CHAPTER
23
TELECOMMUNICATIONS,
IT AND E-COMMERCE
The increasing population of Thailand, and the growth of business and commerce have
increased the demand for modern communications.
Historically, the government held an
absolute monopoly over the right to provide such services. The consequence was
inefficiency and delay in essential services, such as installing landlines or
connecting new lines. In the face of growing pressure from business and
consumers, the government was forced to grant concessions to the private sector
to allow companies to install and operate fixed phone lines, mobile phone
services, paging, information and other services.
Internet usage has also increased
dramatically during the 1990s. The use of electronic communications and making
of business transactions by electronic means had also increased. It has been
necessary to create new legal frameworks in which such activities can take
place, and to regulate such activities.
Telecommunications
Background Formerly, the Government, through its ministries and state enterprises
had a monopoly over the provision of all telecommunications services and
internet services. Formerly, any person or company that wished to supply such
services in Thailand had to apply for a license or concession from the ministry
or state enterprise that had power to grant a license or concession for the
particular service or activity. This included internet service carriers and
service providers.
Since the establishment of the
National Telecommunications Commission (“NTC”) in 2004 as the independent
telecommunications regulator, the NTC now has the sole power to grant licenses
or vary existing licenses to operate telecommunications activities or IT
services.
Relevant institutions
Ministry of Information and
Communications Technology (MICT)
The MICT (formerly the Ministry of Transport and Communications) has various responsibilities.
These include the administration of telecommunications, broadcasting, internet
services, postal services, post offices, and supervision of the state
enterprises that come under it, most importantly, the Post and Telegraph
Department.
In addition, the Ministry supervises
the activities of other agencies namely:
It is intended that other agencies
related to telecommunications and IT will also be transferred so as to be under
MICT supervision.
CAT Telecoms Public Company Limited
(formerly the Communications Authority of Thailand) The Communications Authority of Thailand was set up under the
Communications Authority of Thailand Act (1976). CAT originally had
responsibility for international telephone services, paging, maritime phone
services, mobile radio services, internet services, telex
and money order services. CAT also licensed internet service providers and
internet service companies.
Under the government’s privatisation
plans, CAT has been corporatised and renamed CAT
Telecom Public Company Limited. All its telecommunications and internet
business activities have been transferred to the new company. All its shares
are currently owned by the Ministry of Finance.
The government has announced that
CAT Telecom will make its initial public offering on the Thai stock exchange.
As at 1 October 2006, this has not yet taken place.
TOT Corporation Public Company
Limited (formerly the Telephone Organisation of Thailand) The Telephone Organisation of Thailand was established under the
Telephone Organisation of Thailand Act (1976). The Act transferred from the PTD
to TOT the responsibility for domestic telephone services, international phone
services for the four countries of Cambodia, Laos, Malaysia and Myanmar, data
communication services, satellite based services, cellular services, paging, telepoint, leased circuits and other services. TOT also
supplies certain services itself.
Under the government’s privatisation
plans, TOT has now been corporatised and renamed TOT
Corporation Public Company Limited. All its telecommunications and internet
business activities have been transferred to the new entity. All its shares are
currently owned by the Ministry of Finance.
The government has announced that
CAT Telecom will make its initial public offering on the Thai stock exchange.
As at 1 October 2006, this has not yet taken place.
Post and Telegraph Department (PTD) The PTD originally was originally established to have responsibility
for postal services, post offices, telex, telegraph
and money order services.
Responsibility for many of these
services has subsequently been transferred to other state enterprises (see
above).
The responsibility for providing
postal services and post offices has now been transferred to a newly established
company, Thailand Post Co., Ltd., which is wholly owned by the government.
The PTD is currently being
transformed into the Office of the National Telecommunications Commission and
will carry out any NTC policies and administration. All PTD’s
assets and liabilities will be transferred to the Office of the NTC.
