San José, Costa Rica, since 1956

Court Sets Deadline for Opening Cell Market

The Constitutional Chamber of the Supreme Court (Sala IV) ordered Tuesday, August 3 that the Costa Rican cellular telephone market be opened within 90 days. Although the Central American Free-Trade Agreement with the United States (CAFTA), in effect since January 2009, required the market to open to competition, access for interested cellular service providers has not yet been granted by Costa Rican regulatory agencies. Currently, the state-owned Costa Rican Electricity Institute (ICE) holds a monopoly on providing cellular phone service.

According to a statement by the Sala IV, which voted unanimously July 30 to enact the order, the Environment, Energy and Telecommunications Ministry (MINAET), the Superintendency of Telecommunications (SUTEL) and ICE must “coordinate actions” in the next 90 days to make cellular frequencies available to would-be competitors. In April, the three government agencies encountered what they characterized as “logistical problems” in securing frequencies for incoming cellular providers.

The court’s opinion said that delays in opening the cellular market have been “excessive and unreasonable,” and that it “is affecting the fundamental rights of consumers who opted for freedom of services” in a nationwide referendum held in October 2007 that was supportive of CAFTA.

On Wednesday, August 4, the Presidency Ministry supported of the decision of the Sala IV, stating in a press release that the process should “respect reasonable time frames” and that “the objective of the licensing process is to be benefit all the users in as little time as possible.”

While the Sala IV’s order echoes widespread frustration with the delays, the 90-day deadline for opening the market might be too ambitious. However, Carolina Mora, a SUTEL spokesperson, said that if the agency were forced to complete the process in 90 days, “it would be possible.”

“We have already contacted MINAET and ICE regarding the order made by the Sala IV,” Mora said. “In order to complete the market opening in 90 days, we will need to modify several of the technical and economic processes we originally outlined.”

In July, SUTEL presented a preliminary timeline for receiving applications, addressing the concerns of interested cellular service providers, and awarding contracts. At the time, SUTEL President George Miley said the process of choosing three companies to compete in the Costa Rican market could take up to six months.

“It’s obligatory that we comply with the ruling of the Sala IV, but there are terms of  the law that they should respect” Miley said. “I’m referring to the terms of receiving the offers, and rewarding and ratifying the contracts. … The awarding of contracts could require additional time.”

When SUTEL releases a definitive timeline later this month, the five multinational companies currently interested in competing in Costa Rica – América Móvil, Cable & Wireless – Digicel, Millicom and Telefónica – will have time to review the market entry terms and to comment on the plan. After this revision period, the five companies will formally apply to enter the market. Once applications are received, SUTEL must review them and select three of the five companies to compete with ICE in providing cellular service in Costa Rica.


Persistent Frustration

In early April, the Office of the United States Trade Representative (USTR) cited delays in opening Costa Rica’s cell phone market as a “key issue” in an annual review of telecommunications trade agreements (TT, April 16). The USTR report urged Costa Rica “to resolve the microwave frequency issue and complete the mobile telephone frequency auction so that it can fulfill its CAFTA commitment to introduce much needed competition into the mobile telephone market.”

Similar frustration is being voiced throughout the country.

In June, Carlos Gallegos, telecommunications director for the international consulting firm Deloitte, considered the closed Costa Rican cellular market “the biggest economic obstacle” facing the country. Gallegos added that an open market would earn Costa Rica an estimated $3 billion in the first five years, and that the new buyers would employ an estimated 2,500 to 3,500 people.

“The dragging-out of the process is depriving consumers of what they voted for (with CAFTA),” said Juan Manuel Campos, a lawyer with Ciber-Regulación Consultores, a firm specializing in telecommunications law. “They are not seeing what was (supposed to be) guaranteed by the free-trade agreement.” Campos also referred to the 2008 Telecommunications Law passed, in part, to lay the ground rules for opening the market. Under the law, once a timeline for opening is announced, competitors must be selected within a maximum of three months.

“If SUTEL releases the timeline in August to potential competitors, they are obligated to announce the winners by November,” Campos said. “Hopefully this order will pressure SUTEL to complete the opening of the market.”


Can it Be Done in 90 Days?

Tuesday, August 3, the Constitutional Chamber of the Supreme Court (Sala IV) ordered the Costa Rican cellular telephone market to open to private service providers within 90 days.

Below is the Superintendency of Telecommunications’ (SUTEL) proposed timeline for complying with that order:

Mid-August – SUTEL will announce an official timeline and guidelines for market entry by new providers. No date has been set.

Late August – Interested companies will apply to compete in Costa Rica. SUTEL estimates this will take two to three months after guidelines are released.

October – SUTEL will recommend three of the applicants to the Executive Branch, which will have two weeks to review the recommendation.

November – The Executive Branch will assign cell phone service frequencies to each competing company.

November – December – New operators will have an opportunity to appeal the designated frequencies.

January February 2011 – Executive Branch signs official contracts enabling new service providers to operate.

In the 17 months since the U.S.-Central America Free Trade Agreement (CAFTA) legislation on opening the cell phone market went into effect, SUTEL has made only moderate progress toward this goal.



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