Telecoms Series | Connectivity in the IoT business

Telecoms Series | Connectivity in the IoT business

In order to implement and develop the Internet of Things (“IoT”) in Brazil, the National Plan of Internet of Things has been instituted by means of Decree No. 9854, dated June 25, 2019

According to this Decree, IoT is defined as “the infrastructure that integrates the provision of value-added services with capabilities of physical or virtual connection of things with devices based on existing information and communication technologies and their evolutions, with interoperability” (art. 2, I).

The value-added service (“VAS”), as defined in Decree No. 9854/2019 (art. 2, IV) and in accordance with article 61 of Law No. 9472, dated July 16, 1997 (General Telecommunications Law, “LGT”), is the “activity that adds, to a telecommunications service that supports it, and with which it is not to be confused, new utilities related to the access, storage, presentation, movement or retrieval of information”. Since it does not constitute a telecommunications service, such activity is not subject to regulation and supervision by the National Telecommunications Agency (“ANATEL”), the Brazilian telecommunications regulatory body. In addition, VAS providers are subject to the Municipal Services Tax (ISS) at tax rates much lower than those of the Tax on the Circulation of Goods and Services – ICMS, which is applied to telecommunications service providers, even though the same might vary according to the Brazilian Municipality where the establishment providing the services is located.    

Decree No. 9854/2019 also specifies that the environments prioritized for IoT applications and solutions include, at least, health, cities, industries and rural environments (art. 4, head provision). In addition, the actions of the National Plan of Internet of Things must be in accordance with the E-digital - Brazilian Strategy for Digital Transformation, according to the provisions contained in Decree No. 9319, dated March 21, 2018 regarding the initiatives related to the digital environment.

Several measures regarding IoT have been published in Brazil, as briefly summarized in our article entitled “IoT - Recent Developments”. And, due to the regulation and the reduction of barriers, there has been a continuous increase in the availability of connectivity for the IoT business in the country.

Only as an example, in Brazil, IoT connectivity might be based on NB-IoT and LTE-M networks, respectively “Narrowband IoT” and “Long Term Evolution - Category M1”, which might coexist with 2G, 3G, and 4G mobile networks. 

NB-IoT is a LPWAN (low power, wide area network) technology, in general used where 3G, 4G, and Wi-Fi connectivity does not work satisfactorily, and which allows connection with low complexity things, having efficiency in the energy consumption of devices. It is suitable for devices which do not transfer large amounts of data and which do not require low latency; the answer is better for fixed devices, such as, for example, traffic light sensors, weather sensors, and energy meters. In Brazil, TIM was the first operator to activate NB-IoT in its 4G commercial network, using the frequency of 700 MHz, followed by other operators in the provision of the technology. 

LTE-M, in turn, uses licensed telephony frequencies, being suitable for solutions involving large data transfers and, due to covering 100 km and having a transmission rate of 1 Mbps, as well as a long battery life, it is also indicated for applications with mobility, being able to be used in the sectors of transport and health, as well as in smart cities, among others. In this regard, for example, looking at both the IoT and the machine-to-machine (“M2M”) connections market, in 2020 Embratel launched corporate connectivity plans with the CAT-M standard developed on the LTE 4G network of the operator itself, the coverage of which might reach a distance of up to 100 km from an antenna.

At this point, it is worth emphasizing that, according to article 8 of Decree No. 9854/2019, M2M communication systems are deemed “telecommunications networks, including access devices, to transmit data to remote applications in order to monitor, measure and control  the device itself, the surrounding environment or data systems connected to them by means of these networks”, and it is necessary to note that such systems do not include debit and/or credit card machines (equipment being formally deemed electronic debit and credit transfer terminals).

With the constant technological advances, we might expect an increase in networks dedicated to the application in IoT in the most diverse sectors in Brazil, which may further foster the entering into of new businesses, thus giving continuity to the current scenario of several important partnerships that were established based on the connectivity networks already available in the country.

Among such partnerships, we can mention that, in 2019, Allcom Telecom signed an agreement with Sierra Wireless, the latter a Canadian company pioneer in the IoT market, for the offer of connected IoT solutions in Latin America that are already implemented worldwide.

In line with other locations in the world, in Brazil there is great interest in the IoT aimed at the automotive industry and, in this regard, we can also mention the case of Vivo Empresas, which entered into a partnership with Mercedes-Benz and, since 2020, is carrying out the connectivity management of some of its trucks, enabling the management of the fleet, as well as of logistics and maintenance issues. 

Still on the topic of business opportunities, in December 2020, the specialized press reported that Algar entered into a partnership with Parlacom, an IoT solutions provider, to develop solutions for digital transformation aimed at the B2B market. 

More recently, at the beginning of 2021, American Tower, which owns the ATC LoRaWAN network for IoT in Brazil, expanded its business, offering a neutral network infrastructure with low-cost connectivity and low battery consumption. The LoRaWAN technology, it is important to say, allows communication between things over long distances, with little data traffic. In addition, the company also entered into technological cooperation agreements, among them, one with the Belo Horizonte Technology Park (BH-TEC). 

IoT has also been relevant to boost advances in the health area, as aimed by Decree 9854/2019. A relevant example, which uses the Sigfox technology, is the development of the ATAS O2 device, which has as its purpose the management of the stock and consumption of medical oxygen cylinders for patients treated in home care, hospitals or healthcare units. The project, which involves a partnership between the CESAR innovation center and Salvus, a startup specialized in technologies for the health sector, received an investment of BRL 1 million from the Brazilian Bank of Economic and Social Development (“BNDES”).

The aforementioned Sigfox uses LPWA technology to transmit data in 12-byte packets at a time, which is sufficient for the transmission of the location of gadgets, for example, and is intended exclusively for the IoT. Currently, the network covers 5.7 million km² in 72 countries, including Brazil. However, due to making use of unlicensed frequency, already in 2018, Sigfox`s technology received criticism from some telecom operators, which claimed to be at a position of competitive disadvantage due to the costs incurred with spectrum investments. 

With an interest in smart cities and in the areas of health, industry and agribusiness, also in January 2021, the mobile virtual network operator (“MVNO”) NLT entered into a partnership with Constanta, a manufacturer of electronic products, making available LoRa connectivity solutions for IoT. An abbreviation for Long Range, LoRa is a radio-frequency technology which, operating under the LoRaWAN network, enables wireless communication solutions for long-range transmissions, with low energy consumption.

Still with regard to the issue of smart cities, the specialized press reported, in the first half of January of this year, that TIM`s NB-IoT network will be used in projects of remote tele management of public lighting, in partnership with M2M Telemetria. This project has several functionalities, including the reading of energy consumption, and allows monitoring of the performance of the lighting network. 

As we have seen, the potential of the Brazilian market within the scope of IoT can be the focus of many interests, both on the part of national and multinational companies. This is the case of Tuya Smart, which has been investing in Latin America and has obtained good local results, confirming that it is opportune to monitor the development of IoT in Brazil.

In terms of legal security, caution is recommended concerning (i) the perfect characterization of connectivity as a VAS, in opposition to the telecommunications service and (ii) the perfect tax framework categorization, based on municipal legislation with jurisdiction over the establishment providing services, in opposition to the applicability of the state tax on telecommunications services. Another recommendation to prevent litigation would be the provisioning of connectivity by a company other than a telecommunications service provider.

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