Regulation of the telecommunications
industry
Position of the Ministry The Ministry of Information, Communications and Technology historically
had ultimate supervisory powers over several state enterprises, including, the
PTD, CAT and TOT. The MICT ultimately controlled licensing, service rates,
competition policy, foreign investment requirements, frequency allocation,
inter connection arrangements and all other aspects of telecommunications.
National Telecommunications
Committee The NTC was set up in 2004 as the
new independent regulator for the telecommunications industry. It now has the
regulatory powers, the right to grant new licenses and the right to supervise
existing license holders, formerly exercised by the CAT, TOT or the Ministry
(see further below).
The NTC is beginning to grapple with
longstanding issues that have affected the development of the
telecommunications industry in Thailand, including:
Telecommunications laws
Telecommunications Act (2001)
On 10 October 2001, the
Telecommunications Act was passed.
Telecommunications businesses The Act applies to all businesses that engage in telecommunications,
meaning the sending out, dissemination, or receiving of marks, letters,
figures, pictures, sounds, codes or anything else made comprehensible by
wireless or frequency waves, light, other electro-magnetic systems or other
systems, or other activities prescribed by law to be telecommunications
activities.
Independent regulator The Act provides that the National Telecommunications Committee will be
established as regulator for the industry. It will consist of seven members,
each of whom may hold office for a period of six years. Other provisions
relating to the NTC are to be found in the Broadcasting Act (1999) (see below).
The members of the NTC have been appointed
and are gradually grappling with the task of establishing an independent
authority to regulate the industry (see further above).
Duty to obtain a license The Act provides that any person who wishes to operate a
telecommunications business must apply for a license to the NTC, and submit an
investment plan and its plan to provide telecoms services. The NTC may impose
conditions requiring services to be supplied in remote areas or to
disadvantaged or special groups, or other conditions.
Types of license The Act specifies that application may be made for three types of
license:
The NTC is empowered to formulate
the rules for granting a license, which must be publicly available.
License applicants The Act sets out general qualifications for license applicants. In
addition, applicants for the second or third type of license above must comply
with the following requirements:
In May 2005, a public consultation
paper was issued setting out the draft rules for applicants for telecom
licenses.
Anti nominee provisions In April 2006, in the wake of the sale of the Shin telecommunications
group to Temasek of Singapore, the NTC prepared a
draft regulation containing provisions designed to deter the use of Thai
nominee shareholders by foreign companies.
The draft regulation only
applies to category (1) and (2) licenses. The draft prohibits or restricts many
activities, including the use of nominees to hold shares, the holding of voting
rights that exceed the number of shares held, the power to appoint senior
executives, the right to have signatory power to bind the company, and other
matters. Reporting requirements are imposed to require reporting of prohibited
acts. The NTC is given authority to prepare a Watch List of companies suspected
of breaking the regulation. Companies on the Watch List are subject to further
reporting obligations. The NTC is given power to investigate companies and to
issue regulatory orders and ultimately, to revoke licenses held.
As at 1 October 2006, it appears
that this draft will not be proceeded with, in the light of the government's
announcement that it is to conduct a review of the Foreign Business Act, which
is the principal act that deals with restriction of foreign business ownership.
Broadcasting Act (2000)
The Broadcasting Act came into force
in March 2000.
Regulator The Act set up two regulatory committees:
As at October 2006, the members of the NBC have been
appointed, but regulatory powers have not been transferred to it. These powers
are currently exercised by the Public Relations Department of the government
(“PRD”) as the government agency involved and to the Mass Communications Organisation of Thailand (“MCOT”) as the state enterprise
responsible for broadcasting. Any application to operate a radio, television or
cable TV business must be submitted to both the PRD and the MCOT.
2. The National
Telecommunications Committee. The NTC will formulate
policy and prepare the model plan for telecommunications and radio frequencies,
and prescribe the nature of telecommunications activities. A support office
will also be created to service this committee.
As at October 2006, the
members of the NTC have been appointed, and their regulatory powers have
been
conferred. See further above.
