VZCZCXYZ0022
PP RUEHWEB

DE RUEHLP #0104/01 0171331
ZNR UUUUU ZZH
P 171331Z JAN 07
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 2090
INFO RUEHAC/AMEMBASSY ASUNCION 6458
RUEHBO/AMEMBASSY BOGOTA 3779
RUEHBR/AMEMBASSY BRASILIA 7654
RUEHBU/AMEMBASSY BUENOS AIRES 4905
RUEHCV/AMEMBASSY CARACAS 2151
RUEHPE/AMEMBASSY LIMA 2235
RUEHMD/AMEMBASSY MADRID 3264
RUEHMN/AMEMBASSY MONTEVIDEO 4346
RUEHQT/AMEMBASSY QUITO 4788
RUEHSG/AMEMBASSY SANTIAGO 9380
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUMIAAA/USCINCSO MIAMI FL
RUEHUB/USINT HAVANA 0088
RHEHNSC/NSC WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS LA PAZ 000104 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND 
STATE FOR EB/CIP/BA/NFETCHKO 
TREASURY FOR SGOOCH 
 
E.O. 12958: N/A 
TAGS: ECON ECPS EINV BL
SUBJECT: GOB ISSUES DECREE TO EXPAND TELECOMS ACCESS 
 
REF: 06 LA PAZ 2770 
 
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Summary 
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¶1. (SBU) The GOB issued a decree aimed at increasing 
telecommunications coverage on January 1.  The decree seeks 
to increase access to fixed line services, mandates that 
fixed and mobile service providers must create a new category 
of service for low-income users, orders cellular operators to 
provide services nationwide at a unified rate (per company), 
requires mobile operators to charge equal rates for on and 
off-network calls, and mandates that all mobile companies 
provide roaming services as requested.  An executive from 
partially U.S.-owned Nuevatel told Econoff on January 16 that 
the government's increasing interference in and 
politicization of the sector and undermining of the 
independent regulator and free competition worried the 
company.  Nuevatel was also concerned about a second draft 
decree that would require companies to expand rural services 
without regard for profitability.  However, various 
provisions of the January 1 decree will benefit Nuevatel vis 
a vis Entel, the largest player in the cellular market.  End 
summary. 
 
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New Year's Decree 
----------------- 
 
¶2. (SBU) The GOB issued a decree aimed at increasing 
telecommunications coverage on January 1.  The decree seeks 
to increase access to fixed line services -- currently only 
used by seven percent of the public due to costs of up to USD 
1,600 to install a land line -- by dictating that service 
providers may not demand guarantees and may not require users 
to purchase shares in telephone cooperatives, which control 
almost all fixed line services in Bolivia, to access 
services.  The decree mandated that telecoms companies create 
a new service category for low-income subscribers, allowing 
them to only pay for actual calls made, billed to the second, 
with no fixed monthly or line rental fees.  Cellular service 
providers must create a similar service for low-income 
subscribers, only charging for actual usage time.  Service 
providers must publish their rates in a transparent fashion 
outlined in the decree, which will enter into force in March. 
 
¶3. (SBU) The decree also orders that cellular operators must 
provide services nationwide, and that rates for calls between 
cell phones must be the same nationwide, eliminating 
differentiation between local and long-distance rates.  Call 
rates must not vary depending on which company is used by 
call recipients, i.e., on-network and off-network calls must 
cost the same.  It further provides that mobile networks must 
be compatible to ensure nationwide coverage and that all 
mobile companies must provide roaming services if requested 
by other companies. 
 
------------------------------------- 
U.S. Investor Opinion -- The Bad News 
------------------------------------- 
 
¶4. (SBU) Vice President Freddy Maldonado of the partially 
U.S.-owned telecommunications firm Nuevatel (Trilogy 
International Partners) told Econoff on January 16 that the 
GOB's decree worried the company because it demonstrated the 
government's intentions of regulating tariffs through 
decrees, which would take power from the independent 
regulatory body (which the GOB has threatened to eliminate - 
reftel), and illustrated that the government intends to 
increase interference in the sector at the expense of free 
competition.  Maldonado was also concerned that the 
obligation to provide roaming services would decrease 
investment incentives, because new market entrants could 
invest little and, if roaming rates were set too low, utilize 
other companies infrastructure to offer low rates and steal 
market share.  Maldonado was also worried about the GOB's 
second telecommunications decree, currently in draft form, 
which would force companies to increase rural services 
whether or not it was profitable.  At the same time, 
Maldonado complained, the government is considering 
increasing taxes on telecoms companies and is imposing high 
fines.  He said that the government does not understand 
business or economics and is formulating sector policies 
solely on the basis of politics. 
 
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The Good News 
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¶5. (SBU) Maldonado explained that fixed line cooperatives, 
and Entel which offers fixed line services, would be harder 
hit by the decree than Nuevatel, which focuses on mobile 
services.  Various provisions of the decree, including the 
requirements that on-network and off-network calls have the 
same rates and that calls nationwide have the same rates, 
will benefit Nuevatel vis a vis Entel, the largest player in 
the cellular market.  Maldonado also added that the company 
has no problem with creating a new category of service for 
low-income users, offering pre-paid cards for fewer minutes 
at lower prices, as long as the government does not impose a 
tariff ceiling that would impede the company from structuring 
the prices in a way that would allow it to profit. 
 
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Comment 
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¶6. (SBU) Although the decree contained some positive points 
for Nuevatel, the trend of increasing politicization of the 
sector and GOB plans to eliminate the independent regulator 
and force companies to provide unprofitable rural services 
without government subsidies do not bode well for the future. 
 End comment. 
GOLDBERG