radio and television) and amateur radioservices;

d/ Wireless private-use telecommunicationnetworks of Vietnam-based foreign diplomaticrepresentations, consular offices, representativeoffices of international organizations, whichenjoy diplomatic privileges and immunities.

e/ Other private-use telecommunication net-works as prescribed by the Post and TelematicsMinistry.

5. Except for the private-use telecommuni-cation networks stated in Clause 4 of thisArticle, other private-use telecommunicationnetworks shall not require network establish-ment licenses but must comply with regulationson interconnection, numbering, radio frequencyand transmitter use licensing.

SECTION 3

TELECOMMUNICATION SERVICES

Article 13.- Classification of telecommuni-cation services

1. Basic telecommunication services are serv-ices that instantaneously transmit users' infor-mation in the forms of signs, signals, data,scripts, sounds and images via telecommuni-cation networks or Internet without modifyingthe forms or contents of information sent andreceived via networks.

2. Basic services include:a/ Fixed telecommunication services (local,

domestic and international long-distance):- Telephony service (voice, far., data trans-

mission in audio tapes);Data transmission service;- Television signal transmission service;

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- Channel lease service;- Telex service;- Telegraph service.b/ Mobile telecommunication services

(local, nationwide):- Mobile earth communication service;- Wireless trunk telephone service; - Paging service;c/ Fixed satellite telecommunication service; d/ Mobile satellite telecommunication service; e/ Maritime radio service;f/Other basic services prescribed by the Post

and Telematics Ministry.3. Supplementary services are services addi-

tionally provided together with basic services,further diversifying and perfecting basic servic-es on the basis of technical properties of equip-ment or servicing capability of telecom-munication enterprises. Telecommunicationenterprises shall prescribe and publicize sup-plementary services they provide.

4. Value-added services are services thatincrease users' information use value by per-fecting the information forms or contents orsupplying the capability of storing and restor-ing such information on the basis of usingtelecommunication networks or Internet. Valueadded services include:

a/ E-mail service;b/ Voice mail service;c/ Network data and information access

service;d/ Electronic data exchange service;e/ Value-added fax service, including stor-

age and sending, storage and access;f/ Code and protocol conversion service;g/ Network data and information-process-

ing service;h/ Other value-added services prescribed by

the Post and Telematics Ministry.5. Internet services include: a/ Internet connection service;b/ Internet access service;

c/ Internet application service intelecommunications.

6. Basing itself on the post and telecom-munication development strategy and telecom-munication service market planning for eachperiod, the Post and Telematics Ministry shallpromulgate the list of basic and value addedtelecommunication services.

Article 14.- Resale of telecommunicationservices

1. Resale of telecommunication services isthe form of direct purchase of telecommunica-tion services from telecommunication enterpris-es on the basis of capacity leasing or traffic pur-chase through contracts signed with suchtelecommunication enterprises for providingtelecommunication services for users. Resale oftelecommunication services includes resale ofterminal services and resale of services on thebasis of leasing domestic or international long-distance channels.

2. Resale of terminal services:a/ When reselling terminal services, all

organizations and individuals shall be obligedto make business registration and pay taxesaccording to law provisions and sign serviceresale agency contracts with telecommunicationenterprises and observe regulations on manage-ment of telecommunication service resale tariffs;

b/ For fixed telecommunication services,organizations and individuals may establishsystems of fixed subscriber terminal equipmentwithin the premises which they have the fullright to lawfully use and resell services to userswithin such premises according to the rightforms and quality agreed upon in the agencycontracts on the basis of leasing local loops(trunk lines, subscriber lines) of telecommunica-tion enterprises;

c/ For mobile telecommunication services,organizations and individuals may supply (sellor lease) mobile subscriber terminal equipmentand resell services to users according to theright forms and quality agreed upon in the

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agency contracts on the basis of purchasing traf-fic of telecommunication enterprises.

3. Resale of services on the basis of leasingdomestic and international long-distance chan-nels:

a/ Network infrastructure-operating enter-prises may install telecommunication equip-ment systems within the premises they have thefull right to lawfully use for resale oftelecommunication services nationwide on thebasis of leasing domestic and internationallong-distance channels of other telecommunica-tion enterprises;

b/ Telecommunication service-providingenterprises may install telecommunication equip-ment systems within the premises they have thefull right to lawfully use for reselling telecommu-nication services within industrial parks, export-processing zones and/or high-tech parks on thebasis of leasing domestic and international long-distance channels of other telecommunicationenterprises. Basing itself on the telecommunica-tion development strategies and plannings, thePost and Telematics Ministry shall consider anddecide on the cases of resale of telecommunica-tion services outside industrial parks, export-pro-cessing zones or high-tech parks.

4. The Post and Telematics Ministry shallissue detailed regulations on technical and pro-fessional matters relating to the resale oftelecommunication services such as the list oftelecommunication services permitted forresale, subjects permitted to resell services,resale scope, and tariffs for service resale, num-bering, interconnection and channel lease.

Article 15.- Telecommunication service pro-vision and use contracts

1. The provision and use of telecommuni-cation services shall be effected on the basis ofcontracts signed between telecommunicationenterprises and service users.

2. Service provision and use contracts shallbe expressed in writing, orally, payment modesor by other specific acts as provided for by law.

3. Where service provision and use contractsare expressed in writing:

a/ Basing themselves on law provisions oncontracts and regulations of the Post andTelematics Ministry, telecommunication enter-prises shall have to formulate and promulgatemodel telecommunication service provisionand use contracts for uniform use within thewhole enterprises. To guarantee the interests oftelecommunication service users, the Post andTelematics Ministry shall prescribe a number ofessential universal telecommunication services;telecommunication enterprises shall have to for-mulate model contracts and submit them to thePost and Telematics Ministry for approval;

b/ In addition to the principal contents pre-scribed for model contracts, the contractual par-ties may reach agreements on other contents oftheir contracts provided that such contents arenot contrary to law provisions, do not infringeupon the State's interests, public interests, legit-imate rights and interests of other organizationsand individuals.

Article 16.- Refusal to provide servicesIn addition to general law provisions on con-

tracts, telecommunication enterprises mayrefuse to enter into contracts or unilaterally sus-pend the performance of contracts signed withservice users in the following cases:

1. Service users commit violations of thetelecommunication legislation according towritten conclusions of competent State bodiesand fail to fulfil their responsibilities accordingto such written handling conclusions.

2. Service users breach the contract termswhich the two parties have agreed to be condi-tions for contract suspension.

3. Service users shirk their obligation to payservice charges as prescribed to anothertelecommunication enterprise, if telecommuni-cation enterprises have reached mutual writtenagreement on this matter.

Article 17.- Professional communication andurgent communication

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1. Professional communication:a/ Telecommunication enterprises may use

domestic and international professional com-munication via telecommunication networksthey have established for managing and admin-istering their operation and dealing with techni-cal and professional matters.

b/ Telecommunication enterprises shallhave to prescribe the use subjects, scope anddegree and issue regulations on management ofprofessional communication within their enter-prises according to the regulations of the Postand Telematics Ministry;

c/ Service charges shall be exempt for pro-fessional communication of telecommunicationenterprises.

2. Urgent communication:a/ Telecommunication enterprises shall

have to promptly provide priority services forurgent communication cases prescribed inArticle 7 of the Post and TelecommunicationOrdinance.

b/ Urgent services are local telephone serv-ices used to call emergency service numbers ofpolice, fire-fighting, first-aid and other agenciesprescribed by the Post and Telematics Ministry;

c/ The Post and Telematics Ministry shallprescribe emergency service numbers in thenational telecommunication numbering plan.Telecommunication enterprises shall have tonotify users of, publish in public telephonedirectories, and publicize on the mass media,emergency service numbers prescribed by thePost and Telematics Ministry;

d/ Telecommunication enterprises shallhave to provide service users with the possibili-ty to access emergency services free of charge.

Article 18.- Subscriber numbers and publictelephone directories

1. Subscriber number is a combination ofnumerals dialed (pressed) by a service user onthe subscriber terminal equipment for connect-ing to another service user in the same number-ing area or service network.

2. Public telephone directories are collectionsof information relating to the names, addresses,subscriber numbers and other relevant informa-tion (if any) of service users, stored in the formof traditional or electronic publication, andprinted, distributed and managed by telecom-munication enterprises according to the regula-tions of the Post and Telematics Ministry.

3. Service users may register or refuse to reg-ister their subscriber numbers in public tele-phone directories. If service users refuse to reg-ister their subscriber numbers in public tele-phone directories, telecommunication enter-prises shall be responsible for keeping confiden-tial information relating to such service users,except for the cases prescribed in Clause 4,Article 4 of this Decree.

Article 19.- Telephone directory assistance 1.Telephone directory assistance service is atelephony service provided by telecommuni-cation enterprises to help service users to findout local subscriber numbers managed by theenterprises and registered in public telephonedirectories. When service users call the tele-phone directory assistance service numbers oftelecommunication enterprises and give infor-mation relating to the names or addresses ofservice users, they shall be informed of the localsubscriber numbers they look for.

2. The Post and Telematics Ministry shallprescribe the telephone directory assistanceservice numbers of telephone networks in thenational numbering plan.

3. Telecommunication enterprises shall haveto notify service users of, publish in public tele-phone directories, and publicize on the massmedia, telephone directory assistance servicenumbers prescribed by the Post and TelematicsMinistry.

4. Telecommunication enterprises shall haveto provide service users with the possibility toaccess the telephone directory assistance servicefree of charge by the following modes:

a/ Self-organization of the provision; or

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b/ Entrusting and signing contracts withother organizations or telecommunicationenterprises to organize such provision.

Article 20.- Notification of subscriber num-ber malfunctions

1. The service of notification of malfunctionsof subscriber numbers of public telephony net-works is a telephony service provided bytelecommunication enterprises to help serviceusers to notify the enterprises of the abnormaloperation or communication disruption of localfixed subscriber numbers managed by suchenterprises and requesting the remedy of suchmalfunctions.

2. The Post and Telematics Ministry shallprescribe the subscriber number malfunctionnotification service numbers of local fixedtelecommunication networks in the nationalnumbering plan. Telecommunication enterpris-es shall have to notify service users of, publishin public telephone directories, and publicize onthe mass media, the subscriber number mal-function notification service numbers pre-scribed by the Post and Telematics Ministry.

3. Telecommunication enterprises shall haveto provide service users with the possibility toaccess the subscriber number breakdown notifi-cation service free of charge.

Article 21.- Billing and payment of charges 1. Telecommunication enterprises shall have

to make bills for payment of service charges inan accurate, full and timely manner for serviceusers. Service users shall have to pay charges ina full and timely manner for using the servicesprovided by the enterprises according to theprescribed tariffs.

2. Service charge payment bills must accu-rately, fully and clearly contain at least the fol-lowing details:

a/ Charge for each type of telecommunica-tion service;

b/ Total charge to be paid;c/ The rate of exchange between the foreign

currency for charge collection and Vietnamdong (if any);

d/ Value added tax (VAT).3. For the monthly billing under contracts,

unless the users do not so request, telecommu-nication enterprises shall have to provide, orentrust other telecommunication enterprisesunder contracts to provide, users with the billsenclosed with the detailed lists free of charge foronce, enumerating:

a/ Domestic long-distance calls; b/ International calls;c/ Calls to the mobile communication net-

works.4. Unless otherwise agreed upon between

telecommunication enterprises and serviceusers, the detailed lists enclosed with the chargepayment bills must contain at least the follow-ing information on each charged call:

a/ Date of the call;b/ Starting time and ending time or starting

time and total call time;c/ Called number (international call: country

code, area code, subscriber number; domesticcall: area code, subscriber number);

d/ Charge amount for each call.Article 22.- Cross-border provision and use

of telecommunication services1. The cross-border provision of telecom-

munication services by foreign telecommuni-cation enterprises for telecommunication serv-ice users on the Vietnamese territory must beeffected under business contracts or commercialagreements with Vietnamese enterprises whichmanage and operate international communica-tion portals.

2. The use of telecommunication services byusers on the Vietnamese territory must beeffected under contracts signed withVietnamese telecommunication enterprises.

3. Basing itself on international practices,regulations on maritime, aeronautical safetyassurance and Vietnamese telecommunicationenterprises' capability of providing telecom-munication services, the Post and TelematicsMinistry shall prescribe the cross-border provi-

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sion and use of telecommunication services forvessels in the sea and aircraft in the space ofVietnam and other special cases.

4. Vietnamese telecommunication enterpriseslicensed to provide telecommunication servicesabroad must observe Vietnamese law provisionsand law provisions of the countries where theyprovide telecommunication services.

