REPORT OF WORKING GROUP APPOINTED BY CABINET TO PREPARE A NATIONAL POLICY ON TELECOMMUNICATIONS FOR TRINIDAD AND TOBAGO

(DR. PETER A. STERN, Consultant

MS. TIRA GREENE, Legal Adviser

August 1997)

TABLE OF CONTENTS

I. INTRODUCTION

1.1      Cabinet by Minute No. 1481 of June 12 1997 appointed a Working Group to prepare and submit for its consideration a National Policy on Telecommunications for Trinidad and Tobago. To this end, the Working Group reviewed and considered existing and other policy documents on telecommunications, liaised with critical stakeholders in the industry, and co-opted additional expertise to assist with the conceptualisation and preparation of the policy document.

1.2      The Working Group took due note that the Draft seven (7) year planning framework (1998 - 2004) identifies a high-quality, information- based economy as a cornerstone for the future development and growth of Trinidad and Tobago. In the view of the Working Group, the adequate management of the evolution of an information-based economy would offer significant export opportunities and earnings, create new and challenging employment opportunities, diversify the economy and contribute to rural growth. Realisation of this potential, however, depends on the majority of the citizenry having access to a modern telecommunications infrastructure, which can offer the whole range of basic and emerging telecommunication services at excellent quality and affordable prices.

1.3      The Working Group is of the view that a modern, information-based economy cannot be achieved with a telecommunication sector characterised by poor quality of service, low penetration ratios, relatively high prices, and inadequate access to modern telecommunication and information services. The evolution of technology, prices and industry structures around the world where countries are becoming more and more interdependent is having a profound impact on telecommunications in Trinidad and Tobago. For this reason, Trinidad and Tobago cannot remain isolated from such global developments.

1.4      The Working Group acknowledged the rapid evolution in international telecommunications towards a new order in which international operators compete to carry traffic between and among countries. This has given rise to two (2) problems - the illegal use of the global telecommunications network and the likely change in the accounting rates system.

1.5      In respect of the telecommunications network, it is generally acknowledged that increasing volumes of international traffic are being routed illegally through the lowest costs points in the global network, where traditional agreed upon bilateral routings are not always respected. The increasing incidence of this practice results in network distortions and wastage of capital. In the case of the accounting rates system used by international telecommunications operators to settle accounts for delivery of one another's international traffic it is also well established that inevitable changes in the system are likely to result in significant reductions in revenues for most international operators. In this regard, the Working Group took due note that the Telecommunications Services of Trinidad and Tobago (TSTT) derives approximately twenty-five (25) percent of its annual revenues of just over TT$1.0 billion through the existing accounting rates system. These earnings allow TSTT to partially subsidise local rates and provide infrastructure for its public service obligations. It is possible that TSTT can to some extent offset the impact of lower prices on its revenue position by generating new sources of earnings.

1.6      The Working Group noted that in Trinidad and Tobago the telecommunications and broadcasting sector generated an output in excess of TT$1.0 billion or nearly three (3) percent of GDP in 1997. The sector also provides employment for over 3,000 persons, in addition to the 1,700 persons employed in the Information Technology (IT) industry. Basic telecommunications, primarily the telephone service, are provided by TSTT which is owned jointly between the Government of Trinidad and Tobago (51%) and Cable and Wireless Company (49%). Although other higher value-added IT services, including Internet and radio communications such as paging, trunking and mobile data transmission are being provided in a competitive environment there is only one (1) cellular mobile telephone service provider - TSTT. This was confirmed by Trinidad and Tobago at the World Trade Organisation (WTO) meeting in February 1997 within the context of commitments by sixty-nine (69) countries to open their telecommunications markets. In the domestic broadcasting sector the existing policy framework is inadequate and license conditions are weak. Therefore the need for an updated policy in this sector is urgent given the growing convergence of the broadcasting, telecommunications and IT sectors.

II. GENERAL PRINCIPLES FOR FORMULATION OF A TELECOMMUNICATIONS POLICY

2.1      In addressing the requirements for a telecommunications policy framework, the Working Group established fifteen (15) principles to guide its deliberations:

(i)	pricing and economic efficiency: the prices of services in the telecommunications sector should conform to those which would have been set in a competitive market. In the case where competition is not pervasive and vigorous, prices should be regulated to make them equivalent to those that would have existed in a competitive market. The price cap methodology should be introduced as the best proxy for fully open market competitive pricing;
(ii)	technical efficiency: the telecommunications sector should be encouraged to make the most efficient use of its installed capacity while continually improving its productivity and its ability to innovate and generally improve efficiency;
(iii)	Universal Service: certain core services, to be defined as Universal Service, should be provided to the society at affordable prices;
(iv)	TSTT's shareholders' agreement and market entry: subject to the TSTT's shareholders' agreement new entrants and/or incumbents should be invited and/or encouraged into all sub-sectors of the market on the condition that they meet certain technical and financial capability standards and, once given a non-transferable license, be mandated to implement the service within a certain specified timeframe. It is also recognised that certain definable parameters, for example, the right of way or frequency spectrum constraints may restrict the number of players that can enter a particular sub-sector;
(v)	national emergency situations: certain services in the various sub-sectors should be defined as emergency services including the restoration and operation of the telecommunicating network during national emergencies. Providers of last resort should be appointed. These will have certain national responsibilities with regard to security and operate basic services during and after natural hazards/disasters;
(vi)	interconnection: regulators should encourage adequate interconnections to maximize economic efficiency and benefits to all users. Network operators should negotiate among themselves for interconnection of networks. These negotiations should be non-discriminatory and transparent. They should be concluded within a specified timeframe after which the regulator's decision would become binding;
(vii)	teledensity: the general economic activity of the country should be allowed to drive the demand for telecommunication services that should be supplied at competitive prices. However, certain teledensity requirements should be given from time to time as an indication of the Government's requirements for Universal Service and other niche areas targeted for national development;
(viii)	international impact: users should be allowed to benefit from the reduction in international prices for services as long as the methods utilised do not violate the legal constraints that bind the industry at the time;
(ix)	spectrum usage: the radio frequency spectrum is a valuable and limited resource which should be made available to prospective service providers and users at competitive prices;
(x)	convergence: providers of telecommunications, computers, video and broadcasting services should not be prevented from competing across traditional service lines;
(xi)	human resource development: local human resources must play an important part in the development of new services and products in the telecommunications sector. The sector has to encourage and provide opportunities for research and development and for the training of personnel;
(xii)	confidentiality: the privacy and confidentiality of information and data carried on all telecommunication networks must be subject to the relevant national regulatory conditions which govern security and confidentiality;
(xiii)	regulation: a regulatory body should be created by the Government to participate in the strategic management process in the setting of objectives, the development of strategies, and the measurement and control of the industry's development. This body should not make policy nor set the mission but should advise Government on policy changes that may be required. The regulatory body should be governed by a collegiate group appointed by the Government;
(xiv)	right of appeal: anyone who feels wronged by the decision of the regulator should have the right to utilise the judicial process for redress in the event that the regulator erred in the process; and
(xv)	global regulation: the regulatory body should be the first line representative of the Government and the people of Trinidad and Tobago in all international organisations that influence and decide on telecommunications matters that will have an impact on this sector in Trinidad and Tobago. The regulator's power in this respect will be subject to policy guidelines and decisions of the Government. The Government intends to continue to support the international thrust towards liberalisation and as such will participate in activities of these international bodies in setting these global benchmarks and in shaping the international environment to provide competitiveness yet with concerns about the important role of the lesser players in mind.

III. RECOMMENDATIONS

3.1      In light of the above, the Working Group recommends to the Minister of Planning and Development that Cabinet be asked to agree in principle to the following:

