TIA | PulseOnline November 2001, Reports from TIA Offices: ANATEL Readies for New Spectrum Auctions, Reviews Competition Rules

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November 2001

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ANATEL Readies for New Spectrum Auctions, Reviews Competition Rules

Brazil's Regulator Begins Auction of 3.5 GHz and 10.5 GHz Bands
Brazil's telecom sector regulator, ANATEL, on October 16 published draft bidding rules for its auction of broadband services licenses in the 3.5 GHz and 10.5 GHz bands.

The draft will remain open to comment until November 7 for paper contributions and until November 12 for email contributions. According to the agency, cost-effective equipment is currently available in the market for data transmission using these frequency bands. Fixed-telephony equipment is still very expensive, although the cost is in line with market averages if used in combination with data equipment.

Fixed-line incumbents are not eligible to bid for 3.5 GHz or 10.5 GHz licenses in their own regions, nor are their affiliates, parents or subsidiaries. The sole exception is Embratel, which, as the national long-distance incumbent, is allowed to operate in any region. ANATEL says the restriction is designed to give other operators a chance to compete with the fixed-line carriers in their own regions.

Based on the legal timetable for the drafting and public consultation processes, ANATEL reckons the final bidding rules will not be published until next year, probably in March 2002. The regulatory agency recalls that fixed-line incumbents must already have obtained licenses to deliver other services outside their own regions in order to bid for these frequencies. In other words, they will not be eligible to bid unless they achieve their 2003 universal service targets by the date of the auction.

According to the draft rules, winners of licenses must start delivering commercial service within 18 months of contract signature. Service must be activated in state capitals and all cities with more than 500,000 inhabitants in the case of licenses for the existing regions defined in the General Licensing Plan (PGO), and in at least one locality to be chosen by the licensee among numbering areas. License fees will be charged, although ANATEL has not indicated what they will be. Licenses will initially be valid for 15 years, renewable for another 15 years.

ANATEL Says Competition Rules May Change in Response to Current Outlook
Francisco Perrone, ANATEL's second-in-command, admitted October 10 that his agency will take the new world outlook into account when the final text of the rules for full competition in 2002 is approved.

"ANATEL realizes that the world has changed and resources have become scarce. We don't plan to relinquish the primary goals of universal service and competition, but changes may have to be made to account for the new economic situation," he said addressing a public hearing held by the Media Committee of the Chamber of Deputies on deregulation in 2002.

Other participants at the hearing included Purificacion Carpinteyro, Embratel's vice president for local services; Ercio Zilli, Telemar's director of regulatory affairs; Arnaldo Tibirica, chairman of Acel; Peter Kallberg, president of Ericsson; and Virgilio Freire, an independent consultant.

During the public hearing, Deputy Director-General Perrone admitted that ANATEL has been inefficient with regard to unbundling. He said it avoided issuing specific rules on unbundling because the General Telecommunications Act clearly states that local exchange carriers must provide access to the "last mile" of their networks. ANATEL ought to be enforcing these provisions more vigorously, Perrone recognized.

Deputy Alberto Goldman (PSDB, Sao Paulo) agreed, calling on ANATEL to get more actively involved. Perrone concurred and promised the agency would do so.

For Carpinteyro, unbundling is one of the few ways to guarantee competition in local service. The best illustration, she noted, comes from the United States, where competitive carriers were able to increase market share only when the Federal Communications Commission (FCC) forced last-mile unbundling by granting permission for resale of telephone lines. But Ercio Zilli, Telemar's director of regulatory affairs, pointed out that unbundling became feasible in Europe and the United States only when all demand for lines had been met, and this is far from the case in Brazil.

"Since privatization, Telemar has extended its networks to provide the last mile and meet pent-up demand. But the competitive players want to use the last mile just to
serve high-income customers," he argued.

ANATEL May Give Small CLECs More Time Until Start-Up
ANATEL has asked all of Brazil's small competitive local exchange carriers (CLECs) for information about investment, progress with infrastructure build-out and operating agreements, among other things. The regulatory agency also wants to know when each small CLEC expects to be ready to start delivering commercial service. ANATEL's private service department plans to work out whether a majority will be able to start on the originally agreed dates, which range from October 30 to December 31, depending on the date of license issue. If not, it may postpone the deadlines. ANATEL's board of directors will analyze the report and ratify any decision on postponement.

For more information, contact Luiz Bonilha, managing director of TIA’s Sao Paulo, Brazil office, at 55-11-3064-9342 or email lbonilha@tia.eia.org.

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November 2001

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