VZCZCXRO4397
PP RUEHCHI
DE RUEHBK #0115/01 0061256
ZNR UUUUU ZZH
P 061256Z JAN 06
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC PRIORITY 5482
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHGP/AMEMBASSY SINGAPORE PRIORITY 1675
RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 1010
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY

UNCLAS SECTION 01 OF 08 BANGKOK 000115 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/CIP, EAP/MLS 
USTR FOR BARBARA WIESEL, JONATHAN MCHALE 
JUSTICE FOR STUART CHEMTOB 
COMMERCE FOR JEAN KELLY, JULIET BENDER, AND ERIC HOLLOWAY 
TREASURY FOR OSIA 
STATE PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ETRD ECPS EINV ECON TH
SUBJECT: THAI TELECOM SECTOR REFORM: NTC ISSUES LICENSES 
WITHOUT CONCESSION CONVERSION 
 
REF: A. 04 BANGKOK 2189 
     ¶B. 05 BANGKOK 6901 
     ¶C. 05 BANGKOK 7043 
     ¶D. 05 BANGKOK 7124 
 
BANGKOK 00000115  001.2 OF 008 
 
 
¶1.  (U) SUMMARY:  Thailand,s telecom sector has long been 
defined by the co-existence of its state owned enterprises 
TOT and CAT, and several private companies doing business 
under concessions granted by the state owned enterprises 
(SOEs).  While the concessions brought competition into the 
Thai telecom market, they also constitute a barrier to free 
and open competition in the market.  Rather than tackle the 
problem of concession conversion head-on, the one year-old 
National Telecommunications Commission (NTC) has opted 
instead to issue new licenses, particularly for 
third-generation (3G) mobile services, which promises to 
facilitate the gradual unwinding of the telecom concessions 
while enabling existing players first crack at the 
next-generation market.  This approach avoids a bruising 
conflict over concession conversion, but it is economically 
inefficient and wasteful of resources because Thailand,s 
existing telecom infrastructure has not yet outlived its 
useful life.  The principal regulatory variable affecting the 
extent of such inefficiency*or the length of the wait for 
rollout of 3G*is an ongoing dispute over formation the 
National Broadcasting Commission, whose approval is required 
by law for allocation of frequencies.  On telecommunications 
issues where it has sole authority, the NTC has established 
itself as the regulator for the telecom industry during its 
first year, and we expect that Royal Thai Government (RTG) 
positions on telecom issues in the pending Free Trade 
Agreement negotiations will accord closely with the 
regulatory guidance the NTC has issued to date. END SUMMARY 
 
THE DUAL STRUCTURE OF THAILAND'S TELECOM SECTOR 
 
¶2.  (U) Thailand's telecommunications operators have 
historically existed as state-owned enterprises (SOEs).  The 
Telecommunications Organization of Thailand was established 
by statute in 1954 to provide domestic telephony services, 
and the Communications Authority of Thailand was established 
in 1976 by a separate law to provide international telephone 
services as well as postal services and other non-voice 
telecommunications services. This division of authority has 
blurred as new technologies not envisioned by existing laws, 
such as mobile phone and satellite services, have emerged. As 
Thailand's economy boomed during the 1980s, however, the two 
SOEs proved unable to meet the nation,s growing demand for 
telecommunications services. 
 
¶3.  (U) From 1986 through the mid-1990s, the RTG introduced 
competition into the telecom sector to increase supply.  The 
state-owned telcos granted several concessions to private 
companies on a build-transfer-operate (BTO) contract basis 
(REF A).  Under the BTO contracts, the private contracting 
party established telecommunications networks at their own 
expense, including installation, handing of network assets, 
and their operation.  Upon completion of the concession 
period, all assets are to be transferred to the concession 
grantor.  Revenue sharing arrangements for each concession 
have differed, based on the proposals and negotiations at the 
time of tender. 
 
¶4.  (U)  Set out below is a list of concessions currently in 
force is set out below.  (Note:  The RTG corporatized TOT 
Public Company Limited (TOT) and CAT Telecom Public Company 
Limited (CAT) by issuing shares still owned by the government 
in 2002 and 2003 respectively.  End note.) 
 