(i)	the immediate appointment of a Telecommunications Steering Group (TSG): The TSG will comprise six (6) part-time members and one (1) full-time Executive Officer and will initiate and undertake several key restructuring and development activities in the telecommunications sector (ref. para. 7.5 - 7.7)* ;
(ii)	the amendments to the Telecommunications Authority Act (Act 40 of 1991): prior to proclamation, the amendments to the Telecommunications Authority Act will seek to reflect the new paradigm of competitiveness, technical efficiency, interconnectivity, convergence, globalisation and Universal Service. The Act will be amended with respect to constitution and responsibilities of the Telecommunications Authority, elimination of references to management functions of the Authority which do not normally belong in legislation, areas in the proposed Policy that are not covered in the current Act, and the elimination of ambiguities between licences and concessions. (ref. para. 6.12 -6.17, Table 4);
(iii)	the creation of a new regulatory body to be called the Telecommunications Authority: the composition, structure, staffing and administration of the Telecommunications Authority would allow for its independence and effective operation. The TSG would assist in establishing this new regulatory body which is expected to be operational by March 1999 (ref. para. 7.8 - 7.9);
(iv)	the identification of resources to implement policy changes in the telecommunications sector: initial funding for the development of the National Policy on Telecommunications for Trinidad and Tobago and related institutional building has been identified under the current Business Expansion and Industrial Loan (BEIRL) from the World Bank. Funding for the establishment of the Telecommunications Authority should be made under the Public Sector Investment Programme (PSIP) (ref. para. 7.10 - 7.11);
(v)	the establishment of an appropriate telecommunications regulatory framework: the regulatory framework should promote greater private sector participation in the sector as well as support a multiple network operator and service provider environment. Regulations should only be applied where the resulting benefits exceed the corresponding costs to society (ref. para. 6.20);
(vi)	the policy of divestment: the divestment of Government's shareholding in the telecommunications sector should be approached within the context of international trends in legislation and regulation and Government's national policy on divestment. The divestment of Telecommunications Services of Trinidad and Tobago (TSTT) and the International Communications Network (ICN) requires an independent and separate assessment (ref. para. 6.30 - 6.32);
(vii)	the maintenance of international competitiveness and the role of competition policy: the management practices of domestic telecommunications and information technology service providers should become consistent with the modern practices of multinational enterprises. The policy on competition for the telecommunications sector should be consistent with the overall national policy on competition (ref. para. 6.3, 6.18 - 6.19);
(viii)	the requirements for optimum network expansion: the assessment and preparation of requirements for the building of a comprehensive telecommunications network will form the basis for discussions with TSTT and other service providers (ref. para. 6.4);
(ix)	the provision of Universal Service: a sector development plan should be designed to reflect the definition of Universal Service as access to the basic telecommunications services, primarily the telephone service. The provision of Universal Service can be funded through a combination of a non-discriminatory and transparent charge on each service provider and network operator as well as the general revenues of the country (ref. para. 6.5 - 6.7);
(x)	the design of an interconnection policy: a strong and enforceable interconnection policy should be designed to facilitate viable competition and the seamless integration of related services within a reasonable timeframe. The regulatory body responsible for telecommunications should formulate a framework on the types of interconnection and access models and the underlying principles and guidelines (ref. para. 6.20 - 6.23);
(xi)	the leasing of circuit capacity: interconnection and leased circuit arrangements including prices should be determined through commercial negotiations between network operators and service providers. The Government of Trinidad and Tobago should retain the right to authorise others to establish networks if TSTT and other licenced network operators are not able to provide interconnection and leased circuit capacity (ref. para. 6.24 - 6.26);
(xii)	the licensing requirements: a licence should be required to operate a public telecommunications network. Telecommunications licences should not be required to provide value-added or Internet services using leased facilities of an authorised network provider. However, value-added and Internet service providers should notify the regulator that they are providing these services. The Government of Trinidad and Tobago should identify the number of available frequencies and establish a transparent and non-discriminatory procedure for the allocation of licenses. The licensing regime in the radio communications sub-sector should be updated and simplified to deal with the new technologies and services, particularly the licensing of spectrum rather than equipment. All awarding of licenses in the telecommunications sector should encourage research and development and training where applicable (ref. para. 4.8 - 4.10, 6.27 - 6.29, 6.33); and
(xiii)	the confirmation of market opening in the telecommunications sector: the Government of Trinidad Tobago should confirm unrestricted market entry to mobile and data transmission services, paging, trunking, value-added services including Internet services, and the sale, rental and maintenance of Customer Premises Equipment (CPE). This is consistent with Trinidad and Tobago's commitment to the World Trade Organisation (WTO) basic telecommunications negotiations. Visitors should be allowed to bring terminals (handsets) into Trinidad and Tobago for use on a temporary basis. (ref. para. 7.2-7.4).
(xiv)	the adoption of the immediate Action Plan to establish the Telecommunications Authority: the immediate action plan provides: -a timeframe for obtaining approval of the Policy; -establishing the Telecommunications Steering Group (TSG); -electing and hiring an Executive Officer of the TSG; -hiring consultants; -seeking advice of legal counsel; -submitting the legal draft to the Legislative Drafting Committee; -debating and approving legislation; -appointment of a Telecommunications Authority Board; -operational establishment and recruitment of staff of the Telecommunications Authority; -preparation and approval of a comprehensive sector development plan; -introduction of new cellular technology; -award of licence for second mobile phone operator; and - the official launch of the Telecommunications Authority (ref. para. 7.9, Table 7);

 

I. INTRODUCTION

1.1      Cabinet by Minute No. 1481 dated June 12 1997 agreed inter alia that the Minister of Planning and Development in his capacity as Chairman of the Ministerial Committee appointed to review the Telecommunications Authority Act 1991 appoint a Working Group to prepare a National Policy on Telecommunications. Appendix A details the Terms of Reference and membership of the Working Group. The Terms of Reference required the Working Group to:

(i)	review and consider existing policy documents and other pertinent literature on telecommunications;
(ii)	liaise with the critical stakeholders, that is, groups, institutions and individuals in the industry in order to solicit inputs that could inform the formulation of the Draft Policy;
(iii)	co-opt additional expertise, as need be, to assist with the conceptualization and preparation of the policy document;
(iv)	liaise with the Caribbean Telecommunication Union (CTU) and World Trade Organization (WTO) as necessary, in the preparation of the policy document; and
(v)	prepare for submission to the Minister of Planning and Development for ultimate consideration by Cabinet a Draft National Policy on Telecommunications.

1.2      Through the Chairman, the Working Group submitted to Cabinet an Interim Report dated September 2 1997 on its activities for the period June 16-August 15 1997. The Final Report builds on the principles of the Interim Report and addresses the imperatives for a National Policy on Telecommunications. Accordingly, Section 2 outlines the growing strategic importance of an information infrastructure, while Section 3 discusses developments and emerging structures in the global telecommunications industry. Section 4 describes the structure, evolution and performance of the information infrastructure in Trinidad and Tobago. Section 5 gives the general principles for formulation of a telecommunications policy and Section 6 provides the policy changes required to foster a dynamic telecommunication and information industry, Section 7 concludes the Report with the implementation stages for the way forward.

II. THE STRATEGIC IMPORTANCE OF AN INFORMATION INFRASTRUCTURE

2.1      The Working Group views knowledge as the axis of human progress. For this reason, a vibrant and dynamic information infrastructure - telecommunications, information technology (IT) and broadcasting - has become essential to the socio-economic, political, and cultural processes of many countries, particularly developing countries. Indeed, the debate is quite conclusive as to the pivotal role that telecommunications has played and will continue to play in facilitating the spread of knowledge. To this end, Governments have fashioned modalities to ensure that the national telecommunications infrastructure provides gilt-edged services which engender optimal performances in the primary, manufacturing and service sectors. The crucial decision for Governments, moreso those in developing countries, is no longer if to plan for alertness and adaptability to the international evolution in telecommunications, but when and how.

2.2      The Working Group recognises that the Government of Trinidad and Tobago is aware of the extent to which information drives the new economic paradigm. As a consequence, The Working Group is of the view that it is important for the country to develop the capability to quickly access and efficiently analyse information in order to secure a more competitive global position. Indeed, the Working Group believes that a competitive productive sector is fundamental for sustained growth and enhancement of the welfare of the populace in small open economies, especially in an era where free trade has emerged as the dominant force in international markets. In the Western Hemisphere, communication and information play important roles in the North American Free Trade Agreement (NAFTA), the proposed Free Trade Association of the Americas (FTAA), and the Association of Caribbean States (ACS). The strategic mission of the 1994 Declaration and Plan of Action of the Summit of the Americas also underscores the growing importance of telecommunications and information technology services, the broad elements of which are to:

(i)	satisfy the communication and information needs under equitable conditions at reasonable costs;
(ii)	use appropriate technologies;
(iii)	develop an environment of fair competition; and
(iv)	encourage participation by a broad spectrum of groups in the decision making process.

2.3      The Working Group took due note that the economy of Trinidad and Tobago has been transformed structurally over the last ten (10) years towards a more multi-product one consistent with the challenges of economic liberalization. In the domestic market, the combination of changing consumer demand and increased sophistication and competition in the work environment have highlighted the strategic importance of telecommunications to the delivery of real time information. New dimensions of inter-enterprise networks such as Automatic Teller Machine (ATM) sharing and point-of-sale operations between the commercial banks and merchants are illustrative.

2.4      As part of the strategic direction of Trinidad and Tobago in the new millennium the Government has stated its intentions to continue the process of economic diversification, placing greater focus on knowledge-based industries which require a dynamic information infrastructure supported by vibrant leading-edge telecommunications and information technology sectors. As an integral part of the information technology industry, telecommunications offer significant opportunities to create new and challenging jobs, enhance export earnings and enable rural growth. However, the full potential of the telecommunications sector cannot be realized until some key issues are resolved, including the quality and pricing of telecommunications services, the training of an adequate complement of experts, and the modernization of the existing technology infrastructure and the implementation of appropriate regulatory arrangements.

2.5      The Working Group sees Government's majority ownership (51 percent) of the country's sole telecommunications operator - Telecommunication Services of Trinidad and Tobago (TSTT) - as providing greater leverage over the sector than most of its Caribbean neighbours. Table 1 provides the basic parameters of the telecommunications market structure in the Caribbean and WTO commitments. As a signatory to the General Agreement on Trade in Services (GATS) on basic telecommunications services the Government is committed as of January 1 1998 to open the country's telecommunications market to several value-added services, including on-line information and data-base retrieval, data processing, electronic data interchange (EDI), enhanced facsimile services, and code and protocol conversion. The Government is also committed to introduce competition in the market for basic telecommunications no later than the year 2010.

2.6      The Working Group is of the opinion that the formulation of a National Policy on Telecommunications for Trinidad & Tobago is a necessary step in addressing the above mentioned issues and proposes that Trinidad and Tobago move forward without further delay in developing a National Information Infrastructure in order to create a Total Quality Nation. The recommended policy framework benefits from more than a decade of discussions and reflections among experts, users, government officials, and domestic and international observers as well as the recommendations of the 1987 White Paper on the Establishment of a Telecommunications Authority and the Communication and Information Policy of 1989. Appendix B lists documents prepared and submitted by both members of the Working Group and outside observers.

