In line with the rest of the world, Portugal has predictably had a dismal year in 2020 due to the COVID-19 pandemic and its wide-ranging fallout. Following an initial lockdown period enacted in mid-March 2020 (a new lockdown has been in place since January 2021 after a second peak in new cases and hospital admissions), restrictions on movement and business have remained in place with varying degrees of severity. The leisure, hospitality and travel sectors have taken a huge hit, but the recession has been felt across the board. GDP fell by 7.6% and corporate investment dropped 16%. Work-from-home has tested network capacity and resilience, with Portuguese telco operators stepping up to the challenge (additional mobile connectivity was offered free of charge to users). The government has pushed forward with an ambitious plan for digital transformation. And the 5G spectrum auction is finally under way in a uniquely controversial setting.
Pandemic response: electronic communications
In anticipation of network constraints and congestion resulting from increased demands on broadband connectivity due to lockdown and work-from-home, the Portuguese government enacted temporary legislation enabling telco operators to implement exceptional traffic management measures. Data traffic increased substantially over the past year: fixed broadband traffic increased +54% and mobile data traffic increased 29% over 2020.
These measures included identifying critical electronic communications services and defining categories of priority customers. Services defined as critical were given priority for service continuity purposes and included, among others: voice and SMS; continuous access to emergency services and warnings to the public; data services, on fixed and mobile networks, required to ensure a minimum set of broadband internet services (e.g. email, search engines, online teaching tools, etc.); and free-to-air television broadcasting and digital terrestrial television.
Specific measures protecting adversely affected consumers (laid off or with significant decreases in income) were also enacted. These temporary rules were repealed in August 2020 but reinstated in January 2021.
During 2020, the Portuguese government has moved ahead decisively with its Action Plan for Digital Transformation (available here, only in Portuguese), setting out policy objectives for 2021-2027. The plan rests on three pillars: (i) digital training; (ii) digital transformation of business; and (iii) digitalization of public administration.
The government wants to educate the population through inclusion and focus on digital literacy, investment in digital businesses, transferring scientific and technological knowledge to the economy, and adapting and connecting public services to the digital era.
Some of the main measures include: intensive and specialized digital training programmes for 3,000 professionals, digital inclusion programmes for 1 million adults, creating a "social tariff" for internet access, the digitization of the 25 most used public services and implementing a cloud strategy for public administration. The plan has also played an important role during the pandemic, notably by enabling the distribution of computers to students in primary and secondary schools, affected by temporary closures.
Digital transition is one of the main goals of the Portuguese Presidency of the Council of the European Union, which is set on accelerating this transition to drive economic recovery and promote European leadership in digital innovation and economy. Furthermore, 31% of the funding Portugal will receive via the EU Recovery and Resilience Facility, in the amount of EUR4.35 billion, will be allocated to digital transition initiatives.
5G: a turbulent process
As a result of regulatory uncertainty, Portugal is lagging in 5G and currently one of only 4 European countries where no 5G commercial offers are yet available.
After several delays to its initial timeline, the 5G spectrum auction finally got under way in December 2020 (initial bidding stage reserved for new entrants and limited to spectrum in the 900 MHz and 1800 MHz bands) and is currently ongoing.
ANACOM, the national regulatory authority for electronic communications, has drawn heavy criticism from Portuguese mobile network operators for some of the options underlying its regulation on the auction rules. The regulator has diverged from the government’s strategy for the roll-out of 5G and, instead, opted to design the auction rules with the single goal of promoting market entry by new players. This has resulted in several advantages being granted to new entrants only, such as reserved spectrum in certain bands and extremely light investment and coverage obligations. Conversely, existing mobile operators have been burdened with heavy obligations, not the least of which is to offer national roaming to new entrants on their networks.
As a result, the atmosphere has degenerated into intense litigation between existing operators and ANACOM, with several interim measures being requested and multiple pending legal actions for annulment of the auction regulation.
Several noteworthy transactions took place during 2020. In April 2020, the independent towering operator Cellnex acquired approximately 2,000 towering sites from NOS, following on from its prior acquisition of towering company OMTEL. This marks a continued trend for telecoms operators to divest passive infrastructure and regulate its use under long-term contractual arrangements as a means of strengthening their ability to invest in core network assets and innovation. More recently, in October 2020, NOS and Vodafone concluded an infrastructure sharing agreement which, in less densely populated areas of the country, will cover both passive infrastructure (towering sites) and RAN sharing. Significant synergies are expected to emerge from this agreement as well as faster network roll-out.
Also worthy of mention is the Portuguese government’s continued effort to stimulate innovation and investment in technology start-ups, through the development of a sandbox-like legislative framework for research, simulation and testing activities, in a real environment, for innovative technologies, products, services, and models in Portugal (including, among others, artificial intelligence, blockchain, virtual reality, big data, 5G or Internet of Things), and the creation of Technological Free Zones.
By Gonçalo Machado Borges