Telecommunications Concessions for Basic (Fixed-Line 
Telephone) Services: 
 
Operator: True Corporation (formerly Telecom Asia) 
Grantor: TOT 
Service: Installation of 2.6 million numbers in Bangkok and 
its vicinity 
Concession Period:  25 years (from October 1992 to 2017) 
Revenue Sharing:  16 percent (2 million numbers); 21 percent 
(600,000 numbers) 
 
BANGKOK 00000115  002.2 OF 008 
 
 
 
Operator:  TT&T 
Grantor: TOT 
Service: Installation of 1.5 million numbers in provincial 
areas 
Concession Period: 25 years (October 1993 to 2018) 
Revenue sharing: 43.1 percent (1 million numbers); 44.5 
percent (500,000 numbers) 
 
Telecommunications Concession for Mobile Telephone Services: 
 
Operator:  AIS 
Grantor: TOT 
Network: 900 GSM 
Concession Period 25 years (starting in 1990) 
Revenue Sharing:  Years 1-5: 15 percent; years 6-10: 20 
percent; years 11-15: 25 percent; years 16-25: 30 percent 
 
Operator: TAC (DTAC brand) 
Grantor: CAT 
Network: 1800 GSM 
Concession Period: 27 years (starting in 1990) 
Revenue Sharing: Years 1-4: 12 percent; year 5: 25 percent; 
years 6-15: 20 percent; years 16-20: 25 percent; years 21-17: 
30 percent; plus network (TOT) connecting fee of Bt. 
200/number/month 
 
Operator:  TA Orange 
Grantor: CAT 
Network: 1800 GSM 
Concession Period: 16 years (starting 1999) 
Revenue Sharing: Year 1: 25 percent; years 2-9: 20 percent; 
years 10-14: 25 percent; years 15-16: 30 percent; plus 
network (TOT) connecting fee of Bt. 200/number/month 
 
Operator: Digital Phone Co. (DPC) 
Grantor: CAT 
Network: 1800 GSM 
Concession Period: 16 years (starting 1999) 
Revenue Sharing:  Year 1: 25 percent; years 2-9: 20 percent; 
years 10-14: 25 percent; years 15-16: 30 percent 
 
¶5.  (U)  The dual structure that has resulted from these 
concessions has added to the challenge of reforming 
Thailand's telecom sector, because the concessionaires must 
both compete with TOT and CAT while at the same time 
submitting to their regulation and making revenue sharing 
payments to them.  Fundamental to establishing a regulatory 
environment that is open to free and fair competition is the 
conversion of the concessions to licenses.  Owing to the 
difficulty of effecting concession conversion, the 
concessions  are known as the Gordian knot of telecom sector 
reform. 
 
 
THE MASTER PLAN FOR TELECOM REFORM 
 
¶6.  (U) Although the Telecom Master Plan has undergone 
several revisions since its initial adoption in 1997, the 
basic goals envisioned at the outset have guided public 
discussions and expectations for reform.  These aims include: 
 establishment of an independent national regulatory body, 
the conversion of build-transfer-operate (BTO) concessions 
granted by TOT and CAT to private operators into NTC-issued 
licenses; the privatization of TOT and CAT; the 
liberalization of the telecom market to allow competition 
according to a process regulated by the NTC.  In the 
international context, the point to emphasize is that the RTG 
has pledged to liberalize its telecom market consistent with 
World Trade Organization criteria by 2006. 
 
 
THE NTC'S FIRST YEAR 
 
¶7.  (U) On November 1, 2005, the National Telecommunications 
Commission marked its first anniversary. In the face of low 
expectations, the NTC can count several achievements to its 
credit.  It has formulated the Telecom Master Plan for 
2005-2007, published in the Royal Gazette on August 3, 2005. 
 
