Beginning with the PGR in 2008, the Federal and State governments have adopted
extensive and wide ranging strategies for supporting improved access to broadband.
These efforts emerged from much earlier initiatives to promote the uptake of
ICTs more generally in Brazil, prior to the advent of 'broadband Internet'.
The first systematic effort by the Government took place in 2000 when the then
President Henrique Cardoso issued a decree to establish the Secretariat for
Logistics and Information Technology in the Ministry of Planning, Budget and
Management (SLTI/MP), as the lead agency for developing and implementing Brazil's
'e-strategy'. SLTI/MP served as the secretariat for an inter-agency committee
chaired by the President’s Civilian Chief of Staff*
- the Executive Committee on e-Government, to which a number of inter-agency
technical groups reported.
ICT development at the Federal level continued during the first administration
of President Lula da Silva (2003-2006), and some progress was made in digital
inclusion, with the development of an interoperability framework and other aspects
of e-applications development. E-strategies also advanced at lower levels of
the federal system, albeit unevenly in the 26 states and the Federal District,
as described further below.
Developed by the Lula government in 2010, the culmination of earlier efforts
toward digital inclusion is the PNBL (Programa
Nacional de Banda Larga,
National Broadband Program), which, after about a year of preparation, marked
its first deployment in August 2011. The five key objectives of the PNBL are
Broaden access to broadband-based Internet services
Accelerate economic and social development
Promote digital inclusion
Reduce social and regional inequalities
Promote job creation and income
To implement the programme, the dormant former state-owned monopoly operator,
Telecomunicacoes Brasileiras (Telebras), was revived and given the task, working
closely with the national regulator, Anatel, and the Ministry of Communications.
Telebras has also been made responsible for ensuring that connectivity is provided
for some of the 2014 World Cup stadiums.
The government owns 89.88% of Telebras shares with voting rights, and 72.67%
of the share capital. In June 2011 it was announced that additional private
investment in Telebras can be made, but that government would still maintain
control. Telebras' business model envisions it to be cash flow positive by its
Aiming to cover 40 million households or 68% of the population by 2014, Telebras
core activity will be to act
as a 'wholesale' operator, providing infrastructure and network capacity for
the broadband providers, as well as the administrations of the federal government,
the states and Federal District, municipalities and non-profit organizations
such as universities, schools, hospitals, community telecentres and other points
of public interest. Telebras will also manage
the deployment of a national fibre network which will eventually reach 3,045
municipalities without access to fibre.
In essence the overarching strategy with the revival of Telebras has been to
create a public broadband operator that will compete with the private operators
in order to lower prices and improve service levels. The government's view is
that the private broadband providers are not competing effectively and therefore
charging too much and giving poor service. MiniCom cites as evidence for this
the fact that average broadband prices have already dropped by 50% since the
announcement of the PNBL strategy, even prior to any actual roll-out of services.
Not unexpectedly, the larger providers have criticised the entry of a state
funded entity into the market arguing instead that the government's role should
be restricted to stimulating demand, such as through provision of improved online
services and perhaps subsidising users. Nevertheless some of the larger
providers have signed agreements with Telebras, and a large number of the smaller
operators have approached Telebras, seeing the opportunity to break the control
of the larger operators on the market.
The service is expected to be particularly useful to small broadband providers
operating in the smaller towns and more remote areas that have not been reached
effectively by the large operators. So far about 600 broadband providers have
registered their interest on the Telebras web site, with 1000 registrations
expected by the end of the year.
The other key actions being taken by Telebras and the government agencies to
achieve the PNBL objectives above are:
The establishment of a broadband price/performance target of R35 per month for a 1Mbps connection
The provision of broadband services directly to consumers where other operators
are not present or providing inadequate services
Provision of soft loans to small broadband providers to expand their services*
Freeing up additional radio spectrum for use in broadband provision
Tax exemptions for equipment and providers meeting local manufacturing or
The PNBL also aims to support the development of the Brazilian ICT equipment
and related services industry, which is seeing strong international competition
especially from China. As with all government purchasing, Telebras is able to
give preferential treatment to Brazilian firms by allowing its procurement process
to select local companies even if the cost is higher than the bids of foreign
A consortium was formed in July 2011 to promote the development of local Brazilian
ICT equipment sector, called GENTE*,
which consists of companies that each invest more than R150 million of their
sales in R&D (about 20%). This includes Gigacom, CPQD, ASGA, WXBR, Trópico,
Icatel, Parks, Digitel e Datacom and PadTec.
