The president of Anatel, Carlos Baigorri, defended today, the 23rd, that Brazil has the knowledge in telecom to export to neighboring countries and the African continent. According to him, there is a growing contingent of entrepreneurs who created successful internet providers, sold the business to consolidating funds and, due to “non compete” clauses, end up without being able to use their knowledge in the country.
“Then we see launches by Brazilians in Colombia, Uruguay, Bolivia. Today we have many entrepreneurs who know telecommunications, have a lot of money, and cannot return to the market”, he commented on a panel during the Conexão Brasil-Africa conference, in Brasília. The event is organized by Momento Editorial, which publishes the Tele.Synthesisin partnership with the association of regulators of Portuguese-speaking countries, ARCTEL.CPLP.
For the president of Anatel, the consolidation of the regional provider market will grow further, and more experienced people will be looking for opportunities outside the country.
“We realized that the small market has reached a saturation level. We see this due to the consolidation that is happening. And every day in the news there are several acquisitions and mergers in this market. In fact, it doesn’t make sense to have 20 thousand providers. There is a high level of fragmentation in the market, and when this exists, external investors begin to consolidate the market with growth theses”, he pointed out.
PPPs did not steal the market from the big companies
Baigorri praised the asymmetric regulatory measures taken by Anatel over the last twelve years, which contributed to the development of the provider market. And he argued that rules, such as the definition of a small provider, did not harm large companies established in the market.
“When I joined Anatel in 2009, every solution that was thought of to bring internet to the interior was to place obligations on large operators. Many people advocated placing fixed broadband under a public regime, having universalization targets and price regulation,” he recalled.
And he highlighted that the solution found was to encourage entrepreneurship. “With PGMC [Plano Geral de Metas de Competição, regulamento da Anatel], came a model in which market forces were at the center. We thought that if we removed barriers, the market would appear. We bet on the entrepreneurial strength of thousands of agents. I think this is the insight we can give: creating an environment conducive to the entry of entrepreneurs, with low barriers, and creating regulatory asymmetries”, he recommended to countries that are interested in replicating the Brazilian experience.
In practice, he commented, the role of the regulator changes, and becomes not just about monitoring incumbents, but also about ensuring that they respect asymmetries in relation to small businesses and do not put in place artificial barriers.
“Instead of betting on big companies that would do something they don’t want to do out of obligation, start creating opportunities for others who want to do it, to do it. The big ones focus on big cities. In Brazil, there was growth among small companies, without a decrease in the participation of large companies. It’s not a game of stealing lots, it’s a market that will make the population benefit,” she concluded.
Baigorri stressed, however, that the model of asymmetries that resulted in 20 thousand providers registered with Anatel will not have a similar effect on the mobile market. “The mobile segment is much more complex than the fixed broadband segment. Bringing a mobile network is more complex than bringing fiber. There’s the transport network, there’s equipment, there’s spectrum, there’s a device to approve, there’s another cost”, he highlighted. Therefore, it does not expect companies to multiply in the segment, as happened with fixed broadband.
Traffic Exchange Points
Demi Getschko, CEO of NIC.br, highlighted other measures practiced in Brazil and that could be replicated by other countries. One of them is the implementation of Traffic Exchange Points, which allow direct connection between internet providers of any size and content providers, neutrally and at low cost. With such measures, it was possible for the internet in the country not only to expand, but also for the speed and quality of access to improve.
“Connectivity is one thing, quality of connectivity is another thing. In a pandemic, there are things you can’t do with a bad device or link. So connectivity may be insufficient for the applications we want to use. And the quality of connectivity in Brazil has improved,” he said.
They defend asymmetries
In the same panel, representatives from Vero, Brisanet, FiberX, Tá Telecom and Abrint defended the importance of regulatory asymmetries for the expansion of regional providers in the interior of the country, where the large ones did not reach.
Flávio Rossini, Director of Corporate Affairs at Vero, highlighted that his company is the result of the opportunities that the consolidation of the ISP market brings. And that consolidation “was only possible because entry barriers decreased and entrepreneurship flourished. These providers are occupying spaces that were previously uninteresting to other players. We see potential in regions where others did not,” he said.
Moderator of the debate, Mauricélio Oliveira, President Director of Abrint, presented data to demonstrate that small businesses occupied spaces in medium and small cities, where large operators do not reach with fixed broadband.
“In Brazil, only 555 companies have more than 5 thousand users, the vast majority of the 20 thousand have less than 5 thousand users.
Providers are the majority among users in cities with less than 100 thousand inhabitants. Now they are leaving the interior and moving up to the big centers. Before, there was no exchange of customers, there was an area that was not explored”, he argued.
José Roberto Nogueira, CEO of Brisanet, agreed. “Brazil has 5,200 cities that represent only 10% of telecommunications revenues. Even so, the small companies surpassed 50% of market share going to these cities, without any reduction in the customer base of the big competitors. In other words, it is a new base, which would not have internet without the little ones”, she commented.
In his view, the model can be replicated in other developing countries. “We did this expansion with an average ticket of US$15, while in the USA the average ticket is US$60. This shows that it is possible”, he stated. He highlighted that providers offer quality and speed as low-income users are demanding. “The lower class consumes more, as the internet is their main form of leisure. A mother puts on streaming for her son to watch and have fun. The consumption of a low-income family easily exceeds 1 Terabyte per month,” he added.
The executive said that he already provides consultancy to those interested in exploring the market in Africa, and showed some strategies to expand the network. He recommended installing fiber in areas with poles and houses along highways. In more dispersed areas, he argued that mobile technology, such as 4G or 5G, could be more efficient. But each case requires thorough analysis. “Building a network has a higher Capex and Opex as well”, he asserted. And for this reason, he argued: “Thus, regulatory asymmetry is necessary”.
Rudinei Gerhart, CEO of Tá Telecom, took his case of building a virtual mobile operator that brings together 120 regional providers and serves 30 thousand users, in just 14 months since launch. “Without small providers, there are cities that would never be connected,” he argued.
But he noted that the broadband market is indeed saturated, with infrastructure already sufficient to serve the population, with the exception of some areas in the North. “The potential private fixed broadband market in Brazil has 85 million accesses in total. And it is estimated that we have more than 125 million homes passed, I think this number is underestimated. So the providers were efficient when creating the infrastructure. Now, going to mobile, I believe it is possible to be as successful as they were on landline”, she defended.
He stated that there is a lot to explore in this area. “Without accounting for M2M, MVNOs represent 0.1% of mobile accesses,” he said, highlighting that asymmetric measures are also necessary in the cellular market.