CHAPTER IIISERVICE PROVISION AND USE PARTIES

Article 23.- Telecommunication enterpriseswith telecommunication services holding domi-nant market shares

1. Telecommunication enterprises withtelecommunication services holding dominantmarket shares are enterprises having theirturnover or traffic market shares accounting forover 30% of total turnover or traffic of the typeof telecommunication service in the geographi-cal areas where they are licensed to provide,which may directly affect the penetration intosuch service market by other telecommunica-tion enterprises.

2. Annually, the Post and TelematicsMinistry shall identify and publicize telecom-munication enterprises with telecommunicationservices holding dominant market shares.

3. Telecommunication enterprises withtelecommunication services holding dominantmarket shares shall have the rights and obliga-tions prescribed in Clause 2, Article 39 of theMay 25, '2002 Post and TelecommunicationOrdinance.

Article 24.- Telecommunication enterprisesholding essential means

1. Telecommunication enterprises holdingessential means are those holding over 30% ofthe capacity of the local loop in the geographicalarea where they are licensed to provide or over30% of the capacity of domestic or internationallong-distance transmission channels; or over

30% of the number of base radio stations of themobile earth communication network.

2. Annually, the Post and Telematics Ministryshall identify and publicize telecommunicationenterprises holding essential equipment.

3. Telecommunication enterprises holdingessential means shall have the responsibility:

a/ To plan and invest in building telecom-munication networks to ensure the capacity ofservicing the network interconnection and thetransmission of the traffic of telecommunicationservices;

b/ To create favorable conditions for thenegotiation and interconnection of networksand services between telecommunication enter-prises' telecommunication networks in a fairand rational manner on the basis of efficient useof telecommunication resources and commonuse of interconnection positions and technicalinfrastructures under interconnection agree-ments between the involved parties;

c/ To formulate and submit to the Post andTelematics Ministry for approval model inter-connection agreements for uniform applicationto telecommunication enterprises that haveinterconnection requests.

Article 25.- Telecommunication serviceagents

1. Organizations and individuals that wishto provide telecommunication services for usersin the form of telecommunication serviceagency must sign telecommunication serviceagency contracts with telecommunication enter-prises and make business registration accordingto law provisions. Telecommunication serviceagents are classified into commission agentsand resale agents.

2. Commission agents may establish single-line subscriber terminal equipment in the prem-ises which they have the full right to lawfullyuse; link subscriber terminal equipment to pub-lic telecommunication networks by subscriberlines for providing telecommunication servicesin such premises strictly according to the pre-

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scribed service forms, quality and tariffs forcommissions.

3. Resale agents may establish subscriber ter-minal equipment systems (single-line and multi-ple-line) within the premises they have the fullright to lawfully use; link their terminal equip-ment systems to telecommunication networks bytrunk lines or subscriber lines for reselling termi-nal services in such premises strictly according tothe telecommunication service resale regulationsof the Post and Telematics Ministry.

4. On the basis of law provisions on contractsand the Post and Telematics Ministry's regula-tions, telecommunication enterprises shall haveto formulate and promulgate model telecom-munication service agency contracts for uni-form application within their enterprises.

5. Telecommunication service agents shallsubmit to the inspection and supervision by thePost and Telematics Ministry and competentState bodies of their provision of telecommuni-cation services.

Article 26.- Reporting regime of telecom-munication enterprises

1. The Post and Telematics Ministry shallprescribe and promulgate report forms for uni-form application to telecommunication enter-prises.

2. Telecommunication enterprises shall haveto regularly or irregularly report to the Post andTelematics Ministry on their manufacture, busi-ness, technical and professional activities at thelatter's requests and shall be accountable for theaccuracy and timeliness of the reported contentsand data.

3. Telecommunication enterprises shall havethe responsibility to evidence their reporteddata if the Post and Telematics Ministry sorequests and create conditions for the Post andTelematics Ministry to verify the reported datawhen necessary.

4.. Telecommunication enterprises that vio-late the reporting regime shall be sanctionedaccording to current law provisions.

CHAPTER IVINTERCONNECTION

SECTION 1

INTERCONNECTION OF PUBLIC TELECOMMUNICATION NETWORKS

Article 27.- Interconnection principlesThe Post and Telematics Ministry shall for-

mulate and promulgate interconnection regula-tions on the following principles:

1. Telecommunication enterprises mayrequest to connect their telecommunication net-works to telecommunication networks or serv-ices of other enterprises, and at the same timeare obliged to allow other telecommunicationenterprises to connect to their telecommunica-tion networks or services under fair and ration-al conditions.

2. The interconnection of telecommunicationnetworks must be effected on the basis of effi-cient use of telecommunication resources andtechnical infrastructures which have beeninvested and constructed.

3. Service users are guaranteed to:a/ Freely select telecommunication enter-

prises in an convenient and easy manner; b/ Communicate with any users, regardless

of which telecommunication enterprises suchusers have signed contracts with;

c/ Be provided with services and paycharges in a convenient and rational manner.

4. Technical requirements for interconnec-tion are guaranteed to:

a/ Conform to the interconnection standardspromulgated by the Post and TelematicsMinistry;

b/ Ensure safety and integrity of each net-work and the entire public telecommunicationnetworks.

5. Interconnection tariff shall be formulatedon the basis of costs, rationally divided for thenetwork components or service phases withoutdiscrimination among various types of service.

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Where the interconnection tariff is inclusive ofamounts contributed for the provision of pub-lic-utility telecommunication services; suchamounts must be clearly stated.

Article 28.- Model interconnection agree-ments

1. Telecommunication enterprises holdingessential means shall have to formulate modelwritten interconnection agreements with trans-parent and non-discriminatory conditions andsubmit them to the Post and Telematics 1'zin-istry for approval.

2. After being approved, model writteninterconnection agreements shall be made pub-lic for uniform application to all telecom-munication enterprises that have interconnec-tion requests.

3. In addition to the major contents pre-scribed in model written interconnection agree-ments, interconnecting enterprises may reachagreements with one another on other contentsof such agreements provided that such contentsare not contrary to law provisions and do notinfringe upon the State's interests, public inter-ests, legitimate rights and interests of otherorganizations and individuals.

Article 29.- Interconnection points1. Interconnection points are points lying on

the routes that interconnect two telecommuni-cation networks, used to define economic andtechnical responsibilities between two telecom-munication enterprises.

2. The geographical positions of interconnec-tion points: unless otherwise agreed upon in theinterconnection agreements of interconnectingenterprises or otherwise requested by the Postand Telematics Ministry, the geographical posi-tions of interconnection points are prescribed asfollows:

a/ Geographical positions of interconnectionpoints for local communication are local switch-boards or local tandem switchboards;

b/ Geographical positions of interconnec-tion points for domestic long-distance commu-

nication are local tandem switchboards or long-distance switchboards;

c/ Geographical positions of interconnectionpoints for international communication are longdistance switchboards or international switch-boards;

d/ Geographical positions of interconnec-tion points for mobile communication are localtandem switchboards or long-distance switch-boards or mobile switchboards.

3. The positions of interconnection pointswithin a network structure are trunk portals ofinterconnected switchboards.

4. The number of interconnection pointsshall be agreed upon by the interconnectingtelecommunication enterprises themselves, pro-vided that it must abide by the interconnectionprinciples prescribed in Article 27 of thisDecree.

Article 30.- Common use of positions andcommon use of infrastructures

1. Common use of positions.a/ Interconnecting telecommunication

enterprises shall apply the principle of commonuse of positions to interconnection points at allplaces where practical conditions permit inorder to improve efficiency in the use of groundareas, reduce costs and create favorable condi-tions for interconnecting enterprises.

b/ There are two methods of commonlyusing positions, namely commonly using realpositions and commonly using virtual posi-tions. The method of commonly using virtualpositions shall be applied only when it is impos-sible to use the method of commonly using realpositions because interconnection-providingenterprises cannot arrange ground areas andother necessary conditions.

2. Common use of infrastructure.a/ Infrastructure consists of houses and

buildings, cable culverts, cable tanks, cableposts, antenna towers, internal cable lines andaccessory equipment within the buildingswhere are installed interconnection equipment

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and other means which need to be commonlyused in an economical and efficient manner,avoiding waste in investment and constructionand creating favorable conditions for intercon-nection, given that the submitted proposals arerational, economically and technically viableand compliant with current law provisions;

b/ The common use of infrastructure iseffected under contracts agreed upon betweenenterprises. In a number of necessary cases ofinterconnection and establishment of telecom-munication networks, in order to guarantee theinterests of the State, enterprises as well as serv-ice users, the Post and Telematics Ministry shalldecide on the common use of telecom-munication infrastructure when enterprisescannot reach any agreement.

SECTION 2

INTERCONNECTION OF PRIVATEUSETELECOMMUNICATION NETWORKS, SPECIAL-USE TELECOMMUNICATION

NETWORKS TO PUBLIC TELECOMMUNICATION NETWORKS

Article 31.- Interconnection principlesThe interconnection of private-use or

special use telecommunication networks topublic telecommunication networks mustensure the following principles:

1. Private-use or special-use telecommuni-cation networks must satisfy the technical stan-dards applicable to public telecommunicationnetworks.

2. Interconnection shall be effected underwritten interconnection contracts betweentelecommunication enterprises and owners ofprivate-use or special-use telecommunicationnetworks.

3. Private-use or special-use telecommuni-cation networks must not be used for forward-ing by any modes (automatic or manual) domes-tic and international long-distance calls (in bothoutgoing and incoming directions) between ter-

minal equipment outside such networks.4. Private-use and special-use telecommuni-

cation networks must not be directly intercon-nected, unless it is permitted by the Post andTelematics Ministry.

Article 32.- Interconnection points1. Private-use telecommunication networks

may be interconnected by trunk lines to publictelecommunication networks at local switch-boards, local tandem switchboards and at otherinterconnection points prescribed by telecom-munication enterprises.

2. Special-use telecommunication networksmay be interconnected by trunk lines to publictelecommunication networks at local switch-boards, local tandem switchboards, long dis-tance switchboards and at other interconnectionpoints prescribed by telecommunication enter-prises.

Article 33.- Common use of infrastructure 1.Where owners of private-use or special-usetelecommunication networks build by them-selves transmission lines according to their net-work establishment licenses, they shall beresponsible for the whole work of installing,operating and maintaining trunk lines.Telecommunication enterprises shall have toarrange areas for installation of transmissionequipment (if any), cable conduits, cable tanks,antenna posts and masts and other accompany-ing equipment such as power sources, air-con-ditioners, etc., at the sites of their interconnec-tion switchboards for owners of private-use orspecial-use telecommunication networks.

2. The use of telecommunication enterprises'infrastructure shall be effected under contractssigned between private-use or special-usetelecommunication network owners andtelecommunication enterprises.

3. Expenses for the use of telecommunicationenterprises' infrastructure shall be agreed uponby private-use or special-use telecommunica-tion network owners and telecommunicationenterprises.

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CHAPTER V TELECOMMUNICATION NUMBERING

Article 34.- Telecommunication numberingplans

1. Telecommunication numbering plans aredetailed regulations on the structure and usepurposes of codes and numbers for uniformapplication in the whole country in order toensure the operation of telecommunication net-works and services. The collection of telecom-munication codes and numbers is calledtelecommunication number budget.

2. Telecommunication numbering plansinclude:

a/ Plan on numbering of public telecom-munication networks;

b/ Plan on numbering of signaling pointcodes;

c/ Plan on numbering of Internet domainnames and addresses;

d/ Plan on numbering of othertelecommunication service networks.

3. The Post and Telematics Ministry shall for-mulate, promulgate, amend and supplementtelecommunication numbering plans.

Article 35.- Management of the telecommu-nication number budget

1. The Post and Telematics Ministry shall for-mulate and promulgate a Regulation on man-agement of the telecommunication numberbudget.

2. Basing itself on the numbering plans andthe number budget management plan, the Postand Telematics Ministry shall decide on theallocation or withdrawal of telecommunicationcodes and numbers to or from telecommunica-tion enterprises as well as organizations andindividuals.

