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Legislative Yuan passed the Telecommunications Management Act

Legislative Yuan passed the Telecommunications Management Act


As information and communications technologies are changing rapidly, in order to respond to industrial development trends and remove out-of-date restrictions, the Legislative Yuan passed the Telecommunications Management Act (“New Law”) on May 31, 2019, with the effective date to be further determined by the Executive Yuan.  The New Law will result in major structural changes to the regulatory environment and the communications industry since the Telecommunications Act was last amended in 1996.  The aim of the New Law is to revitalize the communications industry in Taiwan and to facilitate the emergence of new types of info-communications services and new entrants.  As was stated in our bulletin issued in December 2017, the main points of the New Law are as follows:


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 telecom operators from innovating and conducting multi-sectoral business operations.  The New Law 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 New Law 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 a telecom operator may still provide telecom services to consumers.  Nonetheless, if a telecom service provider intends to obtain certain rights or resources conferred by the New Law, e.g., negotiating with other telecom operators for interconnection or filing an application with the NCC for adjudication, applying for the allocation of radiofrequency, etc., such telecom service provider would still need to register as a telecom operator (Article 5 of the New Law).


2.     The New Law adopts a “behavioral management” model and divides the obligations into general obligations, special obligations, and designated obligations based on the business activities of telecom operators:

(1)  The “general obligations” refer to the obligations that all business operators which register with the NCC as a telecom operator 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 communications 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 a telecom operator’s annual turnover exceeds a certain amount (Articles 8 through 12 of the New Law).

(2)  The “special obligations” refer to the obligations that telecom operators which are allocated certain resources or designated by the NCC must comply with, which include: (a) telecom operators providing voice communications service by using telecom numbers allocated by the NCC must provide emergency communications services free of charge, number portability, and equal access services; (b) telecom operators establishing public telecom network(s) which use(s) telecom resources, such as radiofrequency, must set forth an information and communications security maintenance plan; and (c) telecom operators which are designated by the NCC due to their special types of service or frequently-occurring customer complaints must submit its service agreement template to the NCC for approval, 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 New Law).

(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 telecom operators that meet certain conditions to undertake necessary measures, 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 New Law).


3.     For the purposes of ensuring fair competition, the New Law stipulates that the NCC may adopt special control measures to require a telecom service provider that has significant market power in certain relevant market(s) in relation to telecom services to take certain action, which includes: (a) to publicize necessary information concerning the interconnection, networking components or using relevant telecom infrastructure; (b) not to treat other business operators discriminatively (i.e., the commercial terms provided to their subsidiaries, affiliates or business partners shall not be more preferential than those provided to other business operators), and not to engage in cross-subsidization, price-squeeze, or any other unfair competition behaviors; (c) to provide access to their interconnection, networking components or relevant telecom infrastructure; and (d) to prepare and publicize their interconnection/access service agreement templates (Articles 27 through 35 of the New Law).


4.     In furtherance of establishing telecom infrastructure, the New Law removed the punishment of unauthorized telecom networks under the current Telecommunications Act, which means that entities may establish their own telecom networks according to their needs without obtaining a prior approval from the NCC.  Furthermore, entities may organize telecom networks by means of leasing others’ telecom networks or using networking slicing technologies instead of establishing their own telecom networks.  Only for the telecom networks that are provided to unspecific persons for their use of communications service, the owner would be subject to the restrictions in terms of the type of entity, the nationality of responsible person, and foreign shareholding, and would be required to comply with relevant technical regulations and dispatch qualified telecom engineers to establish and maintain telecom networks.  In addition, it is worth noting the New Law authorizes the NCC to ban the purchase and use of certain telecom equipment for national security reasons (Articles 36 through 43 of the New Law).


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 New Law 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.  A telecom operator that has obtained spectrum may file an application with the NCC to provide the spectrum or part thereof to other telecom operators for their use by dividing the spectrum into different subbands, time slots, or subregions.  Telecom operators may even combine and use their spectrums together, which is expected to bring about dramatic changes to the competition in the relevant market(s).  In addition, a telecom 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 telecom operator, and the winning bidder would not be subject to the original usage restrictions (Articles 52 through 60 of the New Law).


6.     In order to respond to the development of emerging technologies, under the New Law, 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 the controlled telecom radio-frequency devices announced by the NCC will be regulated (Articles 65 through 67 of the New Law).


In summary, the New Law drastically reduces the current controls over the communications industry.  Traditionally, telecom operators are required to conduct a “vertical” business operation, whereas the New Law gives new entrants the opportunity to provide more efficient communications services via telecom networks established by other telecom operators, instead of establishing telecom networks on their own.  The New Law also creates a secondary market of radio spectrum, which may make the use of spectrum more efficient.  Furthermore, by implementing voluntary registration, emerging ISPs need not register with the NCC as a telecom operator, which may facilitate the entry of new entrants and the development of new types of services.  It is worth observing how the NCC concretizes the above-mentioned management model in the future.


The Communications and Media Practice Group of Lee and Li is closely following up on the New Law and the relevant developments.  If you have any questions or require any assistance, please do not hesitate to contact any of the members of the practice group.