Vargens                                                               Convergence and Regulation in Brazilian Telecommunic...
Vargens                                                                Convergence and Regulation in Brazilian Telecommuni...
Vargens                                                              Convergence and Regulation in Brazilian Telecommunica...
Vargens                                                              Convergence and Regulation in Brazilian Telecommunica...
Vargens                                                               Convergence and Regulation in Brazilian Telecommunic...
Vargens                                                               Convergence and Regulation in Brazilian Telecommunic...
Vargens                                                                      Convergence and Regulation in Brazilian Telec...
Vargens                                                              Convergence and Regulation in Brazilian Telecommunica...
Vargens                                                              Convergence and Regulation in Brazilian Telecommunica...
Vargens                                                                 Convergence and Regulation in Brazilian Telecommun...
Vargens                                                                        Convergence and Regulation in Brazilian Tel...
Vargens                                                              Convergence and Regulation in Brazilian Telecommunica...
Vargens                                                            Convergence and Regulation in Brazilian Telecommunicati...
Vargens                                                            Convergence and Regulation in Brazilian Telecommunicati...
Upcoming SlideShare
Loading in …5
×

Convergence and regulation in brazilian telecommunications - Jose Rogerio Vargens (2011)

2,197 views
2,142 views

Published on

This paper deals about the process of convergence in telecommunications and the evolution of the legislative and regulatory
framework. As convergence changes industry, regulation has to be adjusted to best fit these changes. The example of Brazil
is used in this paper to illustrate the analyses of regulation in the context of convergence.
Convergence can be understood as the set of technical and competitive changes that is altering the industry structure. In a
technical view, convergence means transmission and processing of any information upon digital networks. In a business
view, it means to offer access to information and communication anytime, anyplace, anywhere and any device. In a public
policy view, convergence demands the access of great part of population to all information and communication services or at
least to most of these services.
One of the most important issues to the convergence is the regime of service licensing. There are two ways to meet
convergence throw regulation reforms: a deep reform to unify licenses, like the European Union did, and gradual regulation
changes to adjust the current licenses for the convergence environment, like a large number of countries have done. Brazil
has five kinds of service licenses: fixed telephony, mobile telephony, data and multimedia services, pay-TV and broadcast.
The paper will show that the licensing model can become convergent through gradual changes in Brazilian legislation and
regulation if three conditions were met: (1) all range of services must be covered by the licensing and regulation framework;
(2) barrier to acquire licenses must be decreased and; (3) any firm could offer any service if it has the proper licenses.
The paper concludes that licenses and the regulation of some of telecom services in Brazil are not convergent today.
Nevertheless, government is promoting a reform to become them convergent. Two laws and several by-law rules are been
discussing. The paper presents the most important changes that subject this discussion and show some concerns that should
be considered to this success and effectiveness in meeting convergence.

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
2,197
On SlideShare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
54
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Convergence and regulation in brazilian telecommunications - Jose Rogerio Vargens (2011)

  1. 1. Vargens Convergence and Regulation in Brazilian Telecommunications Convergence and Regulation in Brazilian Telecommunications Jose Rogerio Vargens Oi Telecom and Paulista University jose.rogerio.vargens@gmail.com - jose.vargens@oi.net.brABSTRACTThis paper deals about the process of convergence in telecommunications and the evolution of the legislative and regulatoryframework. As convergence changes industry, regulation has to be adjusted to best fit these changes. The example of Brazilis used in this paper to illustrate the analyses of regulation in the context of convergence.Convergence can be understood as the set of technical and competitive changes that is altering the industry structure. In atechnical view, convergence means transmission and processing of any information upon digital networks. In a businessview, it means to offer access to information and communication anytime, anyplace, anywhere and any device. In a publicpolicy view, convergence demands the access of great part of population to all information and communication services or atleast to most of these services.One of the most important issues to the convergence is the regime of service licensing. There are two ways to meetconvergence throw regulation reforms: a deep reform to unify licenses, like the European Union did, and gradual regulationchanges to adjust the current licenses for the convergence environment, like a large number of countries have done. Brazilhas five kinds of service licenses: fixed telephony, mobile telephony, data and multimedia services, pay-TV and broadcast.The paper will show that the licensing model can become convergent through gradual changes in Brazilian legislation andregulation if three conditions were met: (1) all range of services must be covered by the licensing and regulation framework;(2) barrier to acquire licenses must be decreased and; (3) any firm could offer any service if it has the proper licenses.The paper concludes that licenses and the regulation of some of telecom services in Brazil are not convergent today.Nevertheless, government is promoting a reform to become them convergent. Two laws and several by-law rules are beendiscussing. The