Padtec recently won Telebras' R68 million tender for hardware to support the
PNBL rollout. The company is a subsidiary of the Centre for Research
and Development in Telecommunications (CPqD), a private foundation that was
the technology arm of Telebras prior to its dissolution following privatization
of the telephone sector. Telebras still holds a 65.7% stake in Padtec.
The scope of the PNBL may widen further if the PNBL adopts the September 2011
recommendations of the IPEA. The IPEA proposes a series of measures to address
those at the bottom of the pyramid who cannot even afford the R35/month target
price for broadband. These include extending tax breaks to mobile phones and
television sets, more public support for additional public access/telecentre
facilities, and offering prepaid plans and fractional prices (weekly rates for
The key elements of the envisaged activities outlined above, along with other
related government initiatives are described in more detail below.
3.01 Price and performance targets
The R35/month target was determined by field research which indicated that the
70% of the Brazilians that are still offline would be willing to pay this amount
for the connection. As mentioned above however, the September 2011 IPEA indicates
that even this price is still too high to be affordable by the poorest segment
of the population. In addition the R35/month target does not include the cost
of the subscriber equipment, and this could also be a significant barrier to
entry unless bundled into long-term contracts.
The initial speed target is perhaps the more difficult component to derive,
since 'broadband' is such a rapidly evolving area*,
and in fact the initial speed target for the PNBL was 512Kbps, but this was
subsequently increased to 1Mbps shortly after the Rousseff government took over.
Currently, operators using the Telebras network are initially required to provide
a minimum of 20% of the target speed of 1Mbps, but the government is planning
to ensure the speed of offerings of all broadband connections in the country
is guaranteed. As a result Anatel has proposed that
providers with more than 50,000 customers will have to deliver to users at least
60% of average contracted plans. The rule also provides for raising the requirement
to 70% in 12 months, and 80% after the following year.
Efforts are also being made to monitor and benchmark the quality of available
broadband services. In mid-2011 Anatel proposed the establishment of a broadband
speed test service which would be available to subscribers directly, and the
test is now available on the NIC.br web site. However Sinditelebrasil, the national
lobby group of telecom operators and service providers, has objected to using
this as a benchmark because it believes that the variable capacity of the end-user
will distort the test and make it unreliable in providing an accurate assessment
of broadband quality. Sindibrasil has made an alternative proposal that
the ISPs should provide speed measurements directly.
Although Telebras' speed target is expected to rise to 5Mbps by 2014, a major
limitation currently is the total traffic download limits allowed by Telebras.
This is only 300Mbytes/month for fixed links and 150Mbytes for mobile links
(after which users will be responsible for paying additional usage fees).
This places a major restriction on the extent of use for the fixed fee of R35,
especially as speeds increase. For example, this would only allow a download
of one 45minute video*
per month. As a result this aspect of the PNBL strategy has come under criticism
from civil society groups and a number of the broadband providers who have indicated
that this will limit their interest in using the Telebras network, pointing
out that many of their low-end packages already offer better value. For example
GVTs basic service is 5Mbps for R49 per month and NET offers a triple-play
package in Sao Paulo, including 1Mbps internet for R29.80 per month, taking
advantage of the VAT exemption.
At the wholesale level, Telebras is selling dedicated capacity on its network
for R230/Mbps/month, which is currently about half the available price from
the commercial providers. This is a significant decrease and will no-doubt put
downward pressure on the wholesale market, and should therefore be good value
for the small providers. However some have observed that combined with the minimum
price/performance stipulations, the economics of the offering do not yet make
business sense. They point out that with a 20% minimum performance target this
means only 5 subscribers can share the 1Mbps upstream capacity purchased, thereby
only generating a revenue of R175/month (R35/month/subscriber), which is less
than the cost of the capacity purchased from Telebras.
