Brazil’s Senate Passes Significant Telecom Law Reform, Sector opens up to Private Investment

RIO DE JANEIRO, BRAZIL – The Senate passed last night, September 11th, Chamber Bill (PLC) no. 79/2016, which amends the fixed telecommunications concession system, as a means of authorizing the private sector to provide the service.

The bill provides that private companies should commit to investing in the high-capacity network infrastructure. Once approved, the project will be subject to presidential endorsement.

“It also seems to me that we all agree that it does not make sense for companies to continue investing in landline communications, that the population disregards in relation to mobile communications. We will follow the steps of this universalization to happen,” said Senator Daniella Ribeiro (PP-PB), the PLC’s rapporteur.

Among the senators who spoke in the debates on the subject, the majority was in favor of its approval. The government leader in the Senate, Fernando Bezerra (MDB-PE), said that the bill will enable investments by private companies in the sector. “The matter is significant, it is mature, ready to be discussed and will unlock important investments in the telecommunications sector”.

Major Olímpio (PSL-SP), party leader in the Chamber, believes that the development of technology will bring benefits in other areas. “Brazil is lacking this progress in telecommunications. When we invest in technology, in advanced communication, we are investing in agility for health, assistance, environment and safety”.

Randolfe Rodrigues (Rede-AP), on the other hand, challenged what he termed the “donation of public goods” to the private sector. “There are rash issues in this matter. We are handing over public concessions to the private sector. In practice, it donates public goods without any compensation”.

No Longer Public Regime

PLC 79/2016 brings several changes in the General Telecommunications Law (LGT). Today, the law provides that services deemed essential must be subject to certain obligations, such as universalization, continuity and affordable prices. These requirements are called public regime, a system that was only applied to landline communications.

Due to the privatization of the Telebrás System in the 1990s, the public regime also included the obligation of utilities (companies that paid for the right to operate the networks for 25 years) to return the infrastructure to the government by the end of the contract, which is now called “reversible assets”.

According to the PLC, these assets would not return to the State but would be delivered to the concessionaires (Telefônica, Oi and Embratel) in exchange for investment targets in broadband networks. The bill also enables that essential services no longer need to be provided under a public regime, allowing in practice for them not to be subject to universalization and continuity obligations.

The proposal allows companies with authorization to explore radio frequencies (bands used in services such as telecommunications and mobile broadband) to market this area. Currently, this is not allowed.

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