Telecom Regulator Caught in Catch-22

May 22, 2009

Given the monumental task of opening up parts of the telecommunications market to new competitors, the state regulator has yet to approve even one new license. Instead, it has created what some are calling a bogged down and irrelevant application process that has left some aspiring operators baffled.

With little time to adapt to its new and greatly expanded responsibilities, the Superintendent of Telecommunications (Sutel) has stumbled out of the starting gate, tripping over its own hurdles as well as some placed by the government, according to some people in the industry.

“The problem is a problem with the country,” said Juan Manuel Campos, a lawyer with Ciber-Regulación Consultores, a firm that specializes in telecommunications law. “They didn’t look for a transition from the old model…to the new.”

The lack of preparation has led to a market that still has one legal provider, the former state-run telecommunications monopoly, Costa Rican Electricity Institute (ICE). This makes for a situation that is the exact opposite of the intention of the recently passed Central American Free-Trade Agreement with the United States (CAFTA).

The law needs to be changed to help SUTEL adjust, said Campos.

Learning Curve

“This is a learning curve,” said Lynda Solar, executive director of the Costa Rican-American Chamber of Commerce. “It’s like Sutel is starting at, well, zero, really.”

Sutel, which was formed out of two small preexisting agencies, opened its doors February 3, with no government financing provided to jump-start the process.

According to Sutel advisor Walther Herrera, the agency went from regulating and dealing exclusively with ICE to becoming “the organism with the maximum authority over regulation” within telecommunications.

“This organism has very specific functions: the opening of the market…regulation of the airwaves, the authorization of the new telecommunications operators…and to take care of the concessions process for the new cellular providers.”

With 23 employees, Sutel has a staff that is less than one-third the size it says it eventually will need. And crippling its ability to expand is its sole source of funding: a small fee charged each customer by their service provider. As the only licensed provider, ICE is SUTEL’s only benefactor.

After nearly four months, and with 28 companies waiting in line, no new licenses have been granted, and Herrera said no licenses will be granted for another two months. According to Campos, the process of opening up the market for Internet providers should have taken only a month.

As a result, the initial burst of hope among potential competitors when CAFTA went into effect earlier this year, now has some aspiring operators frustrated.

“It’s more difficult now that the mechanisms are in place,” said Michael Kister, president of TicoSAT, a satellite broadband Internet service in Costa Rica. “It feels like the requirements were lifted from some other source and don’t apply to what we do.”

Sutel has defended its thorough application process by saying it’s meant to ensure that the companies entering the market are serious about investing in Costa Rica and that they will provide quality service.

“One function of the regulator is to make sure that everyone getting services is getting quality service,” said Herrera.

Regulation ‘Doesn’t

Make Sense’

Others feel the process places unnecessary conditions on applicants.

“That everything is regulated doesn’t make sense,” said Campos. “The market simply works. …Looking for valid investors; this isn’t a problem for the regulator. …We’re not in a financial market where we have to protect the investors. There aren’t any investors there to protect. …There isn’t one company that’s going to become part of the national stock exchange.”

And, the way in which the law has been implemented has only complicated the situation and caused friction between ICE and its new competitors.

Kister said TicoSAT spent approximately 500 man-hours compiling the application – the equivalent of one person working 40-hour weeks for over 12 weeks on just the application. For a young company, it could be too much, said Kister.

Part of the process was a feasibility study for the company’s infrastructure.

“That would have been fine if we were building a dam,” said Kister, “but our network is already built.”

Adding to the delays, Sutel almost had to shut down last week after ICE refused to turn over the fees meant to keep the regulator running. ICE’s complaint was that, while other competitors were operating, ICE w

Given the monumental task of opening up parts of the telecommunications market to new competitors, the state regulator has yet to approve even one new license. Instead, it has created what some are calling a bogged down and irrelevant application process that has left some aspiring operators baffled.

With little time to adapt to its new and greatly expanded responsibilities, the Superintendent of Telecommunications (Sutel) has stumbled out of the starting gate, tripping over its own hurdles as well as some placed by the government, according to some people in the industry.

“The problem is a problem with the country,” said Juan Manuel Campos, a lawyer with Ciber-Regulación Consultores, a firm that specializes in telecommunications law. “They didn’t look for a transition from the old model…to the new.”

The lack of preparation has led to a market that still has one legal provider, the former state-run telecommunications monopoly, Costa Rican Electricity Institute (ICE). This makes for a situation that is the exact opposite of the intention of the recently passed Central American Free-Trade Agreement with the United States (CAFTA).

The law needs to be changed to help SUTEL adjust, said Campos.

Learning Curve

“This is a learning curve,” said Lynda Solar, executive director of the Costa Rican-American Chamber of Commerce. “It’s like Sutel is starting at, well, zero, really.”

Sutel, which was formed out of two small preexisting agencies, opened its doors February 3, with no government financing provided to jump-start the process.

According to Sutel advisor Walther Herrera, the agency went from regulating and dealing exclusively with ICE to becoming “the organism with the maximum authority over regulation” within telecommunications.

“This organism has very specific functions: the opening of the market…regulation of the airwaves, the authorization of the new telecommunications operators…and to take care of the concessions process for the new cellular providers.”

With 23 employees, Sutel has a staff that is less than one-third the size it says it eventually will need. And crippling its ability to expand is its sole source of funding: a small fee charged each customer by their service provider. As the only licensed provider, ICE is SUTEL’s only benefactor.

After nearly four months, and with 28 companies waiting in line, no new licenses have been granted, and Herrera said no licenses will be granted for another two months. According to Campos, the process of opening up the market for Internet providers should have taken only a month.

As a result, the initial burst of hope among potential competitors when CAFTA went into effect earlier this year, now has some aspiring operators frustrated.

