5G in Brazil: a new network at everyone’s service

September 20 2017

5G in Brazil: a new network at everyone’s service

Luigi Gambardella - Alfredo Valladão

Brazil will emerge from its long and profound economic crisis. But only a technological revolution, not only revenues from traditional sources, will guarantee the country’s sustainability. Like many other countries around the world, the biggest economy in Latin America will have to face a number of challenges, such as competiveness, economic growth and new job creation. Today, this means the country must embrace innovation and the digital economy, which have become the “engine” of modern economies. The “Silver Bullet” of economic development is broadband connectivity. The World Bank estimates that a growth of 10% of high-speed internet connections will represent an expansion of 1.3% of economic growth, allowing a “democratization of innovation”.Without reason of doubt, the main challenges posed are the new telecommunications networks and the creation of an ecosystem of services related to 5G.

But why is 5G so important for Brazil?

The issue is not only about Brazilian consumers being able to have a speed of 1.000 times faster for their mobile phones compared to 4G, or downloading a movie in just seconds. The real and more profound revolution, is in the capacity to use the “Internet of Things” (IoT) on a massive scale. It allows the connection of billions of objects and, most of all, allows new services, known as “low latency” to be created: cars without a driver or even Augmented Reality services for medicine.  These “low latency” services are fundamental to produce new standards for 4.0 industry – just think about all the robots used in factories today.

Outdated Brazilian networks

The Brazilian telecommunications infrastructure is inadequate. Operator investment hasn’t been highenough, there’s little competition, prices are high and quality of service is mediocre. All Brazilians are aware of this. In addition, Brazil has a great problem called “digital fracture”. Many areas of the country are not covered, making it almost impossible to connect  to the internet.

If we consider the future, the situation is even worse. If we focus on 5G, Brazil was left behind and the telecommunication operators, which are already very late in investing in 4G –, don’t show any interest in making new investments in 5G. They simply prefer to upgrade 4G. In addition, these operators will do everything in their power to block this new technology, in order to avoid other ones doing it in their place. A simple example of how Brazil is behindon this: today, all mobile phone users in China have 4G. There is no reason for Brazilian people not to benefit from this as well.

Split Wholesaler and Retailer

Brazil needs 5G immediately if the country doesn’t want to lose its industrial competitiveness and, particularly in logistics and transport. 5G is an infrastructure of national interest. The Brazilian government should promote the creation of a Newco “5GBrasil”, with private investors (in a Public Private Partnership – PPP), with a mandateto createa new and last generation of 5G mobile network, covering the whole country. A NewCo “5GBrasil” could focus on the retailer market, including active network services, without competing with other operators in the residential market. What advantages could be obtained? A single network is more efficient, with less costs. If we consider just the network without associated services, this would favour competition, having a positive effect in terms of price reduction, better quality of service and more options for consumers. Today, the Brazilian retail market is possessed by just 4 operators, each with its own network. By having a single network, many other retailers could join the market, increasing competition – a powerful incentive to draw more attention to the development of new services.

This “single network” would eliminate the “digital fracture”. Brazil has 4 mobile networks, some areas have 2 available, while others have none. Another advantage of having a single network would be the appeal of new investors interested in long-term as opposed to short-term ROI. Telecomunications operators and other players could focus on the retail market and technological platforms to offer new services. NewCo “5GBrasil” clients would not be restricted to telecommunications operators, but also TV channels, vertical industry (automobile, transports, logistic, 4.0 industry, etc) and internet companies. All of them would have access to the network at the same conditions, without any discrimination. The new business models created, based on generalised access to fibre optics and partition of active network elements, would have the potential to transform companies’ roles.

5G: A Public Private Partnership of 30 billion dollars

The Brazilian public sector could facilitate the access to alternative infrastructures – for example, electric networks – and could join NewCo “5GBrasil” with an “in-kind” contribution, giving the contributions through a guarantee fund (of around 2 billion dollars considering an overall investment of 30 billion) to reduce investors’ risk. An estimate of overall investment would be around 30/35 billion dollars, which would be allocated by international private investors, industrial or financial partners. Bigger suppliers could be partners in this initiative.

Of course, we can’t ignore how complex the telecommunications market is in Brazil, due to the situation with Oi operator. This problem could be turned into an opportunity. If Oi could be split in two companies – Oi Network and Oi Retail -  the NewCo “5GBrasil” could take the lead of Oi Network. This solution would be favourable for both sides. Oi would solve part of its financial problems and could be back to market with a much more competitive “Oi Retail”. Meanwhile, the NewCo “5GBrasil” would benefit from a network already created? in many areas of the country.

The most positive aspect of this single 5G network is that everyone wins. The Brazilian government solves the problem of creating a latest generation broadband network in all parts of the country, addressing the issue of “digital fracture”. Brazilian TV channels would find a net distribution platform, which could allow the creation of services and consistent revenues. Existing telecommunications operators could use this single network, paying only rental charges, without having to make new investments. This would allow them to focus on software platforms, creating new high-quality services.  New American, European and Chinese companies could join the retail market, offering new services to the Brazilian consumer. Just think on the potential of ecommerce or new Big Data, Artificial Intelligent, Virtual Reality, Augmented Reality, Robotics services.

Luigi Gambardella is President of EUBrasil, ex-Executive President of ETNO, European Telecommunications Network Operators’ Association.

Prof. Alfredo Valladão is President of EUBrasil Advisory Board, Professor at Paris School of International Affairs (PSIA), Sciences Po Paris, Senior Fellow OCP Policy Center.

Source: http://www.eubrasil.eu/en/2017/09/01/5g-no-brasil-uma-nova-rede-a-servico-de-todos/

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