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

Vargens Convergence and Regulation in Brazilian Telecommunications

Proceedings of the 5th ACORN-REDECOM Conference, Lima, May 19-20th, 2011 295

Convergence and Regulation in Brazilian Telecommunications

Jose Rogerio Vargens

Oi Telecom and Paulista University

[email protected] - [email protected]

ABSTRACT

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.

Keywords

Telecommunications, convergence, competition, legislation, regulation.

INTRODUCTION

This paper summarizes the update process of Brazilian regulation facing the changes and challenges brought about

by technological convergence in the telecommunications industry. In order to achieve the proposed objective, it is divided in

nine sections, besides this introduction. In Section 2 there is the definition and explanation to what convergence is. In Section

3 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 the

development of convergence in the industry. Section 5 presents a summarized view of how telecommunication services are

classified in Brazil. Section 6 presents how technological convergence is provided in the Brazilian legal-regulatory

framework. Section 7 shows the legal impediments to the development of convergence in Brazil, while Section 8 analyzes if

the 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 to

update the Brazilian regulatory framework. Finally, Section 10 brings a conclusion to the paper.

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WHAT IS CONVERGENCE?

Technical definition: convergence is the transmission and the processing of any codified information as a bit in digital

networks. It can be understood as the orientation of all telecommunication services platforms to common and universal

patterns 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 a

single infrastructure; second, the packet switching and IP addressing made possible that more information could be

transmitted simultaneously using non-congested routes on the networks. With this, they have multiplied the transmission

capacity and reduced the transmission cost per bit.

Such process has happened in two phases. A first wave of Internet innovation has conditioned the evolution of

telecommunication in the 1990’s, through the expansion of dial-up, entry of new competitors and profound changes in the

organization of the industry. A second wave of Internet innovation has been occurring since 2000, based on broadband

connection and new technologies for client access and offering voice over IP. This new wave is strongly changing telecom

business, 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 be

called “IP communications”, replacing the previous paradigm of dedicated, analog and circuit switched fixed telephony

network (VARGENS; 2005; p. 3-4).

Commercial definition: convergence means to make it possible to the user the access to information and communication at

anytime, 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 be

completely achieved, but which offers the strategic direction for companies to improve their competitiveness in an industry

increasingly dynamic and competitive. In other words, it is impossible, in practice, to enable the user to always have the

possibility 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 or

office and outside (when traveling, for instance), the better it will be attending the needs of the user, concerning the

communication and information, and more competitive it will be.

Regulatory definition: convergence is to allow the development and the offer of many kinds of information and

communication 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 in

which all citizens would have access to all services of telecommunications on any kind of platform. Despite the practical

impossibility of this ideal, it translates into a strategic orientation to the public policies for telecommunications which can be

implemented through specific programs. For example, the government of Singapore aims to create an intelligent nation in

2015 enabling the broad convergence in telecommunications (IDA; 2008). To do so, it is assumed that 90% of broadband

penetration in the population is a tangible goal that embodies almost all the benefits of convergence.

PRINCIPLES AND REGULATORY MECHANISMS TO STIMULATE CONVERGENCE

The development of technological convergence in the industry of telecommunications and the achievement of benefits and

opportunities resulting of from it are favored by the existence of a regulatory environment that meets some principles and

regulatory mechanisms. Among those principles and mechanisms, six are highlighted, as follows:

Technological neutrality

All providers of telecommunication services should be free to choose the network and the technology with which they will

offer their services. Whenever this principle is not observed, there is the violation of the property of convergence that all

services can be deployed on any available network. By the principle of technological neutrality, services must be regulated

according to their functions and purposes to the users, regardless the technology used in the production process.

Freedom of services offer



All providers must be free to offer any kind of information and telecommunication service to consumers. Whenever this

principle is not observed, the benefits of customers from the company which was barred from offering determined kind of

service is reduced, by restricting their possibility to access information and communication in anytime, anyplace and

anydevice conditions.

