10/19/2009


Attractive markets for broadband implementation

By José Luis de Souza

 

The "Guarujá Letter" (Telebrasil) established, as target for 2014, to reach 150 million people with broadband access to the internet.

 

Teleco estimates that Brazil will have 90 million broadband accesses in 2014, 60 million of them will be mobile and 30 million fixed (Huawei whitepaper). With this number of accesses, this target presented by Telebrasil in August 2009 would be surpassed, if we consider that fixed access cover residencies and offices - average of 3 or 4 people per access.

 

The broadband massification in Brazil, a country of continental dimensions and different realities, will happen in a uniform way. There seems to be a consensus about the need to treat differently the competitive markets - like metropolitan regions in the main cities of the country - and cities in remote regions of the country.

 

In order to quantify these differences, Teleco - considering as base the methodology used by the European Community - classified the area codes, sharing the country, in the following categories:

  • Black areas: attractive markets where the market itself may be enough to stimulate the implementation of a broadband infrastructure. In these area codes there is already competition in fixed telephony and the market share of CLECs is equal or exceeds 15%.
  • Gray areas: requires a deeper analysis in order to determine its attractiveness.
  • White areas: markets that aren't attractive where the broadband infrastructure will need policies to be implemented. The competition in fixed telephony in these area codes is low or nonexistent.

 

 

In black areas are concentrated 58% of the population, 68% of the mobile accesses and 77% of the fixed telephones.

 

 

Areas
Population
Mobile Accesses
Fixed
GDP
Black
58.1%
68.0%
76.9%
72.5%
Gray
24.8%
21.0%
16.8%
19.1%
White
17.1%
10.9%
6.3%
8.4%

 

 

Note that the attendance with fixed telephony in the white areas happened mainly due to universalization targets imposed to the fixed telephony incumbents. In mobile telephony, coverage targets and programs, like the one promoted by the Government of Minas Gerais, helped to amplify the mobile coverage.

 

The table below presents the mobile density and the market share of mobile carriers in each one of these areas.

 

 

Areas
Cell/100 inhab.
Vivo
Claro 
TIM
Oi
Black
101
28.8%
27.2%
23.1%
20.8%
Gray
73
30.9%
21.4%
24.8%
21.5%
White
55
30.3%
22.2%
26.3%
20.8%
Brazil
86
29.4%
25.4%
23.8%
21.0%

 

The diversity of situations existing in Brazil confirms that the broadband universalization in shot term - as many indicators show it to be the desire of the Brazilian society - will require the participation and mobilization of all the involved parts (whether private companies, vendors and service providers, specially, incumbents of fixed telephony and mobile carriers, or government agencies in many levels: federal, state and municipal).

 

The broadband infrastructure in the country is concentrated in black areas and it is incipient in white regions. Some initiatives, such as the commitment to backhall extension to all the Brazilian cities and the targets for 3G coverage, can help changing this situation over the next years.

 

A national broadband plan may encourage the construction of access networks based on fiber in black areas holding the offer of fixed and mobile broadband, as well as the expansion of broadband offer in white and gray areas, where there is low competition. The White areas may, also, subject to public-private partnerships, aiming at accelerating the broadband penetration inside the area codes where the return on investment is less attractive to operators. The federal government has instruments in BNDES and in FINEP that can be used in order to improve attractiveness in these white and gray areas.

 

Other incentives, such as ICMS for accesses from 200 kbps to 1 Mbps, signed during Futurecom by the government of São Paulo, can stimulate broadband penetration in Brazil.

 

You could ask:

  • Can the act of sharing Brazil into areas drive to a better understanding about Brazil and help to develop a national broadband plan?
  • What policies should be established in order to stimulate broadband massification inside white and gray areas?
  • Would tax exemption for broadband terminals produced in Brazil by 2014 be a good incentive for the industry? What are the pros and cons?
  • Should federal and state governments join these initiatives, such as São Paulo's, exempting taxes for accesses from 200 Kbps to 1Mbps?

 

 

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Note: The opinions expressed in the published articles in this section are their authors' responsibility.

 

 

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