Telecoms Series | IoT – Recent Developments

Telecoms Series | IoT – Recent Developments

In Brazil, Decree No. 9854, dated June 25, 2019 (“Decree”), instituted the National Plan of Internet of Things (“IoT”) to implement and develop IoT in the country, based on free competition and free movement of data, provided in compliance with the guidelines of information security and personal data protection. According to the regulation, the priority for IoT solutions’ application should include, at least, health, cities, industries and rural environments. 

The aforementioned Decree also established important definitions in its articles 2 and 8. Thus, IoT corresponds to the infrastructure that integrates the provision of value-added services (“SVA”) with capabilities to physically or virtually connect things with devices based on existing information and communication technologies and their evolutions, with interoperability. “Things” are defined as objects in the physical or digital world, capable of being identified and integrated by communication networks. In turn, "devices" are equipment or subsets of equipment with mandatory communication capabilities and optional sensing, action, collection, storage and data processing capabilities. Finally, “machine-to-machine communication systems” (“M2M”) are 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, not including equipment called debit and/or credit card machines, which are formally deemed electronic debit and credit transfer terminals.

The same Decree stipulates, in article 2, IV, that SVA is an 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, being this definition in line with the terms of article 61 of Law No. 9472, dated July 16, 1997 (General Telecommunications Law, “LGT”). According to LGT, a SVA does not constitute a telecommunications service; thus, its provider is categorized as a user of the telecommunications service that supports it, with the rights and duties inherent to the condition of user. As a result, the activity is not subject to regulation and supervision by the National Telecommunications Agency (“ANATEL”), the Brazilian telecommunications regulatory body (LGT, article 8).

The aforementioned National Plan of Internet of Things (“Plan”) aims to: (i) improve people’s quality of life and promote efficiency gains in services, by means of the implementation of IoT solutions; (ii) promote professional training related to the development of IoT applications and the creation of jobs in the digital economy; (iii) increase productivity and foster the competitiveness of Brazilian companies developing the IoT, by promoting an innovation ecosystem in this sector; (iv) seek partnerships with the public and private sectors for the implementation of the IoT; and (v) increase the integration of Brazil in the international scenario, among others, by means of development and innovation and the internationalization of IoT solutions developed in the country (art. 3 of the Decree). 

Monitoring of the Plan’s implementation is the responsibility of the Chamber of Management and Monitoring of the Development of Machine-to-Machine Communication Systems and Internet of Things (“IoT Chamber”), composed of representatives from different Ministries (art. 7 of the aforementioned Decree), among them the Ministry of Science, Technology and Innovation and the Ministry of Economics. The Chamber is in charge of (i) monitoring and evaluating initiatives to implement the Plan; (ii) promoting and fostering partnerships between public and private entities aiming at achieving the Plan’s objectives; (iii) discussing issues with the public bodies and entities in order to render the Plan feasible; (iv) supporting and proposing mobilizing projects; and (v) acting together with public bodies and entities to encourage the use and development of IoT solutions (art. 7 of the Decree).

It is interesting to note that, in June 2020, a ministerial reformulation occurred in Brazil, which resulted in the dismemberment of the former Ministry of Science, Technology, Innovations and Communications and in the recreation of the Ministry of Communications, which is not an integral part of said Chamber. It should be emphasized, however, that ANATEL is in charge of  regulating and inspecting M2M systems (art. 8, § 2 of Decree No. 9854/2019).

According to art. 5 of the aforementioned Decree, the Plan’s actions must be in line with the E-digital - Brazilian Strategy for Digital Transformation, under the terms of Decree No. 9319, dated March 21, 2018, which provides for Brazilian federal initiatives related to the digital environment, taking advantage of digital technologies to promote sustainable and inclusive economic and social development, with innovation, increased competitiveness, productivity and employment and income levels in Brazil. In this regard, (i) science, technology and innovation; (ii) international insertion; (iii) education and professional training; (iv) connectivity and interoperability infrastructure; (v) regulation, security and privacy; and (vi) economic viability, are themes integrated within the scope of the Plan.

In fact, the Brazilian government has published several measures decreasing barriers to IoT in the country. There was also the creation of local plans on the subject, as in the Federal District, which by means of Law No. 6692 of October 1, 2020, instituted the District Plan of Internet of Things, among other provisions. 

Thus, in line with the foregoing, on December 1, 2020, ANATEL’s Resolution No. 735 came into effect. This regulation is important due to having changed the wording of the General Regulation on the Rights of the Telecommunications Services Consumer (“RGC”) (as approved by ANATEL’s Resolution No. 632, dated of March 7, 2014), specifying that "those devices exclusively allowing the offer of value-added services based on their communication, sensing, action, acquisition, storage and/or data processing capabilities” are deemed IoT devices. Furthermore, the aforementioned Resolution No. 735/2020 specifies that the obligations provided for in the RGC are not applicable to accesses intended exclusively for the connection of IoT devices.

