THE REFORMS IN TELECOMMUNICATION SECTOR: THE EXPERIENCE OF THE ISLAMIC REPUBLIC OF IRAN

Transcription

1 MULTI-YEAR EXPERT MEETING ON SERVICES, DEVELOPMENT AND TRADE: THE REGULATORY AND INSTITUTIONAL DIMENSION Geneva, March 2010 THE REFORMS IN TELECOMMUNICATION SECTOR: THE EXPERIENCE OF THE ISLAMIC REPUBLIC OF IRAN By Mitra NASSIRI Researcher Ministry of Commerce

2 1. Economic Development and Telecom Sector in Iran After the termination of Iran-Iraq war (1988), Economic development was an indispensable priority to Iranian policy makers. Per-capita income and the investment rate had declined and the state-controlled war-economy could not jump start economic growth. The investment/gdp ratio, particularly for the private sector, had been reduced just before the end of the war in The main challenges of the economy were: to raise more saving outside the government sector, to provide incentives for greater private participation in the economy, and to provide more incentives for non-oil exports partly to reduce chronic foreign exchange shortage in the Iranian economy at the time. Several reform packages were included in the First ( ), Second ( ), and Third Plans ( ) and additional supporting measures prescribed by the Fourth Plan. These reforms called for less government control, more reliance on the market and price mechanism, wider private sector participation, trade/exchange rate liberalization for transition to a more open economy. These policies were similar to the Structural Adjustment Policies which a large number of developing countries had subscribed to during the 1980s and the 1990s. In Telecom Sector Iran experiences one of the fastest growth periods in the development of Telecom infrastructure. The new era in which the pace of telecom development was accelerated started in early 1990 experiencing a steady growth reach up to 2 billion $ which is 20 times more than In early 1990 to remove some administrative bottlenecks and delays, more authority was given to provinces and provincial telecom companies were established in Regional and International Cooperations At present, Iran is a member of international institutions such as International Telecommunication Union (ITU),Asia Pacific Telecom (APT),International Telecommunication Satellite Organization (INTELSAT) International Maritime Satellite Organization (INMARSAT), Organization of Islamic Conference (OIC), - Economic Cooperation Organization (ECO) Global System for Mobile (GSM),Asia Electronics Union (AEU), World Radio Conference (WRC),ICO Global Communication,COSPAS-SARSAT So far as regional and international cooperations are concerned, Telecommunication Company of Iran (TCI) has carried out extensive activities to export technical and engineering services, and has put its experiences at the disposal of other countries within the framework of consulting and contracting agreements. In this respect TCI executed the Trans Asia Europe (TAE) OFC project in the territory of Turkmenistan with a length of 700 kms. while the main route, equipped with OFC, has a capacity of 7560 channels and the back-up route, with 14 radio links, entails 1890 channels. All phases of this project, including planning, equipment procurement, execution, and training have been carried out by TCI. 3. Institutional arrangements and Players in Iranian Telecommunication Sector 3.1 Communications Regulatory Authority (CRA) Communications Regulatory Authority is responsible of executing the approvals of the Radio Regulations Provision Commission to achieve the objectives set in this sector, and for the fulfillment of Ministry of ICT s governmental supervision, and executive 1

