5G in Brazil: from market opportunities to challenges

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The term 5G is used to describe the next generation of mobile networks beyond LTE mobile networks. It is not just a new frequency for data transmission. Rather, 5G technologies are also significantly faster than the previous 4G and require little energy consumption for data exchange between connected devices.

In terms of the LATAM region, Brazil occupies a leading position in terms of the mobile economy, with research suggesting that by 2025 Brazil will have predicted 175-Million smartphone connections.

Brazil is one of 2 countries in Latin America (the other being Uruguay) where 5G services have already been launched in 2020, with the government’s highly anticipated 5G Network Auction (which according to the OECD could be the largest network auction in the world to date) scheduled to take place in June this year (regulators in Chile, Colombia and Dominican Republic have also announced their intentions to hold such processes during 2021).

Below we will address the market opportunities, as well as some of the key challenges in terms of rolling out 5G technologies in Brazil over the coming years.

Market opportunities

Despite the on-going health pandemic, and huge growth in mobile data traffic, the Brazilian telecom and software industry is continuing to grow steadily.

Research shows that 58% smartphone users in Brazil watch free online video content on a mobile phone at least once per day, compared to just 39% in the US, and this trend is likely to increase because of lockdown measures resulting from the pandemic.

5G brings with it the possibility of greater data traffic stability, as well as enabling innovative technologies to improve processes and the way we interact as societies, through higher speeds and ultra-low latency. In Brazil, we are already seeing new possibilities emerge, for example in the manufacturing, mining, and utilities sectors, as well as for digital technologies and the Internet of things (IoT), Smart city and Fintech initiatives. Giving just one recent example of this potential, in July 2020, Nokia and Telefónica Brazil agreed a deal with mining firm Vale to provide a private LTE network to the Carajás Mine – the world’s largest iron ore mine, in northern Brazil.

5G technologies further represent a big opportunity to provide Internet access to more Brazilians and thereby to democratize access to the Internet.

Current challenges

Despite these clear opportunities and the developments in the Brazilian market, the country faces several key challenges in terms of implementing and rolling out 5G technologies.

The first such problem relates to logistics, which really is no surprise given the size of the Brazilian national territory. In this moment, Brazil needs to improve the required infrastructure for 5G. It is estimated that 5G technologies will require between 5 – 10 times more antennas than the previous 4G standard. This issue is significant, due to the country’s complicated regulatory environment at a local level for the installation and maintenance of such equipment. That said, it is important to note that ANATEL (Brazil’s National Communications Agency) is currently working on ways to simplify this regulatory landscape.

In fact, this very issue was recently the subject of litigation in Brazil, involving a constitutional challenge to the so-called Brazilian “Antenna Law” (Law 13.116/2015), which gives a right of way for common public goods or facilities. Importantly, Article 12 of the law states clearly that:

No consideration will be required due to the right of way on public roads, in public areas and in other public goods in common use of the people, even if these goods or facilities are exploited through a concession or other form of delegation, except for those whose contracts result from bids prior to the date of enactment of this Law.

The case was heard by the Brazilian Supreme Court (STF) in February, and the challenge was denied, maintaining the wording in Article 12 of the Antenna Law, and avoiding a charge due to the right of way on public roads, domain rights and in other public goods of common use. We believe that this judgement brings greater legal certainty to the market, as it prevented a multiplication of municipal and state laws with different regimes.

Moreover, the OECD (Organization for Economic Cooperation and Development), to which Brazil has applied for membership, recently presented a report with suggestions for the telecommunications sector in Brazil, recommending among other things that the country should:

  • Improve legal and regulatory frameworks to strengthen institutions and adapt them to a converging environment.
  • Reform the framework for taxes and fees in the communications and broadcasting sectors.
  • Improve market conditions, promoting competition in the communications and broadcasting markets – including the 5G Auction.

Finally, the controversy regarding the potential barring of Chinese communications giant Huawei at national auctions, which is playing out on the world stage, must also be mentioned with respect to Brazil.

With the 5G-network auction scheduled to take place in June, Brazil has found itself in the middle of the on-going trade war between China and the United States. Most recently, Brazilian government sources have indicated that it will not seek to bar Huawei from Brazil’s 5G-Network Auction, a decision that is supported by companies in the sector, who fear a potential imbalance in the values to be invested in implementing this technology, as well as direct consequences to the service offerings, should such a ban be imposed. In addition, it is worth pointing out that ANATEL has not taken an official position on the issue and has already given notice of the rules in relation to the 5G technology auction, which do not mention any restrictions on Huawei.

Conclusion

There are massive investment opportunities in Brazil for companies aiming to ride the 5G wave and utilize it to enable innovative technologies and processes in the market. Indeed, in terms of the Latam region, Brazil undoubtedly represents the biggest prize. Nevertheless, it is also apparent that this story unfolds in an environment where there are still significant hurdles to cross. It is still early days, and any action should be taken with caution, together with a partner that understands the local environment, and considering all its particularities.

At Daniel, we are continuing to monitor all developments regarding 5G in Brazil and the potential effect on our clients’ rights. If you have any questions on this topic do not hesitate to contact us. 