3.02 Coverage targets
As indicated above, the primary target of the PNBL is to ensure that
40 million households or 68% of the population are able to access broadband
In May 2010, the first 100 under-served
cities were identified and the availability of PNBL services from Telebras'
wholesale facility announced. With a combined population of 14 million, most
of the cities are in the Northeast (58) and Southeast (30). The states with
the most cities listed are Bahia, Minas Gerais and Rio de Janeiro, with eight
listed in each.
By the end of 2011 at least 300 cities should be covered. These have been selected
as those at the bottom of the Human Development Index (HDI) and in states that
have exemption from sales tax.
3.03 Backhaul/backbone network development
To establish its national backbone fibre network, Telebras is leasing capacity
from traditional and alternative infrastructure fibre operators (mainly the
energy distribution parastatals). So far it has established a fibre network
of about 35 000kms, having reached agreement with Eletronet and Petrobras.
Telebras is in the process of making similar arrangements with other wholesale
fibre operators, such as electrical energy distribution group CEMIGTelecom in
the state of Minas Gerais.
3.04 Promoting increased broadband competition
In July 2011 Anatel approved rules to increase competition in the telecom sector
with the introduction of the General Plan for Competition*
(PGMC) which applies only to the large telecommunication and subscription/cable
TV companies with Significant Market Power (SMP). The regulation allows Anatel
to compel these operators to share network infrastructure with smaller players
who must be offered lower wholesale prices than the SMPs offer at the retail
level. In the area of subscription TV, users would be allowed to purchase their
own decoders at retail prices. A form of local loop unbundling is also being
considered that would allow any provider to sell services on the last mile if
the operator that installed it is not providing services. In addition broadband
providers will also will be required to implement 51 new internet exchange points
The PGMC also aims to create three organizations funded by the operators. One
will compare the offers from retail services to give more transparency to the
consumer and pinpoint the best options for them. Another will provide a representative
forum for operators without significant market power, and a supervisory body
will be create a centralized database of wholesale offers and to promote conflict
resolution between operators.
Finally, operators are expected to provide a range of backhaul capacities, depending
on the city size
32 Mbps (for municipalities of up to 20 000 inhabitants), 64 Mbps (for 40,000
inhabitants), 128 Mbps (60,000) and 256 Mbps (over 60 000 inhabitants). Where
there is capacity available companies will have 60 days to install the link.
In August 2011 Anatel announced proposed revisions to the SCM license (the main
broadband service provision license), which aimed to make it easier for small
providers to enter the broadband market. The main changes are to relax the criteria
for evaluating the credentials of the licence applicant and to create new licenses
with smaller geographic scope
state and municipal level licenses. Previously there was only the national licence
costing R9000 per year, the price of which remains unchanged, while the annual
fees of the new licenses are R1200 for a state license and R400 for a municipal
Other planned changes include:
Companies without SCM licenses would be able to partner with an existing
SCM license holder to provide niche services such as broadband-based home
The individual costs of bundled services (such as broadband with IPTV or
are to be made explicit and operators required to allow any part of the
service bundle to be cancelled by the subscriber
Above the 50 000 subscriber threshold the quality of the provider's service
will be regulated and increased time limits imposed on subscriber data retention*.
The concept of net neutrality would be upheld, whereby providers are not
allowed to limit the speed of any of the data passing to the subscriber
3.05 Use of satellite
A network of free broadband services via satellite, known as the GESAC Program,
has been incorporated as part of the national broadband strategy. In November
2010 new contracts were signed between MiniCom and a private satellite operator
to expand the number of ground stations in schools, community telecenters and
other public or community entities in areas not served by other broadband services.
The number of ground stations will be expanded by 1,460 to a total of 13,379,
operating at speeds between 512 kb/s and 2 Mb/s.
