Scope of the Law
Prices and Rates
Rights of Way
Use of Satellites
Violations and Sanctions
In November 1991 the privatization of 41% of the former state telephone company (CANTV) led to the expansion and modernization of Venezuela's basic telephone services. A number of decrees followed the privatization, with the aim of opening the industry to private sector competition. The most significant decree created the National Telecommunications Commission (CONATEL), which introduced the Organic Telecommunications Law (June 12 2000) to replace the Telecommunications Law 1940.
Between 1991 and 1999 the telecommunications industry was the economy's fastest growing sector. Accumulated investment between 1992 and 1999 was approximately $6.5 billion. During 1998 the industry expanded by 23% despite a slowdown in the overall economy, and several political and legal changes within government structure. The sector has continued to grow and remains the country's second most important economic sector after oil.
Currently, the telephone market has approximately three million subscribers. The cellular market has grown from 85,000 subscribers in 1993 to 3.5 million in 1999. Venezuela is the most widely tapped cellular/personal communication systems market in Latin America. The granting of three concessions in 1996 and 1997 to develop the rural areas of the country, which included authorization to provide cellular services, has allowed new companies to join the industry. Internet and data usage has simultaneously grown between by 60% and 70%.
The CANTV monopoly for basic telecommunications services ended in November 2000, creating more competition in the industry. The National Telecommunications Plan, announced by the president in February 2000, confirms the state's willingness to promote competition in this sector.(1)
Since December 2000 basic telephone services have been open and new concessions have been granted for the use of the radio electric spectrum.
The Organic Telecommunications Law governs the following:
- the granting of authorizations and concessions;
- rights and obligations of customers and operators;
- powers of public administration;
- universal service and its funding;
- the Fund for Investigation and Development;
- the radio electric spectrum;
- use of satellites;
- certification of equipment;
- prices, tariffs and taxes; and
The law's main goal is to create favourable conditions for competition among operators, by adopting measures to eliminate or avoid the granting of exclusive rights.
The law is based on the following principles:
- promoting competition within the sector;
- supplying telecommunications services, to be provided by private companies (not by the government);
- future spectrum awards being available through public auction;
- tariffs being set freely by operators (except for services where there is a dominant carrier with a virtual monopoly);
- mandatory interconnection;
- establishing rights of way on existing ducts; and
- access to telecommunications services for all social classes and people living in remote areas.
Service providers fix their prices freely except in cases of (i) the universal service and (ii) abuse by a dominant position in the corresponding market (determined by the telecommunications and antitrust laws). In such cases CONATEL establishes the maximum rates to be charged for the relevant services.
Services can be provided by individuals or companies pursuant to an administrative authorization. Concessions are only awarded when allocating frequencies of the radio electric spectrum. Administrative authorization facilitates the establishment and development of networks, and the provision of telecommunications services. The specific activities and services that can be performed under an authorization (named attributes) grant the rights and obligations inherent to the activity being authorized. CONATEL has issued regulations describing each of the attributes that administrative authorizations may contain.
The provision of value added services does not require an authorization or concession. However, internet service providers require an authorization.
Activities involving the use of the radio electric spectrum require a concession from CONATEL. In selecting the appropriate entity to receive the concession, the following principles will be taken into account:
- plurality of contenders;
- fair competition;
- technological development and incentive for initiatives; and
- protection and guarantees for users.
The Organic Telecommunications Law details the public offer procedure for the concession to use and develop a limited resource, which contains a pre-qualification phase and a bidding phase. At the start of each year, CONATEL publishes the frequencies to be auctioned or allocated through direct award. Frequencies will not be auctioned if:
- they have low economic value;
- they are to be used for radio or television broadcasting;
- they are to be allocated to the state;
- no offers are received at auction; or
- they are to be allocated for the universal service.
The public auction process is supervised by the Public Auction Commission, comprising two members designated by the Ministry of Infrastructure and three designated by CONATEL. The general comptroller may also designate an officer to participate in the commission's meetings.