BANGKOK 00000115  003.2 OF 008 
 
 
It has established licensing criteria for the three types of 
telecommunications licenses it may issue:  Type I (without 
network), Type II (with or without network for specific 
groups or users), and Type III (with network for public 
telecommunications services).  It has set criteria for 
allocation of telephone numbers.  It has established license 
criteria, license fees, and interconnection charges for 
internet service providers (ISPs).  It has set temporary 
measures for radio frequency allocation.  It has also issued 
licenses as noted in paragraph no. 9 below. While much 
remains to be done, the NTC has without question established 
itself as the source of regulatory guidance in the telecom 
sector. 
 
¶8.  (U) The NTC's pro-business (rather than pro-consumer) 
outlook merits emphasis.  The NTC desires profitable industry 
players, and it frowns on the cutthroat competition that it 
has seen in the mobile services market the past year. 
Securities analysts also suggest that the NTC's reluctance to 
force concession conversion flows in part from its desire to 
avoid crippling TOT.  To the Commissioners, an independent 
and healthy TOT is necessary for a healthy Thai telecom 
industry.  By the same thinking, forcing private operators to 
accelerate payments currently scheduled to be paid out of 
future revenues as proposed before the Commission was formed, 
would likewise risk imposing an impossible burden on the 
private firms.  Thus, in dealing with the question of 
concession conversion, the NTC has clearly attempted to find 
an answer that accommodates the interests of both the SOEs 
and the private operators, at least in the short-term. 
 
CHOOSING LICENSES OVER CONFLICT 
 
¶9.  (U) The path of least resistance that the NTC has chosen 
is to leave the existing concessions in place while issuing 
new licenses that provide both an incentive and the mechanism 
for the gradual unwinding of the concessions. The NTC 
announced accordingly that it would not interfere with 
existing concessions.  The NTC has issued Type I telecom 
licenses (for operators without their own networks) to 18 
operators, beginning with its first license to KSC Commercial 
Internet Public Company Limited in June 2005.  It has issued 
6 Type I and Type III telecom licenses under the 
Telecommunications Business Act to TOT and CAT on August 4, 
2005, which was also the 122nd anniversary of National 
Telecommunications Day.  The licenses granted cover the 
existing telecommunications services operated by the two 
incumbent operators.  The licenses to TOT were fixed-line, 
ISDN, 470 MHz, 900 MHz mobile phone, Internet, trunk mobile, 
paging, international phone, leased line, audiotext, and card 
phone services.  The licenses granted to CAT covered CDMA, 
800, 1800, maritime and aviation radio, trunk mobile, 
satellite communications, international phone, data 
communications, and Internet services. 
 
¶10.  (U) The legal reasoning underlying the NTC,s decision 
to leave the concessions in place is that, contrary to 
assertions of reformers, any attempt to force conversion 
would be open to strong legal challenge.  According to one of 
the Commissioners, who is a lawyer by training, a careful 
reading of Thai law as written does not substantiate the view 
that the Telecommunications Business Act (TBA) of 2001 is 
necessarily incompatible with the existing access fee regime. 
 The TBA (specifically Section 80) provides that 
concessionaires may continue their operations until the end 
of their concessions under the same conditions and that the 
concessionaires are subject to the rules of the NTC, which 
are prescribed to promote free and fair competition. 
 
¶11.  (U) As a practical matter, the NTC sought to stay out of 
court. While the NTC can issue regulations, operators and 
other interest groups have recourse to the courts to 
challenge those regulations.  These courts include the 
Administrative Court, which rules on the appropriateness of 
government agencies, and the Constitutional Court, which 
would have jurisdiction because the Thai Constitution 
specifically stipulates that the telecom concessionaires can 
continue to operate until the expiration of their 
concessions, and that changes to the concession agreements 
 
BANGKOK 00000115  004.2 OF 008 
 
 
cannot have a materially negative impact on their business. 
In short, any action drawing a legal challenge could wind up 
stuck in court for years, a very real prospect in view of a 
long-running court battle between TOT and TT&T over the 
concession between them. Additionally, the courts would only 
decide issues of legality after the NTC has issued 
regulations, because the NTC does not have the right to seek 
declaratory judgments from the Thai courts to pre-empt 
disputes. 
 