3. Telecommunication enterprises shall havethe following responsibilities:

a/ To fill in procedures to apply for codes,numbers and number blocks according to thePost and Telematics Ministry's regulations;

b/ To formulate plans on the use of telecom-munication codes and numbers already allocat-ed by the Post and Telematics Ministry;

c/ To grant numbers, lease numbers to, andwithdraw numbers from, service users accord-ing to the Regulation on management of thetelecommunication number budget;

d/ To report to the Post and TelematicsMinistry the plans on, and the situation of, theuse of telecommunication codes and numbersregularly or irregularly when the Post andTelematics Ministry so requests;

e/ Within the scope of allocatedtelecommunication number blocks, on the basisof the telecommunication numbering plans andthe network development plans alreadyapproved by competent authorities, at least 60days before changing subscriber numbers,telecommunication enterprises must notify theconcerned service users of the time of, and nec-essary information about, the number changeplans and instructions on the use of servicesafter their numbers are changed.Telecommunication enterprises must bear allnumber change costs but shall not be liable forindirect damage caused by the number changeto users.

4. Private-use and special-use telecommuni-cation network owners, service agents andusers that are granted or leased codes and/ornumbers shall have to use such granted and/orleased codes and numbers according to theRegulation on management of the telecommu-nication number budget and the guidance oftelecommunication enterprises.

5. The Post and Telematics Ministry shallwithdraw service codes and numbers or sub-scriber number blocks already allocated for usefor other purposes when telecommunicationenterprises or network owners no longer needto use them.

6. When they need to change number blocksor the length of subscriber numbers, telecom-munication enterprises and special-use telecom-

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munication network owners must draw upplans, propose solutions and may only imple-ment them after obtaining the Post andTelematics Ministry's written permission.

7. All agencies, organizations and individu-als must pay charges and fees for using telecom-munication codes and numbers according tolaw provisions.

CHAPTER VITELECOMMUNICATION LICENSES

SECTION 1

GENERAL PROVISIONS ON LICENSING

Article 36.- Licensing principles1. Compliance with Vietnam's telecommuni-

cation development strategies, plannings andplans.

2. Priority shall be given to schemes that canbe quickly executed in practice, with commit-ments to long-term provision for a majority ofservice users; schemes that provide services indeep-lying, remote, border areas and islands;schemes that provide public-utility telecommu-nication services, serve Party and State agen-cies, security and defense.

3. Where the licensing involves the use offrequencies or the number budget, licenses shallbe considered and granted only if the allocationof frequencies or the number budget can beeffected in line with the approved plannings.

4. The licensing of telecommunication enter-prises that have foreign investors as their part-ners must comply with law provisions on for-eign investment and international agreementswhich Vietnam has signed or acceded to.

5. It is strictly prohibited to purchase, sell ortransfer telecommunication licenses of all kinds.In case of organizational change such as merger,dissolution, equitization or change of the State-contributed capital portions, agencies, organiza-tions and enterprises shall have to report such

to the Post and Telematics Ministry for re-grantor withdrawal of licenses strictly according toregulations on the licensed subjects.

6. Agencies, organizations and enterprisesshall bear full responsibility before law for theaccuracy of their dossiers of application fortelecommunication licenses. On the basis of theapplication dossiers, the Post and TelematicsMinistry shall conduct evaluation and grant orrefuse to grant licenses under the provisions ofthis Decree. After receiving telecommunicationlicenses, agencies, organizations and enterprisesshall be responsible for, and take initiative in,carrying out activities stated in their licensesand bear full responsibility before law for theirmanufacture, business and service provisionactivities according to law provisions and theprovisions of their granted licenses.

7. All agencies, organizations and enterpris-es shall be obliged to pay licensing charges andfees according to regulations.

Article 37.- Telecommunication businessesthat do not require licenses

1. Organizations, individuals and enterprisesof all economic sectors that operate lawfully inVietnam may register and conduct telecommuni-cation business activities in the followingdomains without having to apply for licenses:

a/ Manufacture of telecommunication sup-plies and equipment (excluding radio transmit-ters and trans receivers);

b/ Export and import of telecommunicationsupplies and equipment;

c/ Provision of telecommunication servicesin the form of telecommunication serviceagency.

2. In the course of conducting telecommuni-cation business activities, organizations, indi-viduals and enterprises must observe law pro-visions on goods and service quality, regula-tions on information and advertisement, regula-tions on resolution of disputes and compensa-tion and other relevant law provisions.

3. In addition to the provisions of Clause 2 ofthis Article:

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a/ For the manufacture of telecommunica-tion supplies and equipment (excluding radiotransmitters and transreceivers), organizations,individuals and enterprises must observe thetelecommunication equipment quality manage-ment provisions of Article 52 of this Decree;

b/ For the export and import of telecom-munication supplies and equipment, organi-zations, individuals and enterprises mustobserve the telecommunication equipmentquality management provisions of Article 52 ofthis Decree, the radio frequency and equipmentuse provisions of the Government's Decree No.24/2004/ND-CP of January 14, 2004 on radiofrequencies and the Prime Minister's regula-tions on goods export and import managementfor each period;

c/ For the provision of telecommunicationservices in the form of telecommunication serv-ice agency, organizations, individuals andenterprises must observe the telecommunica-tion service agency provisions of Article 25 ofthis Decree.

SECTION 2

LICENSING OF THE ESTABLISHMENT OFTELECOMMUNICATION NETWORKS AND

PROVISION OF TELECOMMUNICATION SERVICES

Article 38.- Licensing conditions1. Conditions on subjects:Being State enterprises or enterprises where

the State holds dominant or special shares.2. Conditions on professional and financial

capabilities:a/ Having adequate financial and profes-

sional manpower capabilities suitable to thescales of the schemes for execution as licensed;

b/ Having feasible technical plans on net-work development and service provision plansin compliance with current regulations on inter-connection, information resource use, servicetariff, technical standards and quality;

c/ Having contingency plans for assuringsafety when technical incidents occur;

d/ Having equipment, facilities, technicaland professional plans for assuring networksafety and information security.

Article 39.- Licensing procedures 1. Application dossiers.Each enterprise shall compile 3 sets of appli-

cation dossier (1 original and 2 copies). Eachdossier set consists of:

a/ The enterprise's application for a license; b/ The business registration certificate or

investment license;c/The enterprise's organization and opera-

tion charter;d/ The service provision scheme with the

following principal contents:- The business plan on types of services;

service provision scope; service standards andquality; tariff; market and turnover forecast andanalysis; total investment capital and allocationof capital for each period; investment form, cap-ital mobilization plans; manpower;

- The technical plan on network configura-tion and equipment, including main and stand-by parts; network and equipment capabilityanalysis; capacity of transmission lines; corre-sponding information resources; equipmentand technical and professional measures forassuring information safety and security;

- Commitments to implement the schemeapplied for a license for the long-term provisionof telecommunication services for users, and toobserve telecommunication management regu-lations.

2. Dossier-processing time and procedures. The Post and Telematics Ministry shall

receive application dossiers, conduct evaluationwithin 75 days, counting as from the date ofreceiving valid dossiers. In case of refusal, thePost and Telematics Ministry shall have to issuewritten notices, clearly stating the refusal rea-sons to the applying enterprises. Where applica-tion dossiers basically meet the technical and

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professional requirements, the Post andTelematics Ministry shall solicit written opin-ions of the concerned ministries and brancheson the enterprises' applications for telecommu-nication network establishment or telecommu-nication service provision licenses, then synthe-size and submit them to the Prime Minister forapproval. If receiving the Prime Minister's writ-ten approvals, within 15 days after the date ofreceiving such approvals, the Post andTelematics Ministry shall have to grant licensesto the enterprises.

3. Amendment and supplementation of thelicenses' contents.

a/ While their licenses remain valid, if theenterprises wish to amend and/or supplementthe licenses' contents, they must send dossiersof application therefor to the Post andTelematics Ministry;

b/A dossier of application for amendmentand supplementation consists of an applicationfor amendment and supplementation of thelicense's contents; a copy of the still validlicense; a report on the e=enterprise's operation;a detailed written description of the amendedand/or supplemented contents and other relat-ed documents;

c/ The Post and Telematics Ministry shallconduct evaluation and consider the grant ofamended and/or supplemented licenses within60 days, counting from the date of receivingvalid dossiers. In case of refusal to grant amend-ed and/or supplemented licenses, the Post andTelematics Ministry shall have to issue writtenreplies, clearly stating the refusal reasons to theapplying enterprises.

4. Extension of licenses.a/ Enterprises which wish to extend their

licenses must send extension applicationdossiers to the Post and Telematics Ministry 60days before their licenses expire. An extensionapplication dossier shall consist of an applica-tion for license extension and a copy of the stillvalid license;

b/ The Post and Telematics Ministry shallconduct evaluation and consider the extensionof licenses within 60 days, counting from thedate of receiving valid dossiers. In case ofrefusal to extend licenses, the Post andTelematics Ministry shall have to issue writtenreplies, clearly stating the reasons to the apply-ing enterprises;

c/ Each license shall be extended only onceand the extended duration shall not exceed oneyear.

5. Withdrawal of licenses. Telecommunication network establishment

and service provision licenses shall be with-drawn in the following cases:

a/ Past 02 years counting from the date theyare granted licenses but the enterprises have notyet carried out in reality activities stated in theirlicenses without plausible reasons. If wishing toapply for new licenses, enterprises having theirlicenses withdrawn shall have to fill in all proce-dures prescribed for application of new licenses;

b/ Enterprises are handled for violations inthe telecommunication domain according tolaw provisions under which their licenses arewithdrawn.

SECTION 3

LICENSING OF THE PROVISION OFTELECOMMUNICATION SERVICES

Article 40.- Licensing conditions1. Conditions on subjects:Enterprises of all economic sectors, which

are established under law provisions.2. Technical and professional conditions:a/ Having technical plans on telecom-

munication equipment system developmentwithin their premises and public service pointsand feasible telecommunication service busi-ness plans in compliance with current regula-tions on network establishment, interconnec-tion, information resource use, tariff, technolo-gy and service quality;

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b/ Having contingency plans for assuringsafety when technical incidents occur;

c/ Having equipment and technical and pro-fessional plans for assuring network safety andinformation security.

Article 41.- Licensing procedures 1. Application dossiersEach enterprise shall compile three (03) sets

of application dossier (1 original and 2 copies).Each dossier set consists of:

a/ The enterprise's application for a license; b/ The business registration certificate or

investment license;c/ The enterprise's organization and opera-

tion charter;d/ The service provision scheme with the

principal contents prescribed at Point d, Clause1, Article 39 of this Decree.

2. Dossier-processing timeThe Post and Telematics Ministry shall con-

duct evaluation and grant licenses within 60days, counting from the date of receiving validdossiers. If there emerge matters in need of re-evaluation, the above-said time limit may beprolonged but must not exceed 75 days, count-ing from the date of receiving valid dossiers. Incase of refusal to grant licenses, the? Post andTelematics Ministry shall have to issue writtenreplies, clearly stating the reasons to the apply-ing enterprises.

3. Amendment and supplementation of thelicenses' contents; extension and withdrawal oflicenses.

To comply with the provisions of Clauses 3,4 and 5, Article 39 of this Decree.

SECTION 4

LICENSING OF THE EXPERIMENTATION OFTELECOMMUNICATION NETWORKS AND

SERVICES

Article 42.- Subjects to be licensed1. Telecommunication enterprises that wish

to experimentally provide new telecommuni-

cation services for the public other than theservices prescribed in their granted licenses ornew telecommunication services involving theuse of telecommunication resources.

2. Agencies, organizations and enterprisesthat wish to experiment private-use telecom-munication networks involving the use oftelecommunication resources.

Article 43.- Licensing procedures 1. Application dossiersEach application dossier shall be made in 3

sets (1 original and 2 copies). Each set consistsof:

a/ An application for a license for experi-mental establishment or experimental provisionof services:

b/The scheme on the experimental establish-ment of a network or experimental provision ofservices, clearly identifying the experimentationpurposes, scope and period; network configura-tion, types of services and the experimentationcooperation party (if any); projected tariffs (ifany); frequencies, number budget for the exper-imentation (if any); terms and conditions forensuring users' interests if the enterprise doesnot put services into official provision after theexperimental service provision period expires;

c/ A copy of the telecommunication license(if any).

2. Dossier-processing timeThe Post and Telematics Ministry shall con-

duct evaluation and grant or refuse to grantlicenses within 30 days, counting from the dateof receiving valid dossiers. In case of refusal, thePost and Telematics Ministry shall have to issuewritten replies, clearly stating the refusal rea-sons to the applying agencies, organizations orenterprises.

3. Extension of the experimentation perioda/ Enterprises that wish to extend the experi-mentation period must send extension applica-tion dossiers to the Post and TelematicsMinistry 15 days before their licenses expire.Such an extension application dossier shall con-

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sist of an application clearly stating the exten-sion reasons and a copy of the still valid experi-mentation license;

b/ The Post and Telematics Ministry shallconduct evaluation and consider the extensionwithin 15 days, counting from the date ofreceiving valid dossiers. In case of refusal, thePost and Telematics Ministry shall have to issuewritten replies, clearly stating the refusal rea-sons to the applying agencies, organizations orenterprises.

c/ The extended period or the total time ofextensions shall not exceed one year.

