Brazil Opts For GSM Tech For PCS, Leaving TDMA
Behind
By MARGARITA PALATNIK
SAO PAULO -- In a decision that will affect billions of dollars of investment and the development of
wireless communications in the country, Brazilian regulators Wednesday said they will sell Personal
Communications Licenses using the 1,800 megahertz frequency.
Anatel's decision after more than a year of fierce lobbying from telecom equipment manufacturers on
behalf of the 1,800 MHz frequency and of its alternative, the 1,900 MHz frequency, means the
introduction to Brazil of Global System for Mobility (GSM) technology, at the expense of the prevailing
Code Division Multiple Access (CDMA) technology.
The 1,900 frequency was mostly favored by North American manufacturers and operators willing to
work with CDMA and TDMA - although Sweden's LM Ericsson Telecommunications Co. (ERICY)
was also in the 1,900 camp - while European equipment makers pressed for the 1,800 frequency, with
its prevailing GSM technology.
During a press conference in New York, Brazilian Communications Minister Joao Pimenta da Veiga
said the choice was based on issues of competition, quality and prices. He added that GSM is used
more broadly around the world, in about 140 countries.
For Verner Dittmar, Brazil director of telecommunications and technology at Germany's Siemens AG,
the big winner is the Brazilian consumer.
"All the arguments we always used for defending 1.8 were contemplating the benefits for users, not just
for the operators," Dittmar told Dow Jones Newswires.
"The GSM technology automatically established with that frequency means that the highest number of
manufacturers with facilities in Brazil will be competing for supply contracts," he said, estimating there
are between seven and eight such firms.
Anatel Saves 1,900 Mhz For Third Generation Phones
But the Brazilian government is also looking to the future.
"It's very interesting because it means that Anatel has saved the 1.9 frequency for third generation
networks," said Pyramid Research analyst Andy Castonguay, addressing the concern that the 1,900
frequency wouldn't have enough capacity for bandwidth-demanding third generation services if
parceled out for PCS licenses now.
The size of the future Brazilian PCS market is still blurry. Estimates vary between 15% and 25% of the
total mobile phone market.
According to Anatel figures, in three years the country will have about 24 million mobile phones.
Siemens' Vittmar declined to offer a sales projection, but said he expects his company to garner 20% of
the new market, and plans to invest $50 million in its plants in Curitiba and in Manaus to adapt them for
manufacturing the new equipment.
For Marcelo Angione, new business director at the Nortel Networks unit of Canada's Northern
Telecom (NT) in Sao Paulo, assuming a conservative 15% share of mobile market for PCS,
infrastructure sales excluding handsets could be around $3 billion or $4 billion in a couple of years.
Angione noted that his company had been rooting for the losing frequency, in line with most of its
clients.
"We wanted to be compatible with our clients, and most of them wanted the 1.9," Angione said, noting
that Nortel will now review all its projections, and try to sell GSM equipment instead.
The most frequently heard downside of the chosen frequency has to do with obstacles to roaming
within the Americas, although as mobile networks stand right now, international roaming is at best a
frustrating experience for users.
At the time of the announcement Anatel hadn't yet decided on the number, size or shape of
concessions, nor on the criteria for awarding licenses.
In Brasilia, Guerreiro said that "guidelines will be set to make sure bids don't get too high and as a result
increase the prices for the final consumer."
Not Seen As Ideal For Roaming
But the choice of a new standard may have one competition-hindering characteristic: users who have
been reluctant even to switch from analog to digital phones, may not be interested in getting a new
phone that doesn't talk to existing networks.
An internal document for a large cellular operator in Brazil discussed the issue, concluding that its
market share would be better protected with the introduction of a new standard.
"Telefonica and Telesp must be very happy," said Nortel's Angione in reference to Spain's Telefonica
SA, which controls the Rio de Janeiro cellular incumbent, and to Telesp Celular Participacoes SA
(TCP), the Sao Paulo operator run by Portugal Telecom SA (PT).
It wasn't very clear either who exactly would be allowed to participate in the coming auctions, the first
one of which should happen in December.
Da Veiga told reporters in New York that fixed line operators wouldn't be allowed to bid, while all
cellular carriers would.
This raises questions about the still-blurry plans of the new alliance formed by Bell Canada
International, Telmex and SBC, who said they plan to leverage the Wireless Local Loop infrastructure
of Vesper SA, a competitive local carrier in Sao Paulo and Rio, to create a large wireless network
linked to a hoped-for PCS license.
The BCI-Telmex-SBC venture could bid for a PCS concession through Algar Telecom Leste
Participacoes SA, or ATL, the competitive cellular carrier in Rio de Janeiro.
Most existing telephone operators and many who are still not present in Brazil have expressed their
interest in bidding for the new licenses.
-By Margarita Palatnik, Dow Jones Newswires; (5511)813-1988;
mpalatnik@aol.com; with Diana Rochford in Brasilia and Namju Cho in New York
Briefing Book for: ALA | ERICY | LU | NT | QCOM | TMX | BCE | E.CGT | E.TMA | S.ERC | T.BCE | T.NT |
TFONY |
