Prepaid Cellular Plans Are a Runaway Success

Prepaid Telephony
Prepaid Cards
Cellular Telephony Prepaid Service Regulation

Brazil has a singular history as far as the prepaid telecommunications industry is concerned. For economic and political reasons prepaid telephony was adopted in the 1970s. This update outlines the development of fixed and cellular telephony prepaid service plans and their recent penetration of the market as well as the regulatory framework.

Prepaid Telephony

Prepaid telephony was introduced by Companhia Telefônica Brasileira in 1972 when the first public telephone to be operated by special prepaid coins was installed in Rio de Janeiro.

A year later the government-owned TELEBRÁS system was incorporated, and started to acquire and absorb the companies that were providing telephone services in Brazil. Prior to TELEBRÁS's incorporation there were approximately 900 privately held licences for telephony services throughout the country. TELEBRÁS became the general concessionaire for the provision of domestic and international telephony services, except for four independent companies which retained their licences.

Special prepaid coins which enabled telephony access from public telephones were extensively produced throughout the country. At the time high inflation rates did not permit the development of public telephones fed by regular currency coins. Thus, any telephone call originating from a public telephone had to be made by using the special prepaid coins. Since there was no other option to pay for these calls, prepaid coins became rather popular.

Prepaid Cards

In 1992 at the Eco Rio-92 Summit the TELEBRÁS system introduced the first national prepaid card. The card was designed and intended to operate nationwide. The technology applied to the cards was considered to be state of the art and they replaced the prepaid telephone coins in a relatively short time. Prepaid telephone coins are now discontinued.

The prepaid cards developed by the TELEBRÁS system are still used by all telephony operators. By the end of 2000 there were almost 1 million public telephones nationwide, all operated by cards. The technical characteristics of the prepaid cards are still regulated by a TELEBRÁS internal rule (TELEBRÁS Practice 245-300-708 of December 1992) which, among other issues, defines the dimension, width, storage conditions, material and physical characteristics of the cards. According to this rule, the specifications shall follow the International Organization Standardization - ISO 2894. ISO 3554 is also referred to as an applicable rule.

Cellular Telephony Prepaid Service Regulation

Although fixed telephony is not governed by any particular rules (except those related to the technical specifications mentioned above) the National Telecommunications Agency ANATEL has issued Resolution 64 of October 20 1998 which regulates prepaid service plans for cellular telephony.

Migration formalities
If the user of a postpaid mobile cellular service plan wishes to change to any of the prepaid plans, he or she must notify the relevant service provider in writing. The purpose of this rule is to prohibit the provider from processing the automatic/compulsory transfers of users of other plans to prepaid plans.

Payment
Prepaid service users who make calls or accept reverse-charge calls are responsible for paying them in accordance with the subscribed tariff structure plan.

Validity term of credits
Generally the validity term of credits is 90 days from the application for such credits. If the credits are not used within this time then the terminal may receive incoming calls only for 30 days. Then both incoming and outgoing calls are blocked. The user can call the provider to activate existing credits or generate new credits at any time. However, if the user does not operate the terminal for 150 days the provider can discontinue the service. All prepaid plans permit real-time checks of existing credits. When the credits are about to finish the system alerts the user so that new credits can be applied for without disrupting the service.

Consumer protection
Consumer rights are established by the Consumer Protection Code Law 8,078/90.

Traffic information
Within the prepaid service provider's area of performance, the user is entitled to make and receive calls to and from all mobile or fixed telephony service users. The user has the right to request documentation from the provider in order to verify all charges placed against its credits.

ANATEL has published Resolution 245/00, which regulates the provision of prepaid cellular services for the new personal mobile service, which are being introduced this year (see Overview). According to this regulation, all prepaid cellular service companies shall necessarily offer prepaid service plans.

Prepaid Service Market Penetration

Cellular operators' prepaid service plans represent the vast majority of their sales. According to the regulatory agency, more than 90 prepaid service plans are registered and approved by it.

The diversity of prepaid cellular plans, together with the ongoing reduction in terminal prices enabled the number of prepaid mobile telephony terminals to grow more than 28 times between 1998 and 1999. According to ANATEL prepaid terminals already represent 59.7% of the 23.6 million cellphones currently in operation in the country. Within the last six months, prepaid service subscriptions gained 1% of market share over post paid subscriptions on a monthly basis.

For further information on this topic please contact Ricardo Barretto, Fabio F Kujawski or José Leça at Barretto Ferreira, Kujawski, Brancher e Gonçalves – Sociedade de Advogados by telephone (+55 11 3066 5999) or by fax (+55 11 3167 4735) or by e-mail ([email protected], [email protected] or [email protected]).