Brazil; race against time

Brazil has the potential to become a vibrant WiMAX market, with numerous operators backing the technology, and a possible head-start on 3G. However, awkward regulatory hurdles must be cleared first.

Brazil is a WiMAX market in waiting. In a country famed for its love of motor racing, there is a grid full of WiMAX operators poised to speed down the broadband wireless track, including incumbent Brasil Telecom and subsidiaries of regional giants Telefonica and Telmex.

In December, TVA, the holder of the largest number of 2.5GHz licences in Brazil revved up impatiently, urging the regulator Anatel to give the green light.

The Pay TV, cable and broadband operator, owned by Telefonica, publicly stated that it was awaiting Anatel’s approval to launch 802.16e services in the city of Curitiba, where it has been testing WiMAX with Motorola.

It has also been testing WiMAX with Motorola in Rio de Janeiro and Nortel and Samsung in Sao Paulo, offering users access to services like mobile TV and video, VoIP, multimedia streaming and other data applications.

Speaking at Informa Telecoms & Media’s WiMAX Latin America conference last year, Virgilio Amaral, director Strategy and Technology, TVA, said the company wanted to move to a “converged personal mobile broadband model” because the fixed broadband market was “getting near to saturated.”

MMDS and Mobile WiMAX

In Brazil, 2.5GHz licences are currently used for MMDS TV transmission and licensees control the entire 2.5-2.69GHz band in their respective territories. Spectrum in Brazil is awarded in small geographical plots, perhaps a 25-35km hotzone around a city centre.

MMDS spectrum holders are eyeing a triple play whereby about 80MHz of their spectrum would be reserved for WiMAX, the rest for their TV services, says José Luiz Navarro Frauendorf, Executive Director of the Brazilian association of MMDS licence holders, NEOTEC, and a consultant to TVA, NEOTEC’s largest member.

This prospect has unnerved the regulator Anatel, which is performing a balancing act between 2.5GHz spectrum holders and the country’s mobile operators who have yet to launch 3G and are concerned about being beaten to the first corner by WiMAX.

The president of Anatel, Ronaldo Sardenberg, was quoted last year by business newspaper Valor Econômico as saying Anatel did not want to “scare the market” by allowing mobile WiMAX when it is also preparing 3G licences.

Anatel has a policy that allows only ‘limited mobility’ in broadband wireless spectrum, whether 2.5GHz or 3.5GHz, effectively forbidding handoff between base stations. Last year, Anatel announced a public consultation, the premise of which was that WiMAX equipment vendors supplying Brazilian operators would have to certify their equipment as non-mobile.

Although TVA has sought to reassure the regulator that 802.16e ‘mobile WiMAX’ doesn’t necessarily mean it is planning full mobility with handoff, Anatel’s policy has effectively stalled the operator’s WiMAX plans.

“In Brazil there is a licence to use the frequencies and then another licence to provide services,” explains Carlos Garza, Motorola’s business development manager for WiMAX Broadband in Latin America. “We want a situation where whoever gets the licence for the frequencies can also get a licence to provide mobile services. That is the way to release the potential advantages of WiMAX.”

Garza adds that he expects Motorola to have handheld WiMAX devices available for the Brazilian market in the second half of 2008.

“We are losing an opportunity to start deploying [WiMAX] systems because we are not able to get certified,” complains Frauendorf. In Brazil, since we don’t have fixed cable and fibre networks WiMAX will be used for all fixed services and that is totally different from mobile services. And to be honest I don’t think Brazil needs mobility today,” he adds.

“Anatel was supposed to define ‘limited mobility’ and have its public consultation but that didn’t happen. Since Anatel did not define ‘limited mobility’ we are forced towards fixed [equipment]. We understand 2.5GHz 802.16e equipment will be cheaper since that is the version most vendors are providing.”

Brazil is a very price sensitive broadband market with service providers and residential end-users demanding low cost CPE (around $100 range). Although the overall demand for broadband remains high in Brazil, it is driven by corporate and government users.

NEOTEC’s members operate 70-80 MMDS networks covering 100 service areas, 202 municipalities, and over 40 per cent of Brazil’s population and so the prospect of many of them entering the mobile broadband fray is explosive.

“It is a highly political environment with tension between mobile operators and companies that would be using mobile to eat into their market,” observes Kevin Suitor, VP of Business Development, Redline Communications, who nevertheless adds that he believes Brazil will ultimately become one of the top three WiMAX markets in the world.