4. Upon the expiry of the experimentationtime limit, agencies, organizations or enterpris-es shall have to conduct a review, finalize theexperimentation dossiers and report the experi-mentation results to the Post and TelematicsMinistry.

5. After the experimentation period, if agen-cies, organizations or enterprises that conductthe experimentation wish to put their networksor services into official operation, they mustapply for licenses to the Post and TelematicsMinistry. The application procedures shall com-ply with the provisions of Sections 2 and 3,Chapter \/I of this Decree.

6. Withdrawal of licensesTelecommunication network and service

experimentation licenses shall be withdrawn inthe following cases:

a/ Past 06 months, counting from the datethey are granted licenses, but the agencies,organizations or enterprises have not yet car-ried out in reality activities stated in their licens-es without plausible reasons. If wishing toapply for new licenses, agencies, organizationsor enterprises having their licenses withdrawnshall have to fill in all procedures prescribed forapplication of new licenses;

b/ Enterprises are handled for violations inthe telecommunication domain according tolaw provisions under which their licenses arewithdrawn.

SECTION 5

LICENSING OF THE ESTABLISHMENT OF PRIVATE-USE TELECOMMUNICATION

NETWORKS

Article 44.- Licensing conditions Agencies, organizations or enterprises wish-

ing to establish private-use telecommunicationnetworks must ensure the following conditions:

1. The establishment of private-use telecom-munication networks is only for ensuring com-munication among the network members, notfor business purposes and profits.

2. Having technical and professional plansfor assuring safety and security for private-usetelecommunication networks.

Article 45.- Licensing procedures 1. Application dossiers.Application dossiers: Each dossier of appli-

cation for a license for establishing an private-use telecommunication network shall be madein 3 sets (1 original and 2 copies). Each dossierset consists of:

a/ An application for a license for establish-ing an private-use telecommunication network.The written request of the Foreign Ministry ifthe applicants are Vietnam-based foreign diplo-matic representations, consulates or representa-tive offices of international organizations whichenjoy diplomatic or consular privileges andimmunities;

b/ The applying agency's or organization'sestablishment decision or operation license orthe applying enterprise's business registrationcertificate;

c/ The operation charter or legal document(s)defining the common organizational structureor the common form of association or activity ofmembers (if any);

d/ The network establishment scheme,clearly stating the network establishment pur-pose; network configuration; categories ofequipment; to be-used services; network mem-bers (if any); operation scope; to be-used tech-

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nology; to be used frequencies, codes and num-bers (if any).

2. Dossier-processing timeThe Post and Telematics Ministry shall con-

duct evaluation and grant or refuse to grantlicenses within 30 days, counting from the dateof receiving valid dossiers. In case of refusal, -the Post and Telematics Ministry shall have toissue written replies, clearly stating the refusalreasons to the applying agencies, organizationsor enterprises. If there emerge matters in needof re-evaluation, the licensing time limit may beprolonged but must not exceed 45 days, count-ing from the date of receiving valid dossiers.

3. Amendment and supplementation of thelicenses' contents

a/ The licensed agencies, organizations orenterprises that wish to amend or supplementthe network configuration, types of services ornetwork operation scope must send dossiers ofapplication therefor to the Post and TelematicsMinistry;

b/A dossier of application for amendmentand supplementation consists of an applicationfor amendment and supplementation; a detailedwritten description of the proposed amend-ments and/or supplements; other documentsrelated to the amendment and/or supplementa-tion; and a copy of the still valid license;

c/ The Post and Telematics Ministry shallconduct evaluation and grant or refuse to grantamended and/or supplemented licenses within15 days, counting from the date of receivingvalid dossiers. In case of refusal to grant amend-ed and/or supplemented licenses, the Post andTelematics Ministry shall have to issue writtenreplies, clearly stating the refusal reasons to theapplying agencies, organizations or enterprises.

4. Extension of licensesa/ Agencies, organizations or enterprises

which wish to extend their licenses must sendextension application dossiers to the Post andTelematics Ministry 15 days before their licens-es expire;

b/ An extension application dossier consistsof a license extension application and a copy ofthe still valid license;

c/ The Post and Telematics Ministry shallconduct evaluation and consider the extensionwithin 10 days, counting from the date ofreceiving valid dossiers. In case of refusal toextend licenses, the Post and TelematicsMinistry shall have to issue written replies,clearly stating the refusal reasons to the apply-ing agencies, organizations or enterprises;

d/ The extended period or the total time ofextensions shall not exceed one year.

5. Withdrawal of licensesPrivate-use telecommunication network

establishment licenses shall be withdrawn inthe following cases:

a/ Past one year as from the date they aregranted licenses but the agencies, organizationsor enterprises have not yet carried out in realityactivities stated in their licenses without plausi-ble reasons. If wishing to apply for new licens-es, agencies, organizations or enterprises hav-ing their licenses withdrawn shall have to fill inall procedures prescribed for application of newlicenses;

b/ Enterprises are handled for violations inthe telecommunication domain according tolaw provisions under which their licenses arewithdrawn.

SECTION 6

LICENSING OF THE INSTALLATION OFTELECOMMUNICATION CABLES IN

VIETNAM'S EXCLUSIVE ECONOMIC ZONEOR CONTINENTAL SHELF

Article 46.- Licensing conditions1. Commitments to observe Vietnamese laws

and international agreements which theSocialist Republic of Vietnam has signed oracceded to.

2. Commitments to submit to the supervi-sion by competent Vietnamese management

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bodies and bear all expenses for this activity.Article 47.- Licensing procedures1. Application dossiers: Each dossier of

application for a license for laying telecom-munication cables in the exclusive economiczone or continental shelf of Vietnam must bemade in 5 sets (01 original and 04 copies). Eachdossier set consists of:

a/ An application for a license for layingtelecommunication cables in the exclusive eco-nomic zone or continental shelf of Vietnam;

b/ The scheme on the laying oftelecommunication cables in the exclusive eco-nomic zone or continental shelf of Vietnam,with the following contents:

- Nature, purpose and scope of the cable line,especially matters related to marine survey andsubmarine operations;

- Technical design and geographical posi-tion, precise co-ordinates of the telecommunica-tion cable line to be laid;

- Plans on the construction and assurance ofsecurity and marine environment.

2. Dossier-processing timea/ The Post and Telematics Ministry shall

receive application dossiers and send them tothe concerned ministries and branches for opin-ions before granting licenses.

b/ The Post and Telematics Ministry shallgrant licenses within 90 days, counting from thedate of receiving valid dossiers. In case ofrefusal to grant licenses, the Post and TelematicsMinistry shall have to issue written replies,clearly stating the refusal reasons to the apply-ing organizations.

c/ On the basis of the granted licenses, thePost and Telematics Ministry shall collaboratewith the Public Security Ministry and theDefense Ministry in permitting vessels toengage in surveys, construction, repair andmaintenance of telecommunication cables in theexclusive economic zone or continental shelf ofVietnam according to the licenses and law pro-visions.

3. Amendment and supplementation of thelicenses' contents

a/ While their licenses remain valid, if theorganizations wish to amend or supplementtheir contents, they must send dossiers of appli-cation therefor to the Post and TelematicsMinistry;

b/ A dossier of application for amendmentand supplementation consists of an applicationfor amendment and supplementation of thelicense's contents; a copy of the still validlicense; a detailed written description of theproposed amendments and/or supplementsand other related documents;

c/ The Post and Telematics Ministry shallconduct evaluation and consider the grant ofamended and/or supplemented licenses within60_days, counting from the date of receivingvalid dossiers. In case of refusal to grant amend-ed and/or supplemented licenses, the Post andTelematics Ministry shall have to issue writtenreplies, clearly stating the reasons to the apply-ing organizations.

4. Extension of licensesa/ The licensed organizations that wish to

extend their licenses must send extension appli-cation dossiers to the Post and TelematicsMinistry 90 days before their licenses expire. Anextension application dossier consists of alicense extension application and a copy of thestill valid license;

b/ The Post and Telematics Ministry shallconduct evaluation and consider the extensionof licenses within 90 days, counting from thedate of receiving valid dossiers;

c/ In case of refusal to extend licenses, thePost and Telematics Ministry shall have to issuewritten replies, clearly stating the reasons to theapplying organizations;

d/ Each license may be extended only onceand the extended time shall not exceed oneyear.

5. Withdrawal of licensesLicenses for laying telecommunication

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cables in the exclusive economic zone or conti-nental shelf of Vietnam shall be withdrawnwhen the licensed organizations are handed forviolations in the telecommunication domainaccording to law provisions under which theirlicenses must be withdrawn.

CHAPTER VIIPROVISION OF PUBLIC-UTILITY

TELECOMMUNICATION SERVICES

Article 48.- Public-utility telecommunica-tion services

1. Public-utility telecommunication servicesinclude universal telecommunication servicesand compulsory telecommunication services,which are telecommunication services essentialto the society and the State assures their provi-sion with the quality and tariff prescribed bycompetent State bodies.

2. On the basis of the telecommunication andInternet development plannings, the Post andTelematics Ministry shall have the responsibility:

a/ To formulate the program on the provi-sion of public-utility telecommunication servic-es and submit it to the Prime Minister forapproval;

b/ To prescribe, and give specific guidanceon, the list, subjects and scope of provision ofpublic-utility telecommunication services;

c/ To formulate and implement the annualplans on the provision of public-utility telecom-munication services.

3. The concerned State management bodiesshall base themselves on their respective func-tions, tasks and powers to coordinate with thePost and Telematics Ministry in implementingthe programs and plans on the provision ofpublic-utility telecommunication services.

Article 49.- Financial mechanisms to supportthe provision of public-utility telecommunica-tion services

1. The State shall support enterprises to pro-

vide public-utility telecommunication servicesthrough:

a/ Interconnection charges;b/ The Vietnam fund for public-utility

telecommunication services.2. The Vietnam fund for public-utility

telecommunication services is a State financialinstitution, attached to the Post and TelematicsMinistry and operating not for profits.

3. Sources for forming the Vietnam fund forpublic-utility telecommunication servicesinclude:

a/ Capital contributed by telecommunica-tion enterprises: compulsory contributions oftelecommunication enterprises to the Vietnamfund for public-utility telecommunication serv-ices shall be accounted in the enterprises' pro-duction and business costs. The Prime Ministershall specify the mechanism on contributions oftelecommunication enterprises;

b/ The State budget's supports for the char-ter capital and capital for implementing the pro-grams assigned by the Government;

c/ Official development assistance amountsand contributions of organizations and individ-uals at home and abroad;

d/ Other capital sources mobilized accord-ing to law provisions.

4. The Prime Minister shall decide on theorganization and operation of the Vietnam fundfor public-utility telecommunication services.

Article 50.- Rights and obligations oftelecommunication enterprises providing pub-lic utility telecommunication services

1. To participate on an equal basis in imple-menting the State programs and projects onproviding public-utility telecommunicationservices according to law provisions.

2. To fully and timely fulfil the obligation tomake financial contributions to the fund forpublic-utility telecommunication servicesaccording to regulations.

3. To collaborate with, and create favorableconditions for, other telecommunication enter-

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prises to implement programs and projects onproviding public-utility telecommunicationservices according to regulations of the Statemanagement agency in charge of telecommuni-cations.

4. To comply with the State regulations onthe provision of public-utility telecommunica-tion services.

CHAPTER VIIITELECOMMUNICATION QUALITY

STANDARDS

Article 51.- System of telecommunicationquality standards

1. The system of telecommunication qualitystandards consists of standards for compulsoryapplication and standards for voluntary appli-cation to telecommunication equipment, net-works, network interconnection, services andworks.

2. Compulsorily applied standards includebranch standards, Vietnamese standards andinternational standards publicized by the Post andTelematics Ministry for compulsory application.

3. Voluntarily applied standards are thosewhich organizations and individuals publicizeto voluntarily apply.

4. The Post and Telematics Ministry shallprescribe the formulation, promulgation andapplication of telecommunication quality stan-dards.

Article 52.- Telecommunication equipmentquality management

1. The quality of telecommunication equip-ment is managed through standard conformitycertification based on the standards publicizedby the Post and Telematics Ministry for compul-sory application or voluntarily applied byorganizations or individuals in accordance withlaw provisions.

