Department of Management -...

Brazil Business SeminarBrazil Business SeminarOsaka Osaka –– JapanJapanJuly, 29, 2010July, 29, 2010

An overview of Brazil’s Regulatory Body and the enhancement of the An overview of Brazil’s Regulatory Body and the enhancement of the Telecommunication sector Telecommunication sector

Rodrigo Augusto BarbosaRodrigo Augusto BarbosaDi tDi tDirectorDirector

Department of ManagementDepartment of Management

Historical Historical Background

The beginning: 1852 – Telegraphic call from the Imperial Palace to the Armed Forces HeadquartersForces Headquarters

More than 150 years of History, divided in 3 main phases:

PHASE 1EMPIRE AND GENERAL GRANTINGS

(XIX to XX Century)

PHASE 2STATE OWNED COMPANIES AND NATIONALIZATION

(XX Century)

PHASE 3PRIVATIZATION AND REGULATION

(Current model)( )

Historical BackgroundHistorical Background

PHASE 1 (XIX to XX Century)

Scenario: rudimentary

( y)

•The country is connected through concessions, but the d i i t ti d th t h l f b dadministration and the technology are from abroad.

• 1873 - Western is granted with a 99 years concession to explore telegraphic cables. British Monopoly.


PHASE 2Scenario: poor quality and unbalanced geographical distribution

• In 1968, 95% of all telecom activities in Brazil were based in the Southern and South-East Region • 1.500 cities still isolated • Phone density reached 3%. In some States, it did not reach 0,3%.

•1962 – first general law on Telecommunication •1963 - Rio talks to the US by satellite1965 E b t l i t d t t d•1965 - Embratel is created as a state owned company

•1968 – Creation of the Ministry of Communications •1972 - Telebrás is created •1973 – Western’s concession is not renewed


Phase III – Making way to the XXI Century

Scenario: strong infrastructure created in the previous phase; expensive and inefficient services

• No coverage: 98% of all rural properties, 80,9% of urban homes, 46,7% ofi l t bli h t d 58% f B ili l liti (1995)commercial establishments and 58% of Brazilian localities (1995)

• Density of 8% which left the country in the 42nd place in world comparison and in• Density of 8%, which left the country in the 42nd place in world comparison and inthe 10th position in the Latina American market. Chile, for example, had alreadyreachd 12,1%

• Inaccessible services: a single residential phone could cost, in 1997, over US$ 1.500and its effective delivery could take 4 years.and its effective delivery could take 4 years.


Phase III – Making way to the XXI Centuryg y y

Evaluation: based on the States’ capacities to provide services the systemEvaluation: based on the States capacities to provide services, the system showed itself socially inefficient

Constitutional Amendment n.º 8, of 1995, allowed private companies to explore the telecommunication sector. A regulatory body was predicted...

Anatel : converge the State’s capacity to regulate with private sector’s efforts in investing and innovating

Legal MilestoneLegal Milestone

L 9 4729 472 th G l L f T l i ti (LGT)Law 9.4729.472, the General Law of Telecommunications (LGT), issued on the 16th of July 199716th of July 1997, defined the framework of the new regulatory

model and created ANATELANATEL.

Legal milestone of the

New Telecommunication model New Telecommunication model

and of Telecommunication Lawand of Telecommunication Law

Anatel :The Regulatory AuthorityAnatel :The Regulatory Authority

Characteristics:Characteristics:

Administrative independence

Financial autonomy

No hierarquical subordination

5 Board members; 5-year fixed mandate

Regulatory Pillars in BrazilRegulatory Pillars in Brazil

Universal Services CompetitionServices

Services available at

p

Fairness of competitionServices available at affordable prices, provided with quality and efficiency

Availability of services in rural, remote and poor areas

Encouragement for new entrants in the market

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CompetencesCompetencesAnatel: Mission and StructureAnatel: Mission and Structure

Regulation and Policy making : shared competence framework

Ministry ofMinistry ofANATELANATEL Ministry of Ministry of CommunicationsCommunications

Policy MakingPolicy Making Telecom BroadcastingTelecom Broadcasting

Spectrum Management Spectrum Management Allocation Allotment and AssignmentAllocation Allotment and Assignment Including BroadcastingIncluding Broadcasting

Policy MakingPolicy Making(Telecom, Broadcasting and Postal Services)(Telecom, Broadcasting and Postal Services) -- Telecom, Broadcasting Telecom, Broadcasting

and Postal Servicesand Postal Services

Allocation, Allotment and Assignment, Allocation, Allotment and Assignment,

Enforcement and Type ApprovalEnforcement and Type Approvalg gg g --

GrantsGrants(concession authorization and permission)(concession authorization and permission)

Telephony and Broadband Telephony and Broadband (Fixed and Mobile)(Fixed and Mobile) and pay TVand pay TV

Broadcasting Broadcasting (TV and Radio)(TV and Radio)

Enforcement of Enforcement of Universal Services ObligationsUniversal Services Obligations Fixed phone marketFixed phone market --

(concession, authorization and permission)(concession, authorization and permission) (Fixed and Mobile)(Fixed and Mobile) and pay TVand pay TV (TV and Radio)(TV and Radio)

Enforcement of Enforcement of Quality of Service and TariffsQuality of Service and Tariffs

Telephony and Broadband Telephony and Broadband (Fixed and Mobile)(Fixed and Mobile) and pay TVand pay TV --

Consumer ProtectionConsumer Protection On quality of Service, Content, On quality of Service, Content, tariff and economic abusetariff and economic abuse

--tariff and economic abuse tariff and economic abuse

Representation of Brazil Representation of Brazil in International Telecommunication forain International Telecommunication fora E.g ITU, CITELE.g ITU, CITEL --

12 years of Anatel: Results?

