PERU Telecommunication Policy Update

Peruvian telecommunication Policy Update was presented at the 36th meeting of the APECTEL working group last october.

The document is available at the meeting website. The following text was extracted form the original text.

POLICIES AND REGULATORY UPDATE
PERU REPORT - 2007

Fixed and mobile telephony services teledensity

By June 2007 the aggregated teledensity, considering both fixed and mobile services, was 52.7%. In particular, it should be noticed that only during the second quarter of 2007 the mobile teledensity increased in 12%, and the market continues to grow steadily. Such improvements are based on aggressive competition, increased coverage, clear rules, and economic stability.

The mobile market is shared by Telefónica Móviles - Movistar (CDMA and GSM), America Móvil Peru – Claro (GSM) and Nextel del Perú (IDEN), with 60.6, 36.1 and 3.3 per cent of market share respectively.

Guidelines fostering competition

In February 2007 the Guidelines for developing and consolidating competition and expansion of telecommunications services in Peru was approved.

This framework establishes new nationwide goals for year 2011: to reach a teledensity of 12 for fixed lines and 60 for mobile lines; to further develop the Internet wideband access, getting a million of connections, among others. In addition, it establishes that from January 1, 2010, the number portability for mobile services will be available to the users.

General Bylaw modification to promote convergence

In July 2007 the new Unified Text of the General Bylaw of the Telecommunications Law, was approved permitting on one side the single concession regime to become into effect, as well as fostering the convergence of services and administrative simplification, in the context of the policies assumed by the Government about State modernization.

Number portability for mobile services

In April 2007, the Law of Number Portability for mobile services was approved. This law establishes that the users have the right to maintain their mobile number, even if they change their service provider.

The technical, economical and administrative conditions for the mobile number portability will be determined by the Ministry of Transportation and Communications and OSIPTEL, according to their jurisdictions.

In September 2007, the Ministry of Transportation and Communications published the document entitled “Conditions for implementing the number portability for mobile services in the country” to receive comments from the public. Firstly, the content of this document establishes a deadline in order to decide the technical solution for implementing number portability, based on a proposal that should be submitted by the mobile service providers. Secondly, it establishes a timeframe in order to let network upgrade and testing. Mobile number portability will take effect by January 1, 2008.

Expansion of telecommunications infrastructure

In May 2007 the law for the expansion of telecommunications infrastructure was approved. This law establishes a nationwide special and temporal regime (4 years), especially in rural areas and places of preferential social interest and border areas for installing and deploying the necessary infrastructure for telecommunications services. Under such regime, among others, any rights or tariffs related to telecommunications infrastructure deployment will be based on real costs of the public administration in charge (local or regional governments). Likewise, the uses of public places, floor, subfloor, are not subject to charges of any kind. Also, any associated procedure for using public sidewalks, pavements and roadways, is subject to the “positive silence”, by means of which the applicant requirement is automatically approved when the deadline established for the administration verdict is overdue.

Infrastructure for telecommunications services in highways

In July 2007 the Ministry of Transportation and Communications approved a Supreme Decree for optimizing the deployment of roads and telecommunications infrastructure. This rule establishes that the highways should include conduits and underground chambers to permit the future installation and optical fibre deployment for telecommunications services.

Local Service Price Regulation

Regarding tariff policy, it must be emphasized that from September 2005, the mechanisms applied by the company, in order to fulfil the Productivity Factor in Local Telephony Service, have consisted on reductions of monthly rents and tariffs on local calls, avoiding therefore the changes in the characteristics of the tariff plans, which are classified in: (i) open (without consumption limit some) and (ii) consumption control, that can be closed on prepaid basis. Also, it is important to emphasize that the reductions in the rents and in local calls tariffs gather the result of the negotiations made between the incumbent and the government. The negotiation results applied quarterly since March, 1st 2007.

During the first semester of the 2007, reductions in the monthly rents in seven plans of controlled consumption have been registered. Those plans represent 94% of the total lines with controlled and prepaid plans by June 2007. It is positive since the plans of controlled consumption are mainly used by low income families.