3. These committees acting together as a joint committee will jointly to
administer the rights to use frequency waves.
Two further committees
will be established to assess the activities of the NBC and the NTC.
Accordingly, the power to grant any
new telecommunications licenses or vary any existing licenses currently lies
with the NTC. Any application for a new radio or television broadcasting
license must be submitted to the PRD and the MCOT, which continues to hold
these rights.
Other relevant laws
Foreign Business Act (1999) The Foreign Business Act places restrictions on foreign participation
in 43 categories of business activities, grouped into three schedules. The
restrictions that apply depend on which schedule the business falls under.
The business of newspaper
publishing, radio and television broadcasting is listed in Schedule 1.This
means that foreign involvement in such businesses is limited to minority
ownership only, with no possibility of applying for majority foreign ownership.
Construction businesses are listed
in Schedule 3 of the Act. This means that minority foreign ownership is
permitted without a license, and it is possible to apply for majority ownership
with the permission of the Department of Commercial Registration. In addition,
the Act permits majority foreign ownership of construction businesses involved
in construction of infrastructure, concerning public utilities and public
communications which requires the use of specialist machinery, equipment, technology
or skills, provided that at least 500 million Baht is invested by the foreign
party.
Service businesses are also listed
under Schedule 3 of the Act. This means that minority foreign ownership is
permitted without a license, and it is possible to apply for majority ownership
with the permission of the Department of Commercial Registration. See further, Chapter 1 above.
Trade Competition Act (1999) The Trade Competition Act came into force on 30 April 1999. It contains
provisions regarding monopolies and unfair competition:
The
TCC only has power to regulate companies and individuals; it has no powers over
state enterprises or government departments.
There
is a degree of overlapping between the activities of the TCC on the one hand,
and the NTC and the NBC (once regulatory powers are transferred to it). It is
not clear at present which regulator would have power to determine issues of
anti competitive conduct by telecommunications or broadcasting companies.
Price of Goods and Services Act
(1999) This Act came into force on 1 April
1999. It is intended to protect consumers and enable them to obtain fair prices
for goods and services, and to prevent excessive increases in the price of
goods and services. The Act establishes a committee to enforce the Act. The
categories of goods and services which are subject to regulation are to be
formulated in ministerial regulations. See further, Chapter
22 above.
At
present, telecommunications and broadcasting activities are not subject to price
controls.
Liberalisation and privatisation of
telecommunications
World Trade Organisation obligations Thailand is a member of the World Trade Organisation. By virtue of its
WTO commitments, Thailand is obligated to liberalise its telecommunications
industry and open it to foreign competition by 2006. As part of this aim, the
government drafted a Telecommunications Master Plan as long ago as 1997.
Telecommunications Master Plan The Telecommunications Master Plan was approved by the Cabinet in 1997.
It is to be a guide to liberalization and privatization of the industry. The
Master Plan dealt with four areas of concern:
It can be seen from what is said
earlier in this Chapter, that progress has been made to achieve the goals set
out in the Master Plan, but full compliance has not yet been achieved.
Current status of privatisation,
concession conversion and independent regulation
Privatisation As noted above, both CAT and TOT have been corporatised.
Neither company has made its initial public offering. In each case, the
Government has announced that it will retain 51% of the shares. Of the
remaining 49%, these shares will be made available to Thai retail investors,
Thai institutional investors and foreign investors in specified proportions.
The number of shares that will be offered and the proportions to be made
available to each investor group have not yet been announced.
Concession conversion Both CAT and TOT have granted numerous concessions to the private sector
for the installation and operation of landlines, the operation of mobile phone
services, paging services, satellite services, information services and other
telecommunications services. The concession periods vary from 17 to 25 years.
For many years, negotiations took
place between the state enterprises concerned and concession holders for the
conversion of these concessions. It has proved impossible to agree a formula
for concession conversion. In 2002, the Government replaced the fees payable
under concession agreements with a special excise duty. However, this
only changed the identity of the party to whom the payment
were made, and actual conversion of the concessions has still not been
resolved.