2. The mutual recognition of standard con-formity certification of telecommunication

equipment between Vietnam and foreign coun-tries as well as international organizations shallcomply with the agreements which Vietnam hassigned or acceded to. The Post and TelematicsMinistry is an agency representing Vietnam inparticipating in the mutual recognition agree-ments on standard conformity certification inthe telecommunication domain.

3. The Post and Telematics Ministry shallprescribe and publicize the lists of home-madeand imported telecommunication equipmentsubject to standard conformity certificationbefore they are permitted for circulation in theVietnamese market or connection to publictelecommunication networks.

4. Organizations and individuals are encour-aged to voluntarily obtain standard conformitycertificates for telecommunication equipmentnot included in the lists stated in Clause .3 ofthis Article.

5. Telecommunication equipment which aredomestically circulated and imported mustcomply with the goods labeling regulations andother law provisions.

6. The Post and Telematics Ministry shallspecify the telecommunication equipment qual-ity management contents, forms and proce-dures.

Article 53.- Telecommunication service andnetwork quality management

1. The quality of telecommunication servicesand networks is managed through quality pub-licization based on the standards publicized bythe Post and Telematics Ministry for compulso-ry application or voluntarily applied by organi-zations or individuals in accordance with lawprovisions.

2. The Post and Telematics Ministry shall pre-scribe the lists of telecommunication networksand services subject to quality management andstandards for compulsory application.

3. For telecommunication services and net-works on the lists of those subject to qualitymanagement, telecommunication enterprises

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must publicize their quality standards whichare not contrary to standards prescribed by thePost and Telematics Ministry for compulsoryapplication and report to the Post andTelematics Ministry on their actual qualityaccording to regulations. For telecommunica-tion services and networks not on the lists stat-ed in Clause 3 of this Article, telecommunica-tion enterprises must formulate by themselvesand publicize the quality standards appliedthereto.

4. Organizations, individuals and enterpris-es are encouraged to voluntarily apply the qual-ity management system. Telecommunicationenterprises shall be responsible for the publi-cized quality standards, maintain the qualityaccording to the publicized standards; ascertainthat the owners of intranets which are operatedfor charges and interconnected to their net-works and their telecommunication agentsensure the publicized quality of their telecom-munication networks and/ or services.

5. The Post and Telematics Ministry shallpromulgate regulations on the telecommuni-cation service and network quality manage-ment, inspect and handle violations related totelecommunication service and network quality.

Article 54.- Telecommunication work quali-ty management

1. The quality of telecommunication works ismanaged through quality inspection based onthe standards publicized by State managementbodies for compulsory application or voluntari-ly applied by telecommunication enterprises inaccordance with law provisions.

2. The Post and Telematics Ministry shallprescribe the list of telecommunication workssubject to quality inspection before they arecommissioned.

3. The Post and Telematics Ministry shallpromulgate regulations on the telecommuni-cation work quality management, inspect andhandle violations related to the quality oftelecommunication works.

Article 55.- Quality test1. The Post and Telematics Ministry shall

promulgate regulations on telecommunicationtest management in service of the quality man-agement aiming to build up and developtelecommunication testing agencies, coordinateand combine the testing capabilities of theestablishments.

2. The mutual recognition of telecommuni-cation test results between Vietnam and foreigncountries as well as international organizationsshall comply with the international agreementswhich Vietnam has signed or acceded to. The Postand Telematics Ministry is an agency representingVietnam in participating in the agreements onmutual recognition of telecommunication testresults and the designated agency within theframework of these agreements.

CHAPTER IX TELECOMMUNICATION TARIFFS

Article 56.- Principles for the State manage-ment over tariffs

1. The State respects the telecommunicationenterprises' right to set tariffs by themselvesand to compete on tariffs according to law pro-visions, encourages them to raise efficiency,reduce costs of, and tariffs on, services in orderto increase the society's use of services and theeconomy's competitiveness.

2. The State shall take necessary measures tostabilize tariffs, ensure non-discrimination intariffs, protect the legitimate rights and interestsof service users, telecommunication service pro-viding enterprises and the State.

Article 57.- Bases for setting tariffs1. Telecommunication service tariffs are

determined on the basis of the production costsof services and the supply-demand relation onthe market.

2. For services with their tariffs set by theState, their tariffs are determined also on thebasis of national socio-economic development

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and telecommunication development policies ineach period as well as the rational interrelationto telecommunication service tariffs in theregion sand the world.

Article 58.- Tariff management tasks andcompetence

1. The Prime Minister:a/ To promulgate telecommunication serv-

ice tariff management policies and mechanisms; b/ To decide on tariffs on important telecom-

munication services which have impacts on manybranches and socio-economic development.

2. The Post and Telematics Ministry:a/ To decide on public-utility telecommuni-

cation service tariffs (excluding services on whichthe tariffs are decided by the Prime Minister);

b/ To decide on tariffs on telecommunica-tion services which have impacts on thetelecommunication market, for application tousers of telecommunication enterprises holdingdominant market shares;

c/ To decide on tariffs on interconnectionbetween telecommunication enterprises;

d/ To prescribe the tariff management bytelecommunication service-providing enterprises;

e/ To guide telecommunication enterprisesto observe the State's regulations and decisionson telecommunication service tariff manage-ment. 3. Telecommunication enterprises:

a/ To account expenditures to determinetelecommunication service costs;

b/ To set specific tariffs on telecommunica-tion services not on the State-prescribed liststrictly according to the tariff management reg-ulations issued by competent State bodies;

c/ To observe competent State bodies' regu-lations and decisions on telecommunicationservice tariff management.

CHAPTER X SETTLEMENT OF DISPUTES

Article 59.- Settlement of disputes betweentelecommunication service providers and users

1. The settlement of disputes betweentelecommunication service providers and usersshall be effected through negotiations betweenthe involved parties. Unless otherwise providedfor in the telecommunication service provisionand use contracts, the statute of limitations fordispute settlement is prescribed as follows:

a/ For tariffs, it shall be one month, countingfrom the date of receiving the first charge pay-ment notice or bill or from the date of paymentof service charges;

b/ For service quality standards and otherviolations, it shall be three months, countingfrom the date of service use or commission ofviolations.

2. Where the involved parties fail to reachany agreement through negotiations, they mayrequest competent State bodies to settle theirdisputes according to law provisions.

Article 60.- Consultation, settlement of inter-connection disputes between telecommuni-cation enterprises

1. Telecommunication enterprises mayrequest the Post and Telematics Ministry to set-tle disputes related to interconnection of publictelecommunication networks.

2. The Post and Telematics Ministry shallconsider and decide on the settlement of dis-putes within 30 days, counting from the date ofreceiving the enterprises' written requests fordispute settlement. In case of refusal to settledisputes, the Post and Telematics Ministry shallhave to issue written replies, clearly stating thereasons therefor to the enterprises.

3. The dispute settlement shall follow the fol-lowing order:

a/ The Post and Telematics Ministry organ-izes consultations between the involved parties.The time limit for such consultations shall notexceed 60 days, counting from the date the Postand Telematics Ministry decides to organize thedispute settlement;

b/ If the involved parties cannot reach anyagreement after consultations, the Post and

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Telematics Ministry shall issue decisions to set-tle disputes within 30 days after the end of con-sultations. After the Post and TelematicsMinistry issues dispute settlement decisions:

- The two involved parties must execute thedecisions;

- Where the enterprises disagree with thePost and Telematics Ministry's decisions, theymay file further requests for dispute settlementor initiate lawsuits for settlement according tolaw provisions. During the time of filing furtherrequests for dispute settlement or initiating law-suits, the two involved parties must still complywith the Post and Telematics Ministry's disputesettlement decisions.

CHAPTER XIINSPECTION, EXAMINATION, HANDLING OF VIOLATIONS

Article 61.- inspection, examinationAll Vietnamese and foreign organizations

and individuals carrying out telecommunica-tions related activities in Vietnam shall be sub-ject to the inspection and examination by thespecialized post and telecommunication aswell as information technology inspectorates

and by competent State bodies according tolaw provisions.

Article 62.- Handling of violationsVietnamese and foreign organizations and indi-viduals that commit law violation acts in thetelecommunication domain shall all be sanc-tioned for administrative violations and han-dled according to current law provisions.

CHAPTER XIIIMPLEMENTATION PROVISIONS

Article 63.- Implementation organizationThe Post and Telematics Ministry shall have topromulgate detailed regulations and guidanceon the implementation of this Decree.

Article 64.- Implementation effectThis Decree takes effect 15 days after its pub-

lication in the Official Gazette. All previous reg-ulations contrary to this Decree are herebyannulled.

Article 65.- Implementation provisionThe ministers, the heads of the ministerial

level agencies, the heads of the Governmentattached agencies, and the presidents of theprovincial/municipal People's Committeesshall have to implement this Decree.

On behalf of the GovernmentPrime Minister

PHAN VAN KHAI

THE GOVERNMENT

Pursuant to the December 25, 2001 Law onOrganization of the Government;

Pursuant to the May 25, 2002 Ordinance on Postand Telecommunications;

At the proposal of the Minister of Post andTelematics,

DECREES:

CHAPTER I

GENERAL PROVISIONS

Article 1. Scope of regulationThis Decree details the implementation of a

number of articles of the Ordinance on Post andTelecommunications regarding the activities ofmanaging and using radio frequencies, radioequipment and satellite orbits under Vietnam'ssovereignty.

Article 2. Subjects of applicationThis Decree applies to Vietnamese organiza-

tions and individuals as well as foreign organi-zations and individuals using radio frequenciesand equipment in Vietnam.

Where an international agreement which theSocialist Republic of Vietnam has signed oracceded to contains provisions on radio fre-quencies different from the provisions of this

Decree, the provisions of such internationalagreement shall apply.

Article 3. State management over radio fre-quencies

1. The Government performs uniform Statemanagement over radio frequencies nation-wide.

2. The Ministry of Post and Telematics takesresponsibility before the Government for per-forming the State management over radio fre-quencies.

3. The contents of specialized State manage-ment over radio frequencies include:

a/ Formulating, and organizing the imple-mentation of, radio frequency plannings; prom-ulgating, or submitting to the Government or thePrime Minister for promulgation, legal docu-ments on management and use of radio frequen-cies and equipment as well as satellite orbits;

b/ Effecting international coordination in,and registration of, radio frequencies and satel-lite orbits; allocating and fixing frequencies;granting frequency band licenses, licenses foruse of radio frequencies and radio transmitters(hereinafter called radio frequency licenses);collecting and managing fees and charges forthe use of radio frequencies according to lawprovisions;

c/ Examining and controlling radio frequen-cies, dealing with harmful interference andmanaging electro-magnetic compatibility;

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Annex 9Decree on Spectrum Management

(Unofficial Translation)

DECREE No. 24/2004/ND-CP OF JANUARY 14, 2004 DETAILING THEIMPLEMENTATION OF A NUMBER OF THE NUMBER OF ARTICLES OF THEORDINANCE ON POST AND TELECOMMUNICATIONS REGARDING RADIOFREQUENCIES

inspecting and sanctioning administrative vio-lations in the radio frequency domain.

Article 4. Interpretation of terms and phrasesIn this Decree, the following terms and

phrases are construed as follows:1. "Fixed service" means a radiocommunica-

tion service between specified fixed points.2. "Mobile service" means a radiocommuni-

cation service between mobile and land sta-tions, or between mobile stations.

3. "Maritime mobile service" means a mobileservice between coast stations and ship stations,or between ship stations, or between on-boardcommunication stations.

4. "Aeronautical mobile service" means amobile service between aeronautical stationsand aircraft stations, or between aircraft stations.

5. "Broadcasting service" means a radiocom-munication service in which the transmissionsare intended for direct reception by the generalpublic. This service may include radio transmis-sions, television transmissions or other types oftransmission.

6. "Amateur service" means a radiocommu-nication service for the purpose of self-training,intercommunication and technical investiga-tions carried out by amateur operators who areduly permitted and are interested in radio tech-niques solely with a personal aim and withoutprofit interest.

7. "Station" means one or more radio equip-ment, including the accessory equipment, nec-essary at one location for carrying out a radio-communication service. Each station shall beclassified by the service in which it operates per-manently or temporarily.

8. "Satellite communication station" means astation located in the atmosphere or on the sur-face of the earth for communication with one ormore space stations or intercommunicationwith one or more stations of the same type viathe reflecting satellite.

9. "Mobile station" means a station in themobile service intended to be used while in

motion or during halts at unspecified points.10. "Coast station" means a station in the

maritime mobile service, which is located onland or islands for intercommunication withships and boats.

11. "Ship station" means a mobile station inthe maritime mobile service located on board aship or boat which is not permanently moored.