3 duties and liabilities in the field of radio communications and regulations, it is established as a subsidiary body of the Ministry of ICT and its head is the Deputy Minister of Information and Communication Technology. This body is responsible for issuance of operations permit to render all types of telecommunication and postal services, including conditions, standards, and methods of indemnification of the losses caused by their non-performance, within the framework of the commission s approvals. This organization is in charge of applying standards, criteria, qualitative control regulations, and type approvals in rendering and expansion of telecommunication, postal, and IT services nationwide. This organization is an authority for compilation of laws and regulations, price tables for all telecommunication and IT services, and determines minimum and maximum prices in order to ensure a sound competition, and their qualitative improvement within the framework of the laws and regulations. It also supervises the performance of permit holders according to the contents of the issued permits. This institution is in charge of compilation and offering proposals on the directions and standards concerning interconnection of telecommunication and computerized networks, from security and safety standpoints, and also regulate their tariffs, and supervises their correct performance as well as offering directions on framework of the agreements concerning the degree and level of services in order to clarify their quality versus cost standards, in postal, telecommunication and IT networks compilation of the required directions in order to adjust the relations among the postal and telecommunication service providers is also responsibility of this regulatory body. CRA has the responsibility of protecting the rights of postal and telecommunication services users, in this regard it may offer proposals on the amendment of postal and telecommunication. 3.2 Telecommunication Company of Iran Telecommunication Company of Iran (TCI) was established in 1971 with an organizational structure as the main responsible administration for the entire telecommunication affairs. TCI is a holding company through which a number of specialized companies are engaged in expansion of telecom networks and services as well as the provision of services to consumers. TCI subsidiaries include the Telecommunication Infrastructure Company (TIC) the Mobile Communications Company of Iran (MCI) the Data Communication Company (DCI) as well as 30 provincial telecom companies (one for each province) these entities are independent in their operation and don t need authorization for their routine development projects.tci through MCI and PTC is the provider of landlines with about 23 million clients and cellular phones with about 30 million customers. This company and its subsidiaries (except TIC) has been recently privatized. 3.3 Telecommunication Infrastructure Company Telecommunication Infrastructure Company`s main duty is management, organization, establishment, operation and maintenance, expansion, and supervision of Iran s telecommunication infrastructure network consisting of a group of telecommunication systems such as long-distance and international microwave centers, optical fiber cable main network, satellite communication earth stations, long-distance switching centers 2

4 (SC,PC) and, international switching center (ISC), which provide the required longdistance and international transmission capacity for the governmental and nongovernmental subscribers and network operators. 3.4 Mobile Communication company of Iran The Mobile Communication Company of Iran with (MCI) about 30 million clients is the first service provider in cellular phone market in Iran. Its duties include establishment, commissioning, operation and maintenance, renovation, development, marketing, introduction and approval of all specialized and technical instruction, criteria, maintenance, and expansion of mobile communication network, Cooperation with other operators in the fields of mobile traffic exchange and transit, roaming, and utilizing other common resources, providing the required systems to enforce supervision on the mobile communication network by the competent authorities, offering the required services to users with due consideration of business and customer-based issues, tracking necessary for network security and protection of the subscribers rights. With 37 million cellular phone clients this company is first cellular phone service provider in Iran this company has been recently privatized. 3.5 Provincial Telecommunication Companies PTC s are in charge of establishment, operation and maintenance, expansion, management, organization, and supervision of communication and Information Technology (IT) networks within the territory of the respective province, rendering value-added services by using modern technologies within the framework of the approved plans and programs, acting as an agent for the execution of the projects on operation and maintenance, expansion, and supervision on behalf of Telecommunication Infrastructure Company (TIC) and Mobile Communication Company of Iran(MCI). TIC s and MCI s are active within the territory of the respective province and their installations and their responsibility and under their proprietorship however preparation of the respective plans for communication and IT networks in the province is based on demands, requirements, standards and criteria is done by PTC`s. PTC`s follow the duty of establishment, operation and maintenance, renovation, expansion, supervision, and management and marketing of communication and IT networks, according to national and international standards in the province these companies are also in charge of the approval of these activities.they also provide communication networks and services required by the users in governmental, private, and cooperative sectors and take necessary measures for network security and protection of the subscribers rights. 4. Universal Access to Telecommunication Services Islamic Republic of Iran has taken great steps in the development of telecommunication networks and, for this purpose, Telecommunication Company of Iran, as the main responsible organization, has utilized digital switching centres, optical fibre cables, mobile phones, data networks, satellite services, and telephone special services during the recent years. 3

