Updating of Honduran Telecommunications Law

The current telecommunications situation in Honduras and especially the system of open competition that is to take effect soon in Honduras, on December 25, 2004, call for a new legal framework adapted to those circumstances.

The legislation currently in force was enacted for a completely different reality, to wit:

The present Framework Law on the Telecommunications Sector [1] essentially governs public telecommunications services classified as: bearer services; teleservices, including basic services and supplementary services; value-added services; and broadcast services. For regulation purposes, the Law established a system of concessions, licenses, permits, and registrations, which in short is a regulatory model ex-ante the telecommunications market.

On the basis of that regulatory structure, the Honduran Telecommunications Company (HONDUTEL) [2] was given a franchise for the provision of the following: domestic and international telephone services as well as telex and telegraphy, with the rest of telecommunications remaining open to competition. With regard to mobile telephone services, the first operator began operations in the Honduran market in September 1996.

During the failed HONDUTEL capitalization process, / public telephones and bearer services were added to its franchise, by means of legislative decrees.

To introduce competition into the mobile telephone market, the current administration, headed by President Ricardo Maduro, granted a second mobile telephone concession, which began commercial operations in November 2003.

As part of its continued modernization of the sector, the present Government, through the program “Telephones for Everyone – A Modern Honduras,” [3] allowed new actors to enter the telecommunications market with a franchise for all services, with the exception of international telephony, which will expire on December 25, 2004.

After that date, the free competition in the telecommunications market will be full competition and the largely ex-ante regulatory model will therefore be unnecessary and might even be detrimental since it often constitutes a legal barrier to market access. It bears mentioning that the merging of services that is becoming increasingly prevalent as a result of constant technological innovations has made the classification of services quite impossible, which is why a proposal has been made to do away with it.

Moreover, at this time the National Telecommunications Commission (CONATEL) does not have the necessary legal tools to regulate competing markets. Its workload will therefore lessen over time.

This also holds true for difficulties that now exist in dealing with user complaints and in settling disputes between network operators and service providers.

It is also important to point out that the Republic of Honduras has assumed specific responsibilities regarding the creation and guarantee of a free market system for telecommunications, in view of bilateral treaties, such as those with the United States, Chile, and Mexico, as well as other international commitments on the horizon like the Dominican Republic-Central America Free Trade Agreement with the United States. These supranational rules take precedence from a legal standpoint and must be complied with.

Given this situation, there is a pressing need for a new legal framework that responds to the new requirements that are already in place as a result of this situation and that will be felt more acutely as of December 25, 2005.

This new legal framework will have as a minimum the following characteristics:

• Regulation of the distortions of free competition in the telecommunications market (ex-post);

• Strengthening of CONATEL, giving it administrative, organizational, technical, financial, and budgetary autonomy;

• Provision of effective regulatory instruments to CONATEL by declaring the: reference market, relevant markets, operators with significant market powers, and economic concentrations;

• Efficiency and effectiveness in allocating the radio spectrum;

• Transformation of the system of concessions, permits, and registrations into a single type of general license;

• Creation of financing mechanisms or subsidies to address universal access and service in areas not served by market forces;

• Establishment of rights and obligations for stakeholders in the telecommunications sector;

• Settlement of user claims through appropriate administrative procedures;

• Expeditious settlement of disputes between network operators and service providers;

• Simplification for network operators and service providers of charge and fee collections; and

• Maintenance of the same legal framework for free radio reception.

Likewise, the Telecommunications and Information Technology Investment Fund (FITT) will be established as a mechanism that enables the state to play its subsidiary role in promoting telecommunications development in areas beyond the reach of market forces.

Under this mechanism, contributions made by all operators, providers, and marketers will be placed in a bank account in the form of a trust and will be used to provide subsidies or financing to operators and providers in accordance projects and studies to be drawn up in due course.

To this end, areas are considered to be covered or not covered. Covered areas have at least one established operator or provider whereas the uncovered areas do not have any or, if they do, the telecommunication services provided are insufficient to meet the demand.

On the basis of this distinction, the FITT is to make every effort to ensure that uncovered areas become covered until it has done so, if possible, throughout the country.

Unless a new legal regulatory framework for telecommunications takes effect in Honduras, the following, inter alia, might occur:

• The country will be in an increasingly less attractive position to attract investments in telecommunications, which will necessarily distance it from the situations of more developed countries.

• Honduran users will not have access to new, more advanced telecommunications services and in time will not even have access to current services, which could also result in unfair service cost increases.

• The digital gap between Hondurans and inhabitants of other countries will continue to widen, which is contrary to the wishes of the population as a whole.

In keeping with the general comments above, the Preliminary Draft Decree on the Framework Telecommunications Law contains: a preliminary chapter, 14 substantive chapters, and transitory and final provisions, for a total of 113 articles.

Presidential Commission
for the Modernization of the State of Honduras (CMPE)  
 

Notes:

[1] Framework Telecommunications Law, adopted by Decree 185-95 of December 5, 1995, and amended by Decree 118-97 of October 25, 1997.

[2] Decrees 244-98 of September 19, 1998, and 89-99 of May 25, 1999.

[3] Adopted by Decree 159-2003, published in the Diario Oficial La Gaceta on October 24, 2004.