paper presents the most important changes that subject this discussion and show some concerns that shouldbe considered to this success and effectiveness in meeting convergence.KeywordsTelecommunications, convergence, competition, legislation, regulation.INTRODUCTIONThis paper summarizes the update process of Brazilian regulation facing the changes and challenges brought aboutby technological convergence in the telecommunications industry. In order to achieve the proposed objective, it is divided innine sections, besides this introduction. In Section 2 there is the definition and explanation to what convergence is. In Section3 some principles and regulatory mechanisms which stimulate convergence in the telecommunication industry are presented.In turn, Section 4 summarizes the two main routes used for international experience to achieve a favorable adjustment to thedevelopment of convergence in the industry. Section 5 presents a summarized view of how telecommunication services areclassified in Brazil. Section 6 presents how technological convergence is provided in the Brazilian legal-regulatoryframework. Section 7 shows the legal impediments to the development of convergence in Brazil, while Section 8 analyzes ifthe Brazilian legal-regulatory framework is compatible with the context of technological convergence in telecommunications.Section 9 presents the main pro-convergence measures which the National Agency of Telecommunications is proposing toupdate the Brazilian regulatory framework. Finally, Section 10 brings a conclusion to the paper.Proceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 295
  2. 2. Vargens Convergence and Regulation in Brazilian TelecommunicationsWHAT IS CONVERGENCE?Technical definition: convergence is the transmission and the processing of any codified information as a bit in digitalnetworks. It can be understood as the orientation of all telecommunication services platforms to common and universalpatterns and protocols, allowing digital communication among any type of networks, computers and users interfaces.With the advent and expansion of the Internet, different kinds of information became encoded into binary form (0; 1),organized in “packs” and transported according to the patterns of transmission and addressing of the Internet Protocol (IP).Such form of communication brought two great advantages: first, it has allowed the combined transmission of bits of voice,data and video over a single network, generating economies of scope by offering various telecommunications services over asingle infrastructure; second, the packet switching and IP addressing made possible that more information could betransmitted simultaneously using non-congested routes on the networks. With this, they have multiplied the transmissioncapacity and reduced the transmission cost per bit.Such process has happened in two phases. A first wave of Internet innovation has conditioned the evolution oftelecommunication in the 1990’s, through the expansion of dial-up, entry of new competitors and profound changes in theorganization of the industry. A second wave of Internet innovation has been occurring since 2000, based on broadbandconnection and new technologies for client access and offering voice over IP. This new wave is strongly changing telecombusiness, with the deepening of competition in the industry by offering various types of telecommunication services(telephony, TV and internet) over broadband supported by multiple technologies (DSL, cable, 3G mobile, Wi-MAX, Wi-fi).Within this process is the emergence of a new technological paradigm in the telecommunications industry, which can becalled “IP communications”, replacing the previous paradigm of dedicated, analog and circuit switched fixed telephonynetwork (VARGENS; 2005; p. 3-4).Commercial definition: convergence means to make it possible to the user the access to information and communication atanytime, anywhere and on any interface (anytime, anyplace, anydevice).From a commercial point of view, the notion of convergence must be understood as an ideal that will not probably becompletely achieved, but which offers the strategic direction for companies to improve their competitiveness in an industryincreasingly dynamic and competitive. In other words, it is impossible, in practice, to enable the user to always have thepossibility of communication and information at their disposal regardless the moment, the place and the interface. However,the greater the variety of services the company can offer and the longest it can keep the user connected in their household oroffice and outside (when traveling, for instance), the better it will be attending the needs of the user, concerning thecommunication and information, and more competitive it will be.Regulatory definition: convergence is to allow the development and the offer of many kinds of information andcommunication services on any type of platform and its access by the greatest number of users.The regulatory definition is also an ideal. From the point of view of the Government, the full convergence world is the one inwhich all citizens would have access to all services of telecommunications on any kind of platform. Despite the practicalimpossibility of this ideal, it translates into a strategic orientation to the public policies for telecommunications which can beimplemented through specific programs. For example, the government of Singapore aims to create an intelligent nation in2015 enabling the broad convergence in telecommunications (IDA; 2008). To do so, it is assumed that 90% of broadbandpenetration in the population is a tangible goal that embodies almost all the benefits of convergence.PRINCIPLES AND REGULATORY MECHANISMS TO STIMULATE CONVERGENCEThe development of technological convergence in the industry of telecommunications and the achievement of benefits andopportunities resulting of from it are favored by the existence of a regulatory environment that meets some principles andregulatory mechanisms. Among those principles and mechanisms, six are highlighted, as follows:Technological neutralityAll providers of telecommunication services should be free to choose the network and the technology with which they willoffer their services. Whenever this principle is not observed, there is the violation of the property of convergence that allservices can be deployed on any available network. By the principle of technological neutrality, services must be regulatedaccording to their functions and purposes to the users, regardless the technology used in the production process.Freedom of services offerProceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 296
