Home Latin America I 2001 Modernizing the Telecommunications Sector in Brazil

Modernizing the Telecommunications Sector in Brazil

by david.nunes
Renato Navarro GuerreiroIssue:Latin America I 2001
Article no.:12
Topic:Modernizing the Telecommunications Sector in Brazil
Author:Renato Navarro Guerreiro
Organisation:ANATEL – Agência Nacional de Telecomunicações – Brazil
PDF size:36KB

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Article abstract

Brazil is profoundly restructuring its telecommunications sector based upon a new and dynamic model, clear and reliable rules and full transparency. The focus is on the needs of Brazilian society and not the interests of private companies. Universal service and competition are the fundamental principles of the new Brazilian telecommunications model. By 2005 all localities with over 100 inhabitants, including tribal lands, must have at least one public telephone installed.

Full Article

The vitality and modernity achieved by the Brazilian telecommunications system in recent years are undeniable. Until just a short time ago, the system’s dynamic and often amazing evolution could only be measured in economic and social terms. But with the municipal elections of last year, held simultaneously in 5,500 municipalities across the country, a more perceptible sign emerged that the new telecommunications model has, as originally intended, begun to contribute to the country’s political development as well. Had the new Brazilian telecommunications model not anticipated the process of technological development or prepared the telecommunications system for the era of telematics, the new electronic voting machines would have served of no value in terms of the savings they represented, both in money and labour, and the reliability and efficiency they brought to the electoral process. Indeed, upon conclusion of the voting, an extraordinary event took place. A huge amount of information from all corners of this massive country flowed instantly into data processing centres and was made available to every Brazilian in real time. For the first time in our nation’s history, an election was initiated and essentially completed in less than 24 hours, a feat that until recently would have been unimaginable. This coming of age of the Brazilian electoral process represents but one example of the new model’s vitality and modernity. Equally surprising, and even more significant, advances are in store for Brazilians in the near future. For instance, the time is nearing when “Information Highways” – modern “highways” founded on Information Technology – will provide all citizens, from the indigenous village to the modern urban centre, with the opportunity to participate directly in the decisions affecting the nation’s future. In other words, Brazil is in the throes of a political and strategic revolution initiated in early 1995 that is redefining the nation’s telecommunications system and which is founded on well-defined technical, economic and social principles and guidelines. In fact, the revolution in progress represents a far-reaching and profound restructuring of the sector configured around a modern and dynamic model that is based on clear and reliable rules, as well as full transparency. Until July 1998, when the state telecommunications monopoly was dismantled in Brazil, the regulation of the Sector centred on the operating companies. Under this arrangement, the State acted as both operator and administrator. A regulatory framework developed within the contours of the current model did not exist. The Government had sole authority to make decisions relative to rules, investments, operational matters, and tariffs and, as a consequence of this singular role, the responsibility to assume the deficits and liabilities of the state-controlled companies as well. By contrast, the new model, which is still under construction, focuses primarily on the needs and rights of Brazilian society and is founded on guidelines that are designed to strike a balance between the interests of private companies – whose primary motivation is to maximize the return on their investments – and users, who seek continuous service that is both of high-quality and offered at fair prices. Thus, the decision to make the individual the focal point of the effort to restructure and modernize the Brazilian telecommunications system is more far-reaching than it appears at first glance. Furthermore, it represents a concern that has carried – and continues to carry -enormous weight in the development of the rules around which the new model will be shaped. To grasp the scope of the new model’s ambitious social component, one need only note that by 2005 all areas of 100 people or more will be required to have at least one public telephone. Indeed, this requirement constitutes one of the goals that has been enshrined in the General Plan of Universal Service Goals (Plano Geral de Metas de Universalização -PGMU), the very plan that in December 2000 was responsible for the installation of countless public telephones in isolated settlements having more than 1,000 inhabitants, including nearly 50 indigenous villages. The point here is that all the rules of the new model were developed on the basis of long-term planning. In the end, the PGMU goals, as well as those set forth in the General Plan of Quality Goals (Plano Geral de Metas de Qualidade – PGMQ), not only comprise important instruments in the restructuring of the telecommunications segment, but their fulfillment, by all licenced companies, is mandatory. Universal service (general access to telecommunications services) and competition constitute the two fundamental principles on which the new Brazilian telecommunications model is founded, a model that is today gradually, but progressively, meeting the needs of all segments of the population. To transform universal service into a viable policy mechanism, the General Telecommunications Law (Lei Geral das Telecomunicações – LGT) classifies telecommunications services according to the juridical regime under which they are provided, namely, public and private. This method of classification was introduced so that the Government could require operators providing services under the public regime – those services provided by means of a licence or permission – to fulfill specific goals concerning service expansion and continuity. Among the services provided under the public regime are the various types of fixed switched telephone services, of any scope (local, domestic, long distance, etc.), intended for use by the general public. Competition among telecommunications service providers is the second principle underpinning the new model. Simply put, this principle is defined by a competitive environment that has clear and reliable rules and is designed to generate benefits for consumers, including those Brazilians who do not yet own a residential or cellular telephone line. Competition, which was first introduced in mobile telephony, now extends to fixed telephony, including the domestic and international long distance segments, the “mirror-image” companies (who compete directly with the privatised operating companies), and the small “mirror-image” companies (which operate