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Chile: digital economy developments and challenges during the Covid-19 pandemic, from a TMT law perspective

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Alfonso Silva
Carey, Santiago
asilva@carey.cl

Matías Osses
Carey, Santiago
mosses@carey.cl

 

There is no doubt that the digital economy – also known as the new economy, the web economy, or the internet economy – is now part of our concrete reality and has become essential to the global economy. Its exponential growth over the past few months has been greatly boosted by the Covid-19 pandemic, which has compelled people to depend more than ever on electronic communications. This boost, however, has required tenacious efforts from public and private entities to eliminate and/or reduce barriers posed by the pandemic. In this context, TMT (technology, media and telecoms) has taken a leading role in the provision of effective solutions. This article describes Chile’s main TMT law developments that have emerged during or due to the pandemic, along with addressing a critical remaining data protection challenge.

Introduction: the economic effects of Covid-19 in Chile

Despite the scientific community predicting the approach of a global pandemic in the coming months, no one could have imagined the devastating effects Covid-19 has wrought, especially in Latin America and the Caribbean (LAC). Its effects have hit a region already in economic difficulties. In this regard, even before the pandemic, the Organisation for Economic Co-operation and Development (OECD) was concerned that the LAC region had grown by only 0.1 per cent in 2019,[1] and that the average growth for 2020 was estimate at between 1.3 and 1.6 per cent.

Within this complex economic scenario, LAC countries have been forced to adapt their economic structures to respond rapidly to the arrival of the pandemic. Chile was no exception, notwithstanding its prior efforts for promoting the use of new technology within its economy. For instance, towards the end of 2016, the Santiago Chamber of Commerce, in its preliminary report The Digital Economy in Chile 2016,[2] stated that markets which do not follow global trends in the digital economy would be at risk of being left behind by the rest of the world. However, such efforts were clearly insufficient. Untimely, the pandemic turned the digital economy into one of the major drivers of the country’s economy for protecting both the population’s health and income. This juncture has meant a series of legislative and regulatory changes, along with public-private alliances, driven by the need to adapt to a ‘new normality’ period, with no clear end date.

At the beginning of 2017, only two in ten of Chile’s companies had invested in digital technologies as an integral part of their business strategy. Also, the digital economy represented but 22 per cent of Chile’s total GDP.[3] Today, although there are no specific up-to-date data, it is estimated that the number of transactions through e-commerce platforms has increased substantially during 2020.

How has Chile been adapting to the exponential need for the digital economy due to the pandemic? Legal and regulatory changes have been significant: from the execution of a Digital Economy Partnership Agreement (DEPA) with New Zealand and Singapore, to the establishment of new rules for e-commerce and the adoption of new standards for telework.

Nevertheless, the effects, benefits and possibilities offered by the digital economy could not be conceived or subsist without its backbone: the telecoms system. Over the last few months, mainly due to the pandemic, telecoms have been tested to maximum service levels. This has caused a prevailing need for actors of the sector, government, legislators and international organisations to call for the development of legal, technical and regulatory frameworks which help to sustain an economy which is increasingly dependant on digital platforms.

Chile has placed telecoms as one of the most crucial topics of its agenda. This article will address the main laws and regulations which have emerged during or on account of the pandemic. These measure have been taken to strengthen the digital economy, by, among others objectives: reinforcing telecoms networks, facilitating access for people on low incomes, in isolated areas, protecting consumer rights, maintaining levels of employment.

Telecoms laws and regulations which emerged during the pandemic to strengthen the digital economy

Definition of radio spectrum caps and the initiation of public bid procedures for granting 5G telecoms concessions

Connectivity is one of the fundamental pillars of telecoms development and, in this sense, Chile has not been oblivious to the deployment of 5G technology. The road to its deployment has been long and difficult. After several legal disputes, through a ruling dated 13 July 2020,[4] the Supreme Court of Chile established the new maximum caps on the rights for the use of radio-electric spectrum by telecoms operators, along with providing complementary measures to be applicable in the future 5G concessions public bids.