III. THE GLOBAL TELECOMMUNICATIONS INDUSTRY

(a) International Developments

3.1      The Working Group recognises that recent significant changes in the structure and ownership of the international telecommunications sector have not been restricted to the industrialized countries as demonstrated by the experiences of Singapore, Chile, South Korea, Malaysia, Argentina and other developing countries. Along with an unprecedented explosion in new technologies, these changes have paved the way for an unparalleled growth in markets and profitability and the manner in which Governments shape policies for the telecommunications sectors.

3.2      The Working Group notes that in the international telecommunications market there is a rapid evolution towards a new order in which multiple international operators compete to carry traffic between and among countries. The rapidly expanding volumes of international traffic are less likely to follow the traditional routes that directly connect two countries or that pass through a point of transit. Instead, traffic is dynamically routed through the lowest cost points in the global network by such alternative service providers as call back operators or wholesalers of dial tone. With the liberalization of markets in North America and Europe and some other countries of importance to Trinidad and Tobago, international traffic at any particular moment, will flow through the lowest cost point.

3.3      The Working Group noted also that effective January 1 1998 Europe has begun to liberalize its basic telecommunication markets and will therefore compete as an international hub with North America. As a result of this development, countries in Asia and South America will have no alternative but to offer competitive services and prices. Indeed, the Working Group believes that under these circumstances it will be virtually impossible for the country's sole operator - Telecommunications Services of Trinidad and Tobago (TSTT) - to maintain high prices for international telecommunications. In this regard, the inevitable fall in prices for international telecommunications is likely to have an adverse impact on the overall revenues of TSTT which derives much of its income from the international service. These dynamics, in the opinion of the Working Group, will induce a restructuring of the telecommunications operations of TSTT in order to offer international services at competitive prices.

3.4      Another major development in the global telecommunications industry relates to the inevitable changes in accounting rates -- the system used by international telecommunications operators to settle accounts for delivery of each others international traffic. The Working Group has noted that effective January 1 1998 Europe began to move from an accounting rate to an interconnection scheme. For European operators the use of an internconnection scheme is likely to result in an estimated 67 percent reduction in revenues from international telecommunication services.

3.5      In Trinidad and Tobago, TSTT derives about twenty five (25) percent of its annual revenues (just over TT$1 billion) from the accounting rates scheme. This allows TSTT to partly subsidize local rates and provide infrastructure for its public service obligations. It is possible that TSTT can to some extent offset the impact of lower prices on its revenue position by generating new sources of earnings from other business opportunities in the local economy and the addition of new customers as a result of the Government's drive to expand Universal Service. Although the evidence demonstrates an overall gain to countries that have liberalized their telecommunications sector, the network and services in Trinidad and Tobago may not be as highly developed and will present a greater challenge to the competitive and regulatory process, especially in the provision of Universal Service. In this regard, the Working Group views as important the need to design a sector development plan for Trinidad and Tobago which reflects the a priori Universal Service requirements.

3.6      The Working Group views innovations in technology as unprecedented given the explosive growth in new methods and systems of communication that open new challenges to the manner in which business is conducted. The existing international market place is as close as the computer terminal and the Internet. Even more challenging is the generation of new technologies to be implemented by the turn of the century. New broadband communications systems such as the Teledesic and Skybridge satellite systems and the global wideband fibre optic system, Project Oxygen, combined with broadband switching systems such as Asynchronous Transfer Mode (ATM), Frame Relay and Linear Modulation Personal Communication Services (PCS) will allow for a more rapid global movement of greater quantities of information.

3.7      The Working Group underscores the fact that countries which do not recognize the importance and economic impact of these changes may be left behind in the highly competitive global economy. In the opinion of the Working Group a public monopoly can no longer satisfy the ever-increasing demands on the telecommunications sector. Private initiatives need to be created in data processing, telemarketing, software development, and computer aided design/computer aided manufacturing (CAD/CAM) applications. It is well established that these enterprises create significant employment opportunities, especially among young graduates at all levels. Even if Governments continue to maintain some degree of ownership of operating entities, the modalities for facilitating greater private sector participation in the telecommunications sector should be pursued. These modalities include:

(i)	establishment of new institutional and regulatory structures to promote greater private sector participation;
(ii)	action by Government in defining the broad directions for the telecommunications sector in the country's overall development plan and to ensure that the institutional and regulatory structures are such that goals can be attained in the most effective manner; and
(iii)	a framework which will promote the development of a broader spectrum of new services, investment and technology.

(b) Emerging Structures

3.8      In the view of the Working Group the global telecommunications industry is becoming increasingly challenging to operate and regulate given the rapid changes in technology and regulatory policies world-wide, emerging trends in convergence towards integrated services, cross-border service provision/operation, and the globalization of businesses and economies. Within this context, many policy makers and service operators are of the view that the emerging structure of the global telecommunications industry may comprise competitive segments set on different levels of a hierarchical structure. As one moves up the hierarchy there is less national resource utilization and economic and social costs, but increased technology dependency, value-added function, and innovation and visibility to end users.

3.9      As an example Figure (I) gives a diagrammatic representation of Singapore's conceptualization of the present and future info-communication industry. This framework outlines the essential composition of the telecommunications industry by identifying the various levels and segments within and between the industry. The Telecommunications Authority of Singapore (TAS) uses this framework as a guide to license players in the industry based on their operations in the various levels and segments of the industry. Level 1 is the backbone infrastructure level consisting of two segments, that is, the core backbone network segment comprising the cable ducts and cables (copper or optical fibre); and the local access segment comprising the last mile connection between the core network (beginning from the local exchanges) and the end-users by wireless technologies. Level 2 represents the network/transport level comprising the switching nodes such as switches and mobile base stations. Level 3 is the service provision level comprising services such as fixed-line telephone services, mobile communication services, Internet access services and broadband multi-media applications; and Level 4 is the reseller level comprising service providers re-packaging and reselling services provided by those in Level 3.

3.10      The Working Group notes also that the Telecommunications Networking Architecture Consortium (TINA-C), an independently funded group of researchers, is developing a slightly different architecture based on a similar concept defined as a generic business model of the Telecommunications oriented business operation. Figure 2 shows the Telecommunications Information Networking Architecture Consortium (TINA-C). Although the architecture comprises five (5) viewpoints, the enterprise viewpoint contributes significantly to the structure of the telecommunications industry as it defines the roles of the entities within and between the industry.

3.11      A comparison of Figure 1 with Figure 2 provides three (3) possible considerations for an emerging telecommunications structure. These are retailers and brokers residing at Level 4, third party providers residing at Level 3, and connectivity providers residing at Level 2. Since competition can occur over different underlying infrastructures (facilities based competition) or over the same facilities, the inverted trapezoid shape of Figure 1 implies that there is increasing room for more players, hence more liberalization can be allowed at each progressive level, moving upward from Levels 1 to 4. For example, if there is a monopoly or duopoly involving the network for the local telephone service (Levels 1 & 2), full competition could take place for value-added or other non-monopoly services (Levels 3 & 4).

3.12      It is well established in the view of the Working Group that a competitive environment which drives operational and planning decisions yields a more efficient overall result than a monopolistic centralized market structure. The benefits of such competition include:

(i)	faster development of network resources as competitors race to establish a market presence, particularly where current service levels may be inadequate;
(ii)	higher service quality as competitors deploy newer technologies to create advantages over the incumbent monopoly and as the monopolist upgrades to avoid losing customers;
(iii)	reduced costs of operations as all market participants seek advantages through streamlining their activities and pursuing productivity-improving initiatives;
(iv)	technical innovation resulting from the impulse to win customers by offering new and different types of services;
(v)	lower prices for all services subject to competition - the textbook economic impact of competitive forces; and
(vi)	lower regulatory costs in the long run as the market takes the primary role of regulating itself and the regulator is able to revert to a monitoring role.

3.13      However, in the opinion of the Working Group an open competition policy can also be risky especially if the policy framework is not suitably prepared. In particular, tariffs and interconnection responsibilities must remain under close regulatory scrutiny when the market is open to ensure that competition is not prematurely stifled by anti-competitive practices. To this end, imbalances in tariffs could also lead to inefficient cream skimming by competitors without bringing the market-based disciplines to the industry as a whole. On the other hand, a safe monopoly operator in one segment can cross subsidize in other segments reserved for competition, drive competitors out of business by pricing at below cost, and allow the monopoly to migrate to areas reserved for competition.

3.14      The Working Group recognises that in the case of facilities based competition, where huge capital outlays are required, the advisability of allowing new entries will depend on two factors. Firstly, the sufficiency of traffic or users to warrant new providers, and secondly the nature of the effect of these new entries on the ability of all service providers to adequately service the public. The experiences of other countries have demonstrated that reasonable restrictions to the entry of additional licensees in certain markets are necessary in order to prevent injury to public and social interest by ruinous competition among a multitude of marginally viable service providers. In the view of the Working Group the free market cannot always be trusted to avoid a wasteful duplication of facilities contrary to the public good. This is of particular significance to Trinidad and Tobago given its size and the need to ensure that there is optimal deployment of scarce capital resources with maximum returns.

