On January 27, 2016 the Brazilian government started a consultation on the rules that are intended to complement the country’s Internet Civil Framework of 2014. These provisions will define the detail of net neutrality regulations in the country. In particular, a proposed complete ban on zero-rated offers signals the government’s willingness to take a radical approach; this is something legislators should think through carefully given the popularity of such offers in the mobile market.
Zero-rating is currently popular in Brazil and plays a role in getting people online
Of the provisions related to net neutrality, the most striking one is in Article 8 of the draft and relates to partnerships between Internet service providers (ISPs) and application providers (i.e., OTTs). In its current form the provision states that such agreements must preserve the public and unrestricted nature of Internet access; any agreement that entailed discriminatory prioritization of data packets would therefore be forbidden. Such agreements would also be subject to prior approval by the national telecoms regulator, Anatel.
The above provisions mean that the practice of zero-rating – offering access to a given application outside the user’s monthly data bundle – would not be possible. This is something legislators should carefully think about before passing the new provisions, because zero-rated offers from popular OTTs such as WhatsApp, Twitter, and Facebook are currently marketed by some of the main operators in the country (TIM Brasil and Claro in particular) and are likely to play an important role in attracting customers. In the last two years 4G connections have been growing rapidly in the country; in particular, the number of 4G smartphones in the country has grown four-fold in the last year, reaching 25.4 million in 4Q15 compared to 6.8 million at the end of 2014.
Internationally, regulators have taken a mix of approaches to zero-rated offers. As Ovum noted in the report The Regulatory Position on Telco–OTT Partnerships, regulators in some countries (e.g., the Netherlands, Slovenia) have opted for an outright ban, whereas others (the US in particular) have adopted what we believe is a more sensible case-by-case approach. The approach in Chile is also quite striking: the regulator formally banned zero-rating in 2014, yet operators are, in practice, still marketing zero-rated offers. Regulators should look to create frameworks in which telcos and OTTs can experiment with different business and pricing models. At the same time, operators should look to diversify their offers to ensure that customers continue to have sufficient choice. This should minimize the likelihood of regulatory intervention.
Stakeholders have the opportunity to comment on the Brazilian government’s draft proposal until the end of February 2016.
The Regulatory Position on Telco–OTT Partnerships, TE0007-000925 (July 2015)
Luca Schiavoni, Senior Analyst, Regulation