In the case of the Long Distance Basket, the maximum regulated tariffs were reduced 5% 2006-2007. Reductions occurred in the tariffs of long national distance, in the prepaid cards modality.

Late July 2007, OSIPTEL has set a new Quarterly Productivity Factor at -0.01645. This factor is being applied since September 2007.

Regulation of the termination charges in mobile networks

In November 24th 2005, OSIPTEL published the regulation of the termination charges in mobile networks by means of Resolution N° 070-2005-CD/OSIPTEL. Through this resolution, the regulator will gradually adjust the termination charges in mobile networks in a three-year basis period (2006-2009). Thus a total reduction of 48.5% is expected to be reached at the end of the application period.

Previously, on May 2005, the regulator – OSIPTEL – applied the first phase of that measure unifying the termination charges into a unique equivalent of US$0.2053 (without VAT); this initial step represented a first reduction of 13.2%.

Essentially, the applied regulation of mobile termination charges has the following characteristics:

• This measure does not regulate the mobile services rates but regulates termination charges.


• The regulation is symmetric. This means it is applicable to all mobile operators, including any new operator.


• Fixed charges are cost-based for each operator.


• The proposed interconnection charge affects any call ending in the mobile networks, independently of the communications origin, except local fixed-to-mobile calls.


• Reductions follow a gradual scheme composed by four reductions along three years as figure bellow shows. The first and second reduction already started on January of 2006 and continues in January of 2007.

Through this measure, the regulator seeks to improve competition conditions in the mobile communications industry which leads to the improvement of the final consumer’s benefits by promoting a better and more adequate pricing structure of the mobile industry. The regulatory measure will allow a reduction of payphone’s originated and long distance calls to mobile networks, and also mobile-to-mobile calls.

OSIPTEL as Competition Agency in the Telecommunications Market

OSIPTEL is the independent regulator and competition authority for the Peruvian telecommunications industry. In this context, OSIPTEL is in charge of:

1. Applying antitrust and unfair competition law in the telecommunications sector.


2. Competition Advocacy in the Telecommunications Market


3. Remove of entry barriers that restrict competition


4. Regulatory proposals that increase and promote competition conditions.


5. Evaluation of license transfers and concessions (often in the context of merger among operators).

During 2006, OSIPTEL decided to update their Guidelines to enforce competition law and unfair competition law in order to include the effects of technological convergence, the particular characteristics of Peruvian markets and recent jurisprudence. Also, on March 2006, in order to give predictability and transparency of criteria to market participants, OSIPTEL published Guidelines to evaluate discriminatory practices. Finally, even though there is not an explicit merger control policy applied to the telecommunications markets, the current legal framework establishes than any transfer of licenses and concessions among telecommunication operators should be evaluated under the scope of its competitive effects on the industry depending on the results of this evaluation, a transfer could be approved, conditioned or potentially denied.

Compliance and enforcement

During 2005 and 2006 OSIPTEL supervised the systems of Appraisal and Invoicing of the incumbent in fixed and mobile telephony services. At the same time, OSIPTEL verified the processes implemented by the operators for the implementation of consumer claims helpdesk services. During 2007 the supervision labour was fundamentally oriented to analyse and to determine the network’s load capacity of the main operating companies with the objective of identify potential quality problems caused by the accelerated growth of the mobile telephony penetration, as well as prepare the new law of a quality assurance in telecommunications services.

Consumer Protection

During 2007, a new decentralization strategy has been established, aimed to enhance OSIPTEL´s scope of action by having their personnel perform some of the other functions inherent to the regulatory agency, such as the supervision of telecommunication public services.

Empowering these decentralized offices will not only result in a more efficient user’s orientation and a wider diffusion of the regulatory measures, it will also improve analysis, evaluation and execution of other issues that require major consideration.

Regarding the User Protection law, during the present year a “User’s Conditions and Claims Directive” information brochure has been issued, attempting to provide users with a simple, didactic, manual, which summarizes the User’s main duties and rights. Service Providers are encouraged to deliver this brochure to all users when contracting services.