  3. 3. Vargens Convergence and Regulation in Brazilian TelecommunicationsAll providers must be free to offer any kind of information and telecommunication service to consumers. Whenever thisprinciple is not observed, the benefits of customers from the company which was barred from offering determined kind ofservice is reduced, by restricting their possibility to access information and communication in anytime, anyplace andanydevice conditions.Absence of institutional-regulatory entry barriersThe presence of institutional-regulatory barriers to the entry of companies in the telecommunication market restricts theactions of competitive firms and violates the premise of convergence that the user can choose any provider to supply themwith all available services and new services that may be developed in the future.Pro-competition regulationOnce a competitive instructional model is decided for the telecommunication sector, the regulation must allow the marketforces act on the industry and must only interfere in case of market failure and abuse –or a threat of it- of economic power.InterconnectionAs convergence requires the provision of telecommunication services on the various existing networks, these networks mustbe interconnected to allow communication among users of different networks. By introducing the possibility of all networkscommunicating among themselves, the interconnection benefits all users and adds value to all companies in the industry. Inaddition, the remuneration scheme of interconnection must not create competitive distortions and allow drainage of theeconomic value from a competitor to the other. The ideal remuneration scheme is the one which makes the interconnectionmarket (or secondary) an efficient market, in which the sum of transactions would preclude the achievement of extraordinaryeconomic profits (normal return theory).Digital Inclusion PolicyThe Government must recognize that the market forces have no ability to disseminate the benefits of convergence to allpopulation, but only to whom can pay and to those who are where there is an offer of viable network. Market solutions areviable to higher income classes and in urban areas. To lower income classes and to rural areas and small cities, thedissemination of the convergence benefits demands public policies solutions that allow their inclusion in the digital world.THE ROUTES FOR CONVERGENCE ADOPTED WORLDWIDEThere are two commonly adopted routes to the adequacy of the regulatory environment of emerging convergence in thetelecommunications industry: a) unification of grants and b) adjustments to the multi-award scheme.The unification of grants consists in merging several individual grants for telecommunication services (e.g. fixed telephony,mobile telephony, broadband Internet, pay TV) into a single convergent grant, under which companies can provide all theirservices. Such model demands a broad review of the national regulation framework, in order to change the several laws andregulations, traditionally applicable to specific services, and replace them with new legal instruments and regulations thatgenerally apply to all services.The main experience with this kind of model comes from the European Union, which determined the unification of grants ofmember countries in the regulation reform of 2002, under the label of Electronic Communication Service (ECS). The systemof grants of the European Union is illustrated in Figure 1. The ECS is the only grant under which all telecommunicationservices may be offered. There are no significant institutional-regulatory entry barriers, for there is no need for asking forpermission to render ECS, the provider must only notify the regulation authority that they are providing ECS.Proceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 297
  4. 4. Vargens Convergence and Regulation in Brazilian Telecommunications Source: ANACOM (www.anacom.pt). Figure 1 – European Union System of GrantsDepending on the service provided, the company falls into one of the following classes of SCE:Electronic Communication Service (ECS) a) Private: confined to private environments, without commercial offer. b) Accessible to the public, by means of commercial manipulation.Telephone Service Available to Public (TSAP)  Rights and duties additional to ECS Accessible to Public.Universal Service (US)  The minimum set of services affordable to all users.This is to allow that the most essential services and firms with greater market power are subject to regulatory requirementsaimed at serving the public interest, usually related to aspects of quality, pricing and universality.Besides the institutional-regulatory barriers reduction, this model meets the other principles of regulation in an environmentof convergence: i) it is neutral from the technological point of view, because the regulation of the ECS does not condition anytype of technology on which the service should be offered; ii) any provider has the freedom to offer ECS in the market; iii)the regulation framework is supported in competition, assuming the theoretical premises of the regulation of imperfectcompetition; iv) there are guidelines and obligations for interconnection among networks and; v) provides digital inclusionpolicies and exposes a kind of ECS, the US (universal service), as a service to be offered under conditions of universality.Within this overall regulatory framework, member countries of the European Union guide their public policies according tonational priorities.In the United Kingdom, the government recognizes that broadband connection is of crucial importance to keep the country’sposition in the global economy and, therefore, it focuses on incentives for development of next generation networks to matchits performance to the performance of international competitors to offer services and applications on broadband. Thechallenge is to stimulate the investment in such new networks and, at the same time, keep competition in the market. In anattempt to meet this goal, the UK regulator is guided by the following strategic actions: a) Allow price flexibility in wholesale to enable appropriate feedback to the considerable risks ofProceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 298
