Telecom Deregulation Pushes Brazil Toward Brave New World
By MARGARITA PALATNIK
Dow Jones Newswires
NEW YORK -- The timing of Brazil's communications sector deregulation
coupled with recent technological advances place the country at the edge of a
brave new world.
Or so hope many U.S. executives who have descended on Sao Paulo for the
Expo Comm Brasil '98 and Networld-Interop trade shows going on this week.
Companies bringing their view of a world where telephone, cable signal and
Internet service travel through a single network include U.S. heavy-weights like
Lucent Technologies, Novell Inc. and Cisco Systems.
What has these executives salivating and polishing up their Portuguese is the
recent split-up and privatization of former monopoly Telecomunicacoes
Brasileiras SA (TBR) and the impending award of four licenses - three for
fixed wireline, plus one for long-distance - being likened to Competitive Local
Exchange Carriers, or CLECs, which have recently proliferated in the U.S.
U.S. technology firms see billions of dollars to be allocated to capital
expenditure as dozens of companies build their networks, expand, or replace
obsolete infrastructure.
And they are ready to evangelize.
"The dilemma for these new companies is, 'Do we invest in a traditional-style
network, known to work, but which we sense may be reaching the end of its
natural life, or do we go for the new technology, which is scary because it's not
so understood, but which would give us a jump on the competition?'", said
Cisco Systems marketing vice president Larry Lang during a telephone
interview.
To put things in context, Brazil is facing in one shot a process that took almost
two decades and happened in two waves in the U.S.
"In the early '80s, when when the U.S. deregulated telecommunications,
Internet Protocol was a science project. Nobody had heard of the Internet,"
Cisco's Lang said.
Thus, new entrants like MCI Communications (WCOM) and Sprint Corp.
(FON) began to compete using virtually the same technology used by
incumbent AT&T (T), Lang added.
Most recently, a new crop of upstarts like Quest Net (QNETD, QNET),
Level 3 Communications Inc. (LVLT) and Enron Corp. (ENE) subsidiary
Enron Communications have started to build fiber optic "backbone", or main
pipe, in the hopes of carving their niches thanks to the much-talked-about
convergence.
So while in the developed world there were two waves of new entrants, "in
Brazil you have the two trends at the same time. It kind of creates a double
excitement level," Lang said.
For example, he adds, the winner of a mirror license concession could charge
consumers $20 or $30 a month for the telephone, another $20 or $30 for
cable, plus another $20 for Internet.
"Right now, the bidders for the mirror companies are going through their
courtship rituals, to see who will partner up with whom," he added. "But the
potential consortia are looking at this technology very seriously."
On the other hand, the "established companies are realizing that the future
competitors are coming on strong, so they don't want to wait until (the new
CLECs) build their networks."
Cisco hopes to cash in with its packet technology, the equipment which can
bring together the telephone, cable and data networks. The company enjoys a
50% global market share, with about half its revenues generated outside the
U.S., Lang said.
"People are gathering up their courage, realizing that the new world networks
are the way to go," the executive said. "Ultimately it's the business driver.
Growing pains are a little frustrating with new technologies, but the economics
are very compelling."
-By Margarita Palatnik; 201-938-2226; margarita.palatnik@cor.dowjones.com |
