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New Law on Telecommunications (Vietnam)

NO&T Asia Legal Review

Author
Ngoc Hoang
Publisher
Nagashima Ohno & Tsunematsu
Journal /
Book
NO&T Asia Legal Review No.82 (May, 2024)
Reference
Practice Areas
*Please note that this newsletter is for informational purposes only and does not constitute legal advice. In addition, it is based on information as of its date of publication and does not reflect information after such date. In particular, please also note that preliminary reports in this newsletter may differ from current interpretations and practice depending on the nature of the report.

Background

The National Assembly of Vietnam passed the new Law on Telecommunications (“LOT 2023”) on 24 November 2023 to replace the old Law on Telecommunications dated 23 November 2009 (“LOT 2009”). LOT 2023 will come into effect as of 01 July 2024, save for certain articles on data center services, cloud computer services, basic telecommunications services on the Internet, and the payment of fees for registering and maintaining the use of network numbers that will come into effect as of 01 January 2025. Although LOT 2023 comprises many new points, in this article, we highlight the provisions related to wholesale, newly regulated services, cross-border supply, and foreign investment in the telecommunications sector.

Wholesale of telecommunications services

For the first time, the concept of wholesale of telecommunication services has been introduced in LOT 2023. It is defined to be the lease of telecommunications network to other telecommunications enterprises or the sale of telecommunications traffic and services for the purposes of services provision. The telecommunications enterprises and groups of telecommunications enterprises with a dominant market position are required to offer their network or services at wholesale to other enterprises. This requirement is expected to promote the wholesale market, create favorable conditions for new enterprises to enter the market, as well as to develop new services and applications. The Ministry of Information and Communication (“MIC”) is drafting a new circular to guide various matters in relation to wholesale activities like the obligations of fair competition and transparency, form of services provision contract and the notification thereof to MIC, and procedures of disputes settlement.

Newly regulated services

To match the trend of converting telecommunications infrastructure into digital infrastructure and, at the same time, creating a transparent legal environment for business development, after a long gestation period of more than one decade, LOT 2023 has introduced the definitions and provisions on data center services, cloud computing services, and basic telecommunications services on the Internet.

  • Data center services are defined to be telecommunications services that provide information processing, storage and retrieval features for users via telecommunications networks by leasing part or all of the data center.
  • Cloud computing services are defined to be telecommunications services that provide information processing, storage and retrieval features for users over telecommunications networks through cloud computing.
  • Basic telecommunication services are defined to be telecommunications services that provide the main features of sending, transmitting, and receiving information between two people or a group of people using telecommunications services on the Internet (“Telco-OTT”).

The management of these services is conducted as a “light management” approach, aiming to protect the rights of users, ensure safety, security as well as to create favorable conditions for the services development. The providers of these new services are also relieved from certain obligations in comparison with the enterprises providing traditional telecommunications services. In particular, they do not have to contribute to the Vietnam Public-Utility Telecommunications Services Fund. They are not required to obtain any license or permit to provide these services but only to notify the Vietnam Telecommunications Authority (“VNTA”) under the MIC. The notification includes the information about the name of the supplier and its business certificate, the type and quality of the telecommunications services. It is expected that VNTA will then issue a confirmation to the service provider within 02 days from the date of receipt of the notice.

Cross-border supply

Article 21 of the LOT prescribes the general rules applicable to the cross-border supply of telecommunications services. Cross-border supply must satisfy the following conditions: (i) it must be permitted under the relevant national regulations and international treaties of which Vietnam is a member, (ii) it must observe the regulations to ensure national defense, security, public policy, and cybersecurity; and (iii) the local counterparty (if any) must have technical plan to ensure information security and implement emergency prevention and stop providing telecommunications services at the request of competent authorities. MIC is drafting a decree to implement LOT 2023 (“Draft Decree”) that gives detailed guidance on cross-border supply. The issuance of the implementing decree will help to address multiple pending questions on cross-border supply of telecommunications services, especially the provision of Telco-OTT, data center services, and cloud computing services. Below are the relevant contents set forth in the third version of the Draft Decree that have been available to the public so far:

  1. In line with the commitments of Vietnam to WTO and other international treaties of which Vietnam is a member, Draft Decree provides that, cross-border supply of the telecommunications services (other than data center services, cloud computing services, and Telco-OTT services) must be provided through commercial agreements with Vietnamese telecommunications enterprises that have been licensed to provide telecommunications services and are allowed to establish international gateways.
  2. Cross-border supply of Telco-OTT, data center services, and cloud computing services

    Although the offshore services providers do not have to assume all rights and obligations similar to that of the onshore services providers, the Draft Decree, by referring to the relevant provisions of the LOT 2023, gives them various rights and obligations. The most important rights and obligations are:

    • the service providers do not have to compensate for indirect damages or unearned profits due to providing telecommunications services that do not ensure time and quality.
    • the service providers are obliged to: (x) prevent and block messages and calls that violate legal regulations. At the request of competent authorities, the service providers must stop providing telecommunications services when the services are used to threaten national security; (y) verify the information about the mobile phone number of users before providing the service, store the information about the service users in accordance with the regulations on cybersecurity, and protect the state secrets and personal data of the services users; and (z) submit ordinary and extraordinary reports in accordance with the MIC’s regulations. It is expected that the MIC will issue a circular to regulate the reporting forms and regime.

Foreign investment in telecommunications

In principle, the capital contribution by foreign investors in telecommunications sector is limited by the caps stipulated in the international treaties of which Vietnam is a member.

Foreign investment in telecommunications services that are not covered by the international treaties will be regulated by national regulations. Notably, LOT 2023 does not limit the ownership ratio of foreign investors in the enterprises providing data center services, cloud computing services, and Telco-OTT services.

Below are the main caps on the ratio of charter capital contributed by foreign investors in a telecommunications enterprise:

Treaties Non facilities-based services Facilities-based services
Basic telecommunication services Value-added services Basic telecommunication services Value-added services
WTO,※1VJEPA,※2VKFTA※3 65%
(VPN services:※4 70%)
65% 49% 50%
AFAS※5 75%
(VPN services: 70%)
70% 49% 50%
EVFTA※6 65%, increased to 75% after 5 years from the effective date of EVFTA.
(VPN services: 70%, increased to 75% after 5 years from the effective date of EVFTA)
65%, increased to 100% after 5 years from the effective date of EVFTA 49% 50%, increased to 65% after 5 years from the effective date of EVFTA
CPTPP※7 65%
(VPN services: 70%), increased to 100% after no more than 5 years from the effective date of CPTPP
65%
(VPN services: 70%), increased to 100% after no more than 5 years from the effective date of CPTPP
49% 51%, increased to 65% after no more than 5 years from the effective date of CPTPP

(Source: Synthetized from the National Portal on Investment https://vietnaminvest.gov.vn/SitePages/News_Detail.aspx?ItemId=217)

Conclusion

LOT 2023 introduces multiple new and progressive provisions, which will enhance fair competition and innovation in the Vietnam telecommunications market. It is expected that the more transparent and comprehensive provisions on foreign investment and cross-border supply in LOT 2023 will guarantee and give more opportunities for foreign investors and offshore telecommunications services providers to penetrate and expand their business in Vietnam.

Endnotes

*1
Vietnam’s commitments to WTO.

*2
Vietnam-Japan Economic Partnership Agreement.

*3
Free Trade Agreement between Vietnam and Korea.

*4
Virtual Private Network.

*5
ASEAN Framework Agreement on Services.

*6
EU-Vietnam Free Trade Agreement.

*7
Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

This newsletter is given as general information for reference purposes only and therefore does not constitute our firm’s legal advice. Any opinion stated in this newsletter is a personal view of the author(s) and not our firm’s official view. For any specific matter or legal issue, please do not rely on this newsletter but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.

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