DFDL Vietnam: Co-Location and Convergence – New Frontiers for Telecoms under Vietnam’s Amended Law on Telecommunications

A. Overview
On 24 November 2023, the Vietnamese National Assembly passed the Law on Telecommunications No. 24/2023/QH15 (Amended Law), governing, among other things, telecommunications activities, the rights and obligations of individuals and entities engaged in telecommunications activities, and the state management of the telecommunications sector.

The key takeaways of the Amended Law are set out below:

  • Scope and implementation date. The Amended Law comprises ten chapters and 73 articles. It will take effect on 1 July 2024, except for the regulations on basic telecommunications services on the internet (also called over-the-top (OTT) services), data centre services, and cloud computing services, and the regulations on the maintenance and registration of network identification numbers, both of which will take effect on 1 January 2025. The Amended Law will supersede the current Law on Telecommunications No. 41/2009/QH12 dated November 2009 and its amendments (Current Law)
  • New telecommunications services. The Amended Law introduces regulations on “new” or non-traditional telecommunications services, namely, data centre services, cloud computing services, and OTT services (collectively, the New Services). Before the Amended Law’s enactment, the telecommunications sector’s legal framework, comprising of the Current Law and its guiding regulations, did not contain specific regulations on data centres, cloud computing, OTT services, or the rights and obligations of related service providers. For the first time under Vietnamese law, the New Services are expressly regulated under consolidated legislation.
  • Foreign investment and ownership. The Amended Law encourages investment in the telecommunications sector by creating favourable conditions for domestic and foreign investment. Notably, no foreign ownership restrictions (e.g., ownership ratios/ceilings) or minimum investment capital amounts for foreign investment apply to businesses providing New Services. As such, a foreign investor may own up to 100% of the charter capital in a business providing New Services.
  • Telecommunications infrastructure sharing. The Amended Law encourages collaboration in the telecommunications sector by regulating (1) the sharing (i.e., subleasing) of telecommunications infrastructure between telecommunication businesses, and (2) the wholesale of telecommunications activities, which is a lease of a telecommunications network or the sale of telecommunications traffic and services by a telecommunications business to other telecommunications businesses to provide telecommunication services. Notably, telecommunications businesses with dominant market positions must agree to provide wholesale activities upon the request of another telecommunications business.
  • Auction of telecommunication codes, phone numbers, and internet resources (domain names). The Amended Law addresses issues related to the auction methods for telephone numbers, intended to bring clarity and consistency to this process.
  • National telecommunications development planning. The Amended Law integrates the national telecommunications sector development planning into the broader information and communication infrastructure sector development planning. This integration will help to coordinate and ensure alignment among telecommunications technological and service convergence and application of modern technologies, effective management and use of resources, sustainable and harmonious development, and environmental protection.
B. Opportunities
Below, we highlight two key opportunities for telecommunications sector investment brought about by the Amended Law.

1. Investment in New Services

The Amended Law aims to facilitate investment in New Services by reducing regulatory barriers to investing and operating businesses in New Services as part of the Ministry of Industry and Communication’s (MIC) ‘light management’ approach, recognising the differences between the New Services and traditional telecommunication services.

As such, the Amended Law imposes fewer regulatory obligations on New Services compared to traditional telecommunication services, such as not requiring businesses providing New Services to:

  • obtain a telecommunications licence (comprising of (i) licences for commercial provision of telecommunications services and (ii) licences for telecommunication operations, which are generally required for lawful provision of telecommunication services (with few exceptions) in order to provide New Services;
  • and pay the telecommunications operating rights fee;
  • contribute to the Vietnam Public-Utility Telecommunications Services Fund.
Instead of licensing, businesses providing New Services must follow a registration or notification process with the competent authorities regarding their provision of New Services, which relies primarily on self-declaration, thereby reducing the administrative burdens typically associated with licensing faced by would-be investors.

However, the Amended Law does not contain guidance on (i) the list of telecommunication services subject to a registration or notification process, (ii) the conditions that must be satisfied in order to provide the telecommunication services subject to a registration process, and (iii) the procedures for registration and notification. These matters will be addressed in subsequent guiding regulations.

Although businesses providing New Services are free from certain regulatory obligations like those mentioned above, many regulatory obligations applicable to traditional telecommunication services would still apply. These include, among others, (i) ensuring that the quality of services provided meets applicable standards and that service contracts contain accurate calculations of service prices, (ii) complying with safety requirements for telecommunications infrastructure and information security under applicable regulations, (iii) complying with routine and ad-hoc reporting requirements on telecommunication activities under applicable regulations, and (iv) registering their template consumer contracts and general transaction conditions with relevant authorities to comply with consumer protection regulations.

2. Investment in Telecommunications Facilities – Data Centers and Telecommunication Towers

The Amended Law also facilitates investment in the development of different types of telecommunication facilities by not categorising development as being “telecommunications services,” which, in turn, relieves the owner of the facility from regulatory obligations applicable to telecommunications service providers.

Some relevant definitions in the Amended Law include:

“Telecommunications facilities mean construction works, including passive infrastructure and equipment installed therein in service of telecommunications.”

“Passive infrastructure means technical infrastructure facilities including buildings, stations, antenna towers, cable towers, culverts, tanks, cable pipes, trenches, technical tunnels and other relevant technical infrastructure facilities on which equipment in service of telecommunications are installed.”

“Data centre means a telecommunications facility encompassing buildings, stations, cable systems, computer systems and electrical systems and auxiliary equipment installed therein to process, store and manage data of one or more organisations and individuals.”

From a plain reading, data centres and passive infrastructure (which capture many technical infrastructure facilities, including telecommunication towers) fall under “telecommunication facilities.” Therefore, the development of data centres and telecommunication towers (as telecommunications facilities) is separate from, and should not be construed as, the provision of “telecommunication services,” defined as:

Telecommunications services include basic telecommunications services and value-added telecommunications services:

(a) Basic telecommunications service means a service of sending, transmitting, and receiving information between two people or a group of users of telecommunications services, between terminal devices via a telecommunications network;

(b) Value-added telecommunications service means a service that provides additional information processing, storage and retrieval functions for users through sending, transmitting and receiving information over the telecommunications networks.

As such, under the Amended Law, the development of a data centre or telecommunications tower for the provision of co-location services (i.e., leasing of space to tenants would not cause the owner of the facility to be regarded as providing telecommunications services and, thus, be subject to the regulations applicable to telecommunication service providers. Instead, the owner of the facility providing co-location services would, in effect, be a landlord, with the tenants being the ones providing telecommunications services to their service users. However, this distinction is still not clear in discussions with relevant authorities and needs to be further clarified in official guidance (such as a subsequent guiding regulation).

C. Outlook
The Amended Law strengthens the Vietnamese telecommunications legal framework by filling in many of the regulatory gaps that have emerged since the 2009 enactment of the Current Law for both traditional telecommunication services and emerging services like the New Services and helping adapt Vietnamese law to evolving digital transformation and digital economy trends occurring globally. The Amended Law also provides a more favourable environment for attracting investment in the telecommunications sector by reducing regulatory barriers.

However, despite the changes, some areas under the Amended Law still require further regulatory action. For example, several guiding regulations need to be enacted following the effectiveness of the Amended Law to assist its implementation by elaborating on certain provisions under the Amended Law, including the registration and notification process for New Services. At present, there is also a lack of clear investment incentives for the telecommunications sector, which may hinder new investment within the sector and should be addressed in subsequent guiding regulations.
But looking at the upside, the Amended Law is a step in the right regulatory direction that provides a wealth of new opportunities in the Vietnamese telecommunications sector.