Business News Americas

Ex-minister: FTA unbundling factor means negative impact - Colombia

Published : Friday, February 11, 2005 11:44 (GMT-0400)

By Cristina Molina
BNamericas.com

The soon to be signed Andean region free trade agreement (FTA) with the US will have a negative impact on the present and future development of Colombia’s telecoms market if approved under the current state of negotiations, local press quoted former Colombian development minister Eduardo Pizano as saying.

As the FTA stands today it authorizes local loop unbundling, which would allow US operators to lease components of private networks in Colombia. This would be a radical change because Colombian telecommunications law does not authorize private networks to provide services to third parties or interconnect with public networks, Pizano said in a document to be sent to congress.

Colombian operators are concerned that if US firms are allowed to access local public networks they would be able to concentrate their services in more attractive segments, that is to say high income and corporate segments. If such clients migrate away from national operators the state communication fund could receive less income and the profitability of national operators could even be at risk, they say.

Operators have therefore asked the government to ensure that, should the entrance of foreign companies be permitted, the regulatory framework will be the same for all national and international firms.

All local operators are obliged by law to offer coverage in the entire territory, and need to rely on cross subsidies to provide service to lower income population, financed by revenue from higher income segments. However, the rule would not apply to US operators.

"Saying no to these restrictions is something that the Colombian government could do. But I don’t think they are going to complete talks until 2006 and in the FTA telecommunications is just a small part. So I think we are far away from seeing this agreement finalize," Pyramid Research analyst Marc Einstein told BNamericas.

This is the second contentious issue within the FTA negotiations since the US government has also demanded the privatization of state-owned telephony operators such as ETB and EPM. "But [the US] backed out from that, which is a much larger issue for Colombia’s telecoms market. So we have seen flexibility in terms of negotiations," Einstein added.