Member Article

On 26 October 2006, the Antitrust Court issued a decision, from a defense of competition perspective, in connection with the legality of the behaviors between Voissnet S.A. ('Voissnet') and Compañía de Telecomunicaciones de Chile S.A. ('CTC-CHILE').

Voissnet, a company that provides telecommunication services consisting of Voice over Internet Protocol (VoIP), accused CTC-CHILE of performing acts against free competition. Among such acts, Voissnet mentioned that the agreement usually executed by CTC-CHILE with the various ISPs (Internet Service Providers) for the provision of broadband Internet, forbids: i) the provision of IP telephony services; ii) the possibility that the ISP's clients may install equipment behind the ADSL (Asymmetric Digital Subscriber Line) modem without CTC-CHILE consent; and iii) the possibility that the ISP's clients may share broadband access with third parties. Likewise, Voissnet pointed out that CTC-CHILE have blocked the access of its clients and its subsidiaries' clients to the IP addresses of the Voissnet servers.

In turn, CTC-CHILE argued that Internet broadband access service is not regulated and that it provides such services under competitive conditions since such service may be provided trough different networks. Therefore, CTC-CHILE stated that it is entitled to freely impose restrictions on the provision of IP telephony services. Likewise, CTC-CHILE emphasized that the local telephone network's elements that are necessary to provide the access to broadband Internet are paid by the users by means of a monthly fixed charge (Servicio de Línea Telefónica or SLT) and a measured local services (Servicio Local Medido or SLM), which fees have been regulated by the Chilean State according to a particular level of traffic demand. For that reason, if telephone traffic is transferred from the traditional local network to IP telephony, such fact would prevent the local telephone network from reaching its self financing.

Additionally, CTC-CHILE filed a counterclaim against Voissnet stating that the telephone services provided by Voissnet through broadband connection is not a telecommunication service different from the local telephone public service provided by CTC-CHILE through its own networks. Thus, CTC-CHILE accused Voissnet of offering public telephone services without having the relevant license required by law. Likewise, CTC-CHILE accused Voissnet of using in a 'parasitic' manner the networks owned by the companies that are licensees of public telephone service without paying the fee for using such networks.

The Antitrust Court, based on the opinion issued by the Undersecretary of Telecommunications (SUBTEL), analyzed the legal nature of IP telephony according to the telecommunication regulations currently in force. The Antitrust Court set forth that the IP telephony services are not included in the telephone public services concept because they cannot be considered as a fixed, mobile or long distance telephony service and because it is not possible to distinguish among such services with respect to IP telephony.

In fact, the service provided by Voissnet differs from the local telephone services provided by CTC-CHILE in the sense that the first one does not guarantee service quality and it is not mandatory to provide such service in a particular geographic area. Also, the Antitrust Court analyzed if the services which use VoIP technology may be considered as public telecommunication services or, otherwise, if they may be only considered as another Internet application. In this sense, the fact that Voissnet needs to be interconnected with other public telecommunication services in order to provide its service to the community in general might lead to the conclusion that IP telephony should be included in the public telecommunication services category. On the other hand, the Antitrust Court mentioned that IP telephony should not be considered as a complementary telecommunication service due to the fact that SUBTEL would only have deemed as such switched Internet services and not broadband Internet access services.

Nonetheless, the foregoing does not resolve the ambiguity regarding the legislation applicable to IP telephony, since it is an activity that would not be currently regulated in the law or other regulations.

The Antitrust Court ordered CTC-CHILE to pay to the Chilean State's benefit, a fine of 1,500 Unidades Tributarias Anuales or UTA (app. US$1,100,000) because CTC-CHILE engaged in conduct that limited free competition by the imposition of artificial entrance barriers to IP telephony by means of contractual restrictions imposed in the agreements executed by CTC-CHILE, with the aim of preventing Voissnet's entrance into the IP telephony service market.

In addition, the Antitrust Court modified the agreements entered into by and between CTC-CHILE and the ISPs, deleting from them any prohibition or restriction related to the use of broadband capacity necessary to provide IP telephony services. Also, the Antitrust Court ordered CTC-CHILE, among other things, to avoid in the future any conduct that may limit or make difficult, in any way, the use of the broadband capacity hired from CTC-CHILE in order to provide IP telephony services, as well as to avoid the execution or performance of any act, fact or agreement that may produce such effects.

In this way, if finally confirmed, the Antitrust Court's decision may be a precedent by future operators of IP technology in Chile, with the objective of providing their services without license and utilizing the broadband and the public telephone service network infrastructures owned by the existing telephone operators. However, the Supreme Court's final decision on the appeal filed by CTC-CHILE against the Antitrust Court decision is still pending.

Notwithstanding the final decision to be adopted by the Supreme Court, it is evident that the Chilean telecommunications laws and regulations need to be amended in order to fully adjust them to the technological convergence process that is taking place all over the world. In this regard, SUBTEL has recently announced the issuance, by the end of 2006, of a new IP telephony Regulation which will specifically rule, for the first time, on such service.

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