SATELLITE 
 
¶12.  (U) The NTC has also moved forward with licenses for 
satellite services.  The Commissioners held public hearings 
on November 2, 2005, and expect to issue licensing criteria 
by the end of the year.  There will be three types of 
licenses: 
 
Type I: Satellite Operators, i.e., satellite owners for which 
the licensing principles will be the same as for the Type III 
telecom license. 
 
Type II: Earth-station Operators, i.e., operators running 
uplink and downlink facilities relaying signals to and from 
satellites, for which the licensing principles will be the 
same as for the Type II telecom license. 
 
Type III: Satellite Service Re-Sellers for which the 
licensing principle will be the same as for the Type I 
telecom license. 
 
Interested companies will be able to apply before March next 
year.  The first satellite license is expected to be awarded 
by June 2006.  The draft criteria for Type I Satellite 
Operators include the qualifications set out below: 
1) financial stability, 
2) technical ability and experience in satellite project 
management, 
3) technical ability and experience in coordination of 
international satellite frequencies, and 
4) documentation to prove reservation of orbit slot(s) and 
plan(s) to coordinate the frequencies of the orbit slot. 
 
Dr. Damrong Kasemset, CEO of Shin Satellite Plc, Thailand's 
sole commercial satellite operator, said that Shin Sat plans 
to apply for a license for its upcoming ThaiCom 5 satellite 
because the licensing fee will be lower than the concession 
fee it currently pays to the MICT.  Shin Sat has four (4) 
satellites under MICT concessions:  ThaiCom 1, 2, 3 and 
iPSTAR.  ThaiCom 5 will replace ThaiCom 1, 2, and 3. 
 
THIRD-GENERATION MOBILE SERVICES AND FREQUENCY ALLOCATION 
 
¶13. (U) For retail services, the most important licenses to 
be issued are those for 3G services, which provide for high 
speed data transmission and Internet Protocol-based services. 
 The NTC began hearings on November 7, and anticipates 
setting criteria by early 2006 (although that target may be 
slipping) and issuing the licenses by mid-2006.  Fees are 
expected to be in the range of 600 million baht, a 
substantial sum but in the aggregate far less burdensome than 
the revenue sharing payments that private operators currently 
pay to TOT and CAT.  The 3G license fee will not likely be 
lower than 3 percent of revenue as that figure is the 
benchmark for telecom operators as previously defined by the 
NTC. Neither the cost nor the method by which 3G licenses 
will be allocated has been decided, however.  Possibilities 
include an e-auction with the opening price starting at the 
above price and the &beauty contest8 model.  Private 
telecom operators oppose the auction approach ostensibly on 
grounds that it is not to the utmost benefit to the consumer. 
NTC Commissioner Prasit Prapinmongkolkarn has said that he 
envisions no more than four operators, indicating a 
preference for domestic operators to lock up the market 
before it is liberalized.  This view does not represent 
either the consensus NTC view or official NTC policy, however. 
 
¶14. (U) One macro-level problem only now being discussed 
among the wider public is whether Thailand either needs or 
 
BANGKOK 00000115  005.2 OF 008 
 
 
can really afford such a dramatic upgrade in its telecom 
network. Thailand,s 2G network is relatively new (rapid 
growth in mobile phone usage occurred during the past 5 
years).  Capital investment in telecom networks will likely 
involve considerable imports of expensive equipment, in 
addition to the high expense generally.  Nokia Thailand has, 
for example, announced that it expects investment in 3G 
cellular networks by local telecom operators to exceed Baht 
17 billion in the next three years.  The market demand for 3G 
is not self-evident, however.  The hearings on November 7th 
attended by econoff consisted mostly of NTC officials and 
NTC-sponsored panelists pitching the uses of 3G. 
 
