5G in Brazil: one network at the service of all?

Brazil is emerging from a long and deep economic crisis, but like many other countries throughout the world it is confronted with the problem of competitiveness, economic growth and job creation.

Today this means reality should be confronted especially on subjects like innovation and digital economy which has become the true motor of the modern economy. The “silver bullet” of economic development is the connectivity of broadband.

The World Bank has estimated that an increase of 10% of high speed Internet connections has an impact of 1,3% on economic growth and promotes the “democratization of innovation”

Brazil must face the challenge of new telecommunication networks together with the creation of an ecosystem of new services related to 5G.

Why is 5G important for Brazil? 5G not only enables Brazilian consumers with an accelerated speed 1000 times faster than 4G and a speedy download of movies in just a few seconds. The true and more profound revolution lies in allowing a massive use of the Internet of things and connects billions of objects with one another and even more important introduces new services to low latency as an example a car without driver or services of augmented reality for medicine. Services to low latency are fundamental for the industrial production industry 4.0. As an example we can consider the introduction of industrial robots in factories.

Delay of telecommunications networks in Brazil

Today Brazil has an inadequate telecommunications infrastructure, operators do not invest sufficiently, there is little competition, prices are high and the quality of service in many cases is mediocre and Brazilians are very much aware of these flaws. Brazil also has a big problem of the digital divide, many areas of the country lack infrastructure and Internet access is limited.

The future looks even worse. Let alone Brazil’s delay in 5G, telecom operators prolonged investment  in 4G increases their reluctance to invest in 5G.

Moreover, telecom operators will try everything possible to block, undermine investments and prevent others from investing.

Why are Brazilians still behind when all customers of mobile telephony in China are already on 4G ?

Separation of networks from services

Brazil needs 5G, and needs it immediately if they do not want to lose further competitiveness in the industrial sector and particularly in logistics and the transport system. The 5G is an infrastructure of national interest.

The Brazilian government should encourage the emergence of a NewCo “5GBrasil” together with private investors (Partnership Public-Private) with the task of building the new next-generation mobile networks 5G throughout Brazil.

The NewCo “5GBrasil” would restrict itself to operate in the wholesale market, also providing active services to the network without entering into competition with other operators in the residential market. What are the advantages? With a single network, you have lower costs and higher efficiency, which increases competition, with a positive effect on price reduction, increased quality and choice for consumers. Today there are 4 operators in the Brazilian residential market, each with its own mobile network. In the future with a single network, several new players may enter the market, increasing the level of competition with the powerful incentive to focus on the development of new services. The unique network can eliminate the digital divide. Today in Brazil there are four mobile networks; multiple networks in some areas no network in the peripheral areas. The advantage of the single network is also to attract new investors in the long term that are not interested in short term returns. Telecom Operators and other players could focus on the retail market and technology platforms to deliver new services. Customers of NewCo “5GBrasil” would not only be telecom operators but would also be the broadcasters, the vertical industry (auto, transport, logistics, Industry 4.0) and the Internet players. All would have access to the new network under the same conditions without discrimination.

New business models will change the roles of players and will be based on: fiber everywhere and sharing of the active elements of the network

5G A Public-Private Partnership of 30 billion dollars

The Brazilian government should facilitate access to alternative infrastructures, such as for example the electric ones, and enter into the NewCo “5GBrasil” with a contribution in kind, transferring frequencies  with a guarantee fund (which could be approximately two billion dollars in the case of an investment of 30 billion dollars) to reduce the risk of investors.

An estimate of the investment required could be in the order of 30-35 billion dollars, which would be borne by international private investors, industrial or financial partners, also the vendors could be part of the initiative.

It is clear that it is not possible to ignore the complexity of the Brazilian telecommunications market also due to the situation of the operator Oi. But this problem might become an opportunity.

If Oi would be divided in two companies, Oi network and Oi Retail, then the Newco “5GBrasil” could bolster the Oi network. This would be a win-win situation for Oi which would solve part of the financial problems and be more competitive in the market with Oi Retail. As far as Newco “5GBrasil” is concerned, it could count on an already developed network in many areas of the country.

The advantage of the single network 5G is that everybody would win. The Brazilian government could solve the problem of rapidly having in Brazil a next generation mobile networks in the entire national territory by eliminating the problem of the digital divide. Television operators may have a new distribution platform with which to create new services and generate new substantial revenue. The existing telecommunications operators will be able to use the new network only paying the rent without any need to make new investments, an advantage that will allow them to concentrate all efforts in new software platforms that will ensure high quality services. New American companies, European and Chinese may be entering the residential market offering new services to Brazilian consumers. Just think for example of the potential of electronic commerce, to new services of Big Data and artificial intelligence, virtual reality and augmented reality, robotics..

*Luigi Gambardella, President EUBrasil, former Executive Chairman of Etno, European Telecommunications Network Operators’ Association

* Alfredo Valladão, President Advisory Board EUBrasil, Professor of the Paris School of International Affairs (PSIA) – Science Po Paris


Related posts