IV. THE EXISTING INFORMATION INFRASTRUCTURE IN TRINIDAD AND TOBAGO

(a) Telecommunications and Information Technology

4.1      The Working Group took due note that in November 1960 the Government of Trinidad and Tobago acquired all the assets of the 50-year old privately-owned Trinidad Consolidated Telephone Limited and operated the telephone service until June 1968 when it entered into a 50-50 partnership with Continental Telephone Company of the United States. This partnership led to the creation of the Trinidad and Tobago Telephone Company Limited (TELCO) under Act 7 of 1968. In November 1972 the Government became the sole owner of TELCO after acquiring the shares of the Continental Telephone Company.

4.2      In 1960 there were about thirty one thousand (31,000) telephones in Trinidad and Tobago, located mainly in and around the urban centres. A forty (40) channel radio system linked Port of Spain and San Fernando in Trinidad to Tobago. Between 1960 and 1975 about $29 million was invested in upgrading the telephone system. Accordingly by 1975 there were about forty five thousand (45,000) subscriber lines in service. During the period 1975-1980 approximately $100 million was spent to further upgrade the system bringing the capacity to about sixty five thousand (65,000) lines; however, the telephone service was not satisfying the demands of both consumers and businesses and service quality was poor.

4.3      The Working Group also notes that in December 1969 the Government established the majority-owned Trinidad and Tobago External Telecommunication Limited (TEXTEL) under a Heads of Agreement with Cable and Wireless (West Indies) Limited. TEXTEL was given the mandate to operate all external public telecommunication services for Trinidad and Tobago as well as the maritime coastal stations. Until 1972 these coastal stations had been managed by the Government Wireless Section, formerly the Telecommunications Division of the Ministry of Works and Transport.

4.4      TEXTEL expanded its international services in 1977 by building at Mathura a Standard A satellite earth station, the 960 Channel Eastern Microwave System, to replace a tropospheric radio link, a tropospheric link to Guyana, a UHF link to Grenada, a microwave link to Venezuela, and various facilities and offices in Trinidad and Tobago. TEXTEL provided a reliable and profitable service allowing the Government to meet its loan commitments on schedule.

4.5      The Working Group took due note of the major improvements in the local telephone service during 1975-1985. These improvements resulted from capital investments of approximately $1.3 billion undertaken by TELCO and financed by international loans. The investment program largely targeted the urban centres and led to an increase in the subscriber base from about forty five thousand (45,000) main lines to about one hundred and eighteen thousand (118,000) main lines, or an increase in teledensity from four (4) to about ten (10) telephone lines per 100 population over the period. Table 2 compares the telephone main lines and penetration rates in Trinidad and Tobago with that of the Caribbean and a selected number of other countries.

4.6      In 1991 TEXTEL was merged with TELCO to form Telecommunications Services of Trinidad and Tobago (TSTT) under an vesting order made pursuant to the Trinidad and Tobago Telephone Act (amended 1990). Pursuant to the shareholder's agreement, TSTT is owned jointly by the Government of the Republic of Trinidad and Tobago (51 percent) and Cable & Wireless (West Indies) Company Limited (49 percent). A twenty (20) year licence was granted to TSTT to provide both local and international telecommunication services.

4.7      The Working Group acknowledges that while the telephone service has functioned satisfactorily during the 1990s many rural areas remained unserved. Furthermore, the perception exists that the cost of the service is high, particularly the international service where a telephone call to the United States costs US $1.00 per minute. Local toll charges at TT$0.23 per call unit are considered reasonable. Table 3 shows the collection charges per minute in US Dollars as at January 1996 for twenty-five (25) OECD countries compared with TSTT. Table 4 provides a comparison of TSTT's international call tariffs within the Caricom region. It is evident that the rates charged by TSTT are not significantly different from those of the more mature countries, especially those among the OECD, having regard to the fact that TSTT depends to a great extent on international revenues to develop our domestic network and subsidise local services. Within the Caricom region, TSTT's international rates are also the lowest. Nonetheless, alternative international calling arrangements such as call-back, refile and the use of calling cards have grown rapidly.

4.8      The Working Group recognises that the radio communications sub-sector forms an important part of the telecommunications sector. Radio communications include terrestrial and satellite-based cellular mobile telephone services, mobile data transmission services, two-way radio systems for land, maritime and aeronautical use, amateur radio services, paging, trunking, Very Small Aperture Terminals (VSAT), and telemetry and control services. About fifteen (15) companies in the financial sector use private VSAT for their private closed data networks.

4.9      Currently the provision of mobile data transmission services, paging, and trunking services are not subject to restrictions. Twelve (12) companies employ about five hundred (500) persons to provide these services to around fifteen hundred (1500) business users in Trinidad and Tobago. A dealer license is the only requirement. The only criteria used to grant operators' (users') licenses is technical compatibility with existing systems and availability of frequencies. Even though all applicants are usually granted licenses, unnecessary delays result from the outdated nature of the regulatory provisions.

4.10      The Working Group anticipates further growth in the radiocommunications sub-sector following the introduction of new services such as Personal Communications Services (PCS), Global Mobile Personal Communications by Satellite (GMPCS), and Global Mobile Distress and Safety System (GMDSS). Positive contributions are also expected from the introduction of new generation Very Small Aperture Terminals (VSAT) systems, Mobile Satellite Services (MSS), Fixed Satellite Services (FSS), wireless data, and trunked radio and paging systems. However, in the opinion of the Working Group there is need to update the regulations and simplify the licencing regime to deal with the new technologies and services in order to reap the benefits of this expansion in the radio communications sub-sector. One of the many changes required under new regulation would be the licensing of spectrum rather than equipment.

4.11      The Working Group took note that in 1992 TSTT introduced a cellular mobile telephone service, an AMPS analog system operating in the 800 Mhz band, which presently serves about twelve thousand (12,000) customers. The system covers about 60 percent of the country and is considered to be expensive, even though prices have been decreasing over the last two (2) years. Table 5 compares the waiting lists and cellular mobile telephone subscribers in Trinidad and Tobago with that of the Caribbean and a selected number of other countries.

4.12      The Working Group was advised that at present the provision of value-added services such as on-line information and data base retrieval, electronic data interchange (EDI), enhanced facsimile, code and protocol conversion, and on-line data processing are not subject to any restrictions. The provision of Internet services as well as the number of service providers is afforded similar treatment. At present there are six (6) Internet Service Providers (ISPs). The Working Group recognises the employment and growth potential of this sub-sector which continues to be constrained by high cost and insufficient bandwidth capacity.

4.13      The Working Group noted that the providers of such value added services as electronic mail, on line network access, data access services and data communication services often operate their own networks which include computers and terminal equipment. To reach their customers providers lease circuit capacity from network operators and in some cases interconnect with the public switched telephone network (PSTN). However, policies with respect to interconnection and leasing of circuit capacity are inadequate. Rising volumes of data transmission translates into a greater demand for high speed data networks. This in turn depends on large bandwidth transmission facilities such as fibre optic cables and new switching technologies, including Asynchronous Transfer Mode (ATM) and Switch Multimegabit Data Service (SMDS).

4.14      The Working Group recognised that the Trinidad and Tobago Telephone Act allows private networks on self-provided or leased facilities only for use by an individual or company. There is therefore little scope for connecting private networks to the public networks at either end, or for resale of the service to third parties.

4.15      The Working Group noted that there is no policy for the resale of services which are licenced to TSTT. Additionally, there are no restrictions on the sale, rental, connection, maintenance and repair of any type of customer premises equipment (CPE) except that all such equipment must first be type-approved by the Telecommunications Division of the Office of the Prime Minister.

(b) Broadcasting

4.16      The Working Group took due note that after the introduction of two (2) radio stations in the 1950s and one (1) television (TV) broadcasting station in the 1960s no other broadcasting entity was licenced in Trinidad and Tobago until December 1990. Accordingly, during this forty (40) year period the public faced limited broadcasting choices. As a result of the recommendations of a Broadcast License Committee, twenty-three (23) new licenses were granted to entities and nationals between December 1990 and January 1991. Subsequently eleven (11) licenses were granted for radio stations, six (6) for cable TV stations and six (6) for broadcast TV stations. These stations were either national or community based. Since 1991 an additional six (6) licenses were granted. Between 1991 and 1993 two (2) of the new television licencees and five (5) new radio stations began operations.

4.17      The rapid increase in the number of players in the market generated fierce competition and several of the existing and new companies were faced with difficult economic conditions. After a shakeout in the market, the industry has settled with improved financial performance and steady growth in terms of advertising and employment. At the end of 1996, there were fifteen (15) licensees in operations. The Working Group is advised that there is no intention at the present time to grant additional licenses in light of unavailable frequencies for radio and TV and unavailable cable infrastructure (poles). Nonetheless, the Working Group is of the view that the opening up of digital frequency spectrum for both radio and TV broadcasting and satellite delivery systems and the use of newer digital frequency technologies will undoubtedly present new opportunities for domestic broadcasting including the areas of distance learning and telemedical applications.

4.18      The Working Group noted that the Government continues to maintain its investment in broadcasting through full ownership of a single entity called the International Communication Network (ICN), which resulted from the merger of Trinidad and Tobago Television (TTT) and the National Broadcasting Service (NBS). More recently, the Government purchased the television station - AVM.