In 2005, the government announced
that further efforts to negotiate conversion of the concessions would be
abandoned. It therefore seems that CAT Telecom and TOT Corporation’s assets
will be valued and the IPO price fixed, on the basis that the concessions will
continue unaltered.
Independent regulation The plan for telecommunications and broadcasting to have independent
regulatory bodies has now been achieved by the appointment of the NTC and the
NBC (although the NBC is not currently able to exercise regulatory authority).
Internet services
Monopoly over the provision of
internet services The NTC now has the right to
issue licenses to operate as an internet service provider. This right was
formerly held by the MICT, and before that, by CAT.
When CAT held this monopoly, its
practice was to require that a person who applied for
a license to operate internet services, must allocate 32% of the shares to CAT
and a further 3% to CAT employees, both without payment by CAT. On any increase
of share capital, the same percentages of shares issued upon a capital increase
once again had to be allocated to CAT and its employees, without any payment.
These requirements served to
perpetuate executive control and to discourage investment and development of IT
services in Thailand.
The NTC has not yet drafted a
formula for conversion of these shareholdings, or other measures to enable ISPs
to operate more freely, rather than being under the influence of CAT.
Foreign business restrictions The relevant parts of the Telecommunications Act and the Foreign Business
Act that apply to internet service providers are the same as apply to
telecommunications (see above).
E-commerce
Laws affecting e-commerce Thailand is beginning to establish a framework of laws that will apply
to electronic communications and the conduct of business transactions by
electronic means. The first Act to be passed in this area was the Electronic
Commerce Act (2001).
Electronic Commerce Act The Electronic Commerce Act (2001) came into force on 3 April 2002. Its
contents are based substantially on the UNCITRAL Model Laws on Electronic
Commerce.
Background Under Thai law, certain documents and transactions must be made in
writing, evidenced in writing, or signed by the parties. These include: loan
agreements, receipts, hire or lease of land or buildings, guarantees,
settlement agreements, insurance policies, hire purchase agreements, sale of
land or buildings, mortgage agreements, the appointment of an agent, and other
documents and agreement. The Act is intended to provide a clear framework so
that where certain documents are in electronic form and bear an electronic signature, they will still be legally enforceable.
Application The Act will apply to all civil and commercial transactions, except
transactions excluded by regulations. The Act will not affect any laws
concerning consumer protection (this expression is not defined). The Act will
apply to all data messages, meaning information generated, sent, received or
stored by EDI, e-mail, fax or telex.
Non excludable provisions Certain provisions of the Act are non-excludable, as follows:
Certification services There are provisions for regulation of data message certification
services.
Excludable provisions Other provisions of the Act may be excluded by mutual agreement, as
follows:
Procedural requirements The Act contains procedural provisions regarding acknowledgment of data
messages, and the deemed time of dispatch, place of dispatch and place of
receipt.
Electronic signatures The Act contains provisions regarding the definition and deemed
reliability of electronic signatures. Various duties of care imposed on the
owner of an electronic signature. There are provisions regarding verification
of electronic signatures.
The legal effect of a certificate or
electronic signature is defined.
Regulation A regulator called the Electronic Commerce Commission will be
established, to formulate policies and to supervise providers of certification
services.
Other intended legislation Four other bills are also under consideration to deal with other
aspects of electronic communications and electronic business transactions, as
follows:
Foreign business restrictions on
electronic commerce transactions
Sale of goods or services via the
internet Where goods or services are
advertised by a foreign company on its own website, and a Thai party purchases
such goods or services, the applicability of the Foreign Business Act is
unclear. Is the seller of the goods or services on a website engaging in
business in Thailand and liable to comply with the Foreign Business Act?
If other factors are present, for
example, the foreign party has appointed an agent in Thailand, or maintains a stock
of goods in Thailand to facilitate orders received via its website, or provides
an after sales or repair service, then, it may be that the foreign seller or
service provider would be held to be doing business in Thailand, and the
requirements of the FBA should be observed. The current legal position is not
clear.