Absence of institutional-regulatory entry barriers

The presence of institutional-regulatory barriers to the entry of companies in the telecommunication market restricts the

actions of competitive firms and violates the premise of convergence that the user can choose any provider to supply them

with all available services and new services that may be developed in the future.

Pro-competition regulation

Once a competitive instructional model is decided for the telecommunication sector, the regulation must allow the market

forces act on the industry and must only interfere in case of market failure and abuse –or a threat of it- of economic power.

Interconnection

As convergence requires the provision of telecommunication services on the various existing networks, these networks must

be interconnected to allow communication among users of different networks. By introducing the possibility of all networks

communicating among themselves, the interconnection benefits all users and adds value to all companies in the industry. In

addition, the remuneration scheme of interconnection must not create competitive distortions and allow drainage of the

economic value from a competitor to the other. The ideal remuneration scheme is the one which makes the interconnection

market (or secondary) an efficient market, in which the sum of transactions would preclude the achievement of extraordinary

economic profits (normal return theory).

Digital Inclusion Policy

The Government must recognize that the market forces have no ability to disseminate the benefits of convergence to all

population, but only to whom can pay and to those who are where there is an offer of viable network. Market solutions are

viable to higher income classes and in urban areas. To lower income classes and to rural areas and small cities, the

dissemination of the convergence benefits demands public policies solutions that allow their inclusion in the digital world.

THE ROUTES FOR CONVERGENCE ADOPTED WORLDWIDE

There are two commonly adopted routes to the adequacy of the regulatory environment of emerging convergence in the

telecommunications 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 their

services. Such model demands a broad review of the national regulation framework, in order to change the several laws and

regulations, traditionally applicable to specific services, and replace them with new legal instruments and regulations that

generally apply to all services.

The main experience with this kind of model comes from the European Union, which determined the unification of grants of

member countries in the regulation reform of 2002, under the label of Electronic Communication Service (ECS). The system

of grants of the European Union is illustrated in Figure 1. The ECS is the only grant under which all telecommunication

services may be offered. There are no significant institutional-regulatory entry barriers, for there is no need for asking for

permission to render ECS, the provider must only notify the regulation authority that they are providing ECS.



Source: ANACOM (www.anacom.pt).

Figure 1 – European Union System of Grants

Depending 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 requirements

aimed 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 environment

of convergence: i) it is neutral from the technological point of view, because the regulation of the ECS does not condition any

type 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 imperfect

competition; iv) there are guidelines and obligations for interconnection among networks and; v) provides digital inclusion

policies 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 to

national priorities.

In the United Kingdom, the government recognizes that broadband connection is of crucial importance to keep the country’s

position in the global economy and, therefore, it focuses on incentives for development of next generation networks to match

its performance to the performance of international competitors to offer services and applications on broadband. The

challenge is to stimulate the investment in such new networks and, at the same time, keep competition in the market. In an

attempt 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 of



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 increasing

the capacity of telecommunication networks to support even more services. Consequently, the government has asked the

Portuguese Regulatory Agency to act in the identification of the main barriers to the development of next generation

networks and in proposing the means to overcome them. Simultaneously, some operators signed a protocol defining a set of

short-term investment goals. Among the goals, making Portugal one of the major European countries with the highest

penetration 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 that

has 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 and

coaxial 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 is

experiencing the development of several convergent telecommunication services. Among them, the launch of digital

terrestrial TV in 2005; (ii) the launch of the first offer of FTTH (made by Orange and Free Enterprises) and the first offer of

mobile television in third generation networks (3G), both in 2006. The development of new TV platforms, especially video

over ADSL technology, has created a proliferation of pay-TV distributors. As a result, the number of subscribers of TV on

DSL 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 and

regulatory 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 specified

telecommunication services, but has undertaken changes in its regulatory framework with the Telecommunications Act of