¶15. (U) As the reality of 3G,s high cost sets in, telecom 
operators have attempted to position themselves as moving to 
roll out 3G services but with varying degrees of commitment 
to specific timelines.  Prior to the NTC,s formation, TOT 
obtained permission to offer 3G cellular services through its 
Thai Mobile joint venture (with CAT), but only after the NTC 
has issued the 3G licensing framework.  Market leader 
Advanced Info Service Plc (AIS), considered the only operator 
capable of financing 3G rollout on its own, has announced 
plans to launch the services in the third quarter of 2006. 
Number-two operator Total Access Communications (TAC, 
operator of DTAC), backed by Norway,s Telenor (REF B), has 
announced continued expansion of its 2G network next year 
with investment in 3G over the course of the next three to 
four years.  CAT is depending upon Huawei Technologies to 
complete the installatin of the first 800 CDMA base stations 
this year to position its CAT-Hutchison joint venture in the 
forefront of the 3G market next year after licenses are 
issued.  The project has been marked by delays and Embassy 
contacts have reported difficulties in obtaining the 
necessary approvals to import equipment in a timely manner, 
but the company says that it is catching up. 
 
¶16.  (U) True Corporation (whose TA Orange unit has applied 
for a 3G license to offer trial services) lacks a declared 
foreign backer to finance investment in 3G.  The company has 
announced that it desires to launch 3G services by the end of 
2006, but it is not clear that the company will be able to go 
it alone, notwithstanding its recent 12 billion baht takeover 
of United Broadcasting Corporation, Thailand,s largest 
pay-television operator, and KSC Internet.  Unlike the other 
telecom operators, True has long considered itself a media 
company and seeks to offer the triple play of voice, 
broadband internet, and multimedia TV programming. 
 
¶17.  (U) The unpredictable variable in the 3G and satellite 
licensing process continues to be the regulatory environment 
for the frequency allocation process.  Under current law, 
frequencies (such as those for 3G and satellite) are to be 
allocated by a joint committee consisting of representatives 
from the NTC and the as yet unformed National Broadcasting 
Commission (NBC).  Until the Central Administrative Court,s 
November 2005 decision that the NBC selection process in 
train was unconstitutional, it appeared that the NBC would 
come into existence in time for 2006 issuances.  The 
government of Prime Minister Thaksin Shinawatra initially 
considered pushing for an amendment to the Frequency 
Allocation Act that would empower the NTC to temporarily 
takeover the NBC,s duties, a move backed by some private 
operators, most notably True Corporation.  Strong opposition 
(outside of the telecom sector) stemming from political 
concerns about press freedom and the erosion of checks and 
balances generally under the current government surfaced 
immediately. At the end of November 2005, the Cabinet decided 
to appeal the Central Administrative Court,s ruling that the 
NBC selection process was illegal rather than to press for 
amendment to the law.  While it is possible that the NTC may 
act on its own in the event of significant delay or 
emergency, the most likely consequence of the NBC fight will 
be continued muddle and delay.  One likely possibility is 
some sort of permission for operation on a trial basis (3G 
applications by AIS, DTAC, True, and TT&T are pending). The 
NTC has supported the principle of issuing a license to 
existing operators on the grounds that no new frequency 
allocation is involved.  Thus, the NTC may go ahead and issue 
a satellite license to Shin Satellite because the firm 
 
BANGKOK 00000115  006.2 OF 008 
 
 
already has four satellites and thus no change in frequency 
allocation will be required.  New entrants would have to wait. 
 
¶18. (U) Long-term, the most important consequence of not 
amending the law or the constitution and moving forward with 
two regulators*one for telecom and one for broadcast*is to 
open the possibility for conflict over jurisdiction in the 
era of media convergence.  Such is the view of a 
knowledgeable attorney handling a large number of 
telecom-related work with whom we spoke.  Leaving aside broad 
political concerns about checks and balances (especially the 
notion that avoiding concentrated regulatory power renders 
the system less vulnerable to corruption), he emphasized that 
as far as industry participants are concerned, the result can 
be regulatory gridlock.  He specifically criticized the 
NTC,s likely preference for establishing a joint committee 
with the NBC to deal with convergence and overlap issues.  It 
may be administratively convenient from the regulator,s 
point of view but it would be slow-moving from the industry 
perspective.  Hence, True Corporation,s preference for a 
one-stop shop, for example.  A dual regulator is not a common 
design, and he warned that US and other foreign companies 
operating in Thailand may encounter gridlock, delay, and 
confusion in dealing with regulatory issues going forward. 
 
