Fixed broadband caps, an old trend revisited in LatAm

Bnamericas Published: Saturday, May 14, 2016

Brazil's Vivo, the local subsidiary of Spanish Telefónica and the leading Brazilian telco, caused an uproar when it announced recently that it would start reviewing the data cap procedures on its fixed broadband plans as from 2017.

The idea was to adopt monthly data allowances, as is already the case with mobile plans. Therefore, those who exceed the limit and do not pay an extra fee for a larger data allowance could have their speed throttled - or even see their internet service cut off.

Other operators, including NET/Claro, from the América Móvil group, and Brazil's Oi, said they may go the same route. Oi argues it has large data allowances, hence the reason why charging extra, throttling or cutting has not been necessary. TIM, which sells fixed broadband through its Live TIM service, explicitly rejected putting limits.

As the public outcry grew, telecoms regulator Anatel vetoed the adoption of caps until further discussions are held. The communications ministry wants a negotiated solution, in which both unlimited and limited plans coexist.

The Americas is the region with the highest rate of countries offering basic fixed-broadband services with unlimited data caps, according to the International Telecommunications Union's 2015 Measuring the Internet Society report. It states that 33 out of 35 countries offered in no limits on data for their basic monthly subscription in 2014. Caps on these plans were applied only in Canada (40 GB) and Uruguay (5 GB). Worldwide, over two thirds (70%) of the countries had a basic fixed-broadband basket with unlimited data allowance that year, compared to 65% in 2013.

But while unlimited data plans in the region give internet users an apparent advantage compared to other regions, speeds are relatively limited, ITU said.

Also, when it comes to premium plans, limits are way more common. Telefónica applies them in Chile and in Mexico, and may do so in Argentina and Spain as well.

José Otero, director for Latin America at 5G Americas, defends the caps. He told BNamericas that caps are so high that the vast majority of users do not reach them, and that they've been in place in markets such as the US for years. The country's main carriers - AT&T, Comcast and Verizon - all have them in force.

ln Brazil, the limits imposed by Vivo are lower than those from Movistar in Chile. Vivo's monthly limit varies between 10 GB and 130 GB, depending on the speed hired. Low limits can affect video streaming consumption, for example.

The discussion in Brazil extends to whether companies can cut off internet or reduce speeds once the caps are reached. Are those measures lawful or not?

"They do not infringe the law if applied to new contracts and if provided in the contracts," Eduardo Tude, head of Brazil's research and consultancy firm Teleco, told BNamericas.

In his opinion, the matter is commercial, and the consumption of data is growing intensely. "I think charging based upon usage is much fairer," he said.

At a commission in congress, Anatel member Rodrigo Zerbone explained that the practice of charging for extra data is not prohibited in any country.

According to local consumer protection associates and legal experts, the country's internet bill of rights states that the internet is an essential service and can only be cut off due to lack of payment. They also see charging after the caps as a form of double charging, which consumer laws would prohibit.

"The interruption of service once cap is reached is illegal, but measures such as charging extra and speed reduction are set out in the regulations in force and can be applied," digital rights expert Victor Haikal told BNamericas.

BNamericas asked Vivo several questions about the caps, including which aspects of the legislation the carrier bases the practice on, but the company declined to comment, as did Teléfonica when asked about its cap plans across the region.

Vivo previously argued that the cap benefits users who make less data-intensive use of the plans (sending e-mails or browsing, for example), who would pay less, whereas those consuming more bandwidth would pay more.

CEO Amos Genish has been saying Brazilian regulation allows for it, and that carriers have the right to place limits on usage.

"Vivo presenting potential data packaging for fixed broadband from 2017 onwards is not a first. We are the third local operator joining this trend. It's a worldwide trend, you have AT&T, Verizon, Comcast in the US, Bell Canada, British Telecom and many others all having some caps on fixed broadband," Genish said in a conference call with analysts on April 29.

There is also a problem of legal attribution. According to legislation in Brazil and many other Latin American countries, internet is framed as a value-added service, and not a pure telecom service.

However, a source at the Brazilian communications ministry told BNamericas that even if Anatel does not regulate internet services, it does regulate the relationship between operators and users. "And who offers internet access?" the source said.

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