12. "Station located on fishing means" meansa station located on a ship, boat or means,mobile or immobile on the sea, intended to beused for exploiting, processing, culturing andcollecting aquatic resources, providing logisticalservices, investigating, exploring, examining,controlling and protecting aquatic resources.

13. "Aircraft station" means a mobile stationin the aeronautical mobile service located onboard an aircraft.

14. "Amateur station" means a station in theamateur service.

15. "Cordless telephone" (of an extendedsubscriber type) means a receiver-transmitter,consisting of two parts linked to each other byradio waves:

- "First part, base unit" is a fixed part, con-nected to a telephone network;

- "Second part, handset" is a part which maybe placed fixedly or carried in motion and sharesthe same telephone number with its base unit.

16. "Out-of-band-emission" means emissionon a frequency or many frequencies immediate-ly outside the necessary bandwidth, whichresults from the modulation process, butexcluding spurious emissions.

17. "Spurious emission" means emission on afrequency or many frequencies which are out-side the necessary bandwidth and the level ofwhich may be reduced without affecting thecorresponding transmission of information.

18. "Unwanted emission" means emissionconsisting of spurious emission and out-of-band emission.

19. "Harmful interference" means interfer-ence which endangers the functioning of lawful

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radio services, obstructs or interrupts a radio-communication service currently permitted tooperate.

20. "Allocation of a frequency band" meansthe designation of a given frequency band foruse by one or many organizations or enterpris-es under specified conditions in a radio serviceor a radiocommunication system.

21. "Assignment of a radio frequency" meansthe permission by a managing agency for a sta-tion to use a radio frequency or a radio frequen-cy channel under specific conditions.

22. "Primary service" means a service thename of which is printed in capital letters(example: FIXED) in the Table of Allocation ofthe Radio Frequency Spectrum to Services.

23. "Secondary service" means a service thename of which is printed in normal letters(example: Mobile) in the Table of Allocation ofthe Radio Frequency Spectrum to Services.

CHAPTER IIPLANNING ON, AND ALLOCATION OF,

RADIO FREQUENCIES

Article 5. The radio frequency spectrumplanning

1. The radio frequency spectrum planning isa plan on the division of the radio frequencyspectrum into frequency bands reserved for dif-ferent services in each period and the prescrip-tion of conditions for establishing the order inexploiting and optimally using radio frequen-cies nationwide.

The Ministry of Post and Telematics shallformulate and submit to the Prime Minister forapproval the national radio frequency spectrumplanning.

2. Basing itself on the national radio frequen-cy spectrum planning, the Ministry of Post andTelematics shall promulgate the band planning,the channel planning and regional radio fre-quency plannings.

a/ The band planning shall specify the con-

ditions and purposes for the use of a number ofband sections for a specific category of radio-communication service or radiocommunicationsystem. The band planning is elaborated on thebasis of the used technologies, the necessaryband number limits, the service developmentdemands and the bands reserved for new tech-nologies and demands.

b/ The channel planning divides each bandinto different groups of frequency channels fora specific category of radiocommunication serv-ice according to a certain system of technicalstandards. The channel planning is elaboratedon the basis of channel division recommenda-tions and technical standards of theInternational Telecommunication Union forestablishing the order in using radio frequencychannels and restricting harmful interferencebetween radio equipment.

c/ Regional radio frequency planningsestablish zones for reusing frequencies for aspecific category of radiocommunication serv-ice in a number of band sections in the frequen-cy band of between 30 MHz and 3,000 MHz.The regional radio frequency plannings areelaborated on the basis of recommendationsand technical standards of the InternationalTelecommunication Union in order to raise theefficiency in the use of the radio frequency spec-trum and limit harmful interference betweenradio equipment.

Article 6. Implementation of the plannings1. It is strictly forbidden to manufacture,

import or use radio equipment and radio-waveappliances in Vietnam in contravention of theplanning (excluding equipment temporarilyimported for re-export; equipment manufac-tured for export; and equipment for technologi-cal display at exhibitions or trade fairs).

2. The plannings on development of elec-tronics, telecommunications, radio and televi-sion broadcasting and other socio-economicdevelopment plannings related to the use ofradio frequencies must be evaluated by the

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Ministry of Post and Telematics in terms ofradio frequency before they are submitted to thePrime Minister for approval.

3. For radio equipment and telecommunica-tion networks having used radio frequencies atvariance with the planning before the planningtakes effect, the Ministry of Post and Telematicsshall prescribe specific measures and time limitsfor converting the equipment and frequencies tocomply with the planning and suit the practicalconditions for their use in Vietnam on the fol-lowing principles:

a/ For equipment which may be adjustedwith no conversion expense to operate in thefrequencies in compliance with the planning,organizations and individuals must carry outthe conversion procedures according to thedeadline specified in the planning.

b/ For equipment which can not be adjustedto operate in the frequencies in compliance withthe planning or equipment which may beadjusted but require conversion expenses:

- In the bands or zones of low use demand,organizations and individuals shall be permit-ted to use their equipment till they are fullydepreciated but for no more than seven years asfrom the effective date of the planning, or tillthey are requested by the Ministry of Post andTelematics to stop using such equipmentbecause of interference.

The replacement of broken-down equipmentor the extension of networks shall not alter thedeadline for the entire networks to stop operating.

- In the bands or zones of high use demand,organizations and individuals must carry outthe conversion procedures according to thedeadline specified in the planning and bear theconversion expense.

c/ Organizations and individuals havingtheir bands withdrawn ahead of the deadlinespecified in the planning shall be refunded partof their conversion expenses which, however,shall not exceed the residual value of the equip-ment at the time of the band withdrawal.

Organizations and individuals permitted to usethese withdrawn bands shall have to pay theconversion expenses incurred by the organiza-tions and individuals with their band with-drawn.

Article 7. Adjustment of the planning1. Basing itself on the national telecommuni-

cation development policy, Vietnam's laws andthe international agreements which Vietnam hassigned or acceded to in the telecommunicationand radio frequency domain, the Ministry ofPost and Telematics shall adjust the planning onthe radio frequency spectrum according to itscompetence or submit such adjustment to com-petent authorities for approval in each period.

2. Amendments and adjustments of the plan-ning on the radio frequency spectrum, oncepromulgated by competent authorities, shallconstitute part of the planning.

Article 8. Allocation of bands in service ofdefense and security

1. The allocation of bands for defense andsecurity purposes shall adhere to the followingprinciples:

a/ Bands for long-term use shall be allocat-ed in proportions suitable to the requirementsand tasks, taking into consideration internation-al practices;

b/ Bands to be used for a definite periodshall apply only to radio equipment currently inuse but not be further furbished;

c/ Bands to be used irregularly for a shortperiod, once being used, must be notified to theMinistry of Post and Telematics, except thoseclassified State secrets;

d/ Where there arises a need to use bandsreserved for socio-economic purposes fordefense or security purposes, the written con-sent of the Ministry of Post and Telematics isrequired and it must be ensured that no harm-ful interference be caused to the communicationnetworks in service of socio-economic activities.

2. In each period, the Ministry of Post andTelematics shall assume the prime responsibili-

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ty for, and coordinate with the Ministry ofDefense and the Ministry of Public Security in,making proposals on the allocation of bands fordefense or security purposes, and submit suchproposals to the Prime Minister for approvalafter consulting the Radio FrequencyCommittee. The Ministry of Defense and theMinistry of Public Security shall have to organ-ize the management as well as economical andefficient use of frequency bands allocated tothem for the right purposes.

3. In case of national security emergency, theMinistry of Defense and the Ministry of PublicSecurity may use a number of bands not speci-fied at Point a, Clause 1 of this Article to ensurecommunication in service of defense and securi-ty on the basis of coordinating with the Ministryof Post and Telematics under the plans alreadyagreed upon.

CHAPTER IIIRADIO FREQUENCY LICENSING

SECTION I

GENERAL PROVISIONS ON LICENSING

Article 9. Licensing principlesThe radio frequency licensing shall adhere to

the following principles:1. Compliance with the telecommunication

development strategies and plans; the nationalradio frequency spectrum planning and otherfrequency plannings specified in Article 5 ofthis Decree.

2. Assurance of efficient, rational and eco-nomical use of the radio frequency spectrum.

3. Observance of the national and interna-tional use norms and technical standards onradio frequencies.

4. Satisfaction of reasonable demands oforganizations and individuals for the use ofradio frequencies.

5. Guaranty of equality among users and

among radiocommunication services of thesame categories.

6. Rational prioritization of the demands forthe use of frequencies in service of new tech-nologies or the efficient use of the radio fre-quency spectrum.

Article 10. Radio frequency use charges1. Radio frequency use charges are amounts

collected under the State regulations to offsetdirect and indirect costs for the work of manag-ing, examining and controlling radio frequen-cies and handling harmful interference; toensure the implementation of the State's poli-cies in each period and suit the actual situation.

2. The radio frequency use charge tariffs shallbe determined on the basis of the value of theused frequency spectrum, the extent of frequen-cy spectrum occupancy, the scope of coverage,the frequency use density of the bands and inthe regions in which the licenses are granted.

3. Vietnamese organizations and individu-als; foreign organizations and individuals inVietnam shall only be granted the radio fre-quency licenses after paying the licensing feesand radio frequency use charges. The manage-ment and use of licensing fees and radio fre-quency use charges shall comply with the legis-lation on charges and fees.

Article 11. Cases of withdrawal of licenses1. Radio frequency licenses shall be with-

drawn in the following cases where:a/ Past one year after being granted the

band licenses or past six months after beinggranted the licenses for use of radio frequenciesand radio transmitters, organizations or indi-viduals still fail to actually deploy the contentsof their licenses.

b/ Organizations or individuals use fre-quencies for wrong purposes, inefficiently,wasting the radio frequency spectrum theyhave been licensed to use.

c/ The radio frequency spectrum planning isadjusted.

2. The Ministry of Post and Telematics shall

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issue decisions to withdraw licenses, clearlystating the reasons therefor.

SECTION 2

BAND LICENSING

Article 12. Band licensesBand licenses are those granted to organiza-

tions and enterprises, entitling them to use aspecified frequency band section under the con-ditions on the upper and lower limits of the fre-quency band (including the protective frequen-cy band section), the scope of coverage, the max-imum permitted level of out-of-band and out-of-coverage scope emissions and other conditions.

Article 13. Conditions for band licensingIn cases where the allocation of bands is fea-

sible, the Ministry of Post and Telematics shallbase itself on the following specific conditionsto consider and grant band licenses to organiza-tions and enterprises:

1. Having plans on development ofradiocommunication networks and plans oncommercial provision of telecommunicationservices, ensuring socio-economic efficiencyand band use efficiency.

2. For public mobile telecommunication net-works, there must be the demand for banddeployment on a national scale; for exclusive-use telecommunication networks and intranets,there must be the high demand for the use offrequencies in a specified region.

3. Equipment must ensure the technical stan-dards according to the regulations of theMinistry of Post and Telematics.

Article 14. Procedures forgranting bandlicenses

1. A dossier of application for a band licenseconsists of:

a/ The application for a license, clearly stat-ing the band applied for use and the scope ofcoverage;

b/ A lawfully notarized or authenticatedcopy of the establishment decision, for organi-

zations, of the business registration certificate,for domestic enterprises, or the investmentlicense, for foreigninvested enterprises or for-eign parties to business cooperation contracts;

c/ A lawfully notarized or authenticatedcopy of the telecommunication network estab-lishment and telecommunication service provi-sion license (or the telecommunication networkand telecommunication service experimenta-tion license or the exclusive-use telecommunica-tion network establishment license), for equip-ment requiring network establishment licenses;

d/ A scheme on establishment of a radio-communication network, clearly stating thepurpose, scope of operation, network configu-ration and technology to be used;

e/ The written registration of the list of radiotransmitters (according to the form set by theMinistry of Post and Telematics).

2. A dossier of application for amendmentand supplementation of the contents of alicense:

In the effective duration of their licenses, iforganizations or enterprises need to amendand/or supplement the contents of their licens-es (except for the provision on the bandwidth),they must compile dossiers of application there-for. A dossier shall consist of:

a/ The application for amendment and/orsupplementation of the contents of the license;

b/ A detailed report on the amendmentand/or supplementation contents, and relevantdocuments.

3. Ninety days before the expiry date of theirlicenses, if organizations or enterprises meet allconditions and wish to continue using theirallocated bands, they must compile dossiers asrequired for application for new licenses.

4. The place for receiving dossiers, guidingthe declaration, handing and receiving licenses:

The Radio Frequency Department - theMinistry of Post and Telematics.

