Feature Issue 03 - 2021 MAGAZINE Telecom

5G is changing Brazil’s telecom sector

The introduction of 5G in Brazil could help sectors like public health and education, which were deeply affected by the Covid-19 pandemic

Over the past few years, Brazil has become more and more reliable on the internet for banking, business, telecommunication and leisure, even more so during the Covid-19 pandemic. But surprisingly, the country ranked 49th in the world for fixed broadband speed and 74th for mobile speed according to April 2021 data from the Speedtest Global Index. Recently, Brazil made a lot of headlines over its introduction of 5G and it became one of the most talked-about pieces in the news.

The history of mobile telephones in Brazil began after the inauguration of the cellular mobile system on December 30, 1990, in the city of Rio De Janeiro. At that time, there were 667 devices in the country. But that number quickly rose to 6,700 in the next year, to 30,000 in 1992. In November 2007 3G services were launched and increased rapidly to almost 90 percent of the population in 2012. The first LTE-compatible devices became available in the local market and LTE services were commercially launched in 2013. Under the terms for 4G use, operators were required to have commercial networks in all twelve state capitals which are acting as host cities for the 2014 FIFA World Cup.

Due to the popularity of high-speed internet and the amenities from it, the use of the internet started dominating the telecom sector. In fact, Brazil’s fixed broadband speed has improved 69.2 percent year-on-year, moving the country up seven places from 56th in April 2020 to 49th in the Speedtest Global Index in April 2021. The country is also at the brink of an internet revolution, with an upcoming 5G spectrum auction and future broadband investments becoming a priority. Currently, Brazil has more than 228.9 million active mobile connections, according to the national Telecommunications Agency (ANATEL). However, little more than half uses 4G.

Clara, Vivo, TIM, and Oi fight for market presence
During the first quarter of 2021, Claro had the fastest median mobile download and upload speeds in Brazil among top providers. Vivo stood second TIM third, and Oi secured fourth place. Experts believe that Brazil’s mobile speeds will continue to accelerate as 5G technology becomes more accessible and network providers invest in more 5G deployments. The 5G spectrum auction could improve 5G offerings for consumers and dramatically accelerate Brazilians’ mobile experience. Additionally, network performance is often an important factor to a customer’s experience, but it’s not the only thing people take into consideration while choosing their internet service provider. According to Consumer Sentiment data, Claro had the best NPS score in Brazil, closely followed by Vivo, with Tim trailing behind, and Oi at the fourth position.

Meanwhile, Brazil’s top fixed broadband providers had a competitive race for the fastest provider in Brazil during Q1 2021 where Vivo achieved the fastest median download and upload speeds in Brazil, followed by Claro, and Oi. Speedtest Consumer Sentiment data and NPS revealed that Vivo had the best score for fixed broadband among top providers during the first quarter of 2021, followed by Oi and Claro.

The 5G spectrum sale
Brazil has one of the largest mobile markets in Latin America due to the sheer size of its population. Along with this, healthy competition in the mobile market has helped reduce the price of mobile services in Brazil in recent years. This has led mobile service providers to convert their customers from a prepaid to a contract plan. Additionally, mobile broadband has also picked up, registering about 213.7 million subscriptions as of March 2021, with the penetration rate staying just above an impressive 100 percent. The principal telcos include Telefônica Brasil that operates fixed-line and mobile services under the Vivo brand, along with América Móvil operating services under the Claro brand. Oi also offers a whole host of services, but the financial difficulty faced by the company recently forced them to sell its mobile, tower, and data centres units in an effort to ease their debt.

The multi-spectrum auction, intended to push the development of 5G, was scheduled for March 2020 but was delayed to mid-2021 due to interference issues with satellite TV broadcasts and the Covid-19 pandemic. Currently scheduled to be held in November, it is regarded as the largest auction in Brazil so far. Additionally, it was also revealed that given the underused capabilities of LTE it is unlikely that the licensees will provide commercial services before the end of 2021. The country also has one of the largest fixed-line broadband markets in Latin America, though broadband penetration is only slightly above the regional average. It is closely followed by Chile, Argentina, and Uruguay. The fixed broadband market has seen rapid growth for a while and they are currently focusing on fibre broadband. In 2019 the number of fibre accesses overtook DSL connections. Vivo has the largest share of the fibre market, followed by Oi and Claro.