In addition, the auction of four satellite positions for private use took place
in September 2011, should reinforce the availability of satellite capacity for
remote areas by 2014. In the same month broadband provider Ozônio Telecomunicações
announced it planned to invest US$1.2bn in a satellite based internet service
for the Amazonas, using the O3b satellite network which is to be launched in
2013. IPEA has also proposed that the feasibility of a national satellite
to complement PNBL be examined.
3.06 Extension of mobile services to remote areas
Another strategy that is being discussed by Anatel to support the PNBL is to
improve mobile network coverage in the more remote and rural areas that are
currently under-served. The two options being considered are either to provide
some type of subsidy to encourage the existing operators to extend their networks,
or to establish a shared wireless infrastructure managed by a third party which
would lease services to the existing operators.
3.07 Universal service
This year (2011) Anatel has been conducting a 5-year review of voice telephony
(PSTN) licenses, the concessions for which expire in 2025. This includes reviewing
the licensees' universal service objectives to ensure they are in line with
updated requirements for meeting outstanding connection needs in remote and
In May 2011, Anatel held a series of public consultations on the license review
which culminated in new USO proposals. Supporting the objectives of the PNBL,
expansion of the fixed network to support broadband services by ensuring a minimum
transmission capacity of 2.5 Gbps to all municipalities with more than 30 000
inhabitants. In addition the proposals, if adopted, will
allow operators to apply their license renewal fees directly toward universal
3.08 Content and applications
Most government services that can be put online have already been implemented
at the national and state levels, but increased demand for local government
services is to be supported by the PNBL with Federal government plans to establish
a cloud services platform for use by municipalities. This strategy has generated
some controversy among some members of the private sector which have said the
provision of application services should be left to the private sector, as with
broadband service provision.
3.09 Radio spectrum liberation
Anatel is accelerating the process of making more radio spectrum available for
broadband, and a number of spectrum bands have already been released.
With its long-distance transmission characteristics, the 450Mhz band has been
opened for rural communications, previously held by a number of state agencies.
In the 3.5Ghz band Anatel also expects to allocate a specific segment for the
The availability of the 3.5Ghz band was initially delayed in court by the fixed
line operators, which challenged Anatel's plan to make the band available for
only for new competitors*,
but their protest was unsuccessful.
Unused parts of the 1.9 GHz band are to be issued to new mobile operators with
the requirement that 3G services be provided with coverage in all municipalities
of 100,000 inhabitants or more, even although mobile services are not under
PGO public service regulatory regime. Similar requirements are likely to be
imposed on operators seeking authorizations to operate in parts of the 3.5 GHz
Other spectrum liberation activities include:
Frequencies above 6 GHz will be made available for Telebras to provide point-to-point
links in municipalities using high-speed radios
The designation of the 2.170-2.182GHz band, and the 2.5-2.690GHz band has
been changed, in order to foster broadband access, and has published public
consultations regarding the designation of other radio frequency channels,
with similar objectives.
3.10 Subscription/cable TV broadcasting
The opening up of the subscription/cable TV sector has been under discussion
for some time, but this intention appears to have been accelerated following
the announcement of the PNBL. In August 2011 the government announced the removal
of the legal limitation that prohibited majority foreign owned telecommunication
companies from operating in the subscription/cable-TV market. This will allow
entry by some of the major telecom providers who are foreign owned, notably
Embratel, Telefonica, GVT and Sky.
The IPEA's analysis of the impact of this measure on broadband-use indicates
it should boost the number of subscribers significantly. The agency said in
a September 2011 research report that the presence of a subscription/cable-TV
provider could increase fixed broadband subscribers in the location by up to
3.11 Fiscal incentives and subsidies
Tax levels on equipment and services are relatively high in Brazil, and according
to the telecom industry lobby group Telebrasil, the government tax on broadband
services currently increases the cost to the consumer by 43%, while taxes on
imported modems adds 78% to the price. Some tax exemptions on connectivity services
pre-dates the PNBL in some states, however the government at both federal and
state levels is now adopting a broad range of tax exemptions to promote the
uptake of broadband and other ICTs.
