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Viewing cable 05LIMA5343, PERU: 1377 TELECOM TRADE AGREEMENTS REVIEW

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Reference ID Created Released Classification Origin
05LIMA5343 2005-12-19 17:45 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Lima
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 LIMA 005343 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/CIP 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USTR FOR KENNETH SCHAGRIN, JONATHAN MCHALE, ARROW AUGEROT 
FCC INTERNATIONAL BUREAU FOR ETALAGA 
 
E.O. 12958: N/A 
TAGS: ECPS ECON ETRD EINV PE
SUBJECT: PERU: 1377 TELECOM TRADE AGREEMENTS REVIEW 
 
REF: A) State 218756   B) Lima 5073     C) Lima 2509 
 
1.  (SBU) Summary.  After several years of anticipation and 
prolonged prodding by Post, Peru's telecommunications 
regulator Osiptel issued resolution No. 70 on November 21, 
2005, which establishes a new mobile termination rate for 
calls made from pay phones and mobile phones.  Under the new 
regulation, OSIPTEL will lower the mobile termination rate 
by 25 percent over the next three years, beginning in 
January 2006.  By 2009, the new mobile termination rate will 
be set at between $0.1056-$0.0922, 54 percent lower than 
current mobile termination rates.  Nextel Peru, the only 
U.S. provider of mobile services in Peru, applauds Osiptel's 
recent action to address Peru's high mobile termination 
rates but emphasized that Osiptel's regulation is not cost- 
oriented and takes too long to regulate prices.  End 
Summary. 
 
2.  (U) In response to reftel A, Post contacted officials 
from Nextel to inform them of the 1377 review comment 
deadline and inquire about Nextel's position on Osiptel's 
recent regulation. 
 
Recent Regulation of Mobile Termination Rates 
--------------------------------------------- 
 
3.  (SBU) For years, Peru maintained one of the highest off- 
net mobile termination rates in South America, at an average 
of $0.23 per call.  Post, working closely with Nextel, has 
repeatedly reminded Osiptel (Peru's telecommunication's 
regulator) of both its domestic and WTO obligations to 
ensure cost-oriented mobile termination rates.  During the 
past year, Osiptel has endeavored to reduce the rate, 
issuing a temporary rate of $.20 in May (ref C) and 
publishing a regulation to lower rates to between $0.1056- 
$0.0922 by 2009 in November (ref B). 
 
4.  (U) Under the new regulation, Osiptel will retain the 
temporary rate of $0.2053 for all companies for the 
remainder of 2005.  Beginning on January 1, 2006, OSIPTEL 
will implement the new rate, between $0.1804-$0.1770, which 
will decrease by 25 percent annually over a three-year 
period.  By January 1, 2009, the mobile termination rates 
will average $.095 -- a 54 percent reduction.  (Note: All 
costs are in dollars and do not include Peru's 19 percent 
value added tax.  End Note.) 
 
--------------------------------------------- -------------- 
Company Original Temp Rate  2006     2007    2008    2009 
          Rate    Jun 2005 
--------------------------------------------- -------------- 
Nextel    $.250   $.2053   $.1772   $.1491  $.1210  $.0929 
Telefonica$.207   $.2053   $.1770   $.1487  $.1204  $.0922 
America   $.250   $.2053   $.1804   $.1555  $.1305  $.1056 
 Movil/TIM 
--------------------------------------------- -------------- 
Source: OSIPTEL 
 
Nextel Argues Osiptel Still Not 
Compliant with WTO Obligations 
------------------------------- 
 
5.  (SBU) We spoke to Nextel Peru officials on December 19 
to obtain Nextel's comments for the 1377 review.  Alfonso de 
Obregoso, Vice President of Legal Regulatory Issues, 
informed us that while Nextel applauds Osiptel's efforts to 
reduce the mobile termination rate, Osiptel's new plan has 
several flaws.  First, he noted that the new rate is not 
completely cost-oriented.  The regulation establishes 2009 
mobile termination rates based on 2004 costs.  Because the 
final rate will not incorporate current costs, Nextel argues 
that OSIPTEL is still noncompliant with both its domestic 
and WTO obligations to ensure cost-oriented mobile 
termination rates.  Second, even though Osiptel acknowledges 
that mobile termination rates, based on 2004 costs, should 
average $0.95, the new regulation mandates a three-year 
phase in for the new rate. 
 
6.  (U) According to de Obregoso, Nextel submitted its 
comments for the 1377 review to USTR on December 16. 
 
Comment 
------- 
 
7.  (SBU) It has taken Osiptel almost five years to regulate 
Peru's abnormally high mobile termination rate; the new 
regulation, unlike previous versions, is based on cost 
analysis.  Osiptel made a politically expedient decision 
rather than immediately issue a more than 50 percent 
reduction in the mobile termination rate.  We were, in fact, 
surprised when Osiptel issued Regulation No. 70, as it 
showed that Edwin San Roman, President of Osiptel, and his 
staff had the political will to stand up to politically 
savvy and well-connected Telefonica officials (many of whom 
are on the Osiptel Board), who argued that there was no need 
for regulation.  However, by delaying the implementation of 
the new rates, Osiptel prolongs unnaturally high rates, 
thereby continuing to undermine competition in the mobile 
market and ultimately affecting Peru's long-term 
competitiveness in terms of access to information and 
overall business costs for small and medium enterprises. 
While we want Osiptel to implement the rate in a more timely 
fashion, we believe that Osiptel has done what it can to 
meet its domestic and international obligations without 
bowing to political pressure from Telefonica. 
 
STRUBLE