4.19      The Working Group acknowledges that in the absence of a clearly defined government policy on broadcasting the industry has for the most part been self regulated. In this regard, the Working Group recommends an updating of the licence conditions in order to be consistent with international trends and to reflect the changes in the broadcasting sector, especially the emergence of niche broadcasting in radio and consolidation of the ownership structure. Policy considerations must also identify ways in which local inputs and outputs are encouraged.

4.20      Apart from the wider policy issues relating to broadcasting, the Working Group is of the view that Government needs to clearly define its ownership interests in the sector. During the last eighteen (18) months the Governments of Jamaica, Grenada and St. Kitts have all moved to reduce the level of direct ownership within the broadcasting sector, a trend that in the opinion of the Working Group is likely to continue. The growth of digital technology applications has led to a convergence of broadcasting and telecommunications that calls for a flexible and dynamic policy to maximize benefits from these new market opportunities.

V. GENERAL PRINCIPLES FOR FORMULATION OF A TELECOMMUNICATIONS POLICY

5.1      In addressing the requirements for a telecommunications policy framework, the Working Group established fifteen (15) principles to guide its deliberations:

(i)	pricing and economic efficiency: the prices of services in the telecommunications sector should conform to those which would have been set in a competitive market. In the case where competition is not pervasive and vigorous, prices should be regulated to make them equivalent to those that would have existed in a competitive market. The price cap methodology should be introduced as the best proxy for fully open market competitive pricing;
(ii)	technical efficiency: the telecommunications sector should be encouraged to make the most efficient use of its installed technical capacity while continually improving its productivity and its ability to innovate and generally improve efficiency;
(iii)	Universal Service: certain core services, to be defined as universal service, should be provided to the society at affordable prices;
(iv)	TSTT's shareholders' agreement and market entry: subject to the TSTT's shareholders' agreement new entrants and/or incumbents should be invited and/or encouraged into all sub-sectors of the market on the condition that they meet certain technical and financial capability standards and, once given a non-transferable license, be mandated to implement the service within a certain specified timeframe. It is also recognised that certain definable parameters, for example, the right of way or frequency spectrum constraints may restrict the number of players that can enter a particular sub-sector;
(v)	market exit: certain services in the various sub-sectors should be defined as emergency services including the restoration and operation of the telecommunicating network during national emergencies. Providers of last resort should be appointed. These will have certain national responsibilities with regard to security and operate basic services during and after natural hazards/disasters;
(vi)	interconnection: regulators should encourage adequate interconnections to maximize economic efficiency and benefits to all users. Network operators should negotiate among themselves for interconnection of networks. These negotiations should be non-discriminatory and transparent. They should be concluded within a specified timeframe after which the regulator's decision would become binding;
(vii)	teledensity: the general economic activity of the country should be allowed to drive the demand for telecommunication services that should be supplied at competitive prices. However, certain teledensity requirements should be given from time to time as an indication of the Government's requirements for Universal Service and other niche areas targeted for national development;
(viii)	international impact: users should be allowed to benefit from the reduction in international prices for services as long as the methods utilised do not violate the legal constraints that bind the industry at the time;
(ix)	spectrum usage: the radio frequency spectrum is a valuable and limited resource which should be made available to prospective service providers and users at competitive prices;
(x)	convergence: providers of telecommunications, computers, video and broadcasting services should not be prevented from competing across traditional service lines;
(xi)	human resource development: local human resources must play an important part in the development of new services and products in the telecommunications sector. The sector has to encourage and provide opportunities for research and development and for the training of personnel;
(xii)	confidentiality: the privacy and confidentiality of information and data carried on all telecommunication networks must be subject to the relevant national regulatory conditions which govern security and confidentiality;
(xiii)	regulation: a regulatory body should be created by the Government to participate in the strategic management process in the setting of objectives, the development of strategies, and the measurement and control of the industry's development. This body should not make policy nor set the mission but should advise Government on policy changes that may be required. The regulatory body should be governed by a collegiate group appointed by the Government;
(xiv)	right of appeal: anyone who feels wronged by the decision of the regulator should have the right to utilise the judicial process for redress in the event that the regulator erred in the process; and
(xv)	global regulation: the regulatory body should be the first line representative of the Government and the people of Trinidad and Tobago in all international organisations that influence and decide on telecommunications matters that will have an impact on this sector in Trinidad and Tobago. The regulator's power in this respect will be subject to policy guidelines and decisions of the Government. The Government intends to continue to support the international thrust towards liberalisation and as such will participate in activities of these international bodies in setting these global benchmarks and in shaping the international environment to provide competitiveness yet with concerns about the important role of the lesser players in mind.

VI. POLICY CHANGES FOR A DYNAMIC TELECOMMUNICATIONS AND INFORMATION INDUSTRY

6.1      The Working Group predicates the policy changes for a dynamic telecommunications and information industry upon the achievement of four (4) main goals. These are the:

(i)	creation of international competitiveness in the economy;
(ii)	development of an optimal telecommunication network;
(iii)	promotion of Universal Service at affordable prices; and
(iv)	changes in the market structure of the telecommunications and information industry.

6.2      The interaction arising from these goals would provide the impetus to alter investment decisions, expand consumer usage, improve productivity and create a new interplay of market forces that will create opportunities for expansion of technology related activities. In addition, specific vehicles for change will emerge out of this policy framework and so the country will move closer towards the fulfilment of these objectives.

(i) International Competitiveness of the Economy

6.3      The Working Group is of the view that modern sophisticated telecommunications and information technology services provided at internationally competitive prices are key to attracting foreign investment and expanding domestic investment. Telecommunication services are also critical to the development of target sectors, such as financial services and tourism. The expansion and development of the telecommunication sector should therefore be viewed as a catalyst in expediting the realization of the benefits of the Government's macro economic reforms. The cost of telecommunications services should allow Trinidad and Tobago to be competitive with the rest of the world.

(ii) Optimum Network Expansion

6.4      The Working Group recognises that an optimal network, extended to all communities, is required to achieve Government's socio-economic objectives. For optimum deployment of scarce capital resources, the telecommunication sector must be encouraged to make the most efficient use of installed capacity. In this regard, the formulation of a comprehensive network expansion framework will provide a blueprint for nation wide telecommunication services and inform discussions with operators, including TSTT.

(iii) Universal Service

6.5      The Working Group defines Universal Service as access to basic telecommunication services, primarily the telephone service. Universal Service does not necessarily mean that each and every person is provided with a telephone, as in certain areas this may initially be achieved through a greater deployment of pay telephones. Universal Service also includes access to emergency numbers, as well as operator and telephone directory services. The concept of Universal Service may be redefined as the network develops and as greater requirements are put on the telecommunications and information technology sectors. Accordingly, Universal Service may evolve to include access to the Internet in all schools, libraries, hospitals and government administration, special telephones for the hearing impaired, access to telephones for the disabled, and access to multimedia services. Accordingly, the Working Group is of the view that the concept of Universal Service must be continuously reviewed. The regulators and the telecommunications provider(s) should implement immediately the terminating fee methodology, now being finalised by the International Telecommunications Union (ITU), to include a charge for Universal Service obligations of the country consistent with government's overall national economic objectives. Asymmetric settlement rates is an extremely important part of this exercise.

6.6      The Working Group was advised that at present, TSTT partly finances the provision of Universal Service through the revenues derived from its profitable international services. As indicated earlier, these revenues are likely to be subjected to strong external pressures and may inevitably be reduced. Since Universal Service must by definition be affordable, some segment of the population may not be able to pay its true economic cost. As a result, mechanisms must therefore be identified for subsidizing these services. To this end, all users of the telecommunications network and services could be made to contribute either directly through a Universal Service tax or through a non-discriminatory and transparent charge on each service provider and network operator. The Working Group recommends that the Government combine the three (3) options so as to fund the provision of Universal Service in a fair, non-discriminatory and transparent way.

(iv) Market Structure

6.7      Figure 3 illustrates the current structure of the telecommunications industry in Trinidad and Tobago based on the hierarchical concept. At present, there are buyers and sellers of services in areas of Trinidad and Tobago without telephones, competing cellular services, mobile wire network interconnecting services, security systems, private voice and data networks, dedicated satellite systems, national cable services, international financial data systems, travel and tourism booking systems, and on line data services for the public.

6.8      The Working Group recognises that the future structure of the telecommunications industry in Trinidad and Tobago must not only minimize the duplication of infrastructure, but also provide an environment conducive to technical and economic efficiencies. The structure should also facilitate the unbundling of the sector and prevent the occurrence of cross subsidies. This could be accomplished by requiring a service provider at one level to provide the new service at the level above by way of a separate subsidiary. In the absence of this, a telecommunications regulatory body can enforce regulation for accounts separation. The Working Group is of the opinion that the success of this structure depends on a strong and enforceable interconnect policy in order to ensure that there is viable competition and seamless integration of related services.

6.9      Figure 4 depicts the recommended structure for the telecommunications sector in Trinidad and Tobago. Level 1 is the Infrastructure and Local Access Level that provide transmission capacity through fixed line services such as copper, cable or optical fibre and wireless technologies such as radio and microwave. Level 2 represents the Voice/Data Networks Level which facilitates Points of Presence by allowing an operator to provide a network service through the installation of the appropriate switching node(s) and the purchase of the relevant transmission capacity. Examples include the provision of ATM and x.25 networks and any other types of networks that may emerge in the future. Level 3 is the Value Added Services Level. Operators at this level can purchase adequate network capacity from any operator(s) at Level 2 and through the installation of ancillary hardware and software, provide services such as Internet, video on demand, teleconferencing and any other such services that may emerge in the future. Level 4 represents the Resellers. Providers at this level can purchase blocks of services and repackage in accordance with the needs of individual customers.

