The Brazilian government has announced that, in the context of a National Broadband Plan, it intends to provide broadband internet connectivity through a public company, whose network is going to be based mainly on assets held by state-owned electric and oil companies. The purpose is to promote digital inclusion, fostering competition. However, in view of the legal regime in force, the direct intervention of the State in the provision of telecommunications services raises some doubts.
In the early 90s, the model for the provision of telecommunications services in Brazil was showing clear signs of inadequacy in face of the needs of the population for fixed and mobile services, which could not be offered by the government (through the so-called Telebrás System), given a chronic lack of investment.
In this context, in August 1995, Constitutional Amendment No. 8 amended the 1988 Federal Constitution to allow the Federal Government to “render telecommunications services, directly or through authorisation, concession or permission, in accordance with the law, which shall set forth the organization of the services, the creation of a regulatory agency and other institutional aspects.” [Emphasis added.]
As a result, the General Telecommunications Law (GTL) was enacted in July 1997. The GTL created a regulatory agency for the telecommunications sector: the National Telecommunications Agency – ANATEL, ordered the privatisation of Telebrás System, and organised the provision of telecommunications services based on two pillars: universal access and full competition.
In short, the GTL divided telecommunications services into two different categories: services provided under the public regime, with obligations of universal service and continuity; and services provided under the private regime, based on the constitutional principles of economic activity, among them, free initiative and free competition. The GTL also provided that the right to render services under the public regime would be granted only through concessions, whereas the right to render services under the private regime would be granted through mere authorisations.
More specifically, the General Licensing Plan, a major landmark for the Brazilian telecommunications model, determined that Public Switched Telephony Service (PSTN) would be the sole service rendered under public regime, while all other telecommunications services were to be rendered solely under the private regime. The GTL reserved to the State the role of regulation and inspection of these services. Thus, the provision of telecommunications services by the State is limited to remedying the cases in which the PSTN concessionaries do not provide adequate service or in the event of a lack of interest from the private sector in the provision of such service.
In this scenario, in principle, the Federal Government is prevented from providing broadband service, a service not rendered under public regime and reserved by law to private initiative.
Even if this issue could be overcome, the creation of a state-owned company for purposes of providing broadband access may harm the public interest.
First, because this kind of government initiative generally discourages private investment. The return of a state-owned company to the telecommunications market may prejudice competition instead of fostering it, as well as lead to the restoration of a government monopoly. In effect, the participation in the telecommunications market of a company which is controlled by those who regulate and inspect the sector threatens fair competition.
Second, because although the GTL sets forth that the providers of telecommunications services of collective interest are entitled to use infrastructure belonging to or controlled by telecommunications service providers and providers of other services of public interest in a non-discriminatory manner and with fair and reasonable price conditions, the government had already stated its intent to use the infrastructure held by state-owned electric and oil companies, apparently without complying with current regulatory procedures aimed at ensuring equal right of access to all operators.
Finally, network neutrality should be a concern given that, while the GTL sets forth that networks shall be organised in the form of integrated highways of free circulation, assuring to all operators access on a non-discriminatory basis, the government has announced that access to the state-owned network may only be allowed to companies that agree to participate in the National Broadband Plan by providing the last mile.
These are just a few considerations in the complex debate of the popularization of broadband access in Brazil. Although digital inclusion is highly desirable, these and other questions should guide the discussions around government initiatives, under penalty of seriously compromising the actual real interest. Further, the return of government to the telecommunications market should be the last alternative to be considered, and only after all other alternatives are tried and found wanting, including those that are already being discussed in the Congress, such as the use of the Fund for the Universal Telecommunications Service – FUST, which currently holds roughly US$5 billion that has really never been used.