5 In order to connect underprivileged areas to the network the number of villages covered has increased from 43,800 in 2004 to 52,783 in 2008 and it was predicted to increase by 62,120 villages by So far 5,672 TCI offices were launched by March 2008 and they are planned to increase by 10,000. Iran is among the first five countries which have had a growth rate of over 20 percent and the highest level of development in telecommunication, and have been awarded the UNESCO special certificate for providing telecommunication services to rural areas. (for more details see table 1) The steps taken toward expansion of telecom network have had important role as a preparatory step before privatization of the existing public telecom companies and some obligations in the agreements with private companies to spend part of their income in development of the telecom services in rural areas are among the most important measures to achieve universal access while intruding competition to the market. The following diagram shows the number of connected villages between years : 5. Government Policy Analysis 5.1 The Economic Development Plans The government of the I.R Iran has addressed policy issues on telecom development within Economic, Social and Cultural Development Plans (ESCD) in five-year cycles In first and second ESCD the development of telecommunication was exclusive domain of the government to perform expansion and improvement of postal and telecom in rural,local cities, long distance and international services. In year 2000 there was a fundamental shift.in this programme state telecommunication companies to transfer some of their functions with regard to maintenance and operation, designing, 4

6 engineering, installation and operation, testing and delivery of equipment and networks to private and cooperative sectors. Principle 43 of the Constitution of the I.R. Iran provides for the prohibition of monopolies as one of the fundamental principles of the Iranian economy. In accordance with Principle 44 of the Constitution, which aims to preclude any economic loss rendered to the society, the Third Economic, Social and Cultural Development Plan Act provides for the elimination of monopolies in banking and credit institutions, communications, energy supply, civil aviation and sea navigation. As regards the telecommunications sector, the establishment and maintenance of mother networks, regulation of the frequency space and ensuring the continuing supply of postal and telecommunications services fall within the competence of the state. However, subject to the approval of the Council of Ministers, the non-governmental sector is authorized to operate in the fields of subsidiary networks of the telecommunications sector, independent and parallel postal and telecommunications networks and also in the fields of Cellular phone services; Paging services; Fixed telephone services; Data transmission; Value-added facsimile services; Rural telecommunications network; Postal receipt services; and Postal delivery services. Following these law the Ministry initiated major activities for cellular mobile services namely issuance of a license to establish a separate GSM mobile network to provide prepaid services. The establishment of Communication Regulatory Authority (CRA) within the Ministry was decided at the same time. Finally in fourth ESCD was enacted in September 2004 for the period of 2005 to 2009 was stated that the government is planning to expand communications and information technology and to materialize knowledge based economy and to reach a regional development and to facilitate communication with standard quality and to provide new opportunities for provision of services for individual families and companies and to attain at least 50%, 35% and 30% penetration ratios in fixed telephone lines, mobile phone lines internet usage respectively and to provide high speed multi media links at least in cities with more than 50,000 inhabitants and to expand capacities of postal services to 20 parcels per person and to provide basic telecom and IT services throughout the country. 5.2 Toward a more competitive Telecommunication Sector The Iranian cellular phone market was opened toward competition after establishment of Talya who entered the market on Build-Operate- Transfer (BOT) and revenue sharing arrangement with TCI. Later the Iranian market was opened to foreign competition when a Joint venture between south Africa`s MTN and consortium of Iranian entities started its operation. As part of the privatization plan according to the Fourth Five-Year Economic Development Plan ( ), the Privatization Organization of Iran affiliated to the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the stock market take charge of the privatization of TCI. Telecom sector which were formerly owned by public sector were part of the privatization plan after the privatization process in (TCI) the shares of this company comprising of specialized parent company, 30 provincial companies and Mobile 5

