Volume 6, Number 3, Page 1

Telecommunications Laws in Brazil: A Summary

By Fabio de Sousa Coutinho and Allesandro Marius Oliveira Martins

Brazilian Telecommunications Code, EMBRATEL and the TELEBRAS System

The Brazilian Telecommunications Code regulated telecommunications services in Brazil for more than 35 years. It authorized the constitution of EMBRATEL (Empresa Brasileira de Telecomunicações S.A.). In 1972, TELEBRAS (Telecomunicações Brasileiras S.A.) was created with the purpose of promoting (through subsidiaries and associated companies) public telecommunications services in Brazil and abroad.

TELEBRAS was named a “general concessionaire” for public telecommunications services; its subsidiaries and associated companies were designated “delegate concessionaires.” TELEBRAS, its subsidiaries and its associated companies (including EMBRATEL) formed the TELEBRAS System.

Recently, the TELEBRAS System underwent a major restructuring, which included the privatization of companies that had been part of the system and encouraging greater investment and expansion of services. Important improvements have been undertaken, such as digitizing the conventional telephone network, digitizing the mobile cellular A Band, expanding the fiber optics network, expanding access capacity to the Internet, and installing the National Speed Network to support exploitation of sophisticated services such as multimedia, tele-medicine and tele-education.

General Telecommunications Law

The General Telecommunications Law which replaced the Telecommunications Code in July 1997 covers:

a) fundamental principles that govern the telecommunications industry of Brazil;

b) creation, operation and authority of the regulatory agency;

c) general organization of telecommunications services; and

d) restructuring and privatization of federal telecommunications companies, including TELEBRAS, EMBRATEL and the subsidiary companies that exploit mobile cellular services.

The purpose of the law is to insure that the telecommunications industry maintains free, broad and fair competition. It is subject to the general regulations protecting economic order. Acts adversely affecting free competition and free initiative in any form are prohibited.

The government is empowered to establish, by decree, telecommunications policy and limits on foreign participation in the capital stock of telecommunications service providers.

Regulatory Agency for Telecommunications (ANATEL)

One of the main innovations in the new law is the creation of the regulatory agency for telecommunications, the National Telecommunications Agency -ANATEL. Among ANATEL's functions are:

a) issue rules for granting, rendering and using telecommunications services in the public sector;

b) establish, control and monitor the tariff structure for each type of service rendered in the public sector;

c) sign and manage concession contracts;

d) issue procedural rules for providing telecommunications services in the private sector;

e) administer radio broadcasting and use of satellite orbits; and

f) supervise the rendering of the services and apply administrative sanctions to violators of telecommunications rules and regulations.

Telecommunications Services Systems: Public and Private

Brazilian regulation defines two systems for the rendering of telecommunications services: the public and the private.

Telecommunications services are considered within the public systems when they provide services of collective interest to Brazil. Public services are contracted out to private entities through concession or special permission.

A concession is granted only to companies organized under Brazilian law, with head offices and management in Brazil. Such companies must be created exclusively to provide the services outlined in their concession. The obligations of universality and continuity are applied to the concessionaire.

Three years after the signing of a concession contract, if there is true and general competition among telecommunications service providers, ANATEL may allow the concessionaires to set rates at their discretion.

Permission to provide telecommunications services is distinguished from concessions in the sense that it is granted on a purely temporary basis.

The telecommunications industry in the private sector is based on the constitutional principles of free competition and subject to the provisions of ANATEL. The prices charged by service providers in the private sector are freely determined. Nevertheless, any act detrimental to free competition will be subject to judicial action.

There is no limit on the number of authorizations to be issued by ANATEL to private sector entities, unless technical limitations exist or an excess of competitors begins to affect the rendering of public services.

The right to use a radio frequency, exclusively or not, is granted by ANATEL by means of a special authorization, linked to the concession, permission or authorization to render telecommunications services. Authorization to use of a radio frequency in the public sector is granted for the same period of time as that of the concession or permission with which it is associated.

TELEBRAS Privatization

The most significant date in the restructuring of the Brazilian telecommunication system was July 29, 1998. TELEBRAS, the holding company of the Brazilian telecommunications system, was privatized in Rio de Janeiro.

This process of privatization was initiated in 1997. The Brazilian Ministry of Communications held a public bid to grant concessions for cellular services in the “B” band. This was the first successful step in the process.

Thereafter, many concessions of various kinds of services (e.g., cable TV) were granted by the Ministry of communications (or ANATEL, which replaced the Ministry in the coordination of the process after the publication of the General Telecommunications Law).

But the highlight of the process was the TELEBRAS privatization. TELEBRAS was split into one long-distance carrier, three regular fixed telephony companies and eight cellular companies (“A” band).

The total minimum price, fixed by the Brazilian government, was approximately US$ 12 billion. Each company to be privatized had its own minimum price.

The results of the process will create many changes in the Brazilian telecommunications systems. Once the monopoly is broken, competition will finally be effective in this market. Foreign competitors likely will invest to upgrade the country's outdated phone technology. Concessionaires will need to invest in services, infrastructure and marketing in order to compete, not always the case in the monopoly era.

Fabio de Sousa Coutinho and Allesandro Marius Oliveira Martins are attorneys with Baker and McKenzie in Brasilia, Brazil. They can be contacted at (55-61) 327-3273