• Labor market grew 300%

• 1.608% more direct investments than in the previous 25 years

• Revenues have summed over US$ 600 billion, against US$ 30 billion inthe previous model

• Taxes added up to over US$ 140 billion

• Fixed phone plant boosted accesses from 17 million to more than 40p pmillion in 2009

• All of Brazilian 5.564 cities have both individual and public access toAll of Brazilian 5.564 cities have both individual and public access tofixed phones.

• Total accesses are over 240 million• Total accesses are over 240 million

Brazil’s general context : Income distribution per regionBrazil’s general context : Income distribution per region

Population: 190 milionPopulation: 190 milionNORTHNORTH5%5% NORTH EASTNORTH EAST

GDP:GDP:• US$ 2 trillion (PPP)

NORTH EASTNORTH EAST13%13%

CENTERCENTER WESTWEST • Estimated growth rate: 5.8%GDP per capita income:GDP per capita income:• US$ 10.200

SOUTHSOUTH--EASTEAST57%57%

CENTERCENTER--WESTWEST9%9%

US$ 10.20057%57%

SOUTHSOUTH16%16% South East + SouthSouth East + South16%16% South East + SouthSouth East + South

Area = 18%Area = 18%Population = 57%Population = 57%

GDP = 73%GDP = 73%

Brazil Brazil –– Fast economic recovery after 2009 crisisFast economic recovery after 2009 crisis

6

4

5

6

3

4

1

2

-1

0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011*1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011*

GDP growth (%) (*) forecasts

Brazil Brazil --Telecom StatisticsTelecom Statistics

Penetration rates of telephone services by income classp y

Income Class Mobile Fixed

A/BA/B92%92% 83%83%

CC46%46%

17%17%

88%88% 61%61%

DD22%22%

65%65% 30%30%

46%46%

EE15%15%

22%22%

49%49% 17%17%15%15%

Fixed phone operators by regionFixed phone operators by region

OIOI

R i IR i IRegion IRegion IRegion IRegion I

Local and Long Distance Local and Long Distance Entrants (mirror companies)Entrants (mirror companies)

OiOiEmbratelEmbratel

Entrants (mirror companies)Entrants (mirror companies)

Region IIRegion II

TFNTFN Region IIIRegion III

ITGITGEmbratelEmbratel

CTBCCTBC

GVTGVT

Region IIRegion II

OIOI

TFNTFN

TelefônicaTelefônica

Region IIIRegion III

GVTGVT

TIMTIM SercomtelSercomtel

GVTGVT

EBTEBTBrTBrT

GVTGVT

Local Fixed Telephony Local Fixed Telephony (Incumbents)(Incumbents)

Regions I, II, III e IV Regions I, II, III e IV Long Distance Long Distance -- National and International (LDN/LDI)National and International (LDN/LDI)

Mobile operators by regionMobile operators by region

OIOIOIOI

CLAROCLAROVIVOVIVO

OIOI

OIOI

TIMTIM

VIVOVIVOOIOI

CLAROCLAROTIMTIM

VIVOVIVO

The Brazilian Telecom SectorThe Brazilian Telecom Sector

hi f i

100%

Geographic coverage of services(% of the population)

100%92%

75%

60%

fixed mobile broadband Pay-TV

*The numbers concerning fixed telephony take into consideration those of public phones.


MillionsMillionsNumber of Users

S T l b il

Fixed-line Mobile Pay-TV Broadband

Source: Telebrasil

The Brazilian Telecom SectorThe Brazilian Telecom SectorBrazilian ICT SectorBrazilian ICT Sector

Fixed Market share Mobile market share

others18% Vivo

29%

Oi21%

incumbents Claro

TIM24%incumbents

82%Claro 26%

Challenge: to foster competition on fixed as reached in mobile.