6.10      In light of these four (4) main goals, the following nine (9) areas of policy considerations arise:

(i)	the role of Government;
(ii)	the role of legislation, regulation and the regulatory body;
(iii)	competition policy;
(iv)	regulation and deregulation;
(v)	interconnection;
(vi)	leasing of circuit capacity;
(vii)	licensing requirements;
(viii)	divestment; and
(ix)	broadcasting.

(i) The Role of Government

6.11      The Government through the Minister responsible for telecommunications should continue to be responsible for promoting the importance of telecommunications for the nation, formulating policy which takes into consideration advice received from regulators and other participants in the sector, approving regulations, issuing licenses, in conjunction with the regulator interacting with regional and international organizations, maintaining an overview of the proper functioning of the regulator and the sector, liaising with other Government departments concerning matters relating to training and research and development in the information technology and telecommunications sector; and coordinating the interests of these sectors within Government.

(ii) Role of Legislation, Regulation and the Regulatory Body

6.12      The basic national telecommunications instrument is the public law enacted by the Parliament. Given that the sector is rapidly and continuously changing, such legislation should be sufficiently flexible in order to avoid complex time-consuming procedures involved in amending laws. With a more dynamic and flexible legislation, the regulatory aspects should be assigned to a body better suited to duly track, study, understand and decide on everyday telecommunications matters, new services and technologies. The Working Group is of the view that such a telecommunications regulatory body and its governing legislation should reflect the new paradigm of competitiveness, technical efficiency, interconnectivity, convergence, globalization, and Universal Service. Strength, impartiality and independence are necessary characteristics of any regulatory body in order to promote confidence on the part of operators, investors and users and to encourage investment in the sector.

6.13      The Working Group acknowledges also that for the legislative and regulatory framework to be effective it is important that the telecommunications regulatory body be independent not only of the organizations providing the infrastructure and services and the various interested parties, but also of the policy formulation function of the State. Nonetheless, all policy decisions and political and international relations should be retained by the Government. One of the more sensitive relationships is that between the regulatory body and the relevant Minister in charge of telecommunications. In general, the Working Group supports the view that Government should be responsible for policy and the agency for regulation, the development of detailed objectives (for Ministry approval), for strategy and implementation and for monitoring and regulation of the industry. Further, the role of the regulator encompasses the recommendation of policy adjustments.

6.14      The Working Group recommends that the regulatory body should be independent as defined in its mode of operations: to treat at arms length with regulated firms, consumers, other private interests and with political authorities. It should possess the attributes of institutional and organizational autonomy such as earmarked funding and exception from civil service rules. In light of the above, the Working Group is of the opinion that the Telecommunications Authority as established in the Telecommunications Authority Act (Act No. 40 of 1991) would be an appropriate legislative and regulatory framework suitably amended.

6.15      The Working Group proposes that Act No. 40 of 1991 be amended with respect to the following:

(i)	manner in which the Authority is constituted and is responsible for: Appointments of Board members. This should be by the President of the Republic on the advice of the Minister Setting and collecting of licence fees Advising the Government on telecommunications and broadcast policy rather than formulating (i.e. making) such policy Regulating instead of establishing prices and quality of services in the sector Preparing instead of determining regulations Settling disputes
(ii)	eliminating references to management functions (of the Authority), which do not normally belong in legislation, or activities which are dealt with adequately in the Policy and do not require to be legislated such as training, research and development and certification of personnel;
(iii)	areas in proposed Policy which are not covered in the current Act and which are being proposed for inclusion: Principles, funding and responsibility for implementation of Universal Service Obligation; Rules and procedures related to Interconnection Licencing conditions and procedures Procedures for disputes settlemen
(iv)	eliminating ambiguities between licences and concessions (the latter is not required)

6.16      The Working Group believes that the amendments as detailed in Table 6 can satisfy (i) and (ii) above, but suggest that the proposed amendments and verification of conformity with the proposed Policy in respect of all issues raised as well as other issues be submitted to Legal Counsel for advice.

(iii) Competition Policy

6.17      The Working Policy notes that Government is expected to introduce a Competition Policy which will form an integral part of its economic reform programme. The general aim of the Competition Policy is to promote an maintain effective competition throughout the economy, and to ensure that competition is not distorted, restricted or prevented, either by private interests or public policy. The Competition Policy is designed to address:

(i)	abuses of dominant market positions;
(ii)	barriers to market entry, including restrictive contracts, government licensing and regulation, and other such issues;
(iii)	horizontal restrictive practices such as resale maintenance, refusal to supply, tied selling and other anti-competitive practices and agreements between buyers and suppliers; and
(iv)	economic concentration and significant mergers, acquisitions and joint ventures where competition is significantly diminished and the economic power of the single organisation is in danger of becoming too great.

6.18      It is the view of the Working Group that the development of an approach to introduce competitive pricing in the telecommunications sector requires a clear distinction between competitiveness and competition policy. In some cases, competition policy would advance the cause of increasing competitiveness in the economy, while there are situations in which competition may not achieve those goals unless the superstructure is conducive to such a policy. The Working group is of the view that the policy on competition for the telecommunications sector should be consistent with the overall national policy on competition.

(iv) Regulation & Deregulation

6.19      The Working Group underscores the fact that when a firm has a monopoly or the market power to impose and maintain prices and conditions independent of other service providers, then the full panoply of regulations should be imposed in the interest of the public. Such regulations could include prices and tariffs, quality standards, conditions of service, and entry and exit rules. By the same token when a firm does not possess a monopoly or market power (a non-dominant firm), then regulation should be kept to a minimum. Unnecessary regulations create entry barriers and discourage potential entrepreneurs from introducing beneficial products and processes. In a competitive services environment, there may be no need to control prices, to prohibit discrimination, to impose an obligation to serve all, and to regulate exit. The Working Group is of the view that regulations should only be applied where the resulting benefits exceed the corresponding costs to society. At any point in time the regulatory authority should be able to introduce regulation in any of the telecommunication sub-sectors.

(v) Interconnection

6.20      The Working Group recognises that for any new licensee to offer nation-wide full services, it is essential that its network be interconnected with those of other operators so that its subscribers can call the subscribers, or access the services of other networks in a transparent manner. In addition interconnection minimizes duplication of network infrastructure thus encouraging the telecommunications sector to make efficient use of its installed technical capacity and to focus more on continuously improving the quality of service. The Working Group is of the opinion that a strong and enforceable interconnect policy is necessary to facilitate viable competition and the seamless integration of related services within a reasonable timeframe. In this regard, the Working Group notes that the Government of Trinidad and Tobago/Cable and Wireless (West Indies) Shareholders Agreement provides for a process whereby TSTT is offered business on no less favourable terms than others, which allows full competition once clearly defined strategy and operational guidelines are used to properly manage the process. Clause 16 of the TSTT's Shareholders' Agreement states that:

(i)	the Government has authorised the Company, by way of licence, to maintain and operate an external telecommunications network for the Republic of Trinidad and Tobago for a period of twenty (20) years from July 13 1989 with an option for renewal on negotiable terms;
(ii)	the Company is authorised under the Telephone Act to operate a telephone system and a telephone service for the public use and for hire or tolls;
(iii)	the Government hereby undertakes that prior to any new licence being granted to any other person or organisation other than the Company to operate telecommunications services that the Company shall be granted the opportunity to provide those services on such terms and conditions as shall be no less favourable that those proposed to be made available to such other person or organisation; and
(iv)	the Government and the Company will agree from time to time on specific performance criteria for the efficient provision of telecommunications services using modern technology.

6.21      The Working Group is of the view that any interconnect policy must include the following components:

(i)	Service Element Definitions (unbundling): it will be necessary to define which components, basic network, and current services can be separately purchased by interconnecting carriers. In general, the more the network is disaggregated, the greater the opportunity for competitors to maximize efficiency by interconnecting at the most appropriate point in the network and paying only for network components or facilities that it requires;
(ii)	Interconnection tariffs (access charges): in addition to defining isolated service elements, it will be important to establish tariffs for interconnection that charge appropriately for the service elements purchased. These tariffs, or access charges, should typically be cost-oriented to the extent possible, although explicit contribution elements may be considered for network development support;
(iii)	Technical standards: the telecommunications regulatory authority will also need to ensure that network interconnection conforms to optimal quality standards, so that signals traveling across networks do not encounter problems. These standards should be worked out within the industry, but the authority should play an active role in requiring coordination and preventing unwarranted delays or costs;
(iv)	Transparent Terms and Conditions: interconnection will be provided in a manner that is most transparent and causes the least inconvenience to the customers of the other operators. For example, customers of other operators will not have to dial more digits to access the network than customers of the incumbent; and
(v)	the conditions of interconnect offered must be the same for identical situations and whipsawing will not be allowed.

6.22      The Working Group recommends that the regulatory body on telecommunications should formulate a framework on interconnection and access, that is, the types of interconnect and access models and the underlying principles and guidelines. Under the Act and the terms and conditions of the public telecommunication licenses, any licensed public telecommunication operator is obliged to provide interconnection and access to its telecommunication systems to other licensed operators. Interconnection must exist at all levels and the rules need to be well defined, effective, and enforceable in order to prevent interconnection or the lack of it from being used by a monopoly or dominant operators to stifle competition.