5. In the process of operation, organizationsand enterprises shall have to strictly comply

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with the conditions prescribed in their licenses;report and add in a timely manner changes inthe technical parameters and the list of radiotransmitters in their radiocommunication net-works.

Article 15. Time limits for settlement of theband licensing

1. The Ministry of Post and Telematics shallevaluate and complete the consideration andgranting of new licenses, amendment and/orsupplementation of the contents of licenseswithin 45 days after receiving the complete andvalid dossiers.

2. If the dossiers are incomplete or invalid,within five days after receiving them, theMinistry of Post and Telematics shall have tonotify the applying organizations or enterprisesthereof and guide them to supplement andcomplete their dossiers.

3. In case of refusal to grant new licenses orto amend and/or supplement the contents oflicenses, the Ministry of Post and Telematicsshall inform in writing the applying organiza-tions or enterprises thereof, clearly stating thereasons therefor.

SECTION 3

LICENSING OF RADIO FREQUENCYAND TRANSMITTER USE

Article 16. Radio frequency and transmitteruse licenses

Radio frequency and transmitter use licensesshall be granted to organizations and individu-als entitled to exploit one or many radio fre-quencies and transmitters at specified locationsor in specified regions, prescribing the condi-tions on receiving and transmitting frequencies,technical parameters of radio transmission, com-munication conventions and other conditions.

Article 17. Conditions for radio frequencyand transmitter use licensing

1. In cases where the fixing of radio frequen-cies is feasible, the Ministry of Post and

Telematics shall base itself on the following spe-cific conditions to consider and grant licenses toVietnamese and foreign organizations and indi-viduals in Vietnam:

a/ The use purposes and communicationobjects are clear and compliant with law provi-sions;

b/ Equipment must satisfy technical stan-dards prescribed by the Ministry of Post andTelematics for application (except for equip-ment for exhibitions or technical tests);

c/ Operators of sea-going ship stations, ama-teur stations and other cases must have radiooperator's certificates granted or recognized bythe Ministry of Post and Telematics;

d/ The locations for antenna installation andantenna heights must comply with the regula-tions of the Ministry of Post and Telematics andother law provisions on aviation safety assur-ance;

e/ The designs of the equipment systemsmust ensure the optimal use of the radio fre-quency spectrum and electro-magnetic compat-ibility with the surrounding environment.

2. Particularly for satellite communicationstations operating via satellites of foreign coun-tries or international satellite communicationorganizations, the Ministry of Post andTelematics shall base itself on the specific condi-tions prescribed in Clause 1 of this Article toconsider and grant licenses only in the follow-ing cases:

a/ Satellite communication stations belong-ing to public telecommunication networks runby telecommunication enterprises licensed toestablish networks and provide telecommunica-tion services by the Ministry of Post andTelematics.

b/ Satellite communication stations oforganizations and enterprises using the com-munication satellite service provided bytelecommunication enterprises licensed by theMinistry of Post and Telematics.

c/ Satellite communication stations in the

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broadcasting-satellite service, which have thepress activity permits for radio and televisionbroadcasting via satellite, granted by theMinistry of Culture and Information.

d/ Satellite communication stations in themaritime mobile- and aeronautical mobile-satellite services for maritime and aeronauticalsafety according to the regulations of theInternational Maritime Organization (IMO) orthe International Civil Aviation Organization(ICAO).

e/ Satellite communication stations of for-eign diplomatic missions and consulates, repre-sentative missions of international organizationsin Vietnam, foreign high-level delegations visit-ing Vietnam and enjoying diplomatic privilegeand immunities (hereinafter called "foreign rep-resentative missions"), foreign correspondentsentering Vietnam for shortterm press activities.

The Ministry of Post and Telematics shallassume the prime responsibility for, and coordi-nate with the Ministry of Foreign Affairs andthe Ministry of Public Security in, detailing thelicensing of the use of satellite communicationstations for foreign representative missions.

f/ Under the international agreementsbetween the Socialist Republic of Vietnam andforeign countries or international organizationson satellite communication.

g/ Other cases prescribed by the Ministry ofPost and Telematics.

Article 18. Dossiers of application for radiofrequency and transmitter use licenses

1. Except for the cases prescribed in Article24 of this Decree, for independently operatingradio transmitters and radio transmittersbelonging to the networks requiring no networkestablishment licenses, a dossier shall consist of:

a/ The application for a license;b/ The declaration of application for a radio

frequency and transmitter use license (madeaccording to a form set by the Ministry of Postand Telematics);

c/ A lawfully notarized or authenticated

copy of the establishment decision, for organi-zations, the business registration certificate, fordomestic enterprises, cooperatives, or theinvestment license, for foreign-invested enter-prises or foreign parties to business cooperationcontracts.

2. For ship stations, radio stations on boardriver ships and boats, apart from the dossiersprescribed in Clause 1 of this Article, the follow-ing papers are also required:

a/ The written certification of the gross ton-nage and the scope of operation of the ship orboat, or of the number of seats (for passengerships);

b/ A lawfully notarized or authenticatedcopy of the operator's certificate, granted or rec-ognized by the Ministry of Post and Telematics(for ship stations).

3. For radio transmitters on board fishingmeans: a/ If they belong to organizations orenterprises, apart from the papers prescribed inClause 1 of this Article, a lawfully notarized orauthenticated copy of the fishing-ship registra-tion certificate or written certification of thegross tonnage of the ship or boat is alsorequired.

b/ If they belong to cooperation groups orindividuals, apart from the papers prescribed atPoints a and b, Clause 1 of this Article, a lawful-ly notarized or authenticated copy of the fish-ing-ship registration certificate or written certi-fication of the gross tonnage of the ship or boatis also required.

c/ The radio transmitters on board fishingmeans, which operate in the band of between26.96 MHz and 27.41 MHz, shall fall into the cat-egory of radio transmitters subject to condition-al use and requiring no radio frequency licenseas prescribed in Articles 24 and 25 of thisDecree.

4. For stations in the broadcasting service,apart from the papers prescribed at Points a andb, Clause 1 of this Article, the following papersare also required:

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a/ A lawfully notarized or authenticatedcopy of the press activity permit, granted by theMinistry of Culture and Information (for appli-cants being press agencies).

b/ A written proposal of the Ministry ofCulture and Information or theprovincial/municipal People's Committee (forapplicants not yet classified as press agenciesbut tasked to re-broadcast the programs of thecentral and provincial/municipal radio orbroadcasting stations.

5. For amateur stations, apart from thepapers prescribed at Points a and b, Clause 1 ofthis Article, the following papers are alsorequired:

a/ A copy of the amateur radio operator'scertificate, granted or recognized by theMinistry of Post and Telematics;

b/ The copies of the passport and permanentresidence card or temporary residence certifi-cates or cards (for foreign operators).

6. For cordless telephones (of the extendedsubscriber type) not on the list of radio equip-ment subject to conditional use and requiringfrequency use licenses, the dossiers prescribedat Points a and b, Clause 1 of this Article arerequired.

7. For stations belonging to foreign represen-tative missions, apart from the papers pre-scribed at Points a and b, Clause 1 of thisArticle, the written proposal of the Ministry ofForeign Affairs is also required.

8. For radio transmitters belonging to thenetworks requiring the network establishmentlicenses, apart from the papers prescribed inClause 1 of this Article, the following papers arealso required:

a/ A scheme on establishment of a radio-communication network, clearly stating the net-work configuration, scope of operation, andtechnology and frequencies applied for use;

b/ A lawfully notarized or authenticatedcopy of the telecommunication network estab-lishment and telecommunication service provi-

sion license (or the telecommunication networkand telecommunication service experimenta-tion license or the exclusive-use telecommunica-tion establishment license).

Article 19. Extension of licensesThirty days before the expiry of their licens-

es, if the organizations or individuals wish tocontinue using them (without amendments andsupplements), they shall carry out the proce-dures for applying for extension of their licens-es. A dossier of application for license extensionshall consist of:

1. The application for license extension;2. A lawfully notarized or authenticated

copy of the telecommunication network estab-lishment and telecommunication service provi-sion license (or the telecommunication networkand telecommunication service experimenta-tion license orthe exclusive-use telecommunica-tion establishment license), which remainsvalid, for equipment requiring network estab-lishment licenses.

Article 20. Amendment and supplementa-tion of the contents of licenses

During the validity terms of their licenses, ifthe organizations or individuals wish to amendor supplement the contents of their licenses,they must compile dossiers of application there-for. A dossier shall consist of:

1. The application for amendment and/orsupplementation of the contents of the license;

2. An additional declaration of changes (ifany);

3. Other documents related to the amendedand/ or supplemented contents.

Article 21. Time limits for licensing radio fre-quency and transmitter use

1. The Ministry of Post and Telematics shallhave to grant new licenses; extend the validityof license, amend and/or supplement the con-tents of licenses within 20 days after receivingthe complete valid dossiers.

2. If the dossiers are incomplete, within fivedays after receiving them, the Ministry of Post

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and Telematics shall have to inform the applyingorganizations or individuals thereof and guidethem to supplement and complete the dossiers.

3. In case of refusal to grant new licenses; toextend the validity of licenses, or to amendand/or supplement the contents of licenses, theMinistry of Post and Telematics shall inform inwriting the applying organizations or individu-als thereof, clearly stating the reasons therefor.

Article 22. Places for receiving dossiers,guiding declarations, and handing and receiv-ing licenses

1. The places for receiving dossiers andhanding and receiving licenses for the cases ofapplication for new licenses for equipmentbelonging to radiocommunication networksrequiring network establishment licenses andcases of application for amendment and/orsupplementation of network establishmentlicenses:

a/ The Ministry of Post and Telematics;b/ The regional Post, Telecommunications

and Information Technology Departments.2. The places for receiving dossiers and

handing and receiving licenses for the cases ofapplication for new licenses, for extension of thevalidity of licenses, and amendment and/orsupplementation of the contents of licenses forequipment requiring no network establishmentlicenses; and the cases of application for amend-ment and/or supplementation of networkestablishment licenses which remain valid:

a/ The Radio Frequency Department;b/ The regional radio frequency control cen-

ters under the Radio Frequency Department.Article 23. Use of radio frequencies and

transmitters in emergency cases1. In emergency cases where the properties

and human life are endangered, organizationsand individuals may temporarily use the unli-censed radio frequencies and transmitters, pro-vided that they must notify such immediately tothe Radio Frequency Department under theMinistry of Post and Telematics when condi-

tions permit.2. When transmitting SOS information or

signals, stations may transmit waves to attractthe attention from frequencies other than thosereserved exclusively for international andnational rescue.

3. Upon receiving SOS information and sig-nals, stations must immediately stop transmit-ting waves on the frequencies which mightcause interference to such SOS information, andkeep listening on the frequencies on which theSOS signals are transmitted, and render immedi-ately all necessary assistance, and at the sametime notify the search and rescue agency thereof.

SECTION 4

TYPES OF RADIO EQUIPMENT SUBJECTTO CONDITIONAL USE AND REQUIRING NO

LICENSES

Article 24. Technical and operational condi-tions

1. Radio equipment subject to conditionaluse include short-range equipment with limitedcapacity, unlikely to cause harmful interferenceand not to be protected against harmful interfer-ence.

2. Technical and operational conditions ofradio equipment subject to conditional useinclude allocated frequency channels, limitedtransmitting capacity, mandated transmittingmode, area permitted for operation, and otherconditions.

3. In each period, the Ministry of Post andTelematics shall prescribe and publicize the listof radio equipment subject to conditional use.The contents of notification must contain fullythe technical and operational conditions ofequipment subject to conditional use.

Article 25. Responsibilities of users1. Organizations and individuals using radio

equipment prescribed in Article 24 must meetall the prescribed technical and operational con-ditions and shall not be required to apply for

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radio frequency licenses.2. It is strictly forbidden to use radio equip-

ment which fail to meet the technical and oper-ational conditions prescribed by the Ministry ofPost and Telematics.

CHAPTER IVEXAMINATION AND CONTROL

OF RADIO FREQUENCIES, HANDLINGOF HARMFUL INTERFERENCE,

MANAGEMENT OF ELECTROMAGNETICCOMPATIBILITY

SECTION 1

EXAMINATION AND CONTROL OF RADIOFREQUENCIES, HANDLING OF HARMFUL

INTERFERENCE

Article 26. Subjects to be examined and con-trolled

Vietnamese as well as foreign organizationsand individuals using radio frequencies andequipment in the Vietnamese territory mustsubmit to the radio frequency and equipmentexamination and control by the Ministry of Postand Telematics.