Teledensities are growingTeledensities are growing% population Teledensities are growingTeledensities are growingp p

Fixed-line Mobile Pay-TV Broadband

S T l b ilSource: Telebrasil


Brazil in the World- World Americas Latin America South AmericaPopulation 2,9% 21,1% 34,8% 50,1%Total Access 3,8% 18,8% 35,1% 47,9%Fixed 3,6% 14,6% 40,1% 55,3%Mobile 3,8% 20,0% 33,7% 46,0%Paid TV 2,2% 10,0% 36,8% 52,3%Internet Users 4,4% 16,8% 44,3% 56,3%Broad Band subscribers 2,5% 8,7% 37,1% 53,5%

Mobile Market (million)

Position Country 2004 2005 2006 2007 2008 ∆Ano1 Chi 335 393 461 547 641 17 2%1 China 335 393 461 547 641 17,2%2 US 48 76 149 234 347 48,2%3 India 181 208 233 255 270 6,0%4 Russia 74 126 152 173 188 8,6%4 Russia 74 126 152 173 188 8,6%5 Brasil 66 86 99,9 121 151 24,5%6 Indonesia - - - - 141 -7 Japan 91 95 99,8 105 110 5,1%

Source: ITU

The Brazilian Telecom Sector The Brazilian Telecom Sector –– Recent AdvancesRecent Advances

3G evolution (million users)

8 66

2,785,73

8,66

0,0010,001

June/08 Dec/08 June/09 Dec/09

Terminals (million)

I D b 2009 8 664 443In December 2009 8.664.443 users


3G Auction Results3G Auction Results

•Authorization contracts signed in April 2008

•44 licenses sold, to cover all national territory

•4 major operators

•Total collection of US$ 3 billion

•4 major operators

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New General Plan of Universal ServiceNew General Plan of Universal Service

Telecommunication Service Centers (PSTTelecommunication Service Centers (PST´́s)s)

ChangeChangeChangeChange

ofof

ObligationsObligations BACKHAUL OBLIGATIONSBACKHAUL OBLIGATIONS

Backhaul GoalsBackhaul Goals

Backhaul deployment terms% M i i li i i h B kh l% M i i li i i h B kh l

80% 100%

% Municipalities with Backhaul% Municipalities with Backhaul

till 31/12/2009 till 31/12/2010/ / / /

Goals for the transmission bitrates of the backhauls Goals for the transmission bitrates of the backhauls **

Cities up to 20k inhabitants 8 Mbps 8 Mbps 20k to 40k inhabitants 16 Mbps16 Mbps

Cities over 60k inhabitants32 Mbps32 Mbps40k to 60k inhabitants 64 Mbps64 MbpsCities over 60k inhabitants

*The capacities are subject to modification in the future, according to technological evolution.*The capacities are subject to modification in the future, according to technological evolution.

Internet access for Public SchoolsInternet access for Public Schools

Amendments to existing multimedia communications services (data communications) authorizations

New obligationsNew obligations: free internet : free internet access for Public Schoolsaccess for Public Schools

By 2025By 2025

55.000 Public Schools estimated 55.000 Public Schools estimated to have free broadband to have free broadband connectionconnection

General Plan for Update of Telecommunication RegulationGeneral Plan for Update of Telecommunication Regulation

Strategic GoalsStrategic Goals•Massification of broadband access

i f i f f i

•Improvement of the quality of service perceived by users

•Reduction of barriers for the use of telecom services by lower income classes and in rural areas

•Improvement of the quality of service perceived by users

•Increase in the use of telecommunications networks and services

•Diversification of services

•Adequate levels of competition

•Expansion of Pay TV services

•Development of national technology and industry

•Simplified regulation in view of convergence

The National Broadband Plan

B k dBackground

i lMain goals

Forecasts for the Telecom Sector in Brazil Forecasts for the Telecom Sector in Brazil

Pay TV (mi)Fixed Telephony (million users)

40 547,25

54 17,9

40,5,

2008 2013 2018

5,910,3

2008 2013 20182008 2013 2018

Mobile Telephony (mi) Broadband (mi)

41123

p y ( )

200

270

( )

162

134

0

159

41

146

102,8 27

41

39

12368

2008 2013 2018

2G 3G

10 27

2008 2013 2018

Fixed broadband Mobile broadband


InvestmentsInvestments

300,00

350,00

200,00

250,00

illio

n

Fixed Broadband

150,00

200,00

US

$Bi

Pay TV

Mobile Phone

Fixed Line Phone

50,00

100,00

-2010 2011 2012 2013 2014 2015 2016 2017 2018


New Frequency Bands

450 MHz

700 MHz

2.500 MHz

3.500 MHz

PerspectivesPerspectivesRegulatory PerspectivesRegulatory Perspectives

•Anatel’s reform

•National Broadband Plan

•New revision of the General Plan of Universal Goals (PGMU-3)

•National Broadband Plan

New Goals for expanding Backhaul capacities by 2015New Goals for expanding Backhaul capacities by 2015

•New frequency bands for mobile broadband technologies

•General Plan of Competition Goals

•Regulation for evaluating the efficiency of Spectrum usage

p

I f h i i f l i

•Unbundling Regulation

•Converged licensing model

•Improvement of the provision of rural services

Conclusion

• The Brazilian telecom sector is the 7th largest in th ldthe world

• Challenges of the past have been tackled, but new advances are demanded

PREDICTIBILITY AND CREDIBILITY

Thank YouThank Youwww.anatel.gov.brwww.anatel.gov.br

[email protected]@anatel.gov.br

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