6.23      The Working Group has examined the experiences of other countries which indicate that negotiating with the incumbent operator for an interconnect agreement is a difficult task, and if not carefully managed could lead to a lengthy and litigious process that would delay, if not cripple effective and sustainable competition. The telecommunications regulatory body should therefore prescribe the general framework, facilitate information provision and monitor developments. The regulatory body must also be able to set firm deadlines, apply regulatory pressure where possible to expedite the process and mediate in the event of a breakdown or deadlock. As part of the technical requirements for interconnection, it should be mandatory that all network operators exchange the information necessary for operator and caller identification services and for routing, billing, traffic accounting, administration and other applications in connection with all calls routed through network gateways.

(vi) Leasing of Circuit Capacity

6.24      The Working Group recognises that providers of services such as Internet access, value-added services, and private networks require access to circuit capacity on reasonable and non-discriminatory terms and conditions and in a competitive environment at prices which reflect the cost of providing the required capacity. As a result, TSTT and any other network operator eventually licenced to operate a network will have to make available the capacity required by these service providers and operators. If TSTT or the other network operators compete with these service providers, then they will have to provide this capacity for themselves or their affiliates under the same terms, conditions and prices offered to their competitors.

6.25      Service providers and operators who lease capacity from TSTT or any network operator may use this capacity only to provide the services which they have notified or for which they have a licence or authorization; they are, however, able to attach terminal equipment and interconnect the circuits which they have leased.

6.26      The Working Group recommends that interconnection and leased circuit arrangements including prices should be determined through commercial negotiations between network operators and service providers concerned. The regulator has an essential role to play in defining the terms and conditions and in establishing the process for interconnection and leased circuits capacity, consistent with regulations and the law. It has the responsibility to ensure that interconnection and leased circuit agreements are respected and the power to resolve disputes and enforce its decisions with respect to interconnection and leased circuit capacity. The Government should retain the right to authorize others to establish networks if TSTT and other licenced network operators are not able to provide interconnection and leased circuit capacity.

(vii) Licensing Requirements

6.27      In respect of licensing requirements, the Working Group is of the view that a licencee should be required to operate a public telecommunications network. A licence should also be required to use the radio frequency spectrums including, the specification of transmitting and receiving equipment even though a separate licence should not normally be required for the equipment. Additionally, telecommunications licences should not be required to provide value-added or Internet services using leased facilities of a network operator. However, value-added and Internet service providers must notify the regulator that they are providing these services and include in the advice the conditions of service to customers, the circuit routing and the technical standards that will be maintained.

6.28      In the interest of transparency and non-discriminatory practices the conditions and procedures for obtaining licences should be made publicly available along with the terms and conditions of individual licences. The procedures may include a bidding process when the number of licenses is limited. In keeping with these practices the reasons for denial of a licence should be made available to the applicant. The conditions for obtaining a licence, be they technical, financial or otherwise should be objective, transparent, and no more burdensome than necessary to obtain the desired quality of service. The telecommunications regulatory body will determine the fee for a licence, part of which may be an identifiable component to be applied to meeting Universal Service obligations. The fee should be reasonable and established in relation to the potential economic benefit of the licence to the licencee.

6.29      The Working Group gave due consideration to the status of Citizen Band Radio Operators who are integral to the operations of the National Emergency Management Agency (NEMA). To a large extent NEMA depends on the services of the Citizen Bank Radio Operators during natural disasters such as hurricanes and earthquakes as well as other events such as industrial accidents. Additionally, in the course of emergency operations Citizens Band Radio Operators interact with several protective forces, including the army and the police. The Working Group notes that Citizen Band Radio Club organisations have an estimated membership of approximately three thousand (3,000) with a further four thousand (4,000) who are not affiliated to any club or organisation. These individuals and organisations are operating without licences and in most cases their equipment are subject to customs duties. The Working Group is of the view that a licensing framework should be established for Citizen Band Radio Operators in Trinidad and Tobago. Amateur Radio operators have served in disaster situations and their operations which are governed by international regulations and present legal status should be maintained.

(viii) Divestment

6.30      Recent trends in legislation and regulation in other countries have proven adequate in ensuring stability and openness within the telecommunications sector. As such the role of Government as a shareholder in the industry is becoming less significant. The Working Group is of the opinion that the divestment of Government's shareholding in the telecommunications sector should be approached within the context of these international trends and Government's national policy on divestment. The Working Group notes that Government's current policy on divestment limits participation in commercial enterprises to those activities which meet strategic national objectives and which cannot be achieved through the legal, regulatory, institutional or incentive framework. Existing state equity holdings including the public utilities, are to be evaluated against the following set of prescribed criteria:

• Strategic National significance
• Protection of the Public Interest
• Validity of Mandate
• Optimal Resource Utilisation
• Viability of the Enterprise
• Market Efficiency
• Requirements for long-term competitiveness
• Socio-economic implications

6.31      The Working Group understands that Government proposes a system of competitive bidding or public offering of shares to be applied to the divestment of state enterprises, thereby ensuring the widest public participation and ownership resulting from the divestment process. Consequently, the disposal of the state's equity holding could be on the domestic stock exchange when it is practical and feasible to do so.

6.32      The Working Group is of the view that the divestment of TSTT and ICN requires an independent and separate assessment which should be guided by the following principles:

(i)	the telecommunications and information technology sectors are vital to Trinidad and Tobago's overall economic development. Government must not only maintain an oversight role but also influence the general direction of these sectors through ownership, regulation or a combination of both;
(ii)	the active participation of all workers is critical to the development and expansion of the telecommunications sector. This can only be achieved if everyone involved is given the opportunity to own part of the sector. Accordingly, all employees of TSTT should be given an opportunity to participate in the ownership of TSTT through some form of employee stock ownership plan (ESOP);
(iii)	to engender a similar level of participation by the general population and to stimulate greater public share ownership in Trinidad and Tobago's economy, part of any divestment of the Government's shares in TSTT should be offered to the general public in Trinidad and Tobago; and
(iv)	in the light of global trends and the increasingly reduced impact of ownership within a more fragmented broadcast sector, the Government should review the divestment of ICN with preference being given to employees and the general public of Trinidad and Tobago.

(ix) Broadcasting

6.33      The Working Group recognises that the primary reason for regulating broadcasting services is a technical one - the need to avoid harmful interference because of the limited availability of frequency spectrum. The second reason is the social and political importance of broadcasting as an important means of conveying information entertainment and education to the public. With the stabilization of the broadcasting industry during the last three (3) years, the focus will now be on growth and development of the industry, including the encouragement of increased local output. In determining the future treatment of licencing of additional broadcasting stations the Working Group is of the view that Government should identify the number of available frequencies and establish a transparent and non-discriminatory procedure for allocation of licences. This process should include options for financing including auctioning of the licences as against the current system whereby stations pay a percentage of advertising revenues.

VII. CONCLUSION - THE FOUR (4) STAGES OF THE WAY FORWARD

7.1      In light of the preceding discussion, the Working Group views the following four (4) action stages as critical to ensuring the continued growth and development of the telecommunications and information technology sectors in Trinidad and Tobago:

(i)	confirmation of market opening in the telecommunications sector;
(ii)	formation of a Telecommunication Steering Group (TSG);
(iii)	creation of a Telecommunications Authority; and
(iv)	identification of resources to implement policy changes.

7.2      On approval of this Policy and consistent with its commitments to the WTO basic telecommunication negotiations, the Government should confirm that the following telecommunication sub-sectors are open for entry without restriction, except in the case of radio-communication services where a licence is required for operations:

• Mobile data transmission services;

• Paging;

• Trunking;

• Value added services including Internet; and

• Sale, rental, maintenance of customer premises equipment.

7.3      Moreover, no telecommunications licences should be required to provide all types of value added services and to sell, rent, maintain or repair customer premises equipment. Such equipment would, however, need to be type approved before it can be used or connected to the network. In addition, access should be free for all types of satellite-based mobile services such as the new type of data and voice services to be provided over low earth orbit satellite systems, the little and big LEOs or Global Mobile Personal Communications by Satellite (GMPCS). Network operators of these systems should make arrangements with service providers in Trinidad and Tobago to provide these services. The Working Group also proposes that visitors be allowed to bring terminals (handsets) into Trinidad and Tobago for use on a temporary basis. Because of the internationally uibquitious nature of GMPCS technology, and the difficulty, if not impossibility of controlling its entry into the country, GMPCS service providers and their customers must comply with the local regulations operating the service in Trinidad and Tobago.

7.4      The policy on leased circuit capacity should ensure that TSTT or any other supplier of such capacity make available to any service provider the capacity it needs to provide an authorized service on reasonable, non-discriminatory conditions at transparent and cost-efficient prices.

(ii) Formation of a Telecommunications Steering Group (TSG)

7.5      The Working Group is of the view that the steps to implement a strategic management of the telecommunications sector and to begin the reform process can commence immediately following approval by Cabinet of the National Policy on Telecommunications for Trinidad and Tobago. Accordingly, the Working Group proposes the appointment by Cabinet of a special Telecommunications Steering Group (TSG) while the Government is in the process of approving a modified law and taking steps to formally appoint members to the new regulatory body.