  5. 5. Vargens Convergence and Regulation in Brazilian Telecommunications building new networks, but limited by the market in the interest of customers; b) Assure that any regulated price allows that investors have the opportunity to earn a rate of return that reflects the genuine cost of deployment and the level of associated risk; c) Minimize unnecessary inefficiencies in the design and construction of the network as a result of regulatory policies, while continuing to protect consumer interests; d) Support the use of new and more flexible wholesale services of British Telecom to offer super-fast services to other service providers and consumers at competitive prices and; e) Safeguard the opportunity to further competition based on physical structure, giving fair opportunities for companies to synchronize their investments with their deployments of British Telecom, in case of reasonable demand, and stimulate the network design that takes the potential for future competition into account (KEMMITT & ANGEL; 2009; p.162-165).In Portugal, the government defined the new generation networks (NGN) as a national priority, due to the need of increasingthe capacity of telecommunication networks to support even more services. Consequently, the government has asked thePortuguese Regulatory Agency to act in the identification of the main barriers to the development of next generationnetworks and in proposing the means to overcome them. Simultaneously, some operators signed a protocol defining a set ofshort-term investment goals. Among the goals, making Portugal one of the major European countries with the highestpenetration of households served with fiber optics FTTH (Fiber-To-The-Home) stands out.In Italy, the renewal of legislation to an environment of convergence has been discussed in the Parliament, about a bill thathas the following objectives: a) Ensure neutrality of Access to electronic communication networks; b) Ensure the rights to active citizenship for purposes of enhancing democratic participation; c) Support the development of public digital systems, ensuring digital pluralism also with the use of free access computer programs and; d) Remove obstacles that impede fair and equal access to digital communication networks and to information when involving situations of disability, poverty and cultural diversity.In France, an aspect that deserves to be mentioned was the expansion of convergent services that combine television,telephony and Internet. The number of platforms available to receive television signals, previously restricted to satellite andcoaxial cable technologies, has significantly increased since the implementation of the European directives of 2002,particularly from 2005. The provision of triple play packages- combining broadband Internet, fixed telephony and cable TV–started in December 2003, when Free, a local Exchange Carrier and second-placed in broadband connections in France,launched its bid, on ADSL technology, followed by the incumbent operator France Telecom. Since then, the French market isexperiencing the development of several convergent telecommunication services. Among them, the launch of digitalterrestrial TV in 2005; (ii) the launch of the first offer of FTTH (made by Orange and Free Enterprises) and the first offer ofmobile television in third generation networks (3G), both in 2006. The development of new TV platforms, especially videoover ADSL technology, has created a proliferation of pay-TV distributors. As a result, the number of subscribers of TV onDSL in France has increased from 10 thousand in 2003 to 5 million by the end of 2008.The other way to adjust the regulations to the convergence environment is the adjustments in the multi-award scheme.This model maintains the system of grants specific to each service, but it contemplates the adjustments to suit the legal andregulatory framework to the principles of convergence, and it may even promote mergers of individual grants.This applies to the United States, which maintained the distinction between information services and specifiedtelecommunication services, but has undertaken changes in its regulatory framework with the Telecommunications Act ofProceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 299
  6. 6. Vargens Convergence and Regulation in Brazilian Telecommunications1996, aiming at adapting it to the emerging convergent environment at the time. These adjustments aimed at reducing theinstitutional-regulatory entry barriers, permitting the freedom of offer by any firm, stimulating competition in the industryand ensuring the technological neutrality of regulation and the interconnection among networks.Making a distinction between the two categories of services, the American regulatory framework provides thattelecommunication services be regulated and the information services are free. This view assumes freedom of supply and useof services and applications on the Internet, classified as information services. Being regarded as the backbone oftechnological convergence in the telecommunication industry, the U.S. regulation reinforces this character of public Internet.According to the Guidelines – Internet Policy Statement (UNITED STATES OF AMERICA; 2005), “the FederalCommunications Commission (FCC) has the duty to preserve and promote the open and dynamic character of Internet, oncethe telecommunications market entries the era of broadband connections. Encourage the creation, adoption and use ofbroadband content, applications, services and attachments, and ensure that users will benefit from innovations that arise as aresult of competition”.In this document, FCC incorporates the following principles in its policies:“In order to encourage the development of broadband and preserve and promote the open and interconnection nature ofpublic Internet, users: a) Are permitted to access legal Internet content according to their choices; b) Are permitted to run applications and use services of their choice, subject to the requirements of law enforcement; c) Are allowed to connect legal devices of their choice since they do not harm the network and; d) Must have the option of competition among network providers, application providers and service and content providers”.Besides adopting guiding principles in the regulation of telecommunications, the convergence policy of the United Statesfocuses on the intensification of broadband connections in the country as a platform to enable convergence. The AmericanRecovery and Reinvestment Decree, published in 2009 in response to the economic crisis that hit the country in 2008,released US$ 7.2 billion to expand broadband services and