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Executive Yuan approved the Draft Telecommunications Administration Act

As information and communication technologies are changing rapidly, in order to respond to industrial development trends and remove out-of-date restrictions, the Executive Yuan approved the draft Telecommunications Administration Act (“Draft Act”) on 16 November 2017, and will submit the Draft Act to the Legislative Yuan for its review soon. If the Legislative Yuan passes the Draft Act, major structural changes to the regulatory environment and the communications industry will take place since the last amendment to the Telecommunications Act in 1996. The aim of the Draft Act is to revitalize the communications industry in Taiwan and to facilitate the emergence of new types of info-communications services and new entrants. Below is a summary of the main regulations contained in the Draft Act:
1.      The current Telecommunications Act divides the communications industry into various types of businesses based on whether business operators own relevant telecom facilities, thereby adopting a vertical regulatory regime, and a telecom service provider which does not have a prior approval from the National Communications Commission (NCC) would be subject to criminal sanctions and severe administrative penalties. However, the foregoing resulted in a closed market restricting the entry of new entrants, and hinders licensed telecom business operators ("Operators") from innovating and conducting multi-sectoral business operations. The Draft Act proposes to implement a horizontal regime, which separates the communications industry into three levels, i.e., the infrastructure level (telecom networks), the operation level (telecom services), and the content/application services level. Moreover, the Draft Act changes the mechanism of market participation to voluntary registration. To encourage new entrants to enter the market and to give them the flexibility to conduct business operations, telecom service providers that choose not to register as Operators may still provide telecom services to consumers. Nonetheless, if a telecom service provider intends to obtain certain rights or resources conferred by the Draft Act, e.g., negotiating with other telecom business operators for interconnection or filing an application with the NCC for adjudication, applying for the allocation of radiofrequency, etc., they would still need to register as an Operator (Article 5 of the Draft Act). Under the Draft Act, emerging Internet service providers (“ISPs”) would not be required to register as an Operator and enjoy more flexibility to provide their services to consumers. However, as most of the current Operators that have already obtained telecom licenses from the NCC need to use spectrums or interconnect with other Operators, they would still need to be registered as an Operator and comply with the obligations under the Draft Act. From this perspective, the Draft Act still cannot achieve the goal of eliminating the different regulatory requirements that are imposed on telecom service providers which are providing services of the same nature.
2.      The Draft Act adopts a “behavioral management” model and divides the obligations into general obligations, special obligations, and designated obligations based on the business activities of the Operators:
(1)   The general obligations refer to the obligations that all registered Operators must comply with, which include: (a) publicly disclosing the information that consumers should be aware of, such as terms and conditions of service, network quality, and the approach to manage their data allowances; (b) separating the accounts in respect of telecom services and non-telecom services; (c) undertaking appropriate and necessary measures to ensure the confidentiality of communications; (d) providing customers with channels for consumer complaints; (e) keeping communication records and accounting records for a certain period of time; (f) proactively notifying the NCC if there is any suspension of service; and (g) sharing expenses incurred by the telecom universal service if an Operator’s annual turnover exceeds a certain amount (Articles 8 through 12 of the Draft Act).
(2)   The special obligations refer to the obligations that Operators which are allocated certain resources must comply with, which include: (a) Operators providing voice communication service by using telecom numbers must provide emergency communications services free of charge, number portability, and equal access services; (b) Operators establishing public telecom network(s) which use(s) telecom resources, such as radiofrequency, must set forth an information and communication security maintenance plan; and (c) Operators designated by the NCC must prepare a service agreement template, regularly perform self-evaluations on the quality of telecom service, and jointly establish an agency that deals with resolving consumer disputes in relation to telecom issues (Articles 14 through 21 of the Draft Act).
(3)   The designated obligations mean that each competent authority, in accordance with the policy requirements or the laws and regulations that it is in charge of, may designate certain Operators that meet certain conditions to undertake necessary measures or set up relevant facilities, such as disaster prevention and relief, communications surveillance, protection of the rights and interests of persons with disabilities, and providing the telecom universal service (Articles 22 through 24 of the Draft Act).
3.      For the purposes of ensuring fair competition, the Draft Act stipulates that the NCC may adopt special control measures to require an Operator that has significant market power in certain relevant market(s) in relation to telecom services to take certain action, which includes: (a) to publicly disclose necessary information concerning the interconnection, networking components or using relevant telecom infrastructure; (b) not to treat other Operators discriminatively (i.e., the commercial terms provided to their subsidiaries, affiliates or business partners shall not be more preferential than the terms provided to other Operators), and not to engage in cross-subsidization, price-squeeze, or other unfair competition behaviors; (c) to provide access to their interconnection, networking components or relevant telecom infrastructure; and (d) to prepare and publicize an interconnection/access service agreement template (Articles 27 through 35 of the Draft Act).
4.      In furtherance of establishing telecom infrastructure, the Draft Act removed the punishment of unauthorized telecom networks under the Telecommunications Act, which means that entities may establish their own telecom networks according to their needs without obtaining a prior approval from the NCC. Only for the telecom networks that are provided to unspecific persons for their use of telecom service, the owner would be subject to the restrictions in terms of the type of entity, the nationality of responsible person, and a foreign shareholding limit, and would be required to comply with relevant technical regulations and dispatch qualified telecom engineers to establish and maintain telecom networks (Articles 36 through 42 of the Draft Act).
5.      The radio spectrums currently must be allocated along with telecom licenses and used within certain business scope(s). For the purposes of increasing spectrum use efficiency, the Draft Act allows the NCC to set a spectrum sharing mechanism, free-to-use terms, etc. in advance while it releases spectrums so as to respond to the needs of innovative technologies and services. An Operator that has obtained spectrum may file an application with the NCC to provide the spectrum or part thereof to other Operators for their use by dividing the spectrum into different subchannels, time slots, or subregions. In addition, an Operator that has obtained spectrum may also file an application with the NCC to return the spectrum after the Executive Yuan makes a public announcement. The NCC will re-auction and re-allocate the spectrum to another Operator, and the winning bidder would not be subject to the original usage restrictions (Articles 52 through 60 of the Draft Act).
6.      In order to respond to the development of emerging technologies, under the Draft Act, the controls over radio-frequency devices have drastically reduced. In principle, radio-frequency devices may circulate and be used freely (but shall not interfere with the normal communications and the aviation safety). Only the manufacture, importation, technical specifications and verification of controlled telecom radio-frequency devices announced by the NCC are regulated (Articles 65 through 67 of the Draft Act).
In short, the Draft Act drastically reduces the current controls over the communications industry. Traditionally, Operators are required to conduct a “vertical” business operation, whereas the Draft Act gives new entrants the opportunity to provide more efficient application services via telecom networks established by other Operators, instead of establishing telecom networks on their own. The Draft Act also creates a secondary market of radio spectrums, which may make the use of spectrum more efficient. Furthermore, by implementing voluntary registration, emerging ISPs need not register as Operators, which may facilitate the entry of new entrants and the development of new types of services. It is worth observing the developments in relation to the Draft Act and how the NCC concretizes the above-mentioned management model in the future.