 | Issue: | Latin America IV 2001 |
| Article no.: | 11 | |
| Topic: | Telecom Investment and Regulatory Stability | |
| Author: | Renato Furtado | |
| Title: | President | |
| Organisation: | Lucent Technologies NSB Ltda | |
| PDF size: | 20KB |
About author
Not available
Article abstract
“Governments, industry and society are partners in the transition from the traditional industrial economy to the new information society and each one of them is paramount to the success and future of telecommunications.”
Full Article
It has been less than seven years since the Brazilian government recognised that an important challenge to modernising and expanding Brazil’s economy would be the rapid growth of modern telecommunications services. The telephone operating companies belonging to Telebrás-the public telephone service monopoly owned by the Brazilian government-had reached their limits and lacked the investment funds required to do the job. To meet the challenge, farsighted members of the Executive Branch, led by the then Minister of Communications Sérgio Motta, and Congress developed and implemented a new model for the telecommunications sector. In 1995, a Constitutional Amendment, Article 8, was passed to allow privatisation of Telebrás, the state’s telecommunications monopoly. This was followed by the General Telecommunications Law approved in 1997, which structured the new model and paved the way for the creation of a national regulatory body. The effectiveness of the model incorporated in these laws has been proven by the tremendous growth of Brazil’s telecommunications services since then. To date, over US$67 billion in foreign investment-more than 35 per cent of the total Foreign Direct Investment (FDI) in Brazil during the last three years-has entered as a result of the privatisation process. The telecommunications sector is now, economically speaking, one of the most dynamic in the country. The single most important aspect of the model was the establishment of an independent and powerful regulatory agency, Anatel, Brazil’s National Telecommunications Agency, to guide the expansion of the telecommunications infrastructure. Since the General Telecommunications Law was originally conceived the country has been caught in an economic and social revolution. The worldwide transition from the traditional market economy to the new information society has changed the economic equation, the government’s relationship with telecommunications and social aspirations. The economic equation now incorporates new services and makes knowledge the most sought-after commodity. It also completely changes the role of governments. They are no longer the traditional administrators of the sector, but regulators developing within the new context of e-government and must be more transparent and responsive to society. Society, itself, is becoming more demanding: it has increased expectations regarding government services and facilities and is now the driving force for the telecommunications industry and future technology. The Brazilian government, sensitive to this inexorable evolution, has started to implement its e-government programme, accelerating digital inclusion and taking the necessary measures to start adapting existing regulations. That still is a formidable task. Why? On top of the already complex and tangled relationship between the government and the private sector, new external developments had to be accommodated in conjunction with the Brazil’s social and economic needs and singularities. These include low domestic savings, high dependence on foreign capital and investments, high interest rates, unfavourable exchange rates and asymmetric income distribution, to mention just a few. Anatel’s immediate challenges are to modify present regulations, maintain the growth and success of the Brazilian privatisation model and manage to lure new investors for what remains to be done. It is essential to emphasise the need to maintain consistency between new regulatory decisions and what had been previously decided and implemented. The potential impact of pending telecommunications legislation on network architecture is of paramount importance to all types of operating companies. Different carriers have different visions. Incumbent operators are comfortable with voice-like architectures. New Regional Carriers recognise opportunity in leveraging new approaches and compete by offering compelling low-cost services and service features. Mobile Operators paid a lot for their licences and are wondering how they can pay for the equipment and meet new challenges in addressing and secure data services. Internet Service Providers (ISPs) and Interchange Carriers (IXCs) are seeking customer ‘first touch’ (direct connection to service provider) for data connectivity and IP aggregation. Unbundling and IP access are other subjects that need to be addressed urgently. It is important to understand that these problems are not just Brazilian, they are part of the world’s telecommunications scenario. Brazil, can profit greatly from global experience, even to the extent of adapting the unbundling rules used in the American market. At times, legislators get clear signals from the market. These should be heeded when developing the rules for the development of the new information society network. Internet access services, for example, are inherently inter-state and international in nature. They should not, therefore, be subject to regulation by individual governments. The regulations passed by some regulatory agencies have impeded the quick delivery of high-speed Internet access services to the public, thereby reducing consumer choice and welfare. In the future great care has to be taken deciding how to expand the spectrum for public services, in order not to affect already installed industry, to attract new investment and remain true to the basic pillars of the Brazilian privatisation model: competition, universalisation, quality and end-user satisfaction. In our view, for that to materialise successfully, the following paradigms need to be taken into account: Transition paradigm The transition from market economy to the new information society is inexorable. Brazil has to decide if it will be a major player in the new economy or not. The evolution from the present model to the network society will only occur with digital inclusion. That will only happen if society is integrated to the network through dissemination of knowledge, service availability, motivation, interest and low-cost access. Otherwise, we will have a magnificent infrastructure with few end-users. Sustainability paradigm The Brazilian model has to encounter its sustainability with a magnitude that will facilitate integration with the Information Society. We understand that this sustainability and the future of the model is based on mobility, because of lower cost, flexibility, remote access, technological evolution, portability, etc. Business model paradigm The present business model is focused on the infrastructure implementation targets and business itself instead of on the end-user. It has to be expanded to include the needs of society as a whole. We have to add content, creativity, knowledge and interest, creating the right conditions for interaction between individuals and services, society and telecommunications. Outlook A great part of the solution to a successful model for competition in Brazil lies within Anatel’s power and its ability to keep legislation updated and abreast of technological developments and market expectations. Unbundling and wideband access are just two of the topics that have to be urgently addressed to create the necessary regulatory framework if the full benefits of service convergence are to reach society. Unbundling was thought to be a simple question of sharing existing networks to provide new entrants with a fast and cheap way to access the means to reach their customers. For that purpose, Anatel defined a process to set the unbundling rules; they created a working group composed of operators (fixed telephony, cellular telephony and long distance; incumbents and mirrors) that would agree upon the terms and write the rules. However, unbundling is much more than just network sharing. It implies equipment co-location, a free pass for one competitor to enter another’s building, and deciding which company should maintain the pieces of the network. Since there are so many issues to resolve it is very difficult to achieve a short-term solution. Wideband access is another issue which is raising blood temperature in Brazil and has to be tackled quickly, as multi-service architecture and its facilities for simultaneous voice, data, image and video in real time are a reality, but not so the corresponding legislation. Unbundling and wideband access should be regulated in 2002, as Brazil’s successful privatisation model enters its last phase-the opening of the market to full competition. It should be kept in mind that, as this new phase in the restructuring of telecommunications proceeds, current laws and regulations for Brazil’s telecommunications sector will not allow any of the four incumbents (Telemar, Brazil Telecom, Telefonica and Embratel) to merge or partner at any point in time. Conclusion We see 2002, with realistic optimism, as the year when unbundling, access, wideband access, content, spectrum expansion and other relevant issues should all be properly addressed by Anatel’s regulators. After all, they can justly claim full credit, up to now, for successfully reconciling the demands of the telecommunications industry and the needs of the market, with Brazilian society’s demands for better living standards.
