NEW DECISION KEEPS ANATEL’S PRELIMINARY POSITION ON FOX+ CASE

Jun 18, 2019


On December 5th, 2019, the Federal District’s federal judge Marcelo Rebello Pinheiro withdrew an injunction that allowed Fox to commercialize its linear channels on the internet through its application Fox+. This injunction challenged Anatel’s previous decision in the case. According to the judge, it is up to the agency to decide whether or not to classify a certain activity as a telecommunications service.

 From now on, Fox must require authentication of the Fox+ app users to guarantee access to linear channels, only for those who have subscribed to their TV channel, in compliance with the decision.

 As we reported on the 18th of June 2019, Claro informed Anatel about the Fox+ app sale of linear channels through the internet in December 2018. In June 2019, Anatel prevented the pursuit of this practice in an unprecedented injunction. In the following month, the Federal District’s Federal Justice suspended Anatel’s decision by a preliminary decision, which has now been withdrawn. Please see below.

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ANATEL preliminarily suspends FOX+ and opens public consultation to discuss the measure

“Live” transmissions of the app must be conditioned to the authentication of the subscriber.

Last Thursday, the Brazilian Agency of Telecommunications (ANATEL) determined that access to “live” channels available at the Fox + app must be conditioned to authentication with Cable TV companies’ subscriptions. The measure is the first decision made by ANATEL in a case filed by Claro S.A. on December 12, 2018, which questioned the legality of Fox’s offer to provide programmed content directly to consumers, before Law No. 12485/11 (“Conditioned Service Access – SeAC Act”).

Claro’s main claims were based on the argument that the paid provision of linear channels by the Fox + app would constitute “distribution activity” and that that activity would not be excluded by the fact that the distribution is carried out through the internet. The legal basis for this interpretation is found in Article 2, XXIII of the SeAC Act, which states that the distribution service may be performed “by means of technologies, processes, electronic means, and any other communication protocols.”

Under this logic, corroborated by the opinions of the former presidents of ANATEL and ANCINE (the Brazilian Film Agency), João Rezende and Manoel Rangel, such activity would lead to an unbalance in the industry by breaking the cross-ownership rules provided in the SeAC Act that prevent programmers from distributing content and distributors from producing content (Article 5). Moreover, it would give an undue advantage to Fox, who would be excluded from the obligations imposed on Cable TV companies under the SeAC Act, as for the distribution of compulsory channels or Brazilian channels. Finally, they also claim that there is a lack of tax isonomy, since Cable TV companies are subject to taxes, such as FUST, FUNTEL, FISTEL, and ICMS that are not applicable to Fox +.

The arguments Fox presented in its defense were mostly endorsed in the joint manifestation of ABERT and ABRATEL, third-parties interested in the process. They alleged that Fox + provides paid content through the app, which constitutes value added service (VAS) under the General Telecommunications Law (Law No. 9472/97, article 62) and not telecommunications services (article 60).

The difference would be in the fact that the label of SeAC is only given if the distribution of the content and the reception of the subscriber are the direct responsibility of an operator. Therefore, the configuration of the telecommunication service would dispense of the existence of a dedicated distribution network operated by the same entity that offers the content. On the contrary, Fox +, like other over the top (OTT) services, depends on third-parties to enable the distribution and for the reception of content by the subscriber: the internet service provider.

Furthermore, they argued that it should be within ANATEL’s competence to deliberate on the matter after the public consultation and hearing with entities of the sector, in accordance with its internal regulations.

After the presentation of the arguments, ANATEL declared that it has the competence to adopt measures that aim at the proper functioning of the development of the telecommunications market, even if such measures are directed to companies that do not have grants to provide such services. It also defended that the elements necessary for the imposition of the injunction were present due to the direct distribution by Fox to the subscriber of the linear content, identical to those offered by Cable TV companies. Afterwards, it stated that it is necessary to debate the issue because if there is wide adoption of this model by other companies, the principles and guarantees established by the SeAC Act would be depleted and the business model of Cable TV companies would be damaged.

For the above mentioned reasons, ANATEL granted the injunction, suspending the transmission of linear content on the Fox + app until the authentication system adopted in the market has been implemented, thus maintaining the content supply in the catch-up model already being practiced in the country. The company has 30 days to adjust the Fox + app under a daily fine of BLR 100,000.00 up to a maximum of 20 million reals.

Update: On July 3rd, 2019, Fox obtained before the Federal Justice 16th Civil Court within the Federal District a preliminary ruling suspending ANATEL’s injunction. Therefore the company is now entitled to keep live distribution of channels through the app Fox+ while the final decision is not issued by courts. ANATEL has declared it will dispute the preliminary ruling, that in a nutshell considered that the agency has not provided enough elements to evidence the urgency in the matter (periculum in mora) and the likelihood of success in the merit (fumus bonus iuris), being these two factors required by law for issuance of an injunction.

Summarizing the court preliminary ruling, the judge declared that “the context of the matter, therefore, poses a reasonable doubt and not a likelihood of truth in the grant of the injunction”. By taking this decision, ANATEL would have been excessively strict with Fox, its consumers and third parties within this market, in against of the principle of minimum intervention that must be abided by regulatory bodies.

Finally, it is due to notice that ANATEL, on the same day it has granted the injunction, has opened Public Consultation No. 22 in order for the sector and other interested companies to manifest about the compatibility of the provisions of the SeAC Act and the General Telecommunications Law, regarding the provision of audiovisual content through the internet. These entities and companies are invited to answer the 7 questions asked by ANATEL by the deadline of September 16, 2019.

Click here to access the website that allows the participation in the Public Consultation (in Portuguese).