Home Latin America IV 1999 A New Phase in Brazilian Telecommunications

A New Phase in Brazilian Telecommunications

by david.nunes
Renato Navarro Guerreiro Issue: Latin America IV 1999
Article no.: 10
Topic: A New Phase in Brazilian Telecommunications
Author: Renato Navarro Guerreiro
Title: President
Organisation: ANATEL (Agencia Nacional de Telecomunicacaoes), Brazil
PDF size: 20KB

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Article abstract

The privatisation process and the introduction of competition, shepherded by Brazil’s regulatory agency for telecommunication-ANATEL, has brought dramatic improvements to the sector. The number of telephones, both fixed and mobile, has grown with unprecedented speed. Telephone services, until recently only for the privileged few, have rapidly expanded; telephones are becoming common at all levels of society. Competition in long distance calling, satellite based communications, subscriber TV, among others, has reduced prices, brought in new investment and created employment in the industry.

Full Article

There have been many parameters used in recent months to evaluate and, not rarely, publicly execrate the privatisation of Brazil’s telecommunications system. The problem is that those judging have committed two grave errors. Firstly, they forget that the privatisation was merely one step of a larger, strategic project to re-direct the system in search of a new model and, secondly, they see occasional incidents and facts-justifiable in the context of such a wide-ranging and profound reform, as evidence of weakness. On the other hand, there is much evidence that Brazil’s project rapidly toppled myths, broke taboos and disappointed the doomsayers of chaos. Until April of 1997, a new telephone line bought through the local telephone operating company, through the so-called “Expansion Plan”, cost US$604.12 (at the time the Real was more or less equal to the dollar). Existing telephone lines were sold through an active secondary, parallel market, for US$3,783 or even US$4,864. In either case, through the expansion plan or the secondary market, few families could afford a home telephone. Today, in most states, it costs about US$27.02 to get a phone line; in Parana it costs only US$4.54 and in the Federal District (Brasilia) it costs just US$5.83. The price of a telephone, as called for by the government’s Universalisation Plan, is now accessible to practically every citizen of Brazil. In 1994, the monthly rate for a residential phone subscription was US$0.23, a low rate, which benefited only those well off enough to afford to buy a telephone. Today the monthly rate is US$6.32, higher, but perfectly compatible with the service received and well within the means of even low-income families. Briefly, in the past, the poorest could not afford a telephone. More than 98% of the telephones were in the hands of the somewhat more than 20% of Brazil’s families, those earning more than US$540.54 per month. These privileged few were favoured by the ridiculous subscription charge of US$0.23 per month. Adjusting this monthly rate to a realistic figure permitted dropping the cost of acquiring a telephone to an affordable level and opened the doors of telephony for millions of previously excluded Brazilian families. From the point-of-view of rates, we have seen another victory. In 1994, the average bill for a standard mix of services we call the “basic basket,” (sign-up charges, basic monthly charge, local pulse, and the cost per minute of domestic and international (long distance calls) cost US$28.10. Today, the same “basket” of services costs US$22.70 or close to 20% less. Correcting the current rate for inflation during the last six years we find the reduction, almost 50%, is even greater. This decline in the true cost buries the fraudulent accusations that, with privatisation, the name adopted as representative of the whole project, the user, would end up paying more for telephone services. The results for mobile cellular service were even more impressive and favourable for the users. Brazil, which in 1994 had roughly 800 thousand cellular users, now has 13 million. Instead of waiting on a long line at the telephone company, today you can buy a handset and sign up for service, without charge, at the store. The cellular phone, no longer a status symbol, is accessible to all social classes. In July 1998 there were 5.6 million cellulars in all of Brazil; this grew by more than 100% in only one year. Since December of 1994 the growth was more than 1,200%. One year after the sale of the Telebras System, the fixed telephone sector has been transformed; there are no longer lines of mistreated “expansion-plan” participants waiting, sometimes years, for their phones. To accomplish this, Anatel ordered the telephone operating companies to pay more than US$16.2 million in damages and compelled the telephone companies to respect the rights of the user to receive their phones. This year, with privatised companies, the number of fixed telephones grew by close to 20%. From 1994 until last October, the volume of fixed phones installed throughout the country has jumped from 13.2 to 26.6 million. The fixed phone user has also benefited by the increase of network digitalisation from less than 50% in 1994 to 80% in 1999. The service density, the number of fixed telephone lines per 100 inhabitants, jumped from 11.48 to 13.98 during the last year; since 1994, when the density was only 7.93, until last October 1999 when telephone density reached 13.98 the system has grown more than 75%. The success in modernizing Brazil’s telecommunications went even further. Competition was introduced in satellite-based services, previously an Embratel monopoly. In the mass communications sector, auctions of licenses opened the market for almost 80 new operators (cable TV now reaches 15.6 million homes) and 26 licenses for MMDS (subscriber TV via land-based microwave transmission which now reaches 7.4 million homes). The recent adoption of a system for long distance calling, requiring the user to choose the carrier for each call, was another step forward in building competition. The reduction in long distance rates by up to 25% demonstrates that we reached our objective. The success of privatisation also buried another myth: that selling a state owned company to private interests would result in unemployment. The results are these: there were 86 thousand people employed in fixed telephony by the Telebras system at the time of privatisation; today, one year later, there are more than 101 thousand. It is estimated that the mobile cellular sector now employs 30 thousand people directly and another 100 thousand indirectly. Conclusion We are still in transition towards the model we have designed, but from the point-of-view of the citizen, it is unquestionable that Brazil, in its new phase in telecommunications is progressively meeting its objective of universalising access to services through competition. In this way free choice is maintained, without affecting such secondary, but just as important, consequences as increased investment and employment in the sector.

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