 | Issue: | Latin America II 2003 |
| Article no.: | 1 | |
| Topic: | The Legal and Regulatory Implications of Network Convergence in Brazil | |
| Author: | Fabio Ferreira Kujawski, Esq. | |
| Title: | Partner | |
| Organisation: | Carvalho de Freitas e Ferreira Advogados Associado | |
| PDF size: | 176KB |
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Article abstract
Convergence of telecommunications networks provides a number of challenges for regulators worldwide, including in Brazil. Since the issuance of the former Brazilian Telecommunications Code, in 1962, as revoked almost in full by the 1997 Brazilian Telecom Act (Law 9,472), regulators used to set forth rules on a per service basis, meaning that for each service, there were specific licensing and operating statutes.
Full Article
The inconvenience of having a regulatory framework divided into services became increasingly evident in the light of customer? demand for bundled services, i.e. full telecommunication service solutions, on a†one stop sho° basis. Another relevant aspect reinforcing this inconvenience involves new technologies and applications in permanent development, and the convergence of networks, which in most times results in convergence of services. This reality provides a good picture of how deep changes on the telecommunications regulations ought to be implemented to accommodate the new market trends. The Brazilian Regulatory Agency (ANATEL), by realizing the unsuitability of certain rules vis-à-vis the market demand, created a new type of telecommunication service named Multimedia Communications (“MCS”), by issuing ANATEL Resolution 272/2001). Multimedia communications were defined as audio, video and data signals, voice and other sounds and images, texts and other information. The MCS Licensee would be able to provide a number of services that were previously subject to specific licenses and rules. The limitations to this service, though, are two-fold: (i) provider cannot carry a call simultaneously originated and terminated in the PSTN (Public Switched Telephony Network) through the MCS network; and (ii) MCS cannot imply provision of (a) FSTS (Fixed Switched Telephone Service), (b) radio and TV broadcasting; (c) MMDS, (d) DTH and (e) Cable TV. If on the one hand the principle that led ANATEL to create such regulation deserves merit; on the other hand, we can still realize reminiscence in terms of setting rules on a per service basis, whatever the definition of this service might be. Another interesting issue to address regards the controlled use of spectrum. In Brazil, a radio frequency license is necessarily linked to a telecommunication service license, which leads to a situation in which licensee cannot use the spectrum through another service license that it may hold. This scenario also represents a hurdle when we talk about convergence of networks and services. The challenge regulators are facing worldwide is to create a regulatory framework that enables and fosters competition so that prices to customers may be reduced due to an efficient and healthy competitive environment. Laws and rules shall be made in such a way as to allow deployment of new technologies and services in a timely and flexible manner, eliminating unnecessary bureaucracy. In addition, investors need to feel transparency in the rulemaking process and the respect of rights and contracts. In Brazil, we are experiencing a unique moment of ANATEL’s history. And this moment relates to the Concession Agreements executed with the major telecom companies in the country–Embratel (MCI WorldCom), Telesp (Telefonica), Brasil Telecom (Opportunity) and Telemar (BNDES, Pension Funds and AG Telecom). The Concession Agreements, executed in 1998, right before the privatization process, set forth annual tariff adjustments. (It should be noted that only such companies have their tariffs controlled by the Government, since they provide services in the public regime. All other licensed companies that provide services in the private regime are not subject to price control). The concessionaires’ tariff adjustments have been regularly implemented since execution of such contracts, in June of every year. In 2003, however, the tariff adjustment faced several problems. Initially, the recently in-charged Ministry of Communications (please note that Brazil has a new President since January 1, 2003) decided to intervene in the adjustment process, which previously was the responsibility of ANATEL. The Ministry was trying to reduce the adjustment, given the fact that the country experienced quite an intense inflationary period (June 2002-June 2003). After several meetings with the companies, the Ministry forwarded ANATEL the results of the negotiations, and ANATEL took over the tariff adjustment process. ANATEL issued four Acts, approving the adjustments in strict compliance with the Concession Agreements executed with the telecom companies in 1998. Although ANATEL strictly followed the Law, several Class Actions started to appear, virtually in every State of the Brazilian Federation, claiming that the adjustment approved by ANATEL was too onerous for consumers, which (according to such Actions) violated the Brazilian Consumer Protection Code. Some injunctions were granted, and now the Judicial Power will have to decide which Court is competent to render final judgment, which will be binding upon all concessionaires, in the whole country. All State Class Actions will concentrate in one Court to prevent multiple and different decisions. At this point in time, it is still difficult to foretell the outcome of this “legal war” surrounding the 2003 tariff adjustment process. Notwithstanding, this situation demonstrates that ANATEL acted in strict compliance with the Agreements executed with the major concessionaires, which is critical for foreign and domestic investors. Stability of the regulatory arena is absolutely necessary to enhance investors’ credibility in the country. To this end, the political conflict between the Ministry of Communications and ANATEL, for example, does not help this stability in any manner. Contrariwise, it disseminates a negative and hostile landscape and creates an undesirable feeling of disorder and overruling From the regulatory standpoint, we shall also address the issue of network remuneration, and its impact on converged networks. The tariffs for network remuneration are controlled by ANATEL, which means that wireline concessionaires are subject to price caps. The same applies to cellphone and PCS companies (although there is only a temporary control for PCS companies). Although there are price caps for both types of network (FSTS and cellphone companies), we must say that such interconnection rates are very high in Brazil, and actually represent one of the major obstacles to implement competition. There is no regulation for unbundling, number portability, resale of communication services and other mechanisms that could play an important role in facilitating things for new entrants. Conclusion The convergence of networks also calls for sound changes in the current rules regarding network remuneration. As explained, there are different tariffs for FSTS networks and Cell/PCS networks. This differentiation has no rationale on a converged scenario, in which fixed and mobile networks represent one single concept, one single network. The task that has to be dealt with is to create a new system that enables a consistent remuneration structure, although allowing and fostering competition. The convergence of the networks, if properly conceived by regulators, will be an important tool to create a competitive environment in Brazil, thus benefiting end users and providing the digital inclusion.
