Investors are concerned about managing DC and Cloud services such as telecommunications services

The inclusion of data center (DC) and cloud computing (Cloud) services in the group of telecommunications services may entail the application of investment conditions and telecommunications licensing procedures such as used for other telecommunications services, thereby negatively affecting foreign investment in Vietnam.

Great potential

According to forecasts of many strategists, by 2025, the Cloud market will be larger than the telecommunications market, helping to accelerate the digital transformation process. Market research firm ReportLinker forecasts the potential of the Cloud market in Vietnam will reach $427 million by 2025.

Specifically, according to a survey in 2021 by the Enterprise Value Research Institute of IBM Corporation (USA), in Vietnam, 56% of businesses are using Cloud services. Meanwhile in the United States, in 2019 there were 94% of businesses using this service. This shows the great potential of the market and the demand for Cloud services in Vietnam in the coming time.

In fact, in the period 2020-2021, this market in Vietnam only reached about 4,500 billion VND. Therefore, Vietnam is a promising market for the development of data center (DC) and Cloud services due to the increasing needs of businesses, along with the development of the digital economy.

In the world and in Asia, all-cloud and DC power services are considered as two essential services of the digital economy and are interested by countries in developing orientations and strategies together with other countries. preferential policies to attract investors to these services.

Not only Vietnam but many countries in Asia such as India, Malaysia, Indonesia… all aim to develop into Digital Hub/Data center Hub of the region and globally. These countries have introduced many incentives and incentives for investment and development of DC and Cloud services.

This reality requires Vietnam to have appropriate and clear policies to increase the competitiveness of the market in mobilizing and encouraging investment in infrastructure construction and development of these essential services.

Concerns when managing DC and Cloud services such as telecommunications services

The Law on Telecommunications was first promulgated in 2009. After 14 years of implementation, this law has revealed many shortcomings and needs to be amended and supplemented to be more suitable with the development of the telecommunications industry. The draft revised Telecommunications Law is currently being considered and discussed by the National Assembly at its 5th session in May and June.

One of the new features of this draft law is the expansion of the scope of the law to include a number of new services, including DC and Cloud services, in the group of telecommunications services. This change is causing great concern for businesses and investors in these two types of services in Vietnam, as it may cause investment conditions, licensing procedures and rates. contributed capital of foreign investors is different from the current regulations.

The inclusion of DC and Cloud services in the group of telecommunications services may entail the application of investment conditions and telecommunications licensing procedures as applied to other telecommunications services, thereby negatively impacting to foreign investment in Vietnam, especially foreign DC service providers are considering investing billions of dollars in infrastructure in the country.

Under the free trade agreements that Vietnam is currently participating in such as WTO, CPTTP or EVFTA, Vietnam has committed to maintain limited access to the telecommunications market for foreign investors, except for services. added value without using facilities.

However, according to the draft revised Telecommunications Law, not all types of Cloud and DC services are in the above service type. Accordingly, foreign investors will be limited in investment capital between 49% and 65% depending on the type of telecommunications service and the investor’s nationality.

Article 12 of the draft revised Telecommunications Law is stipulating that “the form and conditions of foreign investment and the percentage of capital contribution of foreign investors in the business of telecommunications services must comply with the provisions of Vietnamese law.” Vietnam, an international treaty to which Vietnam is a signatory.

Thus, if there is no clear regulation for DC and Cloud services, foreign investors in these two types of services will also be limited in terms of investment capital ratio as well as market access conditions. such as investment in telecommunications services.

Besides, both domestic and foreign enterprises, when investing in DC construction projects or providing Cloud services in Vietnam, will also have to apply for a license to provide telecommunications services.

Therefore, the inclusion of DC and Cloud services in the group of telecommunications services will create limitations and legal barriers as well as many administrative procedures for investment activities, providing these services, making reducing Vietnam’s competitiveness in attracting investment in data storage services and thereby affecting the development of the digital data industry in particular and the digital economy in general.

According to some recommendations of experts, instead of being regulated in the Telecommunications Law, DC and Cloud services should be regulated in the Law on Digital Technology Industry that the Ministry of Information and Communications is drafting. This will encourage DC and Cloud to develop strongly and openly, remove restrictions and conditions on investment, thereby improving Vietnam’s competitiveness compared to other countries in the region while increasing revenue. attract foreign investment in these two types of services.

During a discussion at the National Assembly’s group on June 10, National Assembly Chairwoman Vuong Dinh Hue also asked the drafting agency to study international experience in regulations on all-cloud electricity services and DC as well as carefully evaluate the impact of including these services in the draft scope to encourage investment and development in this area.

Enterprises investing in DC construction projects or providing Cloud services in Vietnam must apply for a license to provide telecommunications services.

Practice in the world

According to some research reports on international experience in managing Cloud and DC services, most countries do not regulate and manage these two types of services like telecommunications services because of the nature of these services. This is different.

The Cloud and DC Services are accessed over a telecommunications network (or via a telecommunications service) and are governed by the common framework of existing laws regarding video games, websites, financial transactions, music and electronics. image. For countries that have regulations governing DC and Cloud services, it is often in the direction of applying technical standards built on the basis of international standards.

The technical standards are also only focused on the user’s data security aspect. According to the review, currently only a few countries regulate DC and Cloud as telecommunications services. However, almost no country has regulations on restricting these two services to cross-border supply or restricting foreign investment ownership.

For example, in Malaysia, this country does not have specific regulations for Cloud and DC services. Meanwhile, Malaysia regulates Cloud services under the Communications and Multimedia Act 1998 (CMA1998) and allows enterprise participation in the development of technical regulations such as standards. technical code for data security based on international standards.

Or as in Indonesia, DC and Cloud service providers are collectively classified as Electronic System Operators (ESO) under the provisions of the Law on Electronic Information and Transactions 2008 and Regulation No. 71 2019 of the Government on system operation and electronic transactions.

In addition, data storage services and DC infrastructure are regulated as two different business lines under Indonesian regulations. Specifically, the data storage businesses are those that provide data storage systems and do not include DC infrastructure leasing. Accordingly, the business line that provides DC infrastructure but does not have a data storage system will be in the real estate business.

In Singapore, the government of this country does not have a legal regulation on classification of DC and Cloud services. However, both of these services are classified as “information and communication technology infrastructure or systems” by the Personal Data Protection Commission and “information & telecommunications technology services” by government procurement portal (GEBiz).

In Thailand, it also does not regulate cloud services and DC as telecommunications services. In fact, Thailand modernized its telecommunications licensing framework in 2019-2020 to remove the need for a separate Internet Business License and make it clear that DCs are not a type of establishment. telecommunications or intended to be administered as such.

For Cloud services, Thailand does not have a specific law for this service. Cloud services are currently defined specifically in the 2019 cloud service manual.

For DC services, Thailand sets quite strict requirements for DC construction. Enterprises planning to build and operate DC in Thailand should first obtain a Certificate of Investment Promotion from the Ministry of Investment of Thailand (Board of Investment). However, the National Telecommunications and Broadcasting Commission of Thailand does not license DC and cloud services as telecommunications services.