President Alberto Fernández tightened the leash on telecommunication companies in Argentina by declaring the provision of internet, cell phone and subscription-based television as essential public services, giving the government scope to regulate prices and intervene more closely in the sector’s economics.
The announcement was the latest in a series of initiatives with a strong Kirchnerite imprint, and revived the conflict with Grupo Clarín — the country’s largest media conglomerate — which marked the eight years of Cristina Kirchner’s time as president.
The presidential decree came at a striking time on the night of Friday, after four years of good relationship between Clarín and Mauricio Macri’s administration, followed by a détente during the first months of Alberto Fernández’s rule. It has since led to fiery reactions from the sector’s business leaders, who joined forces to publish full page adds expressing their “surprise, given that we always held good-faith dialogue with all authorities”, and warning that “such a sudden change in regulations will have a deep negative impact in the sector” and create “uncertainty over the quality of services provided to clients in the future.”
What does Public Service mean?
The decree itself leaves some room for speculation, as it only grants new powers to regulators in broad strokes, and the ultimate characteristics of the state’s intervention in telecommunication markets will only be clear when the fine print regulatory details are published by the ENACOM communications watchdog.
But the “public service” tag now applied to telecommunications has already been present for several decades in other services such as electricity, natural gas and telephone landlines, where the state has the prerogative to freeze prices, demand the creation of social tariffs for the poor, or the expansion of coverage to remote regions that might not prove profitable to the service provider.
Electricity, natural gas and phone services in Argentina have been provided by private companies since the 1990s, despite retaining the public service status which allows for these regulations. State intervention of public services was mild in the pro-market 90s, with companies often enjoying the advantages of monopolistic service provision, but became heavier since the 2001 crisis, after which subsidies and price caps on residential rates turned into the norm. This resulted in smaller costs for consumers, but also higher public spending, reduced profitability and some infrastructure decay.
The text of the decree argues that modern constitutional law in countries like France and Mexico considers internet access a basic human right, and that the Argentine state should likewise guarantee these rights through larger regulatory powers to make information and communication services “effectively available” to its population.
With the declaration of telecommunications as a public service came a mandatory price freeze until the end of the year. This put the brakes on a series of hikes that the country’s three main cell phone providers — Telefónica’s Movistar, Carlos Slim’s Claro and Clarín’s Personal — had anticipated to their clients for the coming weeks.
The three companies, plus a series of cable TV and internet providers, had voluntarily agreed to a freezing at the start of the COVID-19 lockdown following a series of sit-downs with the government, given the importance of telecommunications during the stay-at-home period.
But the agreement not to raise prices expired on August 31, and telecommunication companies were now looking to join food producers and gas distributors in unlocking the hikes they had contained throughout the year. The government was not very receptive to their idea, seeing phone, cable and internet services as central to sustain the continued lockdown and social distancing measures.
An illustration of this has been the struggle to sustain virtual classes, which has delivered Fernández’s administration a few hits over the past few weeks: an ongoing conflict with BA city authorities that want to start re-opening, considering that many students are falling out of the system due to lack of connectivity; plus the resignation of Adriana Puiggrós as Education Vice Minister following a clash over the lack of support for students in slums with little to none computer access to take classes at home.
The worries about keeping connectivity cheap during the lockdown, the attempts to keep suppressing inflation with price controls, a perception that a majority of Argentines would support the decision (surveys circulating among officials said three out of four voters would back a regulation of this kind), plus a recent bout of animosity with the media for their supposedly favorable coverage of anti-government protests, seemed to have combined in the lead up to the decree.
The decision was very poorly received amid the sectors’ businessmen, with everyone from big firms to small provincial cooperatives coming out against it. Noticeably, Chinese giant Huawei and the American Chamber of Commerce in Argentina both joined the protest, leaving aside any difference between the parts amid the US-China fight to gain influence in the deployment of 5G technologies around the world.
But one sector was euphoric with the resolution: the most ardent Kirchnerites in the media, who saw the decision as proof that Fernández (often criticized for being lukewarm or timid) is not shying up from a fight against Clarín, their historic enemy.
“Six or seven companies have concentrated all the power in the market, formed a cartel, and were making massive profits and cutting investments even during the pandemic, when they were needed the most,” El Destape host Roberto Navarro said in his first show after the news. “And four of those seven companies belong to Clarín”. Not long ago, Navarro argued that Fernández’s relationship with the Clarín group was a classic case of “Stockholm’s syndrome”, among many other criticisms in a similar line.
The conflict between the Kirchnerite camp and Clarín dates back to 2008. The two sides were close allies during the presidency of Néstor Kirchner, as strong economic growth and favorable regulations for the group bred a climate of friendship, of which then Cabinet chief Alberto Fernández was a key instrument, acting as a daily liaison between the President and the group’s main journalists and directors.
But the alliance broke up decisively in 2008, when the group sided with farmers in their conflict over export duties, while Néstor Kirchner denied them entry to country’s telephone business (secured years after during Macri’s administration). Since then, a decade of war took off, with the Kirchners launching an anti-monopoly media law and taking TV football rights from the hands of the group, amid many other hostile maneuvers, with the media conglomerate responding in kind through a single-minded coverage against the family and their government.
The risks of price controls
Looking beyond politics, the question is how the new regulations will affect the development potential of the sector.
Experts are divided between those skeptical of the need for state intervention in a sector that had been showing some signs of growth despite the country’s difficulties, and those who think fears are overstated.
“Across the world, the pandemic showed how essential communication services are in these critical moments. The needs of vulnerable sectors with access limitations will not be solved by the market, so active public policies will be needed. A public service declaration should not be confused with a nationalization”, Conicet and Quilmes University media policy expert Martín Becerra argued. “The decree speaks of public services but also of competition.”
Becerra says telecommunication costs have been growing at a higher pace than average inflation, so some ceilings on prices should not be so hurtful to the sector’s sustainability.
Enrique Carrier, a telecommunications adviser, is more skeptical of what’s ahead. “The countries that have seen more development did not do it through price regulations but through competition. The decree spoke of improving access but price controls have no relationship with that.”
In Carrier’s view, access deficiencies are real, but infrastructure has improved markedly in the last few years since the late arrival of 4G networks in 2014-2015, and broadband coverage has expanded after companies were authorized to provide multiple services. “The mere public service declaration does not solve problems. It can be a first step depending on what your intentions are, but we know other services already have public service status, and access problems have still continued.”