ordered the FCC to prepare, by February 17th 2010, a nationalbroadband plan aimed at ensuring access for every American to broadband facilities (UNITED STATES, 2009).China is another example of a country which makes adjustments in the multi-award model to tailor the regulation to thetelecommunication convergence environment. In China, the telecommunications network, the cable network and the Internetare run by different regulators. The Ministry of Industry and Information Technology (MIIT) regulates thetelecommunications network through a vertical regulation system. The TV & radio network is regulated by SARFT (StateAdministration of Radio, Film and Television) through a four-layer structure in broadcasting and regulation of centralgovernment, provincial (autonomous regions & towns), city (regional or municipal), and county (city). The Internetinfrastructure is regulated by MIIT, while its contents is regulated by different departments, such as ministries of Culture,radio & TV, general journalism administration, education and public health.The main laws of the Chinese Telecommunication Industry include the Regulation of Telecommunications and theDispositions on Foreign Investment in Telecommunications. The laws of radio and TV industry include the Provisions onSupervision of Radio & TV, the Dispositions on Infrastructure Protection for Radio & TV, the Dispositions on Installationsof terrestrial reception for TV Broadcasting through Satellite. The legal structure of the Internet industry has its main focuson the content security and service supervision areas, for which the MIIT has created relevant laws and regulations.To offer services in different networks, Chinese operators need to obtain different licenses. For example, license for Radio &TV station, license for Broadcasting of Radio & TV (wireless) and license for cable TV for Urban Communities arenecessary to the services of radio and TV. Telecommunication Operators need a License for the Telecommunication BasicServices and License for Added Value Services, for providing telecommunication services.In an effort to promote convergence, the Chinese government is working to standardize the Technologies for mobile TV andwireless broadband, in order to accelerate business and the application of services and to improve China’s competitiveness inkey technologies. Despite the mutual access only partially occur among the telecommunication networks and radio & TVProceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 300
  7. 7. Vargens Convergence and Regulation in Brazilian Telecommunicationsnetworks, a Circular on Policies to Encourage the Development of Digital TV has been published, in order to encourageRadio & TV agencies to use public telecommunication and radio & TV networks to provide services in the area of digital TVand telecommunications with added value. At the present, some Chinese cable TV companies have already entered thebroadband services.SERVICES, GRANTS AND TECHNOLOGIES IN BRAZILIn Brazil, the telecommunication sector is structured according to a multi-award model which has different types of grants,including the grants for restricted services in telecommunications that allow the communication between specific users andare not object of commercial manipulation.To simplify the representation of the Brazilian model of grants, Figure 2 explains the Five main types of services oftelecommunications and broadcasting: the telecommunication services of STFC (Fixed Switched Telephone Service), SMP(Personal Mobile Service), SCM (Multimedia Communication Service), pay-TV and radio broadcasting services (OpenRadio and TV). Source: Elaborated by the author. Figure 2 - Model of grants for telecommunications in BrazilThe concessions for radio broadcasting make possible the broadcasting of TV and Radio. Such services are regulated by theMinistry of Communications, while the rest of them are subject to the regulation of the Telecommunication National Agency(Anatel). Fixed telephony is offered through concession, permit or authorization in the form of Fixed Switched TelephoneService (STFC). Mobile telephony is mainly offered through authorization of the Personal Mobile Service (SMP), althoughthere are other grants for mobile service: the former Mobile Service (SMC) and the Specialized Mobile Service (SME).Pay-TV is offered through concession or authorization of four different services: i) the Cable TV Service, which consists ofthe distribution of pay-TV signal through cable; ii) the Multichannel Multipoint Distribution Service (MMDH), based on thewireless distribution of pay-TV signals through terrestrial antennas; iii) the services DTH (Direct to The Home), where thepay-TV signals are distributed via satellite and; the former pay-TV service (TVA). The pay-TV services are distinguishedonly by the technology used in their transmission and distribution, and not by their functions. The customer does not noticethe difference of the services, because the technology is transparent for them.Finally, there is the grant of the Multimedia Communication Service (SCM). It is a “buffer” grant, created to accommodate inthe Brazilian system of grants classification all the services that do not fit into other grants. Thus, SCM is a service definedby what it is not. In other words, what cannot be classified in the other grants is SCM. Actually, there is the expressdetermination in the Regulations of the SCM for the service not to be misunderstood with the STFC and it cannot be used toProceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 301
