US embassy cable - 05BRASILIA1894

UNCLAS SECTION 01 OF 02 BRASILIA 001894 
 
SIPDIS 
 
STATE PASS TO USTR 
EB/CIP/TCFINTON 
STATE PASS TO FED BOARD OF GOVERNORS FOR ROBITAILLE 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DDEVITO/DANDERSON/EOL SON 
FCC FOR ETALAGA 
USTR FOR JOHANTHAN MCHALE, PAUL NEUREITER 
 
E.O. 12958: N/A 
TAGS: ECPS, ECON, Telecommunications 
SUBJECT: BRAZIL - TELECOMMUNICATIONS LICENSING CONDITIONS 
 
REF: STATE 114687 
 
1.  Post submits the following in response to the Reftel 
questions regarding licensing conditions in the 
telecommunications sector in Brazil.  On July 14, EconOff 
met with the Brazilian Telecommunications Regulatory Agency 
(ANATEL) General Manager for Tariffs and Prices and Acting 
General Manager over Competition, Vanderlei Campos, and 
ANATEL Regulatory Specialist, Jorge Ruiz. 
 
2.  ANATEL administers two types of licenses for fixed-line 
services -- concessions and authorizations -- each of which 
have their own contractual obligations.  When Brazil 
privatized its telecommunications sector during the 1990s, 
the state monopoly was divided into three large companies - 
Brasil Telecom, Telemar, and Telesp --, each of which bought 
(an expensive) concession under a General Licensing Plan 
over one of three geographic telecommunications regions. 
(The concessions expire at the end of 2005.)  To promote 
competition, a "mirror" company was also originally created 
in each of the three regions.  In addition, "authorizations" 
are granted by ANATEL to companies that wish to provide 
fixed line telephone services to increase competitiveness in 
the concessions market.  Although the telecommunications 
infrastructure remained under the control of the 
concessionaires, the GOB had hoped that wireless technology 
would allow for a competitive playing field for the newer 
companies.  The baby companies of the original parastatal 
have continued to dominate the market, however, according to 
Campos, and competition has been "weak."  Nevertheless, a 
number of telecommunication companies have received 
authorizations to operate in Brazil and compete with the 
larger companies, especially in the long-distance market. 
 
3.  ANATEL charges a fixed licensing fee of R$ 9,000 (US$ 
3,900) which corresponds to ANATEL administrative expenses. 
The amount of the fee does not change depending on the 
geographic scope, type of fixed-line service, or whether the 
service is facilities-based or not.  The amount can be 
readjusted annually, however, by the ANATEL Board of 
Directors, based on variation of the IGP-DI inflation index. 
Ruiz noted that the fixed licensing fee does not include use 
of radio frequencies by the telecommunications companies, 
which are licensed separately. 
 
4.  ANATEL does not have capitalization or bonding 
requirements for the companies that request authorization to 
compete with the concessionaires.  ANATEL regulates and 
audits the concessionaires, which have public service 
obligations to provide fixed-line services in their 
respective geographic regions. 
 
5.  The GOB has build-out investment requirements for the 
concessionaires, but not the companies operating under 
authorizations.  The build-out requirements are part of the 
GOB project called "Universalization," which is defined as 
the "right of access to telecommunications by every person 
and institution regardless of their location or 
socioeconomic condition."  The Universalization plan 
includes specific goals for the concessionaires.  For 
example, in terms of build-out requirements, the 
concessionaires are required by the end of 2005 to have 
installed at least one public telephone in every locality in 
which there are more than 100 residents.  Concessionaires 
construct and maintain the infrastructure as a reversible 
public good.  In contrast, the private companies which 
operate under authorizations have no obligation to expand 
their service network and retain ownership of whatever 
infrastructure they install.  Although it is possible for 
companies to rent the lines of another company, Campos said 
that is extremely rare; as a result, there are some cities 
with two separate fixed-line telecommunications 
infrastructures. 
CHICOLA