1996, aiming at adapting it to the emerging convergent environment at the time. These adjustments aimed at reducing the

institutional-regulatory entry barriers, permitting the freedom of offer by any firm, stimulating competition in the industry

and 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 that

telecommunication services be regulated and the information services are free. This view assumes freedom of supply and use

of services and applications on the Internet, classified as information services. Being regarded as the backbone of

technological 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 Federal

Communications Commission (FCC) has the duty to preserve and promote the open and dynamic character of Internet, once

the telecommunications market entries the era of broadband connections. Encourage the creation, adoption and use of

broadband content, applications, services and attachments, and ensure that users will benefit from innovations that arise as a

result 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 of

public 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 States

focuses on the intensification of broadband connections in the country as a platform to enable convergence. The American

Recovery 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 national

broadband 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 the

telecommunication convergence environment. In China, the telecommunications network, the cable network and the Internet

are run by different regulators. The Ministry of Industry and Information Technology (MIIT) regulates the

telecommunications network through a vertical regulation system. The TV & radio network is regulated by SARFT (State

Administration of Radio, Film and Television) through a four-layer structure in broadcasting and regulation of central

government, provincial (autonomous regions & towns), city (regional or municipal), and county (city). The Internet

infrastructure 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 the

Dispositions on Foreign Investment in Telecommunications. The laws of radio and TV industry include the Provisions on

Supervision of Radio & TV, the Dispositions on Infrastructure Protection for Radio & TV, the Dispositions on Installations

of terrestrial reception for TV Broadcasting through Satellite. The legal structure of the Internet industry has its main focus

on 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 are

necessary to the services of radio and TV. Telecommunication Operators need a License for the Telecommunication Basic

Services 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 and

wireless broadband, in order to accelerate business and the application of services and to improve China’s competitiveness in

key technologies. Despite the mutual access only partially occur among the telecommunication networks and radio & TV



networks, a Circular on Policies to Encourage the Development of Digital TV has been published, in order to encourage

Radio & TV agencies to use public telecommunication and radio & TV networks to provide services in the area of digital TV

and telecommunications with added value. At the present, some Chinese cable TV companies have already entered the

broadband services.

SERVICES, GRANTS AND TECHNOLOGIES IN BRAZIL

In 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 and

are not object of commercial manipulation.

To simplify the representation of the Brazilian model of grants, Figure 2 explains the Five main types of services of

telecommunications 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 (Open

Radio and TV).

Source: Elaborated by the author.

Figure 2 - Model of grants for telecommunications in Brazil

The concessions for radio broadcasting make possible the broadcasting of TV and Radio. Such services are regulated by the

Ministry 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 Telephone

Service (STFC). Mobile telephony is mainly offered through authorization of the Personal Mobile Service (SMP), although

there 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 of

the distribution of pay-TV signal through cable; ii) the Multichannel Multipoint Distribution Service (MMDH), based on the

wireless distribution of pay-TV signals through terrestrial antennas; iii) the services DTH (Direct to The Home), where the

pay-TV signals are distributed via satellite and; the former pay-TV service (TVA). The pay-TV services are distinguished

only by the technology used in their transmission and distribution, and not by their functions. The customer does not notice

the 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 in

the Brazilian system of grants classification all the services that do not fit into other grants. Thus, SCM is a service defined

by what it is not. In other words, what cannot be classified in the other grants is SCM. Actually, there is the express

determination in the Regulations of the SCM for the service not to be misunderstood with the STFC and it cannot be used to



connect 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 FRAMEWORK

The General Telecommunications Act - LGT (BRAZIL; 1997) provides most regulatory principles which enable the

technological 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 the

private system, Art. 128 in LGT states that freedom will be the rule, that the imposition of necessary administrative

conditions will observe the demand of minimum intervention on private life and that no authorization will be denied, except

for relevant reason. Any company can easily obtain authorization for providing STFC and SCM services in private system in

Brazil.

LGT also strictly demands the interconnection among telecommunication networks, stating, in Art. 146, that the networks

will 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. 22

in this regulation states that “the telecommunication services will be defined according to the user finality, regardless the

technology used and they will be provided through different modalities defined in the terms of art. 69 in Law 9,472 from

1997”(ANATEL; 1998).