  8. 8. Vargens Convergence and Regulation in Brazilian Telecommunicationsconnect users of STFC through telephony process. As examples of SCM, there are the data communication services,broadband access to Internet and video on demand (VoD).CONVERGENCE IN THE BRAZILIAN LEGAL-REGULATORY FRAMEWORKThe General Telecommunications Act - LGT (BRAZIL; 1997) provides most regulatory principles which enable thetechnological convergence in the telecommunication industry.Competition is one of the pillars of the National Regulatory Framework. Art. 6 in LGT states that: [...] Telecommunication services will be organized based on the principle of free, broad and fair competition among all providers, and the Public Power must act to enable it, as well as to correct the effects of imperfect competition and to refrain economical order infractions from happening.The institutional-regulatory barriers to the provision of STFC and SCM are reduced. In the provision of services in theprivate system, Art. 128 in LGT states that freedom will be the rule, that the imposition of necessary administrativeconditions will observe the demand of minimum intervention on private life and that no authorization will be denied, exceptfor relevant reason. Any company can easily obtain authorization for providing STFC and SCM services in private system inBrazil.LGT also strictly demands the interconnection among telecommunication networks, stating, in Art. 146, that the networkswill be organized as integrated paths of free circulation and that the interconnection among them is mandatory.The technological neutrality is strictly provided in the Regulation of Telecommunication Services (ANATEL; 1998). Art. 22in this regulation states that “the telecommunication services will be defined according to the user finality, regardless thetechnology used and they will be provided through different modalities defined in the terms of art. 69 in Law 9,472 from1997”(ANATEL; 1998).Legal barriers to the development of convergence in BrazilThe main legal barriers to the development of convergence in Brazil are the Cable Law (Lei do Cabo) (BRAZIL; 1995),which regulates the Cable TV Service in Brazil, and the Fund for Universal Telecommunication Services Law (Lei do Fust)[BRAZIL; 2000], which establishes and disciplines the Fund for Universal Telecommunication Services, whose purpose is tofund universal access policies to telecommunication services in Brazil.The Cable Law (Lei do Cabo) is prior to the regulation framework introduced by LGT and, when published, thetelecommunication industry hasn’t had yet the convergent features of the present day. There still was the technologicalparadigm of dedicated analogue networks, where STFC was the specific service to be offered on its own network, as well asthe pay-TV services. The Internet was in its initial stages of development in Brazil and the communication over the InternetProtocol (IP) and broadband networks as vectors of the convergence in the industry were not foreseen.Art. 2 in this Law defines the Cable TV Service as the “distribution of subscribed video and/or audio signals, throughtransport by physical means”. This definition violates the principle of technological neutrality, for which the service must beregulated according to its functions and finalities to the user, regardless the technology. Due to this distortion of theregulatory framework, there are four co-existing pay-TV services (Cable TV, MMDS, DTH and TVA) which are similarfrom the point of view of the user, but granted and regulated differently.The offer of Cable TV Service is subject to high institutional-regulatory barriers. Art. 12 in Cable Law (Lei do Cabo) statesthat the implementation of the service is conditioned to the recognition of the convenience and opportunity by the State.Besides, the decision process over the service grant is defined in accordance to the Executive Power, according to Art. 13from the same Law.In addition, the Cable Law violates the services offer freedom principle, once the Art. 15 restricts the operation oftelecommunication concessionaires only in cases of manifested lack of interest by private companies, characterized byunresponsiveness to public notice on a specific area of service.Proceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 302
  9. 9. Vargens Convergence and Regulation in Brazilian TelecommunicationsThe Fund for Universal Telecommunication Services Law (Lei do Fust) was published after the LGT, but in a moment inwhich the technological paradigm of convergence hasn’t been clearly outlined yet in the telecommunication industry and thatthe universality of fixed telephony was the main priority in the sector.Art. 1 in Lei do Fust determines that: [...] Is hereby established the Fund for Universal Telecommunication Services – Fust, which aims at providing resources to cover the portion of cost attributable solely to the obligations of universality of telecommunication services, which cannot be recovered through efficient service.Well, as the only telecommunication service that has obligations of universality is the Fixed Switched Telephone Service(STFC), the text of Lei do Fust has restricted the application of the fund resources to projects and programs which aim theuniversality of this service, excluding, consequently, the other services. In the current configuration of globaltelecommunications, the universal access to broadband and mobile telephone services can be considered at least as importantas the universal access to fixed telephony. This way, the Lei do Fust restricts the use of the fund for universality as aninstrument of public policy capable of providing that the benefits of technological convergence reach the whole Brazilianpopulation.The restrictions contained in the Cable Law and in the Lei do Fust hinder the performance of the bodies responsible for theregulation and for the public policy in the sense of encouraging the development of Brazilian telecommunications in theconvergence environment.All 5,564 Brazilian municipalities count with the fixed telephony service, but only 465 (8.3%) were attended services of pay-TV in 2009 (ANATEL; 2009). The networks of coaxial cables and the other pay-TV networks do not reach the othermunicipalities, but the broadband networks will connect all the municipal head offices by the end of 2010 through thebackhaul of concessionaries of STFC. Many of those municipalities could be attended the TV service on DSL technology bythe concessionaries of STFC. However, the Cable Law restricts the offer of cable TV service by concessionaries of STFC,obstructing the care of most small Brazilian municipalities that already are –or soon will be- connected with broadbandaccess from these companies.By preventing that resources from Fust are applied in the universality of broadband, the Lei do Fust hinders theGovernment’s political involvement to intensify such service, as have countries like the United States, the United Kingdomand Portugal done. Even with all Brazilian municipalities connected to the national backbone, as it has been done with thegoal of backhaul of concessionaries of STFC, there won’t be the intensification of broadband without incentives to thedemand. To introduce a network offer does not mean that, necessarily, to obtain demand to the service. The Law of Say,which states that “the offer creates its own demand” (SAY; 1803), does not apply to the telecommunication market, asverified after the privatization of