7 Communication Company of Iran (Public Joint Stock ) as the largest telecom operator of the region started its operation as a private company to provide services to customers and the formerly all telecommunication sub-companies and in the most recent step in year 2009, fifty one percent of its share was sold in stock market to Tose-e- Etemad Mobin Consortium comprising of three private Iranian companies Competetive Telecom Market and pricing Policy For public policy reasons and to achieve universal access to telecom services the main policy of the government had been keeping the tariffs constant meaning an effective reduction of prices considering inflation rate. Also as a result of alternative methods (such as voice chat or Vo IP) and abundance of low cost international service providers the international call prices was drastically decreased however the general revenue of the service providers increased this happened thanks to increase in number of clients and more usage of the consumers. After privatization of TCI as the most important telecom service provider some concerns over its commitment to provide universal access and pricing has been raised. In this regard RCA as an authority for setting laws and regulations, price tables for all telecommunication and IT services, this organization determines minimum and maximum prices in order to ensure a sound competition and to make sure the right of the consumers is protected. So far as the universal access is concerned this private provider has been obliged to spend up to 5 percent of its income in rural areas in order to provide universal access to telecom services. 6. Successes and Challenges in Regulating Telecom Market The most significant positive results of reforms in Iranian Telecom market has been achieved after opening the market, when thanks to issuing license in cellular phone services the consumers experienced a sharp decline of SIM card prices and prepaid cellular phones.new value added services was introduced to market before second and third operators enter the Iranian market the consumers used to wait long time to buy a SIM card at prices up to 500 $ which now is almost offered for free the competition led market to higher quality services however there has not been significant changes in tariffs. One of the challenges of Regulation now is that in fact there is neither an explicit policy nor regulations and the experience of activities of private companies in public services is a new concept to Iranian economy actually what is now being followed is an implicit policy like issuing licenses to limited number of potential service providers for the fee (that some times is excessive). Although there is no basic law or detailed policy nevertheless plans of Ministry of ICT and Government planning organization have been used to expand the infrastructures and to introduce new services but the more competitive the market becomes the lack of transparency and clear policies becomes more challenging. 6

8 7. Conclusion As steady steps are taken toward a more open and competitive market more prudential laws which protect the rights of consumers and preserve healthy competition are required. Minister of, Communication and Information Technology regulates the provision of services through the Communication Regulatory Authority (CRA). However the CRA in its existing form in the Ministry is challenged by some service providers as they find its position affecting its impartiality specially in the absence of a basic law on telecom. The dominance of former public companies in Iranian market and their access to financial resources enable them to manipulate the prices and impede competition by newcomers. So a new policy statement with specific and effective punitive measures beside a fully authorized enforcement agency to enforce the policy to form a fair and equitable and effective market is required. The comprehensive law to regulate a competitive market should follow these objectives: Promoting affordable access to advanced telecom services in all regions including urban, rural and remote areas ; enhancing efficiency of domestic telecom market and improve productivity of the economy ; enhancing social well being of nation and public safety and security ; protect personal privacy. In addition to policy statement and objectives there should be modalities for achieving telecom policy objectives the modalities should consider following : market forces should be relied upon to maximum extent feasible as the means of achieving telecom policy objectives in particular price manipulations and cross_subsidies should be prohibited by stipulating punitive mandatory and effective measures Regulatory authorities and other government measures should be adopted where market forces are unlikely to achieve the policy objective within a reasonable time frame and only when costs of regulation do not outweigh benefits 7

9 Table 1 : The National Telecommunication Report ( the highlighted items show universal access performance) No Service/facility Mach Fixed line activation Mobile subscriber activation Connected villages Fixed line penetration rate Mobile subscriber penetration rate Transmission channels International channels (incoming) Public phone booths local Long- distance public phone booths Cities under the mobile network coverage Areas with long- distance connection Data transmission network (cities) International band width ( mbps) Optical fiber network ( km) Rural ICT Offices 9,486, ,595 28,062 14,9 1,51 405,997 8,483 84,971 11, , ,205-22,626,944 15,385,289 51,058 32,57 22,20 1,371,712 11, ,366 89,460 1,016 6, ,726 75,000 2,287 23,585,125 21,545,510 52,563 33,06 30/10 1,758,142 12, , ,499 1,016 6,280 1,086 9,626 77,500 3,668 23,957,639 24,509,714 52,783 33/46 34/20 2,052,543 15, , ,314 1,035 6,280 1,182 10,870 77,500 5,672 8

10 Table 2 9