The measures described above were the object of a Public Consultation held in 2019 and, even before the publication of Resolution No. 735/2020, the approval of amendments, as decided at the 892nd Meeting of the ANATEL’s Board of Directors, was emphasized in the specialized press

In fact, the emphasis is well-founded, since, with IoT devices being deemed SVA, the tax rates on operations related to the Circulation of Goods and Services of Interstate and Intermunicipal Transportation and Communication (“ICMS”), as well as other charges imposed on telecommunications services are no longer applicable. In Brazil, ICMS rates are instituted by the States and the Federal District (in accordance with the Complementary Law No. 87, dated September 13, 1996), and may reach 18%. However, it is important to note that, according to the legislation of the Brazilian Municipality in which the provision of the SVA occurs, there may be imposition of the Municipal Services Tax (“ISS”), the rates of which are also variable according to such location and the fiscal year, however being lower than those of telecommunications services.

Another important change brought by Resolution No. 735/2020 concerns the changes introduced in the Regulation on the Exploitation of Personal Mobile Service (“SMP”) by means of a Virtual Network (as approved by ANATEL’s Resolution 550, dated of November 22 2010), which enable the so-called MVNOs (Mobile Virtual Network Operators) to hold contracts for representation with more than one origin provider in a given registration area. This provision might also be important in case of permanent roaming being allowed to IoT applications, a fact highlighted in the specialized press

However, in this regard, ANATELs decision on whether to allow permanent roaming in Brazil remains pending, with the Agency’s technical area being granted a period of 180 days from October 29, 2020 (date of the 892nd Meeting of the Board of Directors), to conduct studies on the subject. 

This topic is important for the IoT, because, in case of permanent roaming being allowed in the future, Things may start to be connected by means of connections completed on foreign networks. However, it is noteworthy that since 2012, ANATEL has been positioning itself against the subject, understanding that the authorization would imply in non-payment of local taxes by global telecommunications operators. This is also the positioning defended by the Brazilian operators, according to which there would be both regulatory and tax imbalances

Foreign operators, on the other hand, are contrary to the prohibition and in some cases, have been trying to reverse this understanding for years, including being willing to discuss tax issues. Recently, it was debated that only Brazil, Egypt and Turkey maintain prohibitions in this regard, an argument mentioned by ANATEL itself in the scope of the Analysis No. 178/2020/VA, which dealt with M2M and IoT communications.

Despite the long discussion on the subject, ANATEL itself expressed its positioning, still in 2018, regarding two alternatives to permanent roaming, i.e., the use of eSIM or the adoption of virtual mobile operators. In this regard, the use of MVNOs for IoT is defended by operators such as Datora. In turn, eSIM, according to ANATEL, would be a solution due to allowing the profile’s update by means of a configuration via software

In fact, eSIM has been the solution adopted by Claro, an operator that uses this model, for example, to service GM cars from the USA, and defends maintaining the prohibition on permanent roaming. In addition, there are projections in the sense that more than 400 million smartphones with eSIM will be sold worldwide in 2024, enabling the integration of these devices with wearables and other devices by sharing a single access. In Brazil, eSIM activation is offered by operators such as Claro, Vivo and TIM.

In addition to the above, Resolution No. 735/2020 also provided that the portability of the access code referred to in ANATELs Resolution No. 460, dated March 19, 2007, is ensured by the telecommunications service providers of collective interest within the scope of connection of IoT devices, provided that the respective necessary technical conditions are present.

Even more recently, on December 16, 2020, Law No. 14108 was enacted, effective as of January 1, 2021, which exempted telecommunications stations that integrate M2M communication systems from paying the Installation Inspection Tax, Operation Inspection Tax, Contribution for the Promotion of Public Broadcasting, as well as Contribution to the Development of the National Film Industry (“Condecine”), with such tax benefits being granted until December 31, 2025. In addition, this same Law exempts the aforementioned telecommunications stations from the obligation of prior operation licensing.

Additionally, also on December 16, 2020, Law No. 14109 was enacted, which provided for the purpose, the allocation of resources, the administration and the objectives of the Telecommunications Services Universalization Fund (“Fust”), instituted by Law No. 9998, dated August 17, 2000. According to the changes introduced by the text, Fust’s resources will finance government telecommunications policies, such as in projects that promote the democratization of the Internet and new technologies, expanding or implementing connection services, which might reduce regional inequalities and benefit cattle breeders, farmers and low-income families.

There are forecasts that by 2025 there will be 55.7 billion connected devices in the world, of which 75% will be connected to an IoT platform. In line with this forecast, an English study points out that, globally, there will be an increase in the number of industrial IoT connections from 17.7 billion in 2020, to 36.8 billion in 2025, with the 5G and LPWA (low power wide area) networks playing central roles in offers to industries. In view of these figures, the importance of promotion in the IoT area in Brazil is undoubtedly reinforced.