San José, Costa Rica, since 1956

Pressure Mounts as Cell Market Remains on Hold

Despite mounting calls for action, the opening of Costa Rica’s cell phone market remains on hold.

Three months since the Telecommunications Superintendency (SUTEL) announced, and then retracted, a schedule outlining the dates of the opening of the cell phone market, there has been no movement. As the idle time accumulates, government officials are beginning to air complaints while fears mount that telecom companies might turn their backs on the stagnant market.

According to George Miley, SUTEL’s president, a new draft version of the schedule will be announced within the “next few days.” Miley said that the draft will be released in order to “receive comments and observations from (interested) companies.” According to Miley, the feedback will be analyzed and incorporated into the final draft of the schedule, which should be released in four to six weeks.

SUTEL had initially planned to begin accepting applications from potential cell phone service providers on Feb. 5, with the hopes approving the participation of three companies in the market before President Oscar Arias leaves office on May 8. However, due to “logistical” problems concerning the availability of wavelength frequencies, the original Feb. 5 kickoff date was postponed just hours before it was to go into effect.

“The negotiation process for the principal wavelength frequencies was very long, (lasting) from May to December of 2009,” Miley said in response to a question about the obstacles causing the extensive delay. “Likewise, the subsequent defining of the frequencies by the (Environment, Energy and Telecommunications Ministry (MINAET))

has kept us waiting.”

But the delays and excuses are beginning to raise concern.

In early April, the U.S. Trade Representative’s Office (USTR) mentioned the delay in the opening of the Costa Rican cell phone market as a “key issue” in an annual review of telecommunications trade agreements (TT, April 16). The opening of the market was a principal issue in the negotiation of the Central American Free- Trade Agreement with the United States (CAFTA), which entered into effect Jan. 1, 2009. CAFTA broke up the long-standing telecommunications monopoly held by the Costa Rican Electricity Institute (ICE).

According to the USTR report, potential participants in the Costa Rican cell phone market must access microwave frequencies that connect base stations to cell towers throughout the country. In order for the market opening to proceed, SUTEL must ensure that these frequencies, presently shared by ICE as well as other private and government entities, are also opened to the new participants in the cell phone market. To date, MINAET has not resolved this problem.

In conclusion, the USTR report urged

Costa Rica “to resolve the microwave frequency issue and complete the mobile telephony frequency auction so that it can fulfill its CAFTA commitment to introduce much needed competition into the mobile telephone market.”

This report was followed by an April 12 announcement by the Public Services Regulatory Authority (ARESEP) that it will conduct a preliminary investigation into SUTEL’s actions. In a letter to the agency’s board of directors, ARESEP General Regulator Fernando Herrero outlined the topics to be investigated. Special attention will be given to the reasons behind the suspension of the market opening process in order to assure that this was not done to benefit any of the interested parties.

Although ARESEP has not publically said so, because ICE is currently the only national cell phone provider, observers say it stands to benefit the most from delays in the opening of the market to private competitors. When SUTEL began operations in early 2009, ICE was the only licensed telecommunications provider, and therefore the only company paying fees to SUTEL. Since SUTEL received no initial government financing, the agency initially relied solely on ICE’s payments for its survival. SUTEL also has oversight over the opening of the market for Internet providers, and, once private companies were approved for operation, these also started paying fees to SUTEL.

ARESEP will also investigate the role of both SUTEL and MINAET in decision-making relating to access to microwave frequencies. The investigation will focus on the question of whether SUTEL exceeded its authority by suspending the process of opening the market, a decision that ARESEP contends lies exclusively with MINAET.

To further complicate matters, MINAET released a decree last week that would require ICE to release operating control of some microwave frequencies and make them accessible to incoming competitors. In response, ICE said in a statement that the decree will “only worsen” existing problems and that the redistribution of the frequencies will likely result in interference with existing operators.

Despite mounting scrutiny, Miley remains confident that within the next few weeks a new schedule for the opening of the market will be released. As of late January, Digicel, Millicom, Telefónica, Cable & Wireless, and América Móvil had expressed interest in providing cell phone service in Costa Rica. All five of these companies have experience providing cell phone service in Central America and the Caribbean.

Although many observers assume these companies will remain interested when the doors to the Costa Rican market finally swing open, there is a widespread sense that the delay is souring the country’s reputation.

“The situation has become chaotic and is sending the worst message to investors that are looking to join the market,” said Juan Manuel Campos, a lawyer with Ciber- Regulación Consultores, a firm that specializes in telecommunications law. “I’m afraid that if they don’t fix this in the next few weeks, it could become a disaster for the country.”

Having promised to release a new market opening schedule in a few weeks, the eyes of the nation, as well as several international cell phone providers, are on SUTEL.

Comments are closed.