Regulation of the Audiovisual Communication Services Law No. 26,522

We summarize the most important aspects of these rules.

One of the most controversial and judicially discussed aspects, because of its impact on the market, has been section 161 of the Audiovisual Communication Services Law ("ASL"), that states that the current holders of licenses of services and registries regulated by the ASL, that at this moment do not comply with the new requirements or exceed some of the limits established by the ASL for holding licenses, or, finally, do not fulfill the corporate conditions, must adjust to the provisions of the ASL within the term of one year. The Federal Authority of Audiovisual Communication Services ("AFSCA") has announced Resolution No 297/2010 which regulates the mentioned section (the “Resolution”).

Firstly, since the ASL delegated the determination of the commencement of the period of one year to the AFSCA, established under said Section, AFSCA has determined that the period begins a day after the Resolution’s publication; in consequence the deadline to adjust to the law began on September 9, 2010 expiring the next year on the same date.

The Resolution provides a process of voluntary adjustment whereby licensees who are in breach may adjust to the ASL by an affidavit submitted within 30 days (the term must be counted as from the following day of the publication of the Resolution) and the affidavit must include not only the aspects that would infringe the provisions of the ASL but also the proposed adjustment. The AFSCA may request an expert opinion from the Argentine Antitrust Commission –the enforcement authority of Law No. 25,156– to analyze the impact that the proposal would have on the market after approving or rejecting it.

AFSCA may also check by itself the adjustment of the licensees to the provisions of the ASL. In the event of breaches, the AFSCA will notify to the infringers giving them a term of 30 days to submit an adjustment plan. Lack of filing of such proposal will enable automatically the declaration of a breach and the corresponding penalties.

The adjustment proposal, as a result of the requirement of the AFSCA, will have to include a proposal transfer to an interested party that must comply with the requirements established by the ASL. The AFSCA may require an expert opinion of the AAC and then will approve or reject the transfer proposal.

In the cases that the proposal is rejected or the licensee holder has not made an adjustment proposal, AFSCA will be able to carry out a forced sale process through a public offering or a bidding process and conditions of acquisition for such licenses.

Finally, AFSCA may unilaterally resolve the transfer of licenses in case the holders of the licenses do not comply with the provisions of the ASL. AFSCA may declare the breach, requiring the participation of the corresponding professional association to determine the value of the license in question after which it will publish the available licenses and offer them publicly. Once the acquirer is chosen, AFSCA will notify the infringer in order to proceed with the transfer of the license.

Decree No. 1225/2010 implemented the general regulation of the ASL. There are more than 75 sections (over 165) without regulation and no major novelties regarding the provisions of the ASL have been introduced. The most important aspects of the regulation are the following:

a. Permanent Regulatory Committee

The Decree creates a Permanent Regulatory Committee. This committee shall be composed of the AFSCA, the Secretariat of Communications and the National Communications Commission and shall prepare the technical rules which regulate the activity.

b. Final Judgment

In general the judicial consequences which have a certain impact on the ASL (for example, subsection g) of Section 50 regarding the termination of licenses for the bankruptcy of the licensee) would require a final judgment.

c. Implementation of International Treaties

Regarding the participation of foreign companies in the broadcasting area, the regulation seems to extend or confirm the concept of acceptance of some International Treaties when it states that the AFSCA should specifically consider the pre-existing legal relationships at the time of enactment of the ASL, taking into account the legal regimes that have been applicable on this matter and the existence of International Treaties and Agreements in which the Nation is a party. This seems to be a clear reference to the acceptance of the Treaty signed with the United States of America which has been peacefully accepted in the past by the regulatory broadcasting authority.

d. Unattachability

Even though the ASL on Section 42 has declared the unattachable character of licenses and authorizations, the regulation on Section 43 extends this concept to those goods considered to be essential for the rendering of services on a regular basis and involved in an audiovisual communication service, and those goods which shall be added for the replacement or re-equipment.

e. Delegation of Exploitation

Section 44 of the ASL considered the delegation of exploitation as a serious misconduct and listed five cases of delegation. Regarding the execution of exclusivity agreements with companies commercializing advertising (subsection b of Section 44), the regulation provides that when a different person from the licensee executes a contract of at least 60% (sixty per cent) of the private advertisement spaces shall be considered as “delegation of exploitation”.

The abovementioned Section on subsection (c) states that “delegation of exploitation” shall be also considered when executing exclusivity contracts with producers of contents. In that case, the regulation states that the delegation of exploitation shall be considered in the event that someone different from the licensee executes a contract of at least 30% (thirty per cent) of the programming spaces and/or its broadcasting.

Finally, under subsection (d), which punishes the performance of any legal transaction that allows the total or partial substitution of the licensees, shall be considered, among other things, when goods involved in rendering the service are replaced by goods belonging to a third party.

 

f. Multiple Licensing

Regarding multiple licensing, the regulation establishes that the territorial range of broadcasting services by subscription will be determined by each Municipal State or Department Authority. The Authority could extend the productive unit to its surrounding areas.

g. Shareholders’ meetings

Following the provisions of Section 53 regarding shareholders´ meetings, the regulation establishes the obligations to notify the AFSCA within 30 days in advance of meetings to be held by the shareholders, their dates, their Agenda and include in the filing a certified copy of the Shareholders’ Record Book.

h. Deductibility

The regulation establishes the deductibility of Gross Income Tax to determine the basis for calculation of the fee established under Section 94 of the ASL.

Regarding the calculation of the fee applicable to the foreign channels, the regulation provides that the base will be the turnover from any act or activity described in the ASL, as an event capable of producing effects in Argentina, regardless of the place of origin, nationality or residence address of the holder or the parties involved in the transactions or the place where contracts are executed.

i. Repetition of Infringements 

Section 105 establishes that it shall be considered as repetition when four (4) infringements to the ASL as described on Section 104 are committed within the same calendar year.

j. Advertisements

Even when the ASL provides that advertisements shall be domestically produced when broadcasted via open broadcasting services or on channels owned by subscription services licensees or when inserted in domestic channels, the regulation incorporated the possibility of including advertisement spots of foreign origin in the mentioned media as long as the advertiser or advertisement agent can provide evidence before the AFSCA that there are reciprocity conditions between Argentina and the country where the advertisement comes from. Also, as a novelty, the regulation provided that the AFSCA could allow for the inclusion of non-traditional advertisement (NTA) as long as it does not damage the integrity and value of the broadcasting, and does not exceed the maximum time of broadcasting set by the ASL.

k. Reorganization of the Channel Chart

AFSCA Resolution No 296/2010 establishes the guidelines for the organization of channel charts of audiovisual services by subscription, linked to Section 65 of the ASL.

As well as ordering the signals by gender (national news channels, open channels, sports channels, children’s channels, etc.), the novelty consists of those locations which are out of range of open channels of the City of Buenos Aires (Channels 2, 9, 11 and 13).

In the cases of those locations, in the spaces reserved to open channels (priority location)  only those open television channels or their authorized repeaters in which primary coverage range are installed in their own headers shall be included, reserving the space immediately after, for the LS82 TV Channel 7.