Legal barriers to the development of convergence in Brazil

The 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 to

fund 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, the

telecommunication industry hasn’t had yet the convergent features of the present day. There still was the technological

paradigm of dedicated analogue networks, where STFC was the specific service to be offered on its own network, as well as

the pay-TV services. The Internet was in its initial stages of development in Brazil and the communication over the Internet

Protocol (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, through

transport by physical means”. This definition violates the principle of technological neutrality, for which the service must be

regulated according to its functions and finalities to the user, regardless the technology. Due to this distortion of the

regulatory framework, there are four co-existing pay-TV services (Cable TV, MMDS, DTH and TVA) which are similar

from 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) states

that 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. 13

from the same Law.

In addition, the Cable Law violates the services offer freedom principle, once the Art. 15 restricts the operation of

telecommunication concessionaires only in cases of manifested lack of interest by private companies, characterized by

unresponsiveness to public notice on a specific area of service.



The Fund for Universal Telecommunication Services Law (Lei do Fust) was published after the LGT, but in a moment in

which the technological paradigm of convergence hasn’t been clearly outlined yet in the telecommunication industry and that

the 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 the

universality of this service, excluding, consequently, the other services. In the current configuration of global

telecommunications, the universal access to broadband and mobile telephone services can be considered at least as important

as the universal access to fixed telephony. This way, the Lei do Fust restricts the use of the fund for universality as an

instrument of public policy capable of providing that the benefits of technological convergence reach the whole Brazilian

population.

The restrictions contained in the Cable Law and in the Lei do Fust hinder the performance of the bodies responsible for the

regulation and for the public policy in the sense of encouraging the development of Brazilian telecommunications in the

convergence 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 other

municipalities, but the broadband networks will connect all the municipal head offices by the end of 2010 through the

backhaul of concessionaries of STFC. Many of those municipalities could be attended the TV service on DSL technology by

the 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 broadband

access from these companies.

By preventing that resources from Fust are applied in the universality of broadband, the Lei do Fust hinders the

Government’s political involvement to intensify such service, as have countries like the United States, the United Kingdom

and Portugal done. Even with all Brazilian municipalities connected to the national backbone, as it has been done with the

goal of backhaul of concessionaries of STFC, there won’t be the intensification of broadband without incentives to the

demand. 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, as

verified after the privatization of fixed telephony in Brazil in 1998, when the concessionaries expanded the individual

telephone service to all cities with over 300 inhabitants. There were no demands in many of those cities, due to the low

income of their population, resulting in idle networks and socially inefficient allocation of investments. Alongside the

expansion of broadband delivery, the telecommunications public policy must also provide incentives to the demand of the

service, 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 (Cable

and Fust). The House Bill No. 116/2010 (BRAZIL; 2010) proposes an amendment to the Cable Law relaxing the restriction

to 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 also

achieve broadband projects.

POSSIBLE PATHS FOR A PRO-CONVERGENCE REGULATION IN BRAZIL

In theory, both the path of unification of grants and the adjustments in the multi-award model can be traced in order to make

the 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 the

regulatory framework, with changes in LGT, in Cable Law and in a large part of the regulations of Anatel. In turn, the

adjustments on the multi-award model would also imply in changes in those regulatory and legal instruments, probably in a

smaller scale.



Is 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 in

particular:

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 the

telecommunications industry in Brazil. The three conditions above are possible to be met or improved in the environment of

LGT, dispensing changes in this legal instrument. Therefore, it is possible to admit that the current needs of convergence in

Brazil 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 legal

instruments and that can be improved to better adapt to a convergent regulation, still retaining the General Law of

Telecommunications unchanged.

THE AGENDA OF THE BRAZILIAN REGULATOR

On October 30th, 2008, the National Agency for Telecommunications - Anatel published the General Update Plan on

Telecommunications Regulation in Brazil (PGR) (ANATEL; 2008). It is an official agenda of the Agency, where the

objectives 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 in

Brazil, recognizing that the broadband is the main vector of convergence in telecommunications; ii) the reduction of barriers

to the access of low income classes and the expansion of the use of the network and services of telecommunications, aiming

at the digital inclusion and “digitalization of economy”; iii) the diversification of telecommunication services offer, with the

expansion 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 regulations

focusing 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 stimulate

convergence: i) availability of radiofrequencies to the intensification of broadband; ii) study for the expansion of offer and

competition through the resale of STFC, SMP, SCM services and provision of satellite capability and; iii) revision and

planning 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 of

types of compensation networks to encourage competition and allow for expansion of inter-network traffic and ii) the

evaluation 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 convergent

model of grants and the review of the pay-TV regulation.

