Telecommunication Infrastructure and Regulation

 

Liberalization and Deregulation Overview-

The telecom market in Taiwan was run solely by the state-owned Directorate General of Telecommunications (DGT) for more than 50 years prior to 1996. However, owing to the advent of telecom liberalization, the DGT could not monopolize the market any longer. The legislature passed three bills in January, 1996, to further open the telecommunication market to private investments. On 1 July 1996, the DGT was formally transformed into two organizations. One is still called DGT, acting as the regulator of the Taiwanese telecom industry, and the other one, the newly established Chunghwa Telecom, acts as a state-run corporation to offer telecom services in a competitive environment.

Regulatory Reform and Telecom Liberalization Process -
The telecom liberalization in Taiwan is based on the three revised telecom bills, the Telecom Act, the Organizational Statute of DGT, and the Statute of Chunghwa Telecom, which have been effective since February 1996.
The major revisions to the Telecom Act are:
• Opening the telecom market to the private sector
• Separating business operations from regulatory functions
• Dividing the telecom business into two types: Type 1 and Type 2 enterprises. -- Type 1 enterprises can be further differentiated into Type 1-A and Type 1-B. Type 1-A operators install land-based equipment and fixed-line facilities providing network transmission, switching facilities, and auxiliary facilities. This type of businesses now is monopolized by Chunghwa Telecom. Type 1-B provides wireless communication services, including cellular phone, mobile data, pager, very small aperture terminal (VSAT) and trunk radio. While type 2 businesses provide any services other than those of type 1, including value-added network services (VANs).
• Guaranteeing equal network access among different telecom operators
• Limiting foreign investment to 20 percent for type 1 business, but no restriction on type 2 business
• Prohibiting cross subsidization between type 1 and type 2 businesses
• Setting up a universal service fund for supporting telecom services to the remote, mountainous areas and offshore islands.

Telecom Market Trends –
Currently, the mobile phone is the most competitive service in Taiwan's telecom market. Besides the analog cellular system AMPS (800M Hz), we have two other digital cellular systems in Taiwan: GSM (900 MHz) and DCS (1800 MHz). Our government has issued eight licenses to six private operators for mobile phone service.
The liberalization of mobile phone service invites both local and foreign consortia to work together to explore Taiwan's telecom market. Before liberalization, the amount of mobile phone subscribers was under 1.5 million. However, only one year after deregulation, the accumulated subscribers were more than 4.5 million (as of January 1999) owing to increased competition and promotion. At present, Chunghwa Telecom owns the biggest market share, about 50 percent, with the other private operators holding the other half.

At the end of December 1998, the number of radio paging subscribers in Taiwan had reached 4.3 million. It is forecasted that the growth of radio paging subscribers will slow down in the future owing to the competition of mobile phone service and the opening of low-tier mobile service.

In 2001, local telephone subscribers reached 13 million. With the opening of fixed-line network services, the intensive use of the Internet and other data communications by dial-up access. In Internet communications, nearly 80 Internet Service Providers (ISPs) have been founded in recent years, including the three largest ones: TANet, HiNet and SeedNet. As of January 1999, there were more than 3 million Internet subscribers registered in Taiwan using dial-up or leased-line connections.

So far, Chunghwa Telecom has still maintained its healthy and strong status quo after liberalization. Its revenue in fiscal year 1998 increased 14 percent compared with that in fiscal year 1996 (the year before Chunghwa Telecom was founded). This revenue mainly came from mobile and fixed-line phone services, including the local, long-distance, and international phone calls. The pie of Taiwan's telecom market has been growing remarkably since liberalization. Competition has brought more choices and better services to customers at lower prices. The opening of the telecom market also provides many golden opportunities for telecom operators and vendors. It is estimated that in the next five years, up to NT$500 billion will be invested in the domestic telecom market, supporting the R.O.C. government's "Boosting Domestic Demand" policy.

Business Opportunities in Taiwan-
In a word, the telecom market in Taiwan is not saturated yet. The opportunities for foreign telecom operators are:
• Offering type 2 services with no investment restriction
• Entering joint ventures with local consortia to run type 1 business
• Providing consulting services to local carriers in fields such as management skills, technological know-how, operational supports, etc.
• Forming strategic alliances with domestic operators to explore the international telecom market.
The telecom market in Taiwan has been completely deregulated in the year 2001. The competition becomes more fierce as more newcomers enter the telecom market. Telecom liberalization can spur further advancements in technology and stimulate the expansion of the market's size, thus promoting Taiwan to be a technological island and bringing along economic prosperity. As consumers have dominant power over the market, with increased demand for high-quality, diversified, and seamless services at reasonable rates, telecom services providers will have to compete and cooperate with each other in order to fully address customers' needs. Although the world economy has been struck by a financial storm and is in a recession, the telecom industry is still a booming business. From the above analysis, we realize that the telecom industry in Taiwan has great potential in the future.