TELECOMMUNICATIONS REGULATION IN CHILE  

Introduction 

In Chile, regulatory powers regarding telecommunications – including the enactment of non-statutory regulations, regulatory interpretation, the issuance of operating permits, industry promotion, the setting of rates, the imposition of sanctions, the administration of radio frequencies, etc – are primarily vested in the government, through the Ministry of Transport and Telecommunications (MTT), specifically in the Undersecretary of Telecommunications (Subtel). There are a few exceptions:

(a) Regulation of broadcasting content on open-access and pay-TV television services, which is carried out by the National Television Council (Consejo Nacional de Televisión – CNTV). CNTV is a regulatory body appointed by the government, subject to Senate approval. CNTV also grants open-access television concessions; Subtel regulates matters related to open-access television concessions only as a technical authority, although pay-TV permits are granted directly by Subtel.

(b) The setting of rates consumers must pay for telecommunications services. Rates can only be fixed by the authorities if the Court for the Defence of Free Competition (Tribunal de Defensa de la Libre Competencia – TDLC) makes a ruling ordering such an action.

There are also certain matters for which MTT and Subtel's areas of jurisdiction overlap with those of other public bodies, requiring co-ordination amongst those parties concerned. Such co-ordination occurs mainly in regard to concerns over protecting competition in the sector and is undertaken in conjunction with the National Prosecutor’s Office of Economic Affairs (Fiscalía Nacional Económica – FNE), which investigates antitrust matters, and in conjunction with the National Consumer Service (Servicio Nacional del Consumidor – SERNAC).

It should also be acknowledged that at times of constitutional exception, control of all or parts of the telecommunications sector resides with the Department for National Defence.

More recently, a joint public-private institution was created to manage matters related to the new law on 'portability' (the right to keep a mobile phone number when changing phone company). Legislation passed last year created the Administrative Agency of Numeric Portability (Organismo Administrador de la Portabilidad Numérica) to manage the centralised databases that 'portability' requires. These databases are consigned by law to a private organisation, chosen via a bidding process involving market operators and subject to Subtel’s approval. The Administrative Agency will be funded through investments made by market operators, and through fees paid by 'portability' service users. Nevertheless, the Administrative Agency will act independently of the operators that finance it.

Regulatory Framework  

The telecoms industry is regulated by the General Telecommunications Law No. 18.168 of 1982 (LGT), which sets out the following: precise sector definitions, particularly in regards to freedom of access to the telecoms industry; rules governing the installation, operation and development of several telecommunications services; fundamental rules of how services should function, such as the interconnections system and the use of networks and other third party media, and overall directives for the proper use of infrastructure supporting telecommunications services; legal protection of user rights; the subsidies regime for urban and rural telecoms projects offering little to no private sector profitability; pricing regimes; fee structures for radio spectrum use; and the infractions and penalties regime.

Besides the LGT, Law No. 18.838 must also be taken into account. This law regulates, as mentioned above, CNTV's control – always ex-post – over programme content on open-access and pay-TV, the procedure for granting open-access television concessions, the subsidies system for a television network’s physical expansion, and quality programming, among other things.

Main Areas of Regulation  

Market access  

For most telecommunications matters in Chile (telephony, television, radio broadcasting, infrastructure and network services), a concession must be obtained for any undertaking. Such concessions are granted by presidential decree for a period of 25 to 30 years.

Although concessions are regulated permits, in practical terms there is no relevant legal barrier or limitation to entering the telecommunications industry as there is no limit to the number of permits that may be granted (other than permits requiring usage of the spectrum) and so more than one permit may be issued within the same geographical zone. An important exception, however, is the use of radio frequencies. Such permits are, by necessity, limited and are granted via bankruptcy proceedings or public tenders, in keeping with the means of administration of all scarce public property.

As regards the prerequisites for gaining access to concessions, it should be noted that concessions can only be held or made use of by 'legal entities' (not natural persons), formed in accordance with Chilean law and based in the country. Their presidents, directors, managers, administrative and legal representatives should not have been convicted of any serious offence. Moreover, in the case of radio or television broadcasting, concession holders, their presidents, managers, administrators and/or legal representatives, have to be Chilean. In the case of radio broadcasting, foreign nationals are permitted to sit on the board of directors of concession holders, as long as they do not constitute a majority.

Should the concession holder, whether for profit or not, charge for its services or engage in advertising of any kind, it shall keep complete accounts of its operations and will be subject to income tax laws in the same way as any ordinary company.

As a general rule, concessions are transferable subject to the authorisation of the respective authority, which may not withhold permission except on justifiable grounds.

Penalties  

The general system of penalties available to the LGT for fixed telephony services ranges from issuance of a warning to the application of a standard fine of USD77,000 (1,000 UTM - the Unidad Tributaria Mensual, a monthly inflation-tracking currency unit used to calculate fines and taxes), which can rise up to USD 770,000 (10,000 UTM) for specific infractions. Along with fines, the corresponding concession contract may also be revoked, for which specific grounds are stated.

As for the penalties, they are first applied by the Ministry of Transport and Telecommunications and are subject to appeal before the statutory courts (the Supreme Court in case of a concession termination). If, prior to a sanction being applied, Subtel orders an operator to put a stop to a contested activity and the operator does not comply, the law considers each passing day as a new infraction, and so penalty amounts may rise considerably.

In the case of content broadcast via television, sanctions are applied by CNTV. Fines applied in this case may amount only to USD31,000 (400 UTM) and there is also the chance of an expiry.

Universal service and special funding 

Chilean legislation makes no provision for social rates in telecommunications, ie the laws do not establish an obligation to keep rates within the reach of the public at large.

As an exception, LGT makes provision for the so-called Telecommunications Development Fund (Fondo de Desarrollo de las Telecomunicaciones), which is not a fund used to invest in universal services but rather a fund to which entities can bid to receive subsidies to implement one-off telecoms projects deemed to have a high social return but which are not financially profitable.

Radio frequencies  

As already mentioned, radio frequencies are assigned through public competition and award schemes. Radio frequencies are linked to service concessions and cannot be traded in the secondary market. The allocation of such concessions is not managed through financial auction but on the basis of technical proposals. Once a concession is awarded, the grantee will have preferential right of renewal, on an equal technical basis with other applicants, upon the conclusion of the term of the concession.

Upcoming regulations  

There are two bills in the final stages of parliamentary discussion which, if enacted, will have profound effects on the industry.

Surface Digital Television Act  

This bill considers full regulation of open-access digital technology television (Chile has already chosen the ISDB-T technical standard and MPEG 4 compression system). The proposed legislation will also decide matters of television content and the use of open-access television signals by paid-television operators.

Telecommunications Service Antenna Act  

This project makes provision for a system governing urban development permits for the installation of antennas, an area currently unregulated and one beset with social controversy. The proposed law will also regulate systems of compulsory co-location to pre-existing infrastructure, which might be owned by competitors of the incoming entity.