The term 5G is used to describe the next generation of mobile networks beyond LTE mobile networks. It is not just a new frequency for data transmission. Rather, 5G technologies are also significantly faster than the previous 4G and require little energy consumption for data exchange between connected devices.

In terms of the LATAM region, Brazil occupies a leading position in terms of the mobile economy, with research suggesting that by 2025 Brazil will have predicted 175-Million smartphone connections.

Brazil is one of 2 countries in Latin America (the other being Uruguay) where 5G services have already been launched in 2020, with the government’s highly anticipated 5G Network Auction (which according to the OECD could be the largest network auction in the world to date) scheduled to take place in June this year (regulators in Chile, Colombia and Dominican Republic have also announced their intentions to hold such processes during 2021).

Below we will address the market opportunities, as well as some of the key challenges in terms of rolling out 5G technologies in Brazil over the coming years.

Market opportunities

Despite the on-going health pandemic, and huge growth in mobile data traffic, the Brazilian telecom and software industry is continuing to grow steadily.

Research shows that 58% smartphone users in Brazil watch free online video content on a mobile phone at least once per day, compared to just 39% in the US, and this trend is likely to increase because of lockdown measures resulting from the pandemic.

5G brings with it the possibility of greater data traffic stability, as well as enabling innovative technologies to improve processes and the way we interact as societies, through higher speeds and ultra-low latency. In Brazil, we are already seeing new possibilities emerge, for example in the manufacturing, mining, and utilities sectors, as well as for digital technologies and the Internet of things (IoT), Smart city and Fintech initiatives. Giving just one recent example of this potential, in July 2020, Nokia and Telefónica Brazil agreed a deal with mining firm Vale to provide a private LTE network to the Carajás Mine – the world’s largest iron ore mine, in northern Brazil.

5G technologies further represent a big opportunity to provide Internet access to more Brazilians and thereby to democratize access to the Internet.

Current challenges

Despite these clear opportunities and the developments in the Brazilian market, the country faces several key challenges in terms of implementing and rolling out 5G technologies.

The first such problem relates to logistics, which really is no surprise given the size of the Brazilian national territory. In this moment, Brazil needs to improve the required infrastructure for 5G. It is estimated that 5G technologies will require between 5 – 10 times more antennas than the previous 4G standard. This issue is significant, due to the country’s complicated regulatory environment at a local level for the installation and maintenance of such equipment. That said, it is important to note that ANATEL (Brazil’s National Communications Agency) is currently working on ways to simplify this regulatory landscape.

In fact, this very issue was recently the subject of litigation in Brazil, involving a constitutional challenge to the so-called Brazilian “Antenna Law” (Law 13.116/2015), which gives a right of way for common public goods or facilities. Importantly, Article 12 of the law states clearly that:

No consideration will be required due to the right of way on public roads, in public areas and in other public goods in common use of the people, even if these goods or facilities are exploited through a concession or other form of delegation, except for those whose contracts result from bids prior to the date of enactment of this Law.

The case was heard by the Brazilian Supreme Court (STF) in February, and the challenge was denied, maintaining the wording in Article 12 of the Antenna Law, and avoiding a charge due to the right of way on public roads, domain rights and in other public goods of common use. We believe that this judgement brings greater legal certainty to the market, as it prevented a multiplication of municipal and state laws with different regimes.

Moreover, the OECD (Organization for Economic Cooperation and Development), to which Brazil has applied for membership, recently presented a report with suggestions for the telecommunications sector in Brazil, recommending among other things that the country should:

  • Improve legal and regulatory frameworks to strengthen institutions and adapt them to a converging environment.
  • Reform the framework for taxes and fees in the communications and broadcasting sectors.
  • Improve market conditions, promoting competition in the communications and broadcasting markets – including the 5G Auction.

Finally, the controversy regarding the potential barring of Chinese communications giant Huawei at national auctions, which is playing out on the world stage, must also be mentioned with respect to Brazil.

With the 5G-network auction scheduled to take place in June, Brazil has found itself in the middle of the on-going trade war between China and the United States. Most recently, Brazilian government sources have indicated that it will not seek to bar Huawei from Brazil’s 5G-Network Auction, a decision that is supported by companies in the sector, who fear a potential imbalance in the values to be invested in implementing this technology, as well as direct consequences to the service offerings, should such a ban be imposed. In addition, it is worth pointing out that ANATEL has not taken an official position on the issue and has already given notice of the rules in relation to the 5G technology auction, which do not mention any restrictions on Huawei.

Conclusion

There are massive investment opportunities in Brazil for companies aiming to ride the 5G wave and utilize it to enable innovative technologies and processes in the market. Indeed, in terms of the Latam region, Brazil undoubtedly represents the biggest prize. Nevertheless, it is also apparent that this story unfolds in an environment where there are still significant hurdles to cross. It is still early days, and any action should be taken with caution, together with a partner that understands the local environment, and considering all its particularities.

At Daniel, we are continuing to monitor all developments regarding 5G in Brazil and the potential effect on our clients’ rights. If you have any questions on this topic do not hesitate to contact us. 

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