Brazil is also one of the key landing points for a number of important submarine cables connecting to the US, Central and South America, the Caribbean, Europe, and Africa. With a lot more cable connections due in 2022, there will be increased bandwidth and push down broadband prices for end-users. Investments have also been made into terrestrial fibre cables between Brazil, Argentina, and Chile. According to experts, the outbreak of the Covid-19 pandemic continues to have a significant impact on production and supply chains globally. Since 2020, the telecom sector has seen a decline in mobile device production. It was also difficult for network operators to manage workflows when maintaining and upgrading existing infrastructure. Due to the aforementioned reasons, progress towards 5G has been postponed or slowed down in some countries.

From the consumer’s perspective, spending on telecoms services and devices is under pressure because of the financial effect of large-scale job losses, disposable incomes, and restrictions. Recently, the US national security adviser Jake Sullivan raised concerns about Huawei equipment in Brazil’s 5G telecoms network during his visit to the country. The US officials have also been requested by Brazil’s president, Jair Bolsonaro, where they questioned national integrity and other issues.

The National Security Council’s senior director for the Western Hemisphere, Juan Gonzalez, denied reports that the US had offered support for a NATO partnership with Brazil in exchange for cooperation over 5G equipment manufactured by Huawei.

Mulling the decision, Brazil decided to go with Huawei, even when US officials had urged both Brazil and Argentina to build native industries. The opposition was made on the grounds of Brazil’s use of Huawei on security grounds, though Brazilian telecom companies have already built networks largely with Chinese components.

Effects of the introduction of 5G in Brazil
The global infrastructure for 5G is provided primarily by three companies: Huawei, the Swedish company Ericsson, and the Finnish company Nokia. The implementation of 5G in Brazil depends on the bidding of radio frequency use authorizations in the 700 MHz, 2.3 GHz, 3.5 GHz and 26 GHz bands, popularly known as the 5G auction. The 5G technology will be explored mainly through the 3.5 GHz band and also through the 26 GHz band. The draft tender notice has already been approved by Anatel’s board of directors. Regardless of the date of the auction, the draft notice establishes that the companies that win bids for the 3.5 GHz band will have to start 5G mobile service in the state capitals and Brasília by July 31, 2022.

Additionally, it also mentions that 5G coverage will be expanded gradually, reaching all Brazilian municipalities by December 31, 2029. Keeping aside the auction, the implementation of 5G in Brazil depends on municipal governments’ rules established in federal standards that deal with the implementation and sharing of telecommunications infrastructure that aims to expand the network. Due to features including high data transmission rates and low response time, 5G technology offers a wide range of possibilities for use by people and also by machines. Additionally, the services provided by 5G networks will contribute to increasing the efficiency of various activities, which, in turn, will enable the digital transformation of the Brazilian economy and benefit the entire society.

Once successfully implemented, the 5G technology is likely to have a significant impact on many areas of Brazil’s economy, including agriculture, and large farms are eager to utilize the new technology to enhance productivity. But, there is risk that the arrival of 5G will deepen the digital divide in the country, boosting innovation in rich urban areas while leaving less affluent rural regions behind.20 percent of the Brazilian population still lacks internet service, especially in remote areas, however, 5G also represents an opportunity for the government to provide better public services, ranging from public health to education, two areas severely affected by the pandemic.

In order to better expedite digital inclusion, Brazil’s communications minister, Fábio Faria, wants all state capitals to have 5G standalone working in a year. Additionally, operators will also be obliged to cover the Amazon region with broadband and deploy a network for the federal government as well. The introduction of 5G in Brazil will have a great influence in improving Internet access and speed.

Bolsonaro wanted to allow Huawei to participate only in local 5G auctions, not national ones. Huawei arrived in Brazil more than 20 years ago and provides about 50 percent of the telecom equipment to the main Brazilian telecom operators, Telefónica (Vivo), América Móvil (Claro), Oi and Telecom Italia. Given the fact that China is Brazil’s largest trading partner, exports from Brazil to China have increased. However, Anatel, the Brazilian telecom operator regulatory agency, has opened the 5G auction to all companies. Brazil is Latin America’s biggest economy, and this decision may influence the rest of the region, where Huawei is a major telecom equipment provider and, after this decision, will continue to be so.

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