Article 27. Examination and control respon-sibilities

1. The Ministry of Post and Telematics shallhave to examine and control radio frequenciesand equipment nationwide so as to monitor andmeasure technical and operational parametersas well as the band occupancy extents of sta-tions; determine interference sources; detectviolating stations; handle harmful interferencein accordance with Vietnamese laws and inter-national agreements on radiocommunication,which Vietnam has signed or acceded to.

2. The results of examination and control,measurement of technical parameters and loca-tion of radio equipment, spectrum forms of sig-nals, call-outs or identification signals and otherevidences shall serve as the basis for determin-

ing and handling law violation acts in the radiofrequency domain.

Article 28. Examination forms1. Regular examinations shall be conducted

according to examination programs and plansapproved by the Ministry of Post andTelematics.

2. Irregular examinations shall be conductedwhen settling complaints or when the Ministryof Post and Telematics detects signs of violationof the law provisions on radio frequencies.

Article 29. Measures to restrict harmfulinterference

1. Organizations and individuals licensed touse radio frequencies and transmitters shallhave to abide by the provisions of their licensesand take the following measures to restrict theharmful interference-causing possibility:

a/ To keep transmission frequencies withinthe permitted frequency deviation limit;

b/ To reduce the level of unwanted emissionto the minimum value;

c/ To use the transmission mode with theminimum occupied bandwidth (excluding anumber of special cases like spectrum spread);

d/ To restrict wave transmission in unneces-sary directions;

e/ To use the minimum capacity enough toensure the communication quality.

2. Stations in secondary services must notcause harmful interference to those in primaryservices and must not complain about harmfulinterference from stations in primary services,with their frequencies having been fixed or to bepossibly fixed later.

Article 30. Handling of complaints aboutharmful interference

1. Organizations and individuals complain-ing about harmful interference must send to theMinistry of Post and Telematics the harmfulinterference reports, made according to a setform, and follow the guidelines of the Ministryof Post and Telematics in organizing the identi-fication of interference-causing sources and

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measures to handle harmful interference.Organizations and individuals using radio

frequencies and transmitters in harmful inter-ference-affected areas shall have to cooperatewith the Ministry of Post and Telematics in, andcreate conditions for, detecting quickly andaccurately interference sources, and effectivelyhandling harmful interference.

2. The Ministry of Post and Telematics shallhandle harmful interference on the followingprinciples:

a/ Prioritizing within-band emissions andrestricting unwanted emissions to the lowestlevel;

b/ Prioritizing primary services whilechanging transmission frequencies and techni-cal parameters of secondary services;

c/ In the same radio service, frequencieslicensed later must be changed while frequen-cies licensed first be prioritized;

d/ Organizations and individuals usingradio appliances in science, industry or medi-cine, electric and electronic equipment, whencausing harmful interference to stations, musttake measures to eliminate such interference(except for cases where the radio appliancesoperate in the right bands as prescribed) andmust cease using these equipment when suchuse causes harmful interference to the naviga-tion, safety and rescue services;

e/ Pending the overcoming of harmful inter-ference, the following measures may beapplied: changing frequencies, restricting trans-mitting capacity; changing the height and polar-ization and directional characteristics of trans-mission antennas; re-distributing working timeof harmful interference-causing stations andother necessary measures, to such stations;

f/ The parties that cause interference due totheir non-compliance with the contents of theirlicenses shall have to pay the expenses forchange of frequencies and equipment as well asfor handling of harmful interference.

Article 31. Handling of harmful interference

between stations in service of socio-economicactivities and stations in service of defense andsecurity

1. Except for the bands already allocated fordefense and security for long-term use pre-scribed at Point a, Clause 1, Article 8 of thisDecree, when harmful interference occursbetween stations in service of socio-economicactivities and stations in service of defense andsecurity, the stations in service of defense andsecurity shall proactively change their transmis-sion frequencies and technical parameters so asto avoid interference.

2. In case of necessity, the Ministry of Postand Telematics shall assume the prime respon-sibility for, and coordinate with the Ministry ofDefense, the Ministry of Public Security andother concerned ministries and branches in, set-ting up inter-branch examination teams to dealwith harmful interference.

SECTION 2

ELECTRO-MAGNETIC COMPATIBILITY MANAGEMENT

Article 32. Purposes of electro-magneticcompatibility management

Equipment and equipment systems which,when being put into use, generate an electro-magnetic energy in the frequency band ofbetween 10 KHz and 3,000 GHz must ensureelectro-magnetic compatibility so that they canoperate stably, neither being affected with infer-ence nor causing harmful interference to otherequipment and equipment systems.

Article 33. Contents of electro-magneticcompatibility management

1. The State management over electro-mag-netic compatibility covers the following con-tents:

a/ Formulating, promulgating, and publiciz-ing the application of, electro-magnetic compat-ibility standards;

b/ Prescribing the electro-magnetic compat-

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ibility certification for radio equipment,telecommunication equipment and radio appli-ances in science, industry and medicine;

c/ Accrediting and designating laboratoriesto test and agencies to recognize electro-mag-netic compatibility standard compliance;

d/ Inspecting, examining and handling lawviolation acts in the field of electro-magneticcompatibility management.

2. The Ministry of Post and Telematics shallformulate and promulgate regulations on elec-tromagnetic compatibility management.

Article 34. Certification and publicization ofelectromagnetic compatibility standard compliance

1. Certification of electro-magnetic compati-bility standard compliance

In each period, the Ministry of Post andTelematics shall prescribe the list of radioequipment, telecommunication equipment andradio appliances in science, industry and medi-cine, which must be certified for electro-mag-netic compatibility standard compliance.

Organizations and individuals manufactur-ing and/ or importing equipment on this listshall have to carry out the procedures forstan-dard compliance certification and affix the elec-tro-magnetic compatibility standard compli-ance marks according to regulations on theirmanufactured and/or imported equipmentbefore putting them into use or circulation onthe market.

2. Publicization and assurance of electro-magnetic compatibility standard compliance ofequipment.

Organizations and individuals manufactur-ing and/ or importing electric and electronicequipment for civil use, equipment with unwant-ed radio emissions and other equipment shallhave to publicize and ensure their equipment becompliant with relevant electromagnetic com-patibility standards and affix the electromagnet-ic compatibility standard compliance marksaccording to regulations on their manufacturedand/or imported equipment before putting them

into use or circulation on the market.3. The certification and publicization of elec-

tromagnetic compatibility standard complianceshall comply with specific regulations of theMinistry of Post and Telematics.

Article 35. Electro-magnetic compatibility-testing laboratories and -certifying agencies

The Ministry of Post and Telematics shallprescribe the requirements on the capabilityand operation of electro-magnetic compatibili-ty-testing laboratories and -certifying agenciesand the procedures for designation of such test-ing laboratories and certifying agencies.

Only the results of electro-magnetic compat-ibility testing and certification by testing labora-tories and certifying agencies designated oraccredited by the Ministry of Post andTelematics may be used in electro-magneticcompatibility management activities.

CHAPTER VINTERNATIONAL COORDINATION

AND REGISTRATION OF RADIO FREQUENCIES AND SATELLITE ORBITS

Article36. Subjects of international coordina-tion and registration

Organizations and individuals, when usingradio frequencies for international radiocom-munication, for the systems of satellites on thegeostationery or non-geostationery orbits orwhen using radio frequencies in such a waylikely to cause harmful interference to radioservices of other countries, or wishing to beinternationally recognized, must effect interna-tional coordination and/or registration of radiofrequencies or satellite orbits.

Article 37. Responsibilities of the Ministry ofPost and Telematics

The Ministry of Post and Telematics shallhave the following responsibilities:

1. To organize the coordination with othercountries and the registration with theInternational Telecommunication Union of

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radio frequencies and satellite orbits in order toprotect the national interests and sovereignty.

2. To specify the management, use and inter-national registration of satellite orbits underVietnam's sovereignty.

3. To assume the prime responsibility for,and coordinate with the Ministry of ForeignAffairs, the Ministry of Defense and theMinistry of Public Security in, organizing thecoordination of radio frequencies with othercountries bordering on Vietnam.

Article 38. Responsibilities of organizationsand individuals

1. Vietnamese as well as foreign organiza-tions and individuals in Vietnam shall beobliged to comply with the regulations of theMinistry of Post and Telematics in effectinginternational coordination and registration ofradio frequencies and satellite orbits.

2. Organizations and individuals wishing touse the positions of satellite orbits underVietnam's sovereignty must obtain the permis-sion of the Ministry of Post and Telematics andobserve the regulations on satellite orbit regis-tration and coordination charges and other rele-vant law provisions.

Article 39. International registration of radiofrequencies

1. A dossier of application for internationalregistration of radio frequencies shall consist of:

a/ The official dispatch, applying for inter-national registration of radio frequencies;

b/A copy of the license for use of radio fre-quencies and transmitters;

c/ The written declaration for internationalregistration of radio frequencies (made accord-ing to a set form).

2. Dossier-receiving place:The Radio Frequency Department, the

Ministry of Post and Telematics.3. Basing itself on the dossiers of application

for international registration of radio frequen-cies, the Ministry of Post and Telematics (theRadio Frequency Department) shall consider

and compare them with the international andnational regulations on technical and profes-sional standards so as to reach agreement on thecontents of, and carry out the procedures for,international registration.

4. The use and exploitation of internationallyrecognized radio frequencies must comply withthe provisions of the international RadioRegulations.

Article 40. International registration of satel-lite orbits

Organizations and enterprises wishing tomake international registration of satellite orbitsmust submit their dossiers to the Ministry ofPost and Telematics and strictly carry out theprocedures prescribed by the InternationalTelecommunication Union and the Ministry ofPost and Telematics.

CHAPTER VICOMPLAINTS, DENUNCIATIONS,INSPECTION AND HANDLING OF

VIOLATIONS

Article 41. InspectionAll Vietnamese and foreign organizations

and individuals in Vietnam, that use radio fre-quencies, manufacture and use radio equip-ment and/or equipment subject to electro-mag-netic compatibility certification, shall submit tothe inspection and examination by the special-ized post, telecommunication and informationtechnology inspectorate and by competent Stateagencies.

Article 42. Handling of violations1. Organizations and individuals commit-

ting acts of violating the law provisions on radiofrequencies shall, depending on the nature andseriousness of their violations, be administra-tively sanctioned or examined for penal liabili-ty, if causing damage, they must pay compensa-tion therefor according to law provisions.

2. Those who abuse their positions and pow-

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ers to commit acts of violating the provisions ofthis Decree and other relevant law provisions inthe radio domain shall, depending on thenature and seriousness of their violations, bedisciplined or examined for penal liability, ifcausing damage, they must pay compensationtherefor according to law provisions.

Article 43. Complaints and denunciations1. Organizations and individuals shall have

the right to complain about administrative deci-sions and acts of State agencies, officials andemployees in the implementation of this Decree.

2. Individuals shall have the right todenounce to competent agencies organizations'or individuals' acts of violating the provisionsof this Decree.

3. The competence, order and procedures forsettling complaints and denunciations shallcomply with the law provisions on denuncia-tions and complaints.

CHAPTER VIIIMPLEMENTATION PROVISIONS

Article 44. Implementation effectThis Decree takes effect 15 days after its pub-

lication in the Official Gazette. All previous reg-ulations contrary to this Decree are herebyannulled.

Article 45. Implementation responsibilityThe Ministry of Post and Telematics shall,

within the scope of their functions and powers,have to guide the implementation of thisDecree.

The ministers, the heads of the ministerial-level agencies, the heads of the Government-attached agencies and the presidents of thePeople's Committees of the provinces and cen-trally run cities shall have to implement thisDecree.

On behalf of the Government Prime Minister

PHAN VAN KHAI

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Concessioning of Services

In Vietnam there has been no concessioningof local or other telecommunications servic-es. There has been little or no discussion ofusing Build-Own-Tranfer (BOT) or similarmechanisms in telecommunications. Asdiscussed in the paper, private sector par-ticipation to date has been limited to: 1.business cooperation (BCC) schemes, whichconvey no ownership rights, even tem-porarily, or 2. investment via the Vietnam-US BTA.

Quality of Service

Data are not available from the ITU, VNPT orMPT on the number of faults per 100 lines permonth in Vietnam. However, VNPT did supply

the following information on call comple-tion ratios.

Successful call ratios:

These ratios would appear to be quitelow by world and regional standards.

Focus on Telecommunications

This chapter focuses largely on telecommuni-cations, rather than ICT, in order to be compat-ible with the overall study on infrastructureissues of which this chapter forms a part.

End Notes

2000 43.5% 60% 2001 43.25% 64.45% 2002 53% 63%

Source: VNPT, 2003 figures.