7.6      The main tasks of the Telecommunications Steering Group would be to:

(i)	assist in setting up the new regulatory body to be known as the Telecommunications Authority. The TSG would also act on behalf of the new Authority until it is formally established;
(ii)	communicate the vision of the National Policy on Telecommunications for Trinidad and Tobago to Government agencies and departments and the general public;
(iii)	develop a network development plan with a five (5) year vision for discussion with TSTT;
(iv)	hire consultants as its and subsequently the Telecommunications Authority's advisors. These consultants would advise the TSG on all relevant matters including the: (a) establishment of a Telecommunications Authority; (b) network development plan and a five (5) year work program with TSTT and others; and (c) preparation of regulations to give effect to the new legislation. As part of the preparation of an effective legislative framework consistent with the National Policy on Telecommunications for Trinidad and Tobago the advice of outside legal counsel will be sought almost immediately to advise on the necessary changes in legislation and assist in the preparation of draft legislation.

7.7      The Cabinet-appointed Telecommunications Steering Group (TSG) should consist of six (6) part-time members and one (1) full-time Executive Officer as follows:

• The Chairman (selected by the Cabinet)
• One (1) representative of the Officer of the Prime Minister
• One (1) representative of the Attorney General's Department
• Three (3) telecommunications experts from outside the Government
• One (1) full time Executive Officer

Figure 5 shows the organisational structure of the Telecommunications Steering Group (TSG). The TSG will be assisted by the staff of the Telecommunications Division of the Office of the Prime Minister in the preparation of new regulations, the drawing up of the network development plans for discussion with TSTT and others, and communicating the new Policy to Government agencies, departments and the general public.

(iii) Creation of a Telecommunications Authority

7.8      The Working Group proposes the creation of an independent effective regulatory body to be called the Telecommunications Authority. The Telecommunications Authority will need the legal authority to operate in the telecommunications sector and will have the authority to regulate tariffs and interconnect arrangements including pricing and dispute settlement, to issue licences and to set fees. This body will have to be created by an Act of Parliament.

7.9      The new Telecommunications Authority should be established and a Board appointed by the end of 1998. An effective skeleton staff should be in place when the new legislation goes into effect and the first Board is appointed. As recommended, the Telecommunications Steering Group (TSG) will be responsible for operationally establishing the new Telecommunications Authority and hiring initial staff. Table 7 depicts the Immediate Action Plan to establish the Telecommunications Authority. The immediate action plan provides a timeframe for obtaining approval of the Policy; establishing the Telecommunications Steering Group (TSG); selecting and hiring and Executive Officer of the TSG; hiring consultants; seeking advice of legal counsel; submitting legal draft to the Legislative Drafting Committee; debating and approving legislation; appointment of a Telecommunications Authority Board; operational establishment and recruitment of staff of the Telecommunications Authority; preparation and approval of a comprehensive network development plan; introduction of new cellular technology, award of licence of second mobile phone operator; and the official launch of the Telecommunications Authority.

(iv) Identification of Resources To Implement Policy Changes

7.10      The Working Group is of the opinion that it is important to clearly identify the resources needed to implement the required policy changes. In this connection, Table 8 summarizes the immediate external resources required to implement the National Policy on Telecommunications for Trinidad and Tobago. It is also important to identify or estimate the quantifiable cost to the implementation of the Policy. The time phase must be clearly identified since telecommunications loans and credit often finance a period (e.g. three to five years) of a sector's investment programme. Support for the telecommunications sector by the multilateral financial institutions, notably the World Bank, has in recent times focused on creating investment, higher production efficiency, and greater service access, responsiveness and choice. At present, initial funding for the development of the National Policy on Telecommunications for Trinidad and Tobago and related institutional building has been identified under the current Business Expansion and Industrial Loan (BEIRL) from the World Bank.

7.11      However, the Working Group recommends that funding for the establishment of the Telecommunications Authority be made under the Public Sector Investment Programme (PSIP). Therefore in collaboration of the Ministry of Planning and Development it is essential to identify specific programmes and projects which will deal with the financial, economic, organizational and management requirements of the Telecommunications Authority. Table 9 gives suggested activities that would form part of the mandate of the Telecommunications Steering Group (TSG) and the proposed Telecommunications Authority. These activities cover the principal areas of developing an export-oriented telecommunication and information services sector, knowledge transfer and innovative human development, expansion of telecommunication services, and the introduction of further competition in the telecommunications sector.

Table 1

Telecommunications Market Structure in the Caribbean and WTO Commitments

*  international operator only

** several operators

VAS = value added services

CUG = closed user group

ISP = Internet Service Provider

CPE = customer premises equipment

Table 2

Main Telephone Lines and Penetration Rates : Caribbean and Other Countries

Source: World Telecommunications Development Report, 1996/7, International Telecommunication Union

GAGR: Compounded Annual Growth Rate

Table 5

Performance And Network Development Indicators

Source: World Telecommunications Development Report, 1996/7, International Telecommunication Union

Table 6

Proposed Revisions to the Telecommunications Authority Act (Act 40 of 1991)

TABLE 7: IMMEDIATE ACTION PLAN TO ESTABLISH THE TELECOMMUNICATIONS AUTHORITY

TABLE 7:  IMMEDIATE ACTION PLAN TO ESTABLISH THE TELECOMMUNICATIONS AUTHORITY

TABLE 7: IMMEDIATE ACTION PLAN TO ESTABLISH THE TELECOMMUNICATIONS AUTHORITY

TABLE 7: IMMEDIATE ACTION PLAN TO ESTABLISH THE TELECOMMUNICATIONS AUTHORITY

Port-of-Spain 10 January, 1998

Table 8

Immediate Resources Required To Implement the National Policy On Telecommunications for Trinidad and Tobago

Table 9

Suggested Activities of the Telecommunications Steering Group

and the proposed Telecommunications Authority

Table 9 (continued)

Table 9 (continued)

Table 9 (continued)

APPENDIX A

TERMS OF REFERENCE AND MEMBERSHIP OF THE WORKING GROUP

Terms of Reference: Working Group to Prepare a Draft

National Policy on Telecommunications

(Cabinet Minute 1481 of June 12, 1997)

The Terms of Reference of the Working Group to Prepare a Draft National Policy on Telecommunications are:

-               To review and consider existing policy documents and other pertinent literature on telecommunications.

-               To liaise with the critical stakeholders, that is, groups, institutions and individuals in the industry in order to solicit inputs that could inform the formulation of the Draft Policy.

-               To co-opt additional expertise, as need be, to assist with the conceptualization and preparation of the policy document.

-               To liaise with the Caribbean Telecommunications Union/World Trade Organization, as necessary, in the preparation of the document.

-               To prepare for submission to the Minister of Planning and Development for ultimate consideration by Cabinet, the Draft National Policy on Telecommunications.

Membership

Chairman

Mr. Winston Dookeran                                                                       Governor,

                                                                                                                Central Bank of Trinidad and Tobago

Deputy Chairman

Ms. Caroline Seepersad-Bachan                                                       Lecturer in Telecommunications,

                                                                                                                University of the West Indies

Members

Dr. John Prince                                                                                     Permanent Secretary,

                                                                                                                Office of the Prime Minister (Science, Technology and Tertiary Education)

Mr. Winston Ragbir                                                                            Director,

                                                                                                                Telecommunications Division,

                                                                                                                Office of the Prime Minister

Mrs. Tira Greene                                                                                  Parliamentary Counsel I,

                                                                                                                Ministry of the Attorney General

Dr. St. Clair King                                                                                  Professor,

                                                                                                                Faculty of Engineering

                                                                                                                University of the West Indies

Mr. Lyle Townsend                                                                             Representative,

                                                                                                                Communication Workers Union

Mr. Richard Azar                                                                                  Chairman,

                                                                                                                Telecommunication Services of Trinidad and Tobago Limited

Mr. Sam Martin (Alternate)                                                                Chief Executive Officer,

                                                                                                                Telecommunication Services of Trinidad and Tobago Limited

Mr. Napier Pillai                                                                                    Managing Director,

                                                                                                                CaribSpace Limited

Mr. Bernard Pantin                                                                              General Manager,

                                                                                                                Direct TV

Mr. Felipe Noguera                                                                              Chief Executive Officer,

                                                                                                                Caribbean Association of Industry and Commerce

Ms. Karen Rampersad*                                                                      Accounts Manager,

                                                                                                                Citibank (Trinidad and Tobago) Limited

Mr. Deoraj Ramnarine                                                                         Telecommunications Consultant

                                                                                                                Representative of the Association of Professional Engineers

Mr. Lindsay Gillette                                                                             Managing Director,

                                                                                                                Representative,

                                                                                                                Association of Broadcasting, Radio Communication, Information Technology and Telecommunications

Secretariat

Ms. Elinor Gittens                                                                                Operational Research Officer III,

                                                                                                                Office of the Prime Minister (Science, Technology and Tertiary Education)

Mr. Peter Mitchell                                                                                Planning Officer I,

                                                                                                                Ministry of Planning and Development

Ms. Donna De Four                                                                             Economist II,

                                                                                                                Ministry of Trade and Industry

Consultant

Dr. Peter A. Stern                                                                                 World Bank

*Ms. Karen Rampersad resigned from the Working Group due to pressing assignments.

APPENDIX B

REFERENCE DOCUMENTS