In accordance with the ruling, on 1 August 2020, the Undersecretariat of Telecoms (Subtel) published in the Official Gazette the call for a public bid for the granting of telecoms concessions which operate high-speed wireless networks, including 5G technology.

It is worth mentioning that even though the public bid for 5G concessions was initially planned for 2020, the legal disputes threatened the estimated original schedule. However, the Supreme Court’s prompt and clear decision and Subtel’s swift reaction led to the initiation of the procedure with minimum delay. Thanks to the above, Chile might have 5G operative networks within the next 12 months.

Guaranteed minimum internet access speed

Although in 2017, Law No 21,046 established the requirement for Internet Service Operators (ISPs) to guarantee a minimum internet access speed, it was not possible to enforce its provisions as they were conditioned to the subsequent issuing of several regulations by the Ministry of Transport and Telecoms (MTT) and Subtel.

The regulations were eventually issued during 2020. They not only defined the missing regulatory and technical matters of the referred law, but also established a roadmap for enforcing its provisions. This legal and regulatory framework mainly provides the following: (1) minimum standards to be met by ISPs regarding the download and upload internet speeds offered to customers; (2) compensation mechanisms for customers in the event that ISPs fail to comply with minimum standards; (3) the creation of an Independent Technical Body (OTI), responsible for carrying out periodic measurements to verify whether ISPs are providing service in accordance to the offered terms and conditions and the minimum standards; and (4) the requirement for ISPs to allow the OTI to access their network systems, among other measures.

Law on working remotely and teleworking

The arrival of Covid-19 forced the Chile’s government to analyse several mitigating measures aimed at protecting the population’s health and strengthening the national economy, severely affected by the pandemic. A constitutional emergency state was declared, followed by various rules established by the Chile’s Health Authority for preventing the spread of the virus. These measures included curfews, quarantine zones, sanitary controls, and special and a temporary permits system for travelling from one place to another.

Although the above rules are not aimed to affect workers, unfortunately, due to a variety of factors including the poor deployment of technology to employees, levels of unemployment and labour contracts’ suspension increased. Government and Congress were urged to look for solutions to adapt ways of working to the reality of the pandemic. Among several measures taken, Congress passed a law which incorporated a section specially dedicated to ‘remote’ work and ‘telework’ into the Labour Code. It recognises equal individual and collective labour rights for the employees working through these systems, as applicable, along with establishing specific rights and obligations.

National Automatic Roaming Law

Although important efforts have been made to increase the quality of mobile services in Chile, due to its geographical characteristics, the country has serious problems connecting isolated areas. Indeed, there are several areas which are only covered by one or very few mobile service operators which did not have an obligation to share their networks with other providers. The situation started to change on 15 June 2020, with the publication of Law No 21,245 on National Automatic Roaming.

This new law aims at reducing the digital gap and improving connectivity across country, by establishing the requirement for mobile services operators to share their networks with others in certain cases (eg, entrant mobile network operator (MNO) or mobile virtual network operator (MVNO)) and/or in specific areas (eg, rural, isolated, low-density), through roaming or MVNO contracts. Nevertheless, its provisions will only come into force once various MTT issues and the relevant regulations are sorted. Once in place, the new law should substantially increase connectivity standards for customers who are heavily affected by coverage issues in areas where they live or work.

‘I want to exit’ (Me quiero salir) platform

According to Chile’s telecoms regulations, the customer has the right to terminate a telecoms service contract simply by contacting their telecoms operator, which is compelled to terminate the service within a day of the request. As a way of reinforcing this right and giving customers swift communication channels with telecoms operators during the pandemic, the National Consumer Service and Subtel released an electronic platform which allows customers to terminate their telecoms services contracts digitally, which has been quite new for Chile’s market. Within a month of its launch, the platform had received more than 17,000 termination requests, of which 78 per cent were resolved favourably.

