All eyes on LatAm regulators in Rio

How spectrum is allocated causes controversy pretty much everywhere and, in the process, regulators invariably become easy targets for abuse. It’s not a job for the faint-hearted.

Yet many national regulators in Latin America are arguably under more pressure than most, conscious on the one hand that low broadband penetration rates are making their economies less competitive than they might be, yet wondering on the other hand how to free up enough spectrum to help address that problem in the fairest way possible for the country’s existing players, as well as making it attractive for investors.

The extent of Latin America’s regulatory dilemma has been thrown into sharp focus at the WIMAX Forum Congress Latin America event, which is being held this week in the sunny climes of Rio de Janeiro.

With the benefit of hindsight some of the spectrum problems could arguably be laid at the door of the regulators. They handed out various MMDS licences to TV operators on a regional and national basis, which chewed up lots of 2.5GHz spectrum in the process (and which now turns out to be prime WiMAX territory) without giving any provision for nomadic broadband internet use. Peru is perhaps an extreme example of this, with now only 24MHz to spare between 2.5GHz and 2.69GHz with the rest used up by the MMDS players. Manuel Quiroz, who heads up cost and interconnection policy at Osiptel, Peru’s regulator, says there’s no chance that more spectrum will be made available at 2.5GHz. But similar problems exist in Brazil and Mexico, two of the largest markets in the Latin American region, although some MMDS licences in Brazil are up for renewal next year.

Some regulators in the region have also been slow to release additional spectrum at 3.5GHz, another standardised WiMAX frequency, which would help stimulate broadband competition for fixed and nomadic services. But there are signs this situation is improving. Earlier this year, the Argentinean regulator said it would be auctioning off spectrum in the 3.3-3.7GHz band and Diego Larriera, senior economist at Ursec, the Uruguayan regulator, laid out plans at the WiMAX Congress in Rio to auction off 150MHz in the 3.3-3.7GHz frequency band (the other 150MHz is used up by proprietary LMDS operations). But it is still the two biggest markets, Mexico and Brazil, which continue to mull over how and when to award additional licences in the 3.5GHz frequency band.

Speaking to WiMAX Vision in Rio, Maximiliano Martinhao, manager at the spectrum division at Anatel (Brazil’s regulator), says that 3.5GHz licensing will begin almost immediately after another period of public consultation on the issue comes to an end in January 2009. It seems an ambitious target, even if a line can be drawn under the conditions surrounding the extent to which mobile services will be allowed at 3.5GHz, which is a moot point. Tightening economic conditions may well persuade Anatel to wait longer before embarking on an auction, much to the frustration of the WiMAX community. Fernando Faria, senior analyst for Latin America at Pyramid Research, points out that Anatel didn’t raise as much money as it hoped for when it initiated the auction of a batch of 3.5GHz and 10.5GHz licences back in November in 2002, and it’s something the regulator is desperately hoping to avoid this time around. He suspects June 2009 is a more realistic timeframe for the next lot of 3.5GHz licences to be awarded in Brazil.
But hoping to raise as much money as possible through spectrum auctions is no doubt short term thinking and invariably causes licensing delays; there is always the temptation to wait a little longer. And that waiting in Latin America has now probably backfired with the onset of the credit crunch.

The WiMAX Forum tack, expressed by president Ron Resnick in his keynote presentation in Rio, is to emphasise to regulators the economic and societal benefits that increased broadband penetration brings. And, of course, issuing ‘WiMAX spectrum’ sooner rather than later does the technology’s prospects no harm either in helping to translate its technological development lead over LTE into hard market gains.

Yet the Chilean regulator, Subtel, is going down the beauty contest route for its upcoming 2.3GHz licence awards. And to encourage network rollout to rural areas, Subtel, in tandem with the government, is attaching a public subsidy package (up to $54m) to one of the three 2.3GHz licences being made available next year. Although Pablo Bello, vice president at Subtel, says the regulator is technology neutral with regard assessing the bids for the public subsidy licence, it does seem pre-disposed towards WiMAX, having already based its coverage requirements and speed specifications on tests using WiMAX equipment. “3G is not a high capacity solution for the types of applications we need, such as telemedicine and connecting schools,” adds Bello.

These are encouraging signs for WiMAX and Tim Hewitt, chair of the Regulatory Working Group (RWG) at the WiMAX Forum, sees WiMAX rising up the agenda of the region’s regulators because it is a broadband solution that is available now. “I’ve been impressed by the extent of their understanding of WiMAX as a technical platform and what it can offer,” he says.

Even so, WiMAX, as a relatively new technology, faces the inevitable economies of scale challenge and getting a wide variety of devices onto the market. In the conference sessions in Rio, some operators, while observing that kit prices are coming down, expressed disquiet that they are still too high. Alex Ternero, CTO of Movilmax, a WiMAX operator in Venezuela, pointed out that while an 802.16d base station costs around $20,000, a mobile WiMAX base station (802.16e) is $100,000, which is hampering the business case.

But if volumes are the answer, then New Clearwire in North America may well have a positive WiMAX impact in Latin America. While a nationwide mobile WiMAX rollout in the US will inevitably help economies of scale, the formation of New Clearwire means that the ‘old’ Clearwire’s 3.5GHz operations in Europe come under the wing of the new company. “Barry West [president of New Clearwire and former president of Xohm] is working with suppliers to bring more 3.5GHz devices to market,” says Teresa Kellett, director of global development at Sprint.

Given that the majority of WiMAX action in Latin America is at 3.5GHz, this is a positive step.