17 September 2001

The Constitutional Court Upheld The Restrictions For Mobile Telephone And Trunking Services Operators To Participate In The Bidding Process For The Concession Of PCS And In The Rendering Of Said Services

Colombia International Law
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Last year the Colombian Congress issued Law 555 of 2000 whereby the general terms and conditions for the granting of the concession for the rendering of Personal Communication Service (PCS) in Colombia were established.

One of the controversial articles of this Law 555 is article 11. Item (b) of this article establishes that the current operators of mobile telephone and trunking services, or their shareholders with an individual or shared participation of 30% or more (in the operator), are not authorized to participate in the PCS bid process or to become shareholders of companies that are awarded the PCS concessions. This limitation applies for a term of 3 years.

The above-mentioned article was subject to an unconstitutionality suit by an individual who argued that it was issued in breach of the constitutional right to equal protection of the law and the right to free economic competition.

The plaintiff also argued that since (i) the PCS is similar to the mobile telephone service, and (ii) the mobile telephone service operators already have the experience for the rendering of these kind of services, then said operators are the most qualified to render an inexpensive and more efficient service.

In view of the above, the plaintiff stated that it was absurd to prevent the mobile telephone service operators to participate in the bid process for the PCS concession.

These proceedings were concluded by means of a judgment from the Colombian Constitutional Court dated 2 August 2001, in which said Court established the following:

a) The mobile telephone services and the PCS are telecommunication public services and thus, as per article 365 of the Colombian Constitution, the Colombian Government is entitled to regulate, control and carry out surveillance activities over the rendering of said service.

b) Furthermore, the Government's intervention should be even more rigorous when public services (i.e. PCS) are to be rendered by private individuals.

c) When the Government decides to grant a concession for the rendering of a specific public service to the private sector, the former is entitled to establish the conditions, restrictions and prohibitions that may be necessary in order to promote free competition.

d) These prohibitions do not imply a limitation to the constitutional right to economic freedom.

e) In accordance with the above, item (b) of article 11 of Law 555 does not contravene the Colombian Constitution.

It is worth noting, though, that the Constitutional Court ordered Congress to regulate, specifically for this case, the negotiation of shares in order to prevent monopolistic practices once the 3-year restriction elapses.

This report was prepared and is copyrighted in 2001 by PARRA, RODRÍGUEZ & CAVELIER, a law firm with offices in Bogotá, Colombia. The general information herein contained does not constitute legal advice. Transcriptions and quotes are permitted citing the source.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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