“It’s more difficult now that the mechanisms are in place,” said Michael Kister, president of TicoSAT, a satellite broadband Internet service in Costa Rica. “It feels like the requirements were lifted from some other source and don’t apply to what we do.”

Sutel has defended its thorough application process by saying it’s meant to ensure that the companies entering the market are serious about investing in Costa Rica and that they will provide quality service.

“One function of the regulator is to make sure that everyone getting services is getting quality service,” said Herrera.

Regulation ‘Doesn’t

Make Sense’

Others feel the process places unnecessary conditions on applicants.

“That everything is regulated doesn’t make sense,” said Campos. “The market simply works. …Looking for valid investors; this isn’t a problem for the regulator. …We’re not in a financial market where we have to protect the investors. There aren’t any investors there to protect. …There isn’t one company that’s going to become part of the national stock exchange.”

And, the way in which the law has been implemented has only complicated the situation and caused friction between ICE and its new competitors.

Kister said TicoSAT spent approximately 500 man-hours compiling the application – the equivalent of one person working 40-hour weeks for over 12 weeks on just the application. For a young company, it could be too much, said Kister.

Part of the process was a feasibility study for the company’s infrastructure.

“That would have been fine if we were building a dam,” said Kister, “but our network is already built.”

Adding to the delays, Sutel almost had to shut down last week after ICE refused to turn over the fees meant to keep the regulator running. ICE’s complaint was that, while other competitors were operating, ICE was the only one paying the fees, because they were the only officially licensed company. Meanwhile, TicoSAT couldn’t pay the fees because SUTEL wouldn’t grant it a license.

“We’re in a Catch-22,” said Kister. “We’re actually worse off than we were before CAFTA. We’re getting clubbed over the head with the very laws that were supposed to help us.”

 

Given the monumental task of opening up parts of the telecommunications market to new competitors, the state regulator has yet to approve even one new license. Instead, it has created what some are calling a bogged down and irrelevant application process that has left some aspiring operators baffled.

With little time to adapt to its new and greatly expanded responsibilities, the Superintendent of Telecommunications (Sutel) has stumbled out of the starting gate, tripping over its own hurdles as well as some placed by the government, according to some people in the industry.

“The problem is a problem with the country,” said Juan Manuel Campos, a lawyer with Ciber-Regulación Consultores, a firm that specializes in telecommunications law. “They didn’t look for a transition from the old model…to the new.”

The lack of preparation has led to a market that still has one legal provider, the former state-run telecommunications monopoly, Costa Rican Electricity Institute (ICE). This makes for a situation that is the exact opposite of the intention of the recently passed Central American Free-Trade Agreement with the United States (CAFTA).

The law needs to be changed to help SUTEL adjust, said Campos.

Learning Curve

“This is a learning curve,” said Lynda Solar, executive director of the Costa Rican-American Chamber of Commerce. “It’s like Sutel is starting at, well, zero, really.”

Sutel, which was formed out of two small preexisting agencies, opened its doors February 3, with no government financing provided to jump-start the process.

According to Sutel advisor Walther Herrera, the agency went from regulating and dealing exclusively with ICE to becoming “the organism with the maximum authority over regulation” within telecommunications.

“This organism has very specific functions: the opening of the market…regulation of the airwaves, the authorization of the new telecommunications operators…and to take care of the concessions process for the new cellular providers.”

With 23 employees, Sutel has a staff that is less than one-third the size it says it eventually will need. And crippling its ability to expand is its sole source of funding: a small fee charged each customer by their service provider. As the only licensed provider, ICE is SUTEL’s only benefactor.

After nearly four months, and with 28 companies waiting in line, no new licenses have been granted, and Herrera said no licenses will be granted for another two months. According to Campos, the process of opening up the market for Internet providers should have taken only a month.

As a result, the initial burst of hope among potential competitors when CAFTA went into effect earlier this year, now has some aspiring operators frustrated.

“It’s more difficult now that the mechanisms are in place,” said Michael Kister, president of TicoSAT, a satellite broadband Internet service in Costa Rica. “It feels like the requirements were lifted from some other source and don’t apply to what we do.”

Sutel has defended its thorough application process by saying it’s meant to ensure that the companies entering the market are serious about investing in Costa Rica and that they will provide quality service.

“One function of the regulator is to make sure that everyone getting services is getting quality service,” said Herrera.

Regulation ‘Doesn’t

Make Sense’

Others feel the process places unnecessary conditions on applicants.

“That everything is regulated doesn’t make sense,” said Campos. “The market simply works. …Looking for valid investors; this isn’t a problem for the regulator. …We’re not in a financial market where we have to protect the investors. There aren’t any investors there to protect. …There isn’t one company that’s going to become part of the national stock exchange.”

And, the way in which the law has been implemented has only complicated the situation and caused friction between ICE and its new competitors.

Kister said TicoSAT spent approximately 500 man-hours compiling the application – the equivalent of one person working 40-hour weeks for over 12 weeks on just the application. For a young company, it could be too much, said Kister.

Part of the process was a feasibility study for the company’s infrastructure.

“That would have been fine if we were building a dam,” said Kister, “but our network is already built.”

Adding to the delays, Sutel almost had to shut down last week after ICE refused to turn over the fees meant to keep the regulator running. ICE’s complaint was that, while other competitors were operating, ICE was the only one paying the fees, because they were the only officially licensed company. Meanwhile, TicoSAT couldn’t pay the fees because SUTEL wouldn’t grant it a license.

“We’re in a Catch-22,” said Kister. “We’re actually worse off than we were before CAFTA. We’re getting clubbed over the head with the very laws that were supposed to help us.”

 

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