Telecom Bill Creates Dust-up Over Landlines

December 14, 2007

It started with an amendment that no one would take credit for, and continued the next day with a front page headline in one of Costa Rica’s premier dailies, La Nación:

“Motion would open landline market.”

For some it was a shocker, considering the Central American Free-Trade Agreement with the United States (CAFTA) – ratified by referendum on Oct. 7 – only requires Costa Rica to open its cellular phone, Internet and private network markets to competition.

Even pro-CAFTA trade groups like the Union of Private-Sector Chambers and Associations sent out scathing press releases, saying the amendment “goes beyond what the people approved in the referendum.”

The amendment was eventually withdrawn, and CAFTA opponents declared victory.

Yet at the heart of the dust-up was a fundamental misunderstanding of how new telecom regulations will work, according to telecom experts and the head of the Costa Rican Electricity Institute (ICE).

Presently, Costa Rica regulates telecommunications according to service. The Public Services Regulatory Authority (ARESEP), for example, approves rates on landlines, international calls, Internet connections and many other discrete services.

The new telecommunications regulations, however, would regulate according to network, said Guillermo Muñoz, assistant director of telecommunications at ARESEP.

That is, new regulations will only supervise how networks – cellular phone or data, for example – interact with each other, which is more or less how developed countries like the United States regulate telecommunications.

What services those networks provide – and at what price – would be left up to the network owners or concessionaires’ discretion.

But in the debate over landlines, Muñoz said, “there’s not a clear separation of concepts.”

When the amendment offered to open “landlines” to private concessionaires, both sides in the squabble took the term as referring to services. The text of the bill actually refers to a network.

Specifically, the bill exempts “public telecommunications networks solely associated with offering basic, traditional telephone services” from concessions to private companies.

ICE President Pedro Pablo Quirós said the exemption applies specifically to a “circuit-switching” network – old telephone technology that relies on physically switching an electrical signal to connect one caller to another.

ICE and most other telecom companies in the world are moving away from that old technology to a digital method of transmitting phone calls that allows all data traffic – Internet, streaming video, telephone conversations – to share the same pipeline and reach their destinations without any switching.

Juan Manuel Campos, an ICE veteran of 20 years who now practices privately as a telecom lawyer and heads up the Chamber of Information Technology, said the exemption “is like saying the law can’t grant concessions to prehistoric technologies.”

But when the motion on Nov. 28 offered to do just that, all hell broke lose, politically; and when the National Liberation Party (PLN) backed off a few days later, the anti-CAFTA Citizen Action Party (PAC) declared victory.

“(The amendment) threatened the country much more profoundly and was obviously excessive compared to what was decided in the referendum,” Leda Zamora, a PAC legislator on the telecom commission, told La Nación.

Other parties, like the Social Christian Unityn Party (PUSC), also made political hay out of the kafuffle.

“Costa Ricans can rest secure because … basic traditional telephone service will continue to be offered only and exclusively by ICE,” said PUSC legislator Ana Helena Chacón in a statement.

The reality is, however, that offering what people think of as landline services – a physical phone connected to a wire from the wall – could still be done by private companies, just not through ICE’s antiquated circuitswitching network.

And, Quirós said, ICE itself is phasing out that old network.

“I’m not going to stick a single new customer with the old technology,” Quirós said.

 

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