OTT, IDC and cloud-computing services under Telecom Law 2023

Yonggeun Bae
Bae, Kim & Lee LLC, Seoul
yonggeun.bae@bkl.co.kr

Su Gu Kang
Bae, Kim & Lee LLC, Seoul
sugu.kang@bkl.co.kr

Kim Thanh Tran
Bae, Kim & Lee LLC, Seoul
kimthanh.tran@bkl.co.kr

Ujin Ahn
Bae, Kim & Lee LLC, Seoul
ujin.ahn@bkl.co.kr

Introduction

In Vietnam, over the last decade, new-generation and innovative ‘telecommunication’ services such as over-the-top messaging (OTT) service, internet data centre (IDC) service and cloud-computing service (Cloud) have emerged and developed rapidly as a result of the 4.0 industrial revolution.

Pursuant to statistical figures from the Vietnam Internet Association, the number of Vietnamese cellphone users using OTT services amounts to approximately 36 million people, increasing from 54.7 per cent in 2021 to 73.8 per cent in 2023 and is forecasted to create a US$54bn’s worth of market from 2026.^[1] While, according to the Vietnam Cloud Computing and Data Report 2023 of Vietnam Cloud Computing and Data Center Club (VNCDC), Vietnam’s data centre market size is expected to grow at a compound annual growth rate of 10.68 per cent in the period 2022–2028, from approximately US$561m in 2022 to approximately US$1,037bn in 2028.^[2]

Nevertheless, no official legislation in Vietnam was in place to govern these business sectors.

The National Assembly of Vietnam has recently passed the Telecom Law 2023 replacing the Telecom Law 2009 (as amended), which will regulate, inter alia, the operation and provision of OTT, IDC and Cloud services from 1 January 2025.

New telecom services

OTT, IDC and Cloud services will be regulated as telecom services

The issue of governing law for OTT, IDC and Cloud services has been heavily debated among industry representatives. Some insisted that these services (especially IDC and Cloud services) are more of information technology services in nature than telecom services. In addition, concern has also been raised as to whether being regulated as a form of telecom service, providers of these services will face burdensome regulatory and licensing requirements applicable to traditional telecom services.

In this regard, the Ministry of Information and Communication (MOIC) invoked precedents from other countries such as EU Member States, China, Korea and others that have been regulating these services as forms of telecom services and putting them under the regulation of their respective telecom regulations. Given the fact that these new services have been developing rapidly in Vietnam, there has been a need for a legal framework regulating these activities to overcome legal gaps and safeguard users in Vietnam.

Furthermore, MOIC has maintained the position that OTT services are increasingly used and are capable of replacing conventional telecom services. Whereas, prevailing laws of Vietnam are silent on the administration of these services, which results in unsecured rights and interests of users, information safety and security.

Notably, in the very first draft of the Telecom Law 2023 in October 2022,^[3] OTT services provided as minor ancillary features (add-ons) to other main services would be excluded from the governance of telecom laws. However, in later drafts and the enacted version in 2023, this exclusion has been left out. Then, a follow-up issue emerged as to whether OTT features provided to users as ancillary features to other main services (like e-wallet app Momo or transportation service app Grab) should be treated as, and be subject to, the same regulatory regime as those OTT services rendered as main services.

Remarkable points

‘Light-touch’ management

Under the Telecom Law 2023, OTT, IDC and Cloud services are subject to lighter and less burdensome regulatory requirements compared with those applicable to conventional telecommunication services.

Instead of applying for telecom licences (granted by the Minister of MOIC) for traditional telecom services, providers of OTT, IDC and Cloud services are only required to follow a formality called registration or notification of telecom service provision.^[4]

Furthermore, providers of these services need to declare the quality of the services provided and comply with relevant laws on cybersecurity, customer protection, personal data protection, cyberinformation security, national security and service quality.

No limitation to foreign ownership ratio

Under the new law, foreign investment in OTT, IDC and Cloud services is not subject to any foreign ownership limit.^[5]

Due to the absence of an explicit legal framework before Telecom Law 2023, it was controversial as to whether OTT, IDC and Cloud services should be categorised as telecom services or something else (eg, IT services). If classified into the former, foreign investment in these services was limited to joint ventures with Vietnamese partners, and the maximum ownership limit of 65–70 per cent (in the case of non-facilities-based telecom services) or 49–50 per cent (in the case of facilities-based telecom services).^[6]

This is in line with Vietnam’s commitments under international treaties and the Law on Investment 2020, which permit the domestic laws of Vietnam to set forth higher/more favourable conditions for market access for foreign investment.

No contribution to the Vietnam Public Utility Telecommunication Services Fund

Under the Telecom Law 2023, providers of OTT, IDC and Cloud services are not obligated to contribute to the Vietnam Public Utility Telecommunication Services Fund (VPUTSF). Meanwhile, traditional telecom service providers have been, and are subject to, a contribution rate of 1.5 per cent of telecom service revenue to the VPUTSF.^[7]

The reason given by MOIC for this is that providers of OTT, IDC and Cloud services have already paid service fees to network developers for using network infrastructures, while developers of network infrastructures are already compelled to contribute to VPUTSF.

Administration of cross-border OTT, IDC and Cloud services

The Telecom Law 2023 also governs the cross-border provision of these services in the Vietnam market by offshore big players (namely Facebook Messenger, WeChat, Kakaotalk and Line).

The Law lays down a principle that the cross-border provision of these telecom services must comply with the principle of respecting independence and sovereignty, equality, ensuring information safety and security and common commitments under international treaties to which Vietnam is a member.^[8] Furthermore, the law assigns to the Government to promulgate detailed regulations stipulating rights and obligations of cross-border providers of these OTT, IDC and Cloud services.

It may be the first milestone in an attempt to control the cross-border provision of these new services which account for a significant stake in Vietnam market.

Conclusion

The Telecom Law 2023 is anticipated to provide a primary legal premise, boost the development of new-generation telecom services and promote fair competition in telecom service provision. More importantly, the Telecom Law 2023 also purports to benefit telecom service users by requiring information confidentiality and data protection.