Neovia’s MTU model

Redline supplies equipment to Neovia, Brazil’s first WiMAX operator, which operates in Sao Paulo region in 3.5GHz spectrum, Brazil’s officially approved broadband wireless band. Neovia counts Intel among its investors.

Neovia has over 35000 customers, mostly in multi-tenant units (MTUs), apartment blocks where it has pioneered a business model delivering affordable broadband access at up to 1Mbps speeds to the mid to low-end of the residential market.

Targeting high-density MTU offers a quicker return, Neovia has calculated, than servicing individual residences.

Neovia’s 802.16d base stations transmit to outdoor CPE sited on apartment block roofs. That CPE then uses copper wire connections in the building to link individual apartments.

“They can turn on and off various units within a building that is lit up. They can offer faster turn on time than their competitors,” explains Suitor. “They are going to expand that to layer 2 VPN and private networking for business services.”

Neovia has also been modelling the business case for 802.16e mobile WiMAX together with investor Intel Capital, and CTO Carlos Barroso has talked of a market “focused on the individual,” echoing TVA’s Virgilio Amaral.

Neovia’s fellow 3.5GHz licensee Brasil Telecom Participações (BrT) has decided to deploy a 802.16e WiMAX network in its 3.5GHz spectrum holdings in São Paulo, Curitiba and Porto Alegre using Alcatel-Lucent equipment.

Meanwhile long distance and data provider Embratel has put a figure to its WiMAX plans, committing $600m through March 2008 to WiMAX rollouts in numerous cities including Sao Paulo, Rio de Janeiro, and capital Brasilia.

The company will reportedly target both the corporate and residential segments and has plans to launch a converged data, video and voice service for the corporate market in 2008.

Embratel is part of Mexican telecoms giant Telmex, which is pushing WiMAX throughout Latin America and has live networks in Chile and Argentina, suggesting the company is definitely serious about WiMAX.

3.5GHz awards pending

“WiMAX should become the de facto standard for 3.5GHz spectrum,” says Andy Fuertes, founder of research firm Visant Strategies, although he counsels caution. “We think it will happen a little slower because of what is going on with the spectrum,” he says.

Fuertes refers to the long-postponed auction of 3.5GHz licences in many territories around Brazil. So far, broadband wireless spectrum allowances have mostly been restricted to the biggest markets in major cities.

“We have 110 million people of 180 million living in cities of less than 170000 inhabitants according to the 2007 government census,” says Frauendorf. “WiMAX is very important for existing cities but much more important for forthcoming cities.”

Almost 2000 licences in smaller cities where fixed line infrastructure is patchy should have been auctioned last year but disputes over the pricing of the licences and the participation of existing mobile operators have delayed the auction.

However, Anatel spokesman Augusto Moraes told WiMAX Vision e-magazine last year than
“the licence award will go ahead in the first quarter of 2008.” Moraes further explained how much spectrum would be made available.

“There are almost 2,000 blocks of spectrum in all Brazil to be awarded,” he explained.
“There is 100MHz uplink and 100MHz downlink to be awarded [in each territory]. Each licence can have a maximum of 24.5MHz uplink and 24.5MHz downlink.”

This multiplicity of licences is a huge driver for the market and attraction for big-name regional players like Telefonica and Telmex says Fuertes.

“The growth in broadband subscribers in Brazil is still relatively high, and they have large areas uncovered so there is an enormous opportunity,” he adds. “They have a growing economy, it is a vast country, and there is a lack of basic services. Having WiMAX to provide those basic services makes sense.”

Garza agrees. “Everyone really thinks this is important spectrum, another means to provide services in the broadband space. What makes it very important is this spectrum could be mobile, depending on how the government agencies grant it,” he explains.

Fuertes again cautions that it will happen slower than expected because operators are waiting for MIMO-enabled Wave 2 802.16e equipment capable of using these frequencies “This is what we are constantly hearing from the component network,” he says, adding: “There is this sense that everything is going to take off rapidly in Brazil. Intel predicted a $100m market for Brazil in 2007. 2007 came and went and the market is nowhere near that.”

Visant Strategies forecasts that Brazil will have 6.8 million WiMAX subscribers by 2013.

Garza meanwhile sees Brazil as a “key potential market and are pushing very hard for WIMAX deployments to happen there.” He believes that the majors such as Brasil Telecom, Telefonica and Telmex will win many of the 3.5GHz licences.

However, until Anatel finalises the regulatory regime for awarding these licences the 3.5GHz hopefuls, along with the 2.5GHz players, are stuck in neutral.