Operators will be able to use the existing general rights of way, as stipulated by CONATEL. The term 'rights of way' covers the means by which information is transmitted, as well as ducts and tubes.
New or established network operators are obliged to interconnect with other networks upon request. Interconnection is based on principles of neutrality, good faith, non-discrimination and equal access. Any operator may require the right to interconnect from another, and both parties must agree the terms (including interconnection fees). If they cannot agree, CONATEL will establish the technical and financial conditions of interconnection within a period of 60 days.
Interconnection between telecommunications operators are governed in detail by the regulations issued by CONATEL.
Telecommunications equipment is subject to CONATEL's certification. The quality of the networks must be guaranteed, as well as customer and operator security. Imported equipment that has been certified previously by an internationally recognized entity does not require a new certification from CONATEL.
Operators are subject to a telecommunications tax ranging from between 1% and 2.3% levied on gross income, payable to the National Treasury. Additionally, a 0.5% tax is payable to CONATEL. The use of the radio electric spectrum is levied with a tax ranging from between 0.5% and 2% on gross income.
Duties due upon the granting of an administrative authorization and concessions will be set by regulations to be issued by CONATEL, as expressly contemplated in the Telecommunications Law.
The use of satellite networks associated to the radio electric spectrum requires the granting of a concession. Concessionaires shall initiate operations within five years of the granting of the concession, with an extension of up to two years. Priority for the provision of satellite-based services is given to Venezuelan satellites, if they offer technical and financial conditions similar to foreign satellites. Foreign satellite operators wishing to provide services must have technical and commercial offices in Venezuela.
The term 'universal service' refers to a group of services that operators are obliged to provide to ensure minimum standards of access, regardless of geographical location.
The purpose of the service is to:
- maximize access to information;
- promote health and educational development;
- reduce discrepancies within the population's access to telecommunications services, as part of new social policies established by the government; and
- provide all persons with access to the public switched network, basic telephone systems and the Internet.
In assigning universal service obligations, CONATEL defines geographical areas and types of services required, and opens a public selection process in which all interested operators may participate. If fewer than two valid offers are received, CONATEL will assign the universal service obligation to one or more operators.
The infrastructure required to develop the universal service is subsidized by the Universal Service Fund. All operators, except those in broadcast television and radio, must contribute 1% of their gross income to the fund.
The Organic Telecommunications Law provides for the creation of the Telecommunications Investigation and Development Fund. All operators, except those in broadcast television and radio, must contribute 0.5% of their gross income to the fund.
The Organic Telecommunications Law clearly defines violations and administrative and penal sanctions. Violations range from lack of prompt notice to CONATEL regarding the interruption of services to wilful damage of telecommunications equipment and clandestine or fraudulent use of services. Sanctions include fines, revocation of authorizations or concessions, and imprisonment.
A series of new technologies is planned to improve quality of life for Venezuelan citizens. In addition to the Organic Telecommunications Law, a series of regulations have been issued detailing every aspect of the law. Such regulations include:
- regulations concerning administrative authorizations and concessions;
- interconnection regulations; and
- regulations on the opening of basic telecommunications services.
CONATEL has yet to pass other regulations concerning taxes and duties.
Bidding processes have been conducted by CONATEL in which wireless local loop concessions were granted.
Venezuela has actively participated in the Simon Bolivar Satellite Project, which involves member countries of the Andean Pact (Bolivia, Colombia, Ecuador, Peru and Venezuela) operating and controlling their own telecommunications satellite system. The project is backed by the Andean Committee of Telecommunications Authorities and the Andean Association of Telecommunications Companies.
For further information on this topic please contact Arnoldo Troconis, Fulvio Italiani or Isabella Reyna at D'Empaire Reyna Bermudez Abogados by telephone (+58 212 264 6244) or by fax (+58 212 264 7543) or by email ([email protected], [email protected] or [email protected]).
(1) The regulations that govern the competition process can be viewed on CONATEL's website at www.conatel.gov.ve/ns/index.htm