Joao Miguel da Rocha Filho Issue: Latin America III 1998
Article no.: 5
Topic: Salvador, NEC’s First CDMA Wireless System in the World
Author: Joao Miguel da Rocha Filho
Title: General Manager, Marketing and Sales
Organisation: NEC, Brazil
PDF size: 20KB

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Article abstract

The privatisation process in Brazil has gone a long way to encourage the introduction of cellular technology in the country. It shows how the competition was fought for the two largest markets in Latin America: Sao Paulo and Rio de Janeiro. NEC’s strategy to deploy its COMA technology in Salvador has allowed the company to emerge as the leading provider of COMA in the Brazilian and the Latin American markets. For its customers, they have had the chance to compare for themselves the merits of both the COMA and TOMA technologies.

Full Article

Salvador, located in the Bahia state in the north-east of Brazil, was the first city in Brazil to introduce a fully commercial cellular Code Division Multiple Access (CDMA) network. Bahia is a very traditional state in Brazil, whose first native population originated from Portugal 500 years ago. With a combination of Portuguese, African and Indian cultures, Bahia is now a source of genuine countrywide culture. Its religion, the carnival, the food and the music are assimilated and now form part of the Brazilian way of life. Salvador was also once the capital city of Brazil. It is now a very busy cultural, tourist and business centre. It has a population of 3 million, with a very good seaport, beautiful beaches and very good quality of life. It is in Salvador that NEC successfully deployed its first CDMA cellular system. Brazilian Telecommunications Backdrop The Ministry of Communications was the government body responsible for telecommunications in the country. Under its control, the holding company Telecomunicacoes Brasileiras (Telebras) was responsible for the provision of all telecommunications services. Telebras was fully state-owned with about 30 subsidiary companies. One of them was Telecomunicacoes da Bahia (Telebahia), responsible for the provision of fixed and cellular services to the state of Bahia. Following the worldwide call for liberalisation, the Brazilian government started its process in 1996, which involved the reorganisation, deregulation and privatisation proccess of its telecommunications sector, to align itself with the needs of a modern economy. As a result of this process, under cellular services provision, there are now two operators per region, in the ‘A’ and ‘B’ bands in the 800MHz. Telebahia Celular is the mobile cellular provider in the ‘A’ band in the State, competing with another operator in the ‘B’ band. In total there are 19 cellular operators in Brazil. At the beginning of 1997 there were about five million cellular subscribers in Brazil, all of them in the ‘A’ band companies, with several ‘B’ band networks under construction. The analogue standard in Brazil is the Advanced Mobile Phone Service (AMPS), and two standards were fixed for digitalisation, opening a window for strong competition between the Code Division Multiple Access (CDMA) (IS-95) and Time Division Multiple Access (TDMA) (IS-136) digital technologies. Creation of NEC DO BRASIL For NEC, with 32% of the market share in the AMPS, it was a major challenge to set a market presence in the digital arena in parallel with the privatisation of the TELEBRAs companies. NEC operates in Brazil via a subsidiary company, NEC DO BRASIL. This company is the largest telecommunications supplier in Brazil with US$1.5 billion sales in 1997. It markets a full range of telecommunications products with 2,700 employees and several offices around the country. Sao Paulo hosts one of the most modern telecommunications plants of the NEC Group, it houses production lines, development centres, repair facilities, engineering offices, etc., and manufactures AMPS and COMA radio base stations, base station controllers and switches. For the cellular area NEC established a Wireless Business Unit with offices and design centres in Sao Paulo city, responsible not only for Cellular services, but also for Personal Communications Services (PCS) and Wireless Local Loop (WLL) businesses. COMA Trials Initially, NEC deployed a COMA trial system in Salvador. The purpose of this trial was to put the equipment under actual field conditions, to develop engineering expertise, to confirm radio frequency design methodology and to familiarise the customer with this new technology. The work proceeded smoothly during the first half of 1997. During this period the two largest telecommunications companies in Brazil, TELESP of Sao Paulo and TELERJ of Rio de Janeiro, were preparing tenders for large capacity cellular digital networks. TELESP CELULAR runs the ‘A’ Band for Sao Paulo covering a population of 34 million people, including the very large metropolitan area of the state capital, Sao Paulo city with 17 million people. TELESP target was an initial deployment of a digital system for one million subscribers, to be expanded up to four million under the same contract. TELER CELULAR is the ‘A’ band service provider for Rio de Janeiro and it planned the initial deployment of a digital system with 660,000 subscribers. This project was to cover nine million people of the metropolitan area of Rio de Janeiro. The trial in Salvador involving one switch, one base station controller, and seven radio base stations, all developed and manufactured by NEC, were to prove fundamental to NEC’s strategy. With a successful trial, NEC started deployment of a commercial system, increasing the number of radio base station to expand the coverage for Salvador City. This system also supported the necessary field tests for handsets to be delivered to the Brazilian CDMA market. In the last quarter of 1997, the CDMA system in Salvador was ready to demonstrate NEC’s capability of deploying a CDMA network in a dense urban environment, like the ones required for TELERJ and TELESP. ‘Mother of All Bids’ The TELESP and TELERJ digital bids proved to be ‘the mother of all bids’ for all the suppliers of cellular infrastructure. First, because it openly put all the big players against each other in an open environment with all the technical and commercial offers open to everyone. Second, because it was a technology competition: CDMA against TDMA for two of the densest urban areas in the world. And third, because of the importance of the market: Sao Paulo and Rio de Janeiro combined, have a population of 50 million people, and almost 50% of the Brazilian Gross Domestic Product (GDP). Following Brazilian law, both bids were on technical and pricing methodology. In this way 50% was assigned to technical features and 50% to pricing. The winner was the proposal that got the highest score within this combined evalution. The bids asked for a turnkey solution involving the following elements: · switches · gateways · radio base stations of several capacities · micro-cells · operation and maintenance centres · short message platforms · centralised home location registers · warranty for strict drop call rate, etc. It is the ‘efficiency’ of each radio site that caught everyone’s imagination; a CDMA site carries 100% more traffic than a TDMA: 56 against 27 Erlang in the Sao Paulo Project and 42 against 22 Erlang in the Rio de Janeiro Project. These figures reveal the superiority of CDMA technology over TDMA. Building on Success NEC designed a two-prong strategy: match any other competitor in technical features and performance and present the most competitive price. The first bid was for Rio de Janeiro and the second for Sao Paulo, both of which proved to be successful. As a result CDMA technology is firmly established in the Brazilian market, and NEC has the lion’s share of this market with systems in Bahia, Rio de Janeiro and Sao Paulo. After privatisation Telebahia Celular belongs to Iberdrola of Spain, Telerj Celular to Telefonica of Spain and Telesp Celular to Portugal Telecom. It is expected that these companies will run an integrated CDMA network offering very advanced services. Conclusion NEC is prepared to expand those systems to several million subscribers in a few years, according to the expected growth of these markets. Indeed, the addition of new valuable services, such as prepaid, data and over-the-air-activation, is already under execution.