COMPETITIVE ENVIRONMENT AND UNANSWERED QUESTIONS 
 
¶19. (U) In the market for mobile services, as operators seek 
to meet their targets for the year, another round of 
price-cutting in which DTAC is performing well appears to be 
in play.  One estimate by KResearch points to an 8.6 percent 
growth in mobile phone users for 2005 and predicts growth of 
6.7 percent next year.  The same study estimates that mobile 
phone subscribers at 45 percent of the population, but it 
notes that the average income per number has shown a drop of 
about 11 percent year over year. 
 
¶20.  (U) The NTC is pressing for more international Internet 
gateway (IIG) licenses so as to further liberalize the 
market.  TT&T has announced plans to enter the market, and 
indications are that public utilities may further shake up 
the market.  The Metropolitan Electricity Authority is 
testing ultra-broadband services in connection with Free 
Internet and Company.  EGAT Plc, the state-owned electric 
power producer, which possesses fiber-optic cables integrated 
with its power cables, has set up a subsidiary EGAT Telecom, 
although the November 2005 suspension of EGAT,s partial 
privatization may delay plans to enter the telecom market. 
 
¶21. (U)  On December 19, 2005, the NTC approved a draft code 
of competition.  The NTC must still consult with telecom 
operators and licensees, but the code is expected to be 
effective in mid-2006.  The most notable feature is a 
35-percent threshold set for NTC licensees across all markets 
for market dominance.  The idea is to prevent major cash-rich 
players from abusing their power and forcing small players to 
drop out of the market and to ensure quality service.  What 
the impact will likely be on prices is unclear. 
 
¶22.  (U)  The NTC also moved in other areas in December 2005. 
 With respect to Voice over Internet Protocol (VoIP), the NTC 
agreed to free up the PC to PC and PC to phone markets for 
ISPs operating under its licenses (without needing to apply 
for a separate license), but not the phone to phone market. 
The NTC also agreed to free up the domestic Internet 
exchanges and the international Internet gateway, but only on 
existing networks.  The basic principle for license fees for 
either domestic or Internet gateway license is 3 percent of 
annual revenue.  The NTC has not decided to open up the 
international call service market. The NTC also agreed to 
grant a type-two license to BMCL Network, a subsidiary of the 
subway operator Bangkok Metro Plc, to operate a telecom 
network-leasing service in the subway.  The NTC has not yet 
granted the request of EGAT Telecom for a license which it 
needs to offer a nationwide fiber-optic network leasing 
service. 
 
¶23. (U) Regarding the prospects for privatization of TOT and 
CAT, a fundamental aim of reformers for years (covered in REF 
 
BANGKOK 00000115  007.2 OF 008 
 
 
C), the mid-November 2005 decision of the Supreme 
Administrative Court to suspend the partial privatization of 
EGAT (REF D) will likely have the effect of further delaying 
SOE privatization in the telecom sector.  At issue are 
complex legal questions regarding the corporatization process 
whereby state assets are transferred to a SOE to be 
privatized.  In practice, 2007 now appears to be a distinct 
possibility, assuming that sufficient investor interest 
exists for a successful public offering of shares.  One 
recent change is the RTG,s revival of the idea of merging 
TOT and CAT.  Sora-at Klingpratoom, ICT Minister, recently 
announced that the interagency consensus within the RTG 
supports a merger after TOT and CAT are listed on the stock 
market. 
 