fixed telephony in Brazil in 1998, when the concessionaries expanded the individualtelephone service to all cities with over 300 inhabitants. There were no demands in many of those cities, due to the lowincome of their population, resulting in idle networks and socially inefficient allocation of investments. Alongside theexpansion of broadband delivery, the telecommunications public policy must also provide incentives to the demand of theservice, which includes the use of the universality fund to this purpose, in areas without economic attractiveness.To overcome such restrictions, there are bills to be passed in the National Congress that propose changes in both laws (Cableand Fust). The House Bill No. 116/2010 (BRAZIL; 2010) proposes an amendment to the Cable Law relaxing the restrictionto the participation of concessionaries of STFC in the offer of Cable TV, among others. In turn, Bill No. 1.481/2007(BRAZIL; 2007) proposed amendment to the Lei do Fust expanding the scope of application of Fust resources to alsoachieve broadband projects.POSSIBLE PATHS FOR A PRO-CONVERGENCE REGULATION IN BRAZILIn theory, both the path of unification of grants and the adjustments in the multi-award model can be traced in order to makethe Brazilian telecommunication regulations more appropriate for the convergence environment prevailing in the industry.The unification of grants would imply in the creation of a “Brazilian ECS” and it would demand a broad reform in theregulatory framework, with changes in LGT, in Cable Law and in a large part of the regulations of Anatel. In turn, theadjustments on the multi-award model would also imply in changes in those regulatory and legal instruments, probably in asmaller scale.Proceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 303
  10. 10. Vargens Convergence and Regulation in Brazilian TelecommunicationsIs the current multi-award system in Brazil compatible to the technological convergence in the telecommunications industry?Our analysis answers yes, since the regulatory principles of convergence1 are met in general and the following conditions inparticular: Condition 1 – All the service universe has to be covered by the existing grants. The system of grants must enable the framework of all existing services and all services that may be developed. In Brazil, SCM meets this purpose. All services that cannot be fit into the other grants are classified as SCM. Thus, SCM is the convergent grant of the Brazilian Regulation Framework. Condition 2 – Absence of restrictions and barriers to the acquisition of grants. The grant itself is not scarce resource and therefore should not have economic value. Thus, the competition conditions in convergence environment require the elimination of restrictions and institutional- regulatory barriers to the entry in the market. In Brazil, the acquisition of cable TV grants still is object of restrictions and entry barriers. Condition 3 – Full freedom to provide services. In order to this condition be met, the company that has all grants must be able to provide all telecommunication services In addition, the company that has two grants can provide convergent services between them. For example, a provider that holds the grants of STFC and SMP can provide any fixed-mobile convergent service (VARGENS; 2008).In general, the regulations framework of the General Telecommunications Act is not inconsistent with the convergence in thetelecommunications industry in Brazil. The three conditions above are possible to be met or improved in the environment ofLGT, dispensing changes in this legal instrument. Therefore, it is possible to admit that the current needs of convergence inBrazil can be supplied through adjustments in the multi-award model, which promote changes in both Cable and Fust Laws,and in the infra-legal regulations of the National Agency for Telecommunications that reproduce the devices of these legalinstruments and that can be improved to better adapt to a convergent regulation, still retaining the General Law ofTelecommunications unchanged.THE AGENDA OF THE BRAZILIAN REGULATOROn October 30th, 2008, the National Agency for Telecommunications - Anatel published the General Update Plan onTelecommunications Regulation in Brazil (PGR) (ANATEL; 2008). It is an official agenda of the Agency, where theobjectives and review actions of the regulations in short, medium and long term are described.Among the many regulations update objectives in the PGR, it is highlighted: i) the intensification of broadband access inBrazil, recognizing that the broadband is the main vector of convergence in telecommunications; ii) the reduction of barriersto the access of low income classes and the expansion of the use of the network and services of telecommunications, aimingat the digital inclusion and “digitalization of economy”; iii) the diversification of telecommunication services offer, with theexpansion of convergent service offers and; iv) the expansion of pay-TV services, through broadband networks.As strategic purposes to achieve such objectives, the PGR mentions, among others, the “simplification of the regulationsfocusing at the convergence”, emphasizing the promotion of competition and the minimal intervention in the private life.In a short-term basis (up to two years since the publication of the plan), the PGR provides the following actions to stimulateconvergence: i) availability of radiofrequencies to the intensification of broadband; ii) study for the expansion of offer andcompetition through the resale of STFC, SMP, SCM services and provision of satellite capability and; iii) revision andplanning of grants for pay-TV services.In a medium-term basis (up to Five years since the publication of the plan), the PGR provides: i) the review and expansion oftypes of compensation networks to encourage competition and allow for expansion of inter-network traffic and ii) theevaluation of service provision to the long-distance modalities in a convergent environment.In a long-term basis (up to ten years from the publication of the plan), the PGR provides the regulation of a new convergentmodel of grants and the review of the pay-TV regulation.1 Described in Section 3.Proceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 304