Taxation of e-commerce transactions There are no specific tax laws that deal with
the tax liabilities that arise when engaging in electronic commerce. It would
be a matter of interpretation of the Revenue Code, the definitions of permanent
establishment and aspects of any relevant double taxation treaty.
In general, income derived from a
sale by a foreign seller is taxable only in the country in which the seller has
its place of business. The country in which the buyer has its place of
business, or from which the income is derived, should not tax the income
arising, unless the seller has a 'permanent establishment' in Thailand. The
definition of a 'permanent establishment' is different in each double
taxation treaty to which Thailand is a party. As an example, we quote from the
United Kingdom-Thailand Double Taxation Treaty:
"A Permanent Establishment
means a fixed place of business in which the business of the enterprise is
wholly or partly carried on. It includes especially: a place of management; a
branch; an office; a factory; a workshop; a warehouse, in relation to a person
providing storage facilities to others; a mine, oil well, quarry or other place
of extraction of natural resources; a building site or construction or assembly
project which lasts for more than 6 months.
A permanent establishment is deemed
to exclude: the use of facilities solely for the purpose of storage, display or
delivery of goods; the maintenance of a stock of goods or merchandise for the
purpose of processing by another enterprise; the maintenance of a fixed place
of business for the sole purpose of purchasing goods or collecting information;
the maintenance of a fixed place of business solely for the purpose of
advertising, for the supply of information, for scientific research or similar
activities of a preparatory or auxiliary character and is deemed to include
arrangements whereby a person in one state appoints a person to act in the
other country (other than as a broker, general commission agent or any other
agent), if such person has authority to conclude
contracts on behalf of the enterprise or where he habitually maintains a stock
of goods in the second country from which he regularly fulfils orders or make
deliveries; or he habitually secures orders for the sale of goods in the second
country exclusively or almost exclusively on behalf of the parent."
A degree of imagination is required
to interpret and apply these principles to e-commerce transactions. The views
expressed below are an opinion only. It is to be hoped that a notification of
the Revenue Department or a decided court case will help to resolve the current
uncertainty.
Website and server: a ‘permanent
establishment?’ The sale and purchase of
goods via the internet has two main aspects: a website and a server. A website
is merely a combination of software and electronic data. It does not imply any
territoriality or involve tangible property or facilities in Thailand. A
website itself cannot constitute a ‘permanent establishment.’ The server
is a tangible piece of electronic equipment where websites may be located and
used. If the server is located in a country in which the purchaser resides or
has a business establishment and the seller maintains the website with the
server, then it may be that a tax authority will treat the seller as having a
permanent establishment in Thailand, merely for the reason that it has opened a
website through a local ISP.
Country in which the website is maintained A tax authority may hold that if the website is maintained in the
country from which the income is derived, that should be sufficient to
establish the liability of the purchaser to pay tax. This is in the situation
where the foreign seller has no right to control the operations of the ISP and
has no physical presence in the country in which the buyer opens the website.
If the foreign seller owns and
operates the server on which the website is stored and through which it is
accessed, some tax authorities may treat the foreign seller as having a
permanent establishment in the country in which its own server is located.
Tax liability of sellers of goods The sale of goods by a foreign seller who is not doing business in
Thailand is not subject to Thai tax, unless the seller has an employee, a
representative or a go between carrying on business in Thailand. If this is the
case, then the income derived from the business is subject to 30% corporate
income tax and 10% remittance tax, where the profits are remitted out of
Thailand to the foreign seller. If there is no representative, employee or go
between, then no Thai tax liability arises.
If the ISP and the seller's website
are both ‘located’ in Thailand, it may be that the ISP should not be
treated as the 'representative or go between' of the seller, and no Thai tax
should be due from the seller. However the legal position is not clear at present, and clarification would be welcome.
Revised 1 December 2006