in those areas not covered by the “mirror-image” companies). Hard figures and statistics provide tangible evidence of the benefits derived from competition, as well as the effectiveness of the new rules that have shattered taboos and corrected anomalies that for decades were embedded in the old model. In 1996, a residential telephone line cost nearly US$ 1,100.00, a sum which, though payable in 24 monthly instalments, carried with it no accompanying guarantees as to when a given line would actually be activated. In most Brazilian states today, a telephone line can be purchased for US$ 25, while in other states, it is possible to have a residential telephone line installed for a fee of only US$ 7.50, which is due, moreover, only upon activation of the telephone line. The gradual implementation of this policy of cost reduction has provided broad segments of the Brazilian population, especially those in the lower income brackets, with access to telephone lines. These steps have opened the door to millions of new consumers, which has promoted an expansion of the market that has, in turn, fuelled an extraordinary increase in the nation’s telephony plant. After all, in a market historically held captive to the high cost of a product that is essential to every household, technology and investments would be of no value without a consumer base to purchase the telephone lines. The social benefits arising from these measures, however, extend even further. Prior to the implementation of the new model, a residential fixed telephone service subscriber’s basic monthly package (average telephone bill), which includes the activation fee, subscription rates, pulse-based charging for local calls, and per-minute charging for domestic and international long-distance calls, cost almost US$ 60. Today, the cost of that same basic monthly package is a little more than US$ 30, almost 50 percent less. These are just some of the ways through which the new model has extended legitimate and needed assistance to millions in the area of telecommunications – assistance, moreover, that benefits a significant number of low-income Brazilians, for whom owning a cellular or residential line was, until only recently, inconceivable. The number of fixed telephone lines in Brazil, which stood at 13.3 million in 1994, reached 38.3 million by December 2000, 3.3 million more than the set target. Of this total, 18.1 million lines were installed in a mere 30 months following privatisation. Another remarkable advance involves the ratio of installed accesses per 100 of population, which increased from 12.5 at the time of privatisation to 23.1 in December 2000. The progress made in cellular telephony has been no less impressive. At the end of 1997, when Anatel was established, there were 4.6 million cellular sets in operation; by December 2000, that number had climbed to 23.2 million. Of this total, 13.7 million were prepaid and 9.5 million post-pay. The number of public telephones, which at the time of the sector’s privatisation barely surpassed 547,000, reached 910,000 in December. In fact, today the number of fixed and cellular telephones in Brazil exceeds the total population of many important nations. For example, it can be safely projected that by 2005 there will be 116 million sets operating in Brazil – 58 million fixed and 58 million mobile. But to open the market and set in motion the ambitious and bold modernization project for the telecommunications system, it was first necessary to develop a regulatory framework. That framework has been largely completed. The first significant regulatory initiative under-taken in the new era of Brazil’s telecommunications system came in August 1995 when the National Congress passed Constitutional Amendment No. 8 ending the state telecommunications monopoly. The measure represented the country’s first step on the road toward consolidation of the new model. Upon conclusion of this stage, attention turned to winning approval of the Minimum Law, a bill intended to shorten the path to market opening, until such time, at least, as a General Law could be completed, which, it was recognized, would take some time. Approved in August 1996, Law No. 9295, or Minimum Law, organized the Mobile Cellular, Satellite Telecommunications Signal Transport, and Limited Services, in addition to the use of the public telecommunications network in the provision of Value Added Services. The Minimum Law also established the procedures for selling the authorizations for the provision of B-band mobile telephony services to domestic and foreign operating companies. Law No. 9472 – General Telecommunications Law (LGT) – approved by the National Congress on 16 July 1997, launched the next stage in the new era of Brazil’s telecommunications system. The Law, which authorized the privatisation of the state-controlled operating companies that made up the Telebrás System, set forth the new model underlying the regulatory framework, introduced a new phase based on clear and reliable rules, created a regulatory agency – the National Telecommunications Agency (Anatel) – and, at the same time, provided valuable support to the Brazilian Government in its efforts to restructure and modernize the nation’s telecommunications system. The General Law was bolstered by a series of important instruments prepared by the Agency: the General Licencing Plan (Plano Geral de Outorgas – PGO), the General Plan of Universal Service Goals (PGMU), the General Plan of Quality Goals (PGMQ), and the Licencing Contract for Provision of Fixed Switched Telephone Services (Contrato de Concessão para Prestação do Serviço Telefônico Fixo Comutado). These legal instruments, in conjunction with the General Telecommunications Law, constitute the fundamental documents of the new Brazilian telecommunications model. Nonetheless, they represent a tiny portion of the 16,000 documents, including regulations, acts, administrative rulings, guidelines, rules, standards and public consultations, issued by the Agency in its three-year existence. Conclusion More than mere statistics, the figures cited above provide evidence that the task to which the present Administration has committed itself, namely, to dismantle the state telecommunications monopoly and adopt a new model based on competition among operators, would have been virtually impossible without the establishment of a regulatory agency. Indeed, the very scope and nature of this project required the presence of an independent entity capable of, and at the same time, organizing the provision of telecommunications services and persuading domestic and international investors alike of the sturdiness and reliability of the new rules. In other words, Anatel was created to secure the viability of the new Brazilian telecommunications model and pave the way for the country’s entry into the Information Society. In the end, the facts and figures, accomplishments, innovations, and political, technical, and administrative initiatives outlined in these pages amply demonstrate that the privatisation process, coupled with a modern, transparent, and reliable regulatory framework, are today reshaping Brazil’s telecommunications system.

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