Bolsonaro vetoes articles of Brazil's telecom fund bill

The signing into law by Brazil’s President Jair Bolsonaro of a bill amending the rules of the universal telecommunications services fund Fust was well received by the sector, but vetoes to key articles displeased telecom companies.

The industry praised the exemption of equipment for internet-of-things (IoT) communication from telecom levies for five years.

"The internet of things exemption in the law that modernizes Fust, enacted this Thursday by the Presidency of the Republic, brings advances for telecommunications and for the country as a whole," Conexis Brasil Digital, the local association of telecom operators, said in a statement.

The new-look Fust is expected to release resources that can be used to fund and subsidize broadband expansion projects.

Conexis says the new legislation will allow the expansion of connectivity and the development of new applications in various segments through IoT.

Fust is maintained by collecting 1% of telecommunications operators’ gross annual revenues, which gives it around 800mn reais (US$157mn) a year. It has swelled to around 25bn reais since its creation in 1998, but virtually none of the funds has actually been invested to expand access to telecom services.

That is because the fund was created to finance fixed telephony, an essential service at the time, and under the original legal terms, the money could not be used to finance broadband expansion, for example.

SCHOOLS

Bolsonaro vetoed an article saying that part of the Fust resources should be used to universalize broadband in public schools by 2024.

Bolsonaro claimed that the item created extra public expenditure without presenting an estimate of the budgetary and financial impact, which according to the president would violate the constitution.

Fust investments were also vetoed in urban and rural areas with a low Human Development Index (HDI). The president claims the proposal restricts the allocation of resources to "a small number of municipalities."

The vetoed articles "would speed up the digital inclusion process of the poorest segments of the population and those who live in remote and difficult to reach areas through public policies and the reduction of regional inequalities," said Conexis.

Bolsonaro also vetoed an article that states the use of Fust proceeds in the form of non-refundable resources be limited to half of the fund’s annual revenue.

In this case, the president argued the article "is contrary to the public interest" as in his view it limited the amount to be used in a non-refundable manner “which serves the most vulnerable part of the population."

The vetoes can still be overruled by congress.

The Fust may now also be used by federal, state and municipal governments to finance programs for the digital transformation of public services, including for the construction of the necessary infrastructure for connectivity.

According to the new rules, a management committee linked to the communications ministry, with one representative each from the ministries of science and technology, economy, agriculture, education and health will be in charge of fund allocations.

The management committee will also include telecom regulator Anatel, two representatives from companies (one representing small internet service providers) and three representatives of civil society.

IoT

Meanwhile, the rates for payments to the telecommunications inspection fund (Fistel), to the development of the national film industry (Condecine) and to promoting public radio broadcasting (CFRP) will be reduced to zero for IoT equipment for five years.

Data from consultancy LCA Consultores indicates that the impact of the exemptions is 1.8bn reais over three years, but the measure will generate economic gains through IoT development of 17bn reais in the period.