  11. 11. Vargens Convergence and Regulation in Brazilian TelecommunicationsThe schedule of actions of PGR has been conceived by Anatel taking into consideration the scenery of legal changes,considering the processing of bills that propose changes in both Cable and Fust laws. This way, the short and medium termactions have been framed in more reduced deadlines because they do not depend on legal changes. For the actions of a newgrant model construction and of pay-TV regulation, Anatel specified a longer deadline considering that those actions dependon legal changes and that it demands more time for discussion among representatives and society and also for theaccomplishment of the legislation process in the National Congress.CONCLUSIONIn the light of international experience and current situation of Brazilian telecommunications industry, one can point out threemajor strategic challenges that the Government must undertake to fully enable the technological convergence in Brazil andobtain the benefits from it: (1) eliminate eventual excess in regulations; (2) direct the aim of the regulation to the services andnot to the technologies and; (3) promote policies that enable the expansion and universal access to the maintelecommunication services in the context of convergence. The conclusion of this article is that such thing is possible to beachieved within the regulatory framework of the General Telecommunications Act (BRASIL; 1997). The main obstructionsto the development of convergence in Brazil are not dealt in such Law, but in the Lei do Cabo (Cable Law) (BRASIL; 1995),which regulates the service of cable TV and by Lei do Fust (Fust Law) (BRASIL; 2000), which regulates the fund foruniversality of telecommunications in Brazil. Currently, in the Brazilian parliament, there are projects that propose changesin both laws, which may minimize or even eliminate such obstructions. In addition, several changes in the regulation arebeing proposed by the National Agency for Telecommunications, regarding the General Update Plan on TelecommunicationsRegulation in Brazil (PGR), published on October, 30th 2008 (ANATEL; 2008). Several pro-convergence measures arebeing proposed in this plan, in a schedule that goes from 2 to 10 years from the plan’s publishing date.REFERENCES1. Anatel (2008). Plano Geral de Atualização da Regulamentação das Telecomunicações no Brasil - PGR. Brasília: Resolution No. 516, October 30th, 2008. Available on: www.anatel.gov.br. Last access on: 06/06/2009.2. Anatel (2009). Dados Estatísticos dos Serviços de TV por Assinatura. Available on: http://www.anatel.gov.br/Portal/verificaDocumentos/documento.asp?numeroPublicacao=232842&assuntoPublicacao= Dados%20Estatísticos%20dos%20Serviços%20de%20TV%20por%20Assinatura%20- %20Cap.%2001%20%2038.ª%20Edição&caminhoRel=null&filtro=1&documentoPat h=232842.pdf. Last access on: 06/11/2009.3. Anatel (1998). Regulamento dos Serviços de Telecomunicações. Brasília: Resolution No. 73, November 25th, 1998. Available on: www.anatel.gov.br. Last access on: 06/06/2009.4. Brasil (2010). Projeto de Lei da Câmara nº 116/2010. Brasília: Available on: http://legis.senado.gov.br/mate- pdf/80127.pdf. Last access on: 14/01/2011.5. Brazil (2007). Projeto de Lei nº 1.481/2007. Brasília: Available on: http://www.camara.gov.br/sileg/MostrarIntegra.asp?CodTeor=478252. Last access on: 14/01/2011.6. Brazil (2000). Lei 9.998: Lei do Fust. Brasília: Available on: www.planalto.gov.br. Last access on: 06/06/2009.7. Brazil (1997). Lei 9.472: Lei Geral de Telecomunicações. Brasília: Available on: www.planalto.gov.br. Last access on: 06/06/2009.8. Brazil (1995). Lei 8.977: Lei do Cabo. Brasília: Available on: www.planalto.gov.br. Last access on: 06/06/2009.9. United States of America. (2009). A national broadband plan for our future. Available on: http://hraunfoss.fcc.gov/edocs_public/Query.do?mode=advance&rpt=cond. Last access on: 28/10/2009.Proceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 305
  12. 12. Vargens Convergence and Regulation in Brazilian Telecommunications10. United States of America. (2005). Guidelines – Internet policy statement: FCC 05-151. Available on: http://hraunfoss.fcc.gov.edocs_public/attachmatch/fcc-05-151a1.pdf. Last access on: 26/10/2009.11. IDA. (2008). Totally connected, wired and wireless. Singapore: Infocomm Development Authority of Singapore. Intelligent Nation 2015. Available on: http://www.ida.gov.sg. Last access on: 08/06/09.12. Kemmitt, Helen, Angel, John. (2009). The telecommunications regime in the United Kingdom. In: WALDEN, Ian (Comp.). Telecommunications Law and Regulation. Oxford: Oxford University Press, 2009. p. 121-166.13. Say, J. B. (1803). Tratado de economia política. São Paulo: Nova Cultural, 1986, 1ª ed. em francês em 1803.14. Vargens, J. R. (2005). Evolução das telecomunicações brasileiras na era da Internet. Rio de Janeiro: Instituto de Economia. Universidade Federal do Rio de Janeiro. Tese de doutoramento.15. Vargens, J. R. (2008). Reflexões sobre convergência e regulação das telecomunicações. Rio de Janeiro: Instituto de Pesquisa Econômica Aplicada – IPEA, IV Jornada de Estudos de Regulação, 31/10/2008 Available on: www.ipea.gov.br. Last Access on: 25/11/2008.ACRONYMS3G – Third GenerationADSL - Asymmetric Digital Subscriber LineAnacom – National Authority on Communications (Portuguese Regulator)Anatel – National Agency for Telecommunications (Brazilian Regulator)Art. - ArticleDSL - Digital Subscriber LineDTH - Direct to the HomeFCC - Federal Communications Commission (American Regulator)FTTH - Fiber to the HomeIDA - Info-communications Development Authority of SingaporeIP - Internet ProtocolIPTV - Television on Internet ProtocolLGT – General Telecommunications ActMIIT - Ministry of Industry and Information TechnologyMMDS - Multichannel Multipoint Distribution ServiceNGN – New Generation Networknº - NumberPGR – General Update Plan on Telecommunications Regulation in BrazilSCE – Electronic Communication ServiceSCM – Multimedia Communication ServiceSARFT – State Administration of Radio, Film and Television (China)SMC – Mobile ServiceSME – Specialized Mobile ServiceSMP – Personal Mobile ServiceProceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 306
  13. 13. Vargens Convergence and Regulation in Brazilian TelecommunicationsSTAP – Telephone Service Available to PublicSTFC – Fixed Switched Telephone ServiceSU - Universal ServiceTV - TelevisionTVA – Pay TelevisionVoD - Video on DemandWi-fi - Wireless FidelityWi-MAX - Worldwide Interoperability for Microwave AccessxDSL - Digital Subscriber Line FamilyProceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 307
  14. 14. Vargens Convergence and Regulation in Brazilian TelecommunicationsProceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 308

×