1 Described in Section 3.



The 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 term

actions have been framed in more reduced deadlines because they do not depend on legal changes. For the actions of a new

grant model construction and of pay-TV regulation, Anatel specified a longer deadline considering that those actions depend

on legal changes and that it demands more time for discussion among representatives and society and also for the

accomplishment of the legislation process in the National Congress.

CONCLUSION

In the light of international experience and current situation of Brazilian telecommunications industry, one can point out three

major strategic challenges that the Government must undertake to fully enable the technological convergence in Brazil and

obtain the benefits from it: (1) eliminate eventual excess in regulations; (2) direct the aim of the regulation to the services and

not to the technologies and; (3) promote policies that enable the expansion and universal access to the main

telecommunication services in the context of convergence. The conclusion of this article is that such thing is possible to be

achieved within the regulatory framework of the General Telecommunications Act (BRASIL; 1997). The main obstructions

to 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 for

universality of telecommunications in Brazil. Currently, in the Brazilian parliament, there are projects that propose changes

in both laws, which may minimize or even eliminate such obstructions. In addition, several changes in the regulation are

being proposed by the National Agency for Telecommunications, regarding the General Update Plan on Telecommunications

Regulation in Brazil (PGR), published on October, 30th 2008 (ANATEL; 2008). Several pro-convergence measures are

being proposed in this plan, in a schedule that goes from 2 to 10 years from the plan’s publishing date.

REFERENCES

1. 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.

http://www.anatel.gov.br/

http://www.anatel.gov.br/Portal/verificaDocumentos/documento.asp?numeroPublicacao=232842&assuntoPublicacao=Dados%20Estatísticos%20dos%20Serviços%20de%20TV%20por%20Assinatura%20-%20Cap.%2001%20%20%2038.ª%20Edição&caminhoRel=null&filtro=1&documentoPath=232842.pdf



http://www.anatel.gov.br/

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10. United States of America. (2005). Guidelines – Internet policy statement: FCC 05-151. Available on:

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(Comp.). Telecommunications Law and Regulation. Oxford: Oxford University Press, 2009. p. 121-166.

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www.ipea.gov.br. Last Access on: 25/11/2008.

ACRONYMS

3G – Third Generation

ADSL - Asymmetric Digital Subscriber Line

Anacom – National Authority on Communications (Portuguese Regulator)

Anatel – National Agency for Telecommunications (Brazilian Regulator)

Art. - Article

DSL - Digital Subscriber Line

DTH - Direct to the Home

FCC - Federal Communications Commission (American Regulator)

FTTH - Fiber to the Home

IDA - Info-communications Development Authority of Singapore

IP - Internet Protocol

IPTV - Television on Internet Protocol

LGT – General Telecommunications Act

MIIT - Ministry of Industry and Information Technology

MMDS - Multichannel Multipoint Distribution Service

NGN – New Generation Network

nº - Number

PGR – General Update Plan on Telecommunications Regulation in Brazil

SCE – Electronic Communication Service

SCM – Multimedia Communication Service

SARFT – State Administration of Radio, Film and Television (China)

SMC – Mobile Service

SME – Specialized Mobile Service

SMP – Personal Mobile Service

http://www.ida.gov.sg/

http://www.ipea.gov.br/



STAP – Telephone Service Available to Public

STFC – Fixed Switched Telephone Service

SU - Universal Service

TV - Television

TVA – Pay Television

VoD - Video on Demand

Wi-fi - Wireless Fidelity

Wi-MAX - Worldwide Interoperability for Microwave Access

xDSL - Digital Subscriber Line Family



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