Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Thursday, September 24, 2020

Opportunity to debate regulation of Decree 690 and also the strategic role of ICT in the post-pandemic

An isolated measure does not seem valid if the government considers that the current regulation does not allow to reach an agreement on prices or establishing mechanisms so that prices result in “more people” hiring ICT services. To achieve greater digital inclusion, it should be based on a diagnosis that identifies barriers and articulates policies that consider the structure of the supply in different locations of the country, the levels of competition for service and barriers of the demand.

During the next two or three months, the Government and the private sector will deliberate to build the regulation of the standard that surprised the ICT industry by defining fixed, mobile and pay TV telecommunications services as public, essential and strategic in competition.

Decree 690 has greater consistency as it was immediately authorized in the Senate. Business sources consulted by Convergencia, see in the regulation a possibility of tempering the decree. They propose some basic rules, such as allowing increases or adjustments based on some type of index, and aspire to contemplate the concept of segmentation in a broad sense: residential market, companies, premium services, and the logic of packaging.

Concerning services for the end user, a senior official from the previous government interprets that as the decree is written, the government could propose two price regimes, one for internet and pay TV for providers of all sizes and another for mobile telephony, with only three operators but impacts on 90% of telecommunications users. Satellite television would be excluded from the definition of public service.

The dissatisfaction and the greatest resistance were due to the modification of article 54 of the Argentine Digital Law, which incorporates mobile telephony as a public service in all its forms, and determines prices regulated by the enforcement authority.

An isolated measure does not seem valid if the government considers that the current regulation does not allow reaching an agreement on prices or establishing mechanisms so that prices result in “more people” hiring ICT services. In order to achieve greater digital inclusion, a diagnosis should be made that identifies barriers and articulates policies that take into account the structure of the supply in different localities of the country, the levels of competition for services and the barriers of demand.

Regulatory asymmetry is being proposed by SME providers, while expressing fears about cross-subsidies from large competitors. But it is the definitions of asymmetries that are crossed: for some it is between large and small, for others it is between wholesale prices, the dollar values ??of dollarized equipment and services that are sold in pesos; for others the asymmetry is in access to passive infrastructure, etc.

It is worth asking: Is the problem of the digital divide in Argentina a matter of prices? Of what price? The end-user service, the device, or the services between operators? If the problem were the price, its root is in the offer. Lack of investment? Lack of competition? The abusive positions of any particular actor in the value chain? The recitals of the decree do not contemplate this context, they are based on human rights, freedom of expression, unquestionable issues promoted by multilateral organizations.

It is also worth asking why with the Argentine Digital Law there was no criticism of Article 15. Which said: ¨The nature of an essential and strategic public service of Information and Communication Technologies (ICT) in competition with use and access is recognized to telecommunications networks, for and between licensees of ICT Services. With this formula, the State intervened in interconnection conflicts between providers whose resolution is essential to promote competition. The DNU (Presidential Decree)added to this article a sentence: "The enforcement authority will guarantee its effective availability."

The original wording of article 48 of Law 27.078 established that ¨The tariffs of essential and strategic public services of ICT in competition, those provided based on the Universal Service and those determined by the Enforcement Authority for reasons of public interest may be regulated by it. There is logic in which the State reserves the right to evaluate, but it was easier 6 years ago than today, with a convergent environment.

For operators it is very worrying that the DNU changes the word "may" to "will". In addition, it is added to this article: "The enforcement authority shall establish in the regulations the compulsory universal basic benefit that will be provided under equal conditions."

Another dilemma posed by the decree is how Enacom is going to determine the right price in a convergent environment, with operators selling multiple services, including other applications. How it will determine the price and fair profitability in services as dissimilar as residential and business services, or those paid by governments, since operators have business units with products and services only for the state segment. Does the State have all this information?

The way out seems to be the agreement of parties to the regulation setting an indicator, that limits are established.

So far it could be interpreted that only with Article 15 unmodified, Article 48, a solid technical team at Enacom and the Secretariat for Innovation, an independent Competition Defense Commission, other complementary regulations, the exercise of State power and the goodwill of parties, the Argentine Digital Law offered a reasonable legal framework to promote price control in the context of the pandemic and a perspective of generating quality universal access.

The biggest contention is over the mobile service. The government argues that in the prepaid mobile phone, which is used by the population with lower purchasing power, the value of the second is more expensive than that of post-payment. Mobile operators do not even want to imagine that the price paid by 60% of their customers will be determined by the State.

Thinking that all ICT services should be public services at first glance is a modern concept: fixed telephony is in decline, but Movistar, Claro, Telecentro and more recently Telecom, install it in combination when a new client hires broadband. Mobile voice is being replaced by apps like WA, which operators promote as free (although it is implicit in the price). And sometimes those who have a public Wi-Fi nearby don't even need a mobile subscription.

Pay TV is another issue. Market actors consider that it is logical that if the price of telephony and internet is regulated, that of Pay TV is also regulated so that cross-subsidies can be avoided, but price control does not solve the problem of freedom of the multiplicity of voices, nor generation of local content.

So far, the decree shows that the center is placed on the user, but without knowing how their habits evolve. You want to regulate the price to promote or guarantee digital inclusion, without determining if that is the problem only for one service or for all. If it is a federal problem, or it applies only to some particular geographies. We all know that the price of the computer that was always the barrier to the Internet, or the smartphone that costs less and is subsidized by the operator (less and less).

The uproar over a price deal leaves collateral damage. Those who intend to imagine how the Decree originated are going the easy way of saying "it is against Clarín ... Cristina wrote it ...". But these assumptions can be questioned because if the Government wanted to annoy Telecom, it could have demanded the return of the remaining spectrum in the middle of the pandemic, which it had to deliver in July.

On another level, large providers now want SMEs by their side, and these are divided between those who prefer the approach but with the banner of asymmetries and together achieve a ¨sustainable¨ regulation, and the SMEs that feel used now that potatoes are burning. Large companies do not like asymmetries and try to discourage this idea that Cabase and cooperative federations use.

At this time, it would have been desirable to discuss the strategic role of ICT in the post-pandemic era. In any case, there is time to give that focus to the discussion. The fair debate can be the profit that the decree leaves. But of course, everyone will have to decline part of their interests.

If the situation is not unlocked with the regulation, investments may decrease and the effect will be negative for users, whether individuals or companies that need cutting-edge services to produce.

History. Through the end of the 90s, fixed telephony was the only massive service (mobile phones only appeared as a luxury object and the Internet has only been offered commercially since 1995) defined as a public service. The rate had three variables in its price: pulse, national and long distance. Six years after the privatization, it was decided to do a "tariff rebalancing." There were public hearings to discuss it. Not even the operators knew what the cost of generating a call was. To find out, the primitive Telecom hired a British consultancy that charged about a million dollars for its work, which, incidentally, did not provide details. In other words, since it did not have a precise cost, it was difficult to determine rates.

6,000. In the city of Buenos Aires there are 6,000 boys who cannot have remote education because the Internet does not reach their neighborhoods or because they cannot pay for it; or they lack computers. These black holes are repeated in the suburbs and large cities and also rural or isolated populations. Digital divide and social divide go hand in hand.

The intervention of the State, with the funds of the Universal Service, was not focused on this vulnerable population and only now have corrective measures been taken. Private parties also have responsibility for these situations.

It is worth asking how it can be that in "the opulent" capital of Argentina these inequities occur with access to the digital world, which now and always worsens the social gap. In some interviews, President Alberto Fernández mentioned the case of the 6,000 boys when the media asked him about Decree 690.

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