¶24.  (U) While the NTC has cleared away a great deal of 
uncertainty surrounding the regulatory environment, important 
questions remain.  After addressing 3G and satellite 
licensing, it is expected to take up outstanding questions on 
liberalization of the international gateway, liberalization 
of VoIP, and determination of the interconnection charge 
regime. Additionally, as one telecom analyst recently 
indicated, it is likely that 3G rollout will continue to 
generate new questions as operators grapple with just how use 
of 2G equipment (covered by concession agreements) will 
square with provision of 3G services (covered by NTC 
licenses).  The stunning 4 percent USO fee also raises 
important questions, not least just what the NTC will do with 
the money raised. Some observers such as Dr. Somkiat of TDRI 
have criticized the NTC for a lack of due process in 
comparison with the practice of regulatory bodies in other 
countries.  Without question, regulation in the ordinary 
sense of the term is relatively new to both the telecom 
sector and Thai governance generally, and it will take time 
to establish transparency in regulation, particularly in view 
of the widespread suspicion that the regulatory deck is 
stacked in favor of telecom companies associated with the 
Shin Corporation, owned by the family of Prime Minister 
Thaksin. 
 
¶25.  Both the Thai media and Embassy contacts have recently 
speculated that the Shinawatra family will sell its holdings 
in AIS or its Shin Corporation parent company, to Singapore 
Telecom, for example.  The Embassy understands from a source 
close to Prime Minister Thaksin that he has voiced the 
possibility in private, but we are not aware of any specific 
plan for such sale.  Shin Corporation itself has publicly 
denied all reports of plans.  The Embassy does not expect the 
Democrat Party opposition to object to any such sale, should 
the possibility materialize.  Embassy contacts generally 
unhappy with the Thaksin government have suggested that the 
main reason why the Shinawatra family would sell its telecom 
holdings is that it had found more profitable opportunities, 
for example in the energy sector.  Telecom industry insiders 
have expressed their doubts about such speculation, however, 
because they consider that AIS and other Shin Corp holdings 
have the potential to remain highly profitable. 
 
COMMENT 
 
¶26.  (U) EVALUATION: Over the course of its first year the 
NTC has made more progress toward establishing a clear 
regulatory framework for Thailand's telecom sector than at 
any other time.  In embracing this challenge as they have, 
the NTC  Commissioners have chosen their political battles 
carefully with an eye to reaffirming the NTC's position as 
the regulator of the industry. This pattern of avoiding 
conflict is most apparent in the decision to issue new 
telecom licenses without forcing concession conversion, which 
amounts to paying off TOT and CAT.  In economic terms, 
however, encouraging the unwinding of concessions by way of 
migrating subscribers from 2G to 3G services wastes resources 
needlessly.  If investment in the Thai telecom sector goes 
forward as currently envisioned, Thailand's telecom operators 
will abandon their 2G infrastructure before the end of its 
useful life, and in advance of a clear economic need for the 
rollout of 3G, all for the purpose of reducing their 
regulatory fee burden.  In view of the high percentage of 
imported content in telecom network infrastructure, the 
 
BANGKOK 00000115  008.2 OF 008 
 
 
premature migration to 3G is also wasteful of foreign 
exchange.  Continued deadlock over the formation of the NBC 
and the high costs of launching 3G may, however, delay both 
NTC issuance of licenses and the pace of 3G rollout. 
 
¶27.  (U) FTA:  We agree that the RTG will likely bring its 
regulation of the telecom sector into line with the WTO 
standards for liberalization effective at the beginning of 
2006 as promised.  We see no practical effect, however, as 
the markets affected are already mature and they do not 
include services in play such as mobile telephony.  The 
pattern evident in the timing of liberalization of the Thai 
telecom sector is that the RTG tends to open up a market 
after strong domestic players have established themselves 
firmly in the market.  Despite the possibility of some delay 
in issuance of licenses, we expect the same pattern to hold 
for 3G services.  We expect that the RTG delegation to the 
FTA talks will follow the lead of the NTC and that Thai 
negotiators will be hesitant to reach final agreement on 
services for which the regulatory regime is not settled, 
although the signs have become more encouraging for VoIP and 
satellite. We think that the successful launch of iPSTAR in 
August 2005, which will provide a boost for the Shin Corp 
going forward, may ease some of the anxiety about foreign 
competition that informs RTG policy.  Longer term, we think 
that concerns about the potential for regulatory gridlock 
resulting from the emergence of two regulators, one for 
telecommunications and one for broadcast, are well-founded. 
ARVIZU