1 The 7 th Annual International Industrial Organization Conference April 3-5, 2009 Boston, MA, USA Measuring the Barriers to Trade and Investment in Telecoms Eng Kooi Lim*, Competition Bureau Zhiqi Chen, Carleton University *This paper is mainly based on the Chapter 4 of his Ph.D. thesis submitted to the University of Ottawa in Zhiqi Chen was the thesis supervisor. Financial assistance from the Social Sciences and Humanities Research Council of Canada (SSHRC) is gratefully acknowledged. The view expressed in this paper is entirely of the authors; it does not, in part or in whole represent the view of the Competition Bureau of Canada, University of Ottawa or Carleton University.

2 World Trade Organization  An agreement to place telecom services under the General Agreements on Trade in Services (GATS) in  The Agreement on Basic Telecoms (ABT) was concluded in February  Specific commitments regarding market access, national treatment, and the regulatory principles were undertaken (partially or fully) by all 89 participants to the ABT in Nov 1998.

3 Literature Reviews  Barriers and trade liberalization is always instrumented by market reforms such as privatization, regulations and competition.  Many use dummy variables to indicate market reform;  some use index as a measure of liberalization, but not in the context of WTO.

4 Measuring in the context of the WTO  Using the GATs or various other trade agreements as the primary source. Hoekman (1995) and Marko (1998).  Using the ITU survey of actual policies Warren (2000)

5 Warren (2000):  He details a set of frequency indices of impediments to trade in telecom services.  He attempts to distinguish between market access and national treatment, but regulatory principles were not addressed.

6 Our work Extending Warren (2000) to include:  Market Access  National Treatment  Regulatory Principles

7 Data source  The 2005 survey in telecommunications by ITU.  The survey covers six main sections comprises 65 questions: legislative framework; regulatory institution; regulatory issues and processes; universal access/service; sector structure and the future plans.  More than 90 member countries have responded to this survey but not Taiwan and Hong Kong.

8 21 APEC member countries Developed countries  Australia  Canada  Chinese Taipei*  Japan  Korea  Mexico  New Zealand  Singapore  Hong Kong, SAR*  United States Developing countries  Brunei  Chile  China  Indonesia  Malaysia  Papua NG  Peru  Philippines  Russia  Thailand  Viet Nam *Not included in our study.

9 Measuring Barriers Market Access Index  National Treatment Index Regulatory Principles Index Composite Index

10 Market Access Index (MA)  MA/Trade  normalized to 1  MA/Invest  normalized to 1  MA=Average of the two

11 MA/Trade Is resale of voice services allowed for: domestic calls? (Yes/No) international calls? (Yes/No) Is resale of voice services allowed through: fixed lines? (Yes/No) mobile network? (Yes/No) Yes=1; No=0

12 MA/Invest 1. Number of operators (weight=3) 3=3;2=2;1=1 2. Level of competition allowed (weight=2) Local; Long distance; International; Data; Leased lines; Internet and Mobile. competitive=1; partial=0.5; duopoly=0.2; monopoly=0 3. Market shares or ownership (weight=1) % of incumbent privatized; Market share of largest operator in Domestic; Long distance; Mobile services.

13 Measuring Barriers Market Access Index National Treatment Index  Regulatory Principles Index Composite Index

14 National Treatment Index (NT) NT/Trade  normalized to 1 Q: Is the call-back services allowed? NT/FDI  normalized to 1 Q:% of foreign ownership allowed

15 Measuring Barriers Market Access Index National Treatment Index Regulatory Principles Index  Composite Index

16 Regulatory Principles Index (RP) 1. Competitive safeguard (CS) 2. Interconnection (IC) 3. Universal service (US) 4. Licensing (LS) 5. Independent regulator (IR)  All 5 principles are each normalized to 1

17 1. CS: 5Q Adoption of WTO Reference Paper ? Enforcement powers of NRA? Competition authority exist in your country? Appeals to the decision of NRA? Are public consultations mandatory before regulatory decisions are made?

18 2. IC: 8Q Are interconnections agreements and prices made public? Requirement for unbundled access and to publish Reference Interconnection Offer? Policy on infrastructure sharing, dispute resolution, pre-selection and number portability?

19 3. US: 4Q Definition of universal access or services? Obligations to provide the services? Obligation to offer below cost? How costs of universal service are funded?

20 4. LS: 2Q Licensing/authorization regime for each of the 7 services? notification  3 registration  2 authorization  1 license  0 Are licensing agreements publicly available?

21 5. IR: 8Q Separation of NRA from the ministry and telecoms operations? Legal mandate; autonomous in decision making; a collegial body? Financing, multi-sector jurisdiction; reporting to legislative/parliament? Existence of the NRA is at least two years

22 Variations of RP RP1= (CS+IC+US+LS+IR)/5; (each including US with a weight of 0.20) RP2 = (CS+IC+LS+IR)*0.225+US*0.1 (US has a weight of 0.10) RP3 = (CS+IC+LS+IR)/4; (US has zero weight)

23 Measuring Barriers Market Access Index National Treatment Index Regulatory Principles Index Composite Index 

24 Variations of CI CI1 = (MA+NT+RP1)/3 CI2 = (MA+NT+RP2)/3 CI3 = (MA+NT+RP3)/3 CI0 = (MA+NT)/2

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29 Conclusions  Developed countries do not always associate with higher levels of market liberalization after taking into account instruments such as market access, national treatment and regulatory principles.  Some developing countries may be more open than their developed counterparts.  In our study, MA, NT and RP are assigned equal weights. In reality, some countries may place different priorities to these issues before opening their markets to trade.

30 Thank you