Definition of the transoceanic fibre cable route

An important milestone in the telecoms field has been the definition of the route (through the Pacific Ocean) that will connect Chile with Asia and Oceania through an optical submarine fibre cable. In this regard, on 27 July 2020, Subtel announced that the first stage of the project will plan a cable directed to Australia and New Zealand, which will have the capability of interconnecting to other several Asia-Oceania fibre cables.

The initiative should open great opportunities for Chile to become attractive for different technology and telecoms investments, such as the construction and operation of data centres and the development of digital economy solutions.

Telecoms services solidarity plans

As mentioned, one of the main cores of the digital economy is the internet, the exponentially rising platform through which economic agents interact with each other. In addition to the usual coverage issues that Chile faces due to the pandemic, a significant number of people have lost or are experiencing substantially reduced incomes. In order to mitigate the effects that a disconnection of a critical percentage of the population may have on the economy, in March 2020, the MTT, Subtel, and some telecoms operators convened to offer free, fixed and mobile connectivity plans for customers who are unable to pay for ordinary telecoms service plans, under a new agreement called Solidarity Plan of Connectivity.

This benefit allows customers belonging to the 60 per cent of households with lower incomes to maintain access to fixed and mobile telephone and internet services (with certain speed restrictions) for 90 days following the customer’s request of acceptance by the telecoms operator. The plan was only initially available for 60 days. However, the government and operators agreed an extension, allowing the customers to apply until September 2020. In this regard, Subtel announced that, to June 2020, more than ten million costumers (pre-paid and contractual) were benefiting from the Plan.

Remaining challenges in data privacy

While these recent improvements in telecoms have been significant, Chile’s laws and regulations still lack proper legal and regulatory frameworks in complementary sectors. This is the case of data privacy, where legislation requires a fundamental updating and improvement for the healthy development of the digital economy.

Prior to the pandemic, there were already serious questions regarding Law No 19,628 on the protection of personal data. This was due to various factors such as the lack of an authority in charge of controlling the processing of personal data, or the lack of protection for data subjects against unlawful processing. A Data Protection Draft Legislation is currently being discussed in the Congress, which is influenced by the EU’s General Data Protection Regulation (GDPR). Its key provisions consider: the regulation of legal institutions for the first time, such as international data transfer, the adoption of security measures and breach prevention models, as well as reporting obligations concerning security breaches; and the creation of a data protection authority with power to monitor and punish violations to the legal and regulatory framework. However, it still needs to pass several legislative stages to become law.

Conclusion

There is no doubt that during 2020, the developments in the TMT field have been significant and many of them will have a massive impact in the development of digital economy, together with helping reduce the serious economic barriers triggered by Covid-19. In this increasingly digital ecosystem, a proper TMT legal and regulatory framework will act as an essential differentiation factor among countries seeking to take advantage of this imposed new reality. In Chile, the most remarkable one corresponds clearly to the near future deployment of 5G technology. However, there are still imminent challenges which need to be addressed, the most critical being the reform of outdated data privacy legislation. We are convinced that this is an ideal time for building the legal and regulatory foundations of the upcoming era of massive digital economic interactions.

 


Notes

[1] OEDC, ‘Covid-19 in Latin America and the Caribbean: Overview of government responses to the crisis’, 4 May 2020, available at: www.oecd.org/coronavirus/policy-responses/covid-19-en-america-latina-y-el-caribe-panorama-de-las-respuestas-de-los-gobiernos-a-la-crisis-7d9f7a2b (in Spanish).

[2] Santiago Chamber of Commerce, ‘The Digital Economy in Chile 2016’, available at: https://www.ccs.cl/wp-content/uploads/2019/11/economia_digital_B.pdf (in Spanish).

[3] Accenture, ‘The advance of the digital economy in Chile: optimising digital capacities to multiply growth’, 2018, available at: https://www.accenture.com/t00010101T000000Z__w__/cl-es/_acnmedia/PDF-71/Accenture-Digital-Index-Chile.pdf (in Spanish).

[4] Supreme Court, case No. 181-2020.

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