Responding to concerns that the backbone and middle-mile networks will not be
sufficient to cope with rising local demand for broadband, in
August 2011 the Ministry of Finance agreed to forfeit an estimated R4 billion
in tax revenue to encourage operators and suppliers to make R70 billion worth
of investment in the construction of fibre-optic networks over the next four
Priority will be given for projects that include coverage of North and Northeast
Due to import substitution promotion, foreign ICT equipment is subject to 50%
duties and this is encouraging efforts to develop more advanced local manufacturing
facilities to help reduce the cost of computers, phones and other telecommunication
equipment. In 2009, the government announced that the exemption on taxes for
strategic capital goods, including computers and tablets, would be extended
to 2014. For computers alone, this was expected to cost the government about
R1.6bn in 2010. In addition all taxes and import duties have been waived
on computers for the public school system.
To further reduce the cost of tablets and related network access devices, in
May 2011 the government announced its intention to exempt locally made hardware
from industrial taxes which, when combined with sales tax exemption, could reduce
prices to consumers by 30-40%. The bill was passed by the lower house in September
and is expected to be approved by Senate shortly. Also in September, IPEA
published a report proposing that tax exemptions be extended to mobile phones
and televisions if universal access to the Internet is to be achieved.
A growing number of states are exempting broadband from sales taxes. In
14 of the 26 states (which have a total of 49% of the population) agreement
to exempt broadband from sales tax (VAT) has recently been reached. However
of these, only seven have signed the exemption in local law - Sao Paulo, Rio
de Janeiro, Espirito Santo, Parana, Goias, Pernambuco and Pará. The remaining
states where this is pending are Distrito Federal (Brasilia), Acre, Amapá, Ceará,
Rio Grande do Sul, Santa Catarina and Sergipe.
Brazil's lower house has given approval to a proposed measure offering tax breaks
for national production of tablet computers.
The bill, which must still gain final approval in the Senate, would offer manufacturers
full exemption from industrial manufacturing and retail taxes, as well as import
taxes for electronic components. According to government estimates, the tax
breaks could help reduce the final cost to consumers by 20%-30%.
To promote deployment of broadband to remote and under-served areas the government
is currently discussing the possibility of subsidising the cost of providing
connections to the end user.
The government also plans to discuss with the energy distributors the possibility
of offering lower electricity prices to small broadband providers.
3.12 State and municipal efforts
Prior to the PNBL there have been a variety of municipal and state supported
efforts to improve access to the Internet, including the use of tax incentives
and provision of low cost, or even free, broadband services in public access
facilities and schools. These efforts are now accelerating following the PNBL.
A growing number of municipalities are participating in the PNBL and partnering
with Telebras for use of network infrastructure. In the agreement, the Telebras
will use the municipal networks and offer access in cities where broadband is
not widely available.
An example is the state of Sao Paulo which has exempted broadband from sales
tax for the last two years but in August 2011, the State announced that
a complete mapping of the investment by operators would be made, including capacity
and locations covered. From this, the department will mount a public investment
plan for municipalities not covered. The goal is to ensure that in the next
two years, all municipalities of less than ten thousand inhabitants in urban
areas have broadband access – this is expected to be about 230 cities. Where
current operators indicate they are unlikely to cover these cities within two
years, the state will offer finance and tax incentives to other operators to
ensure that access is provided.
The State of Paraná
has been taking a different approach to improving connectivity for its citizens,
using the state energy company, Copel*,
as its primary vehicle for this. The Paraná
State Plan for Broadband was adopted in August 2010 and in February 2011, Copel
announced that it would use its 17 000 km fibre optic network to provide 100Mbps
broadband connections. With an investment of R100 million, the company plans
to ensure 100% coverage of all municipalities by 2012. Paraná
State is allowing Copel to defer its tax payments in return for a) ensuring
the wholesale 1Mbps price is R230 or less, b) reserving 15% of capacity for
low-income groups paying R15/month or less, and c) reserving another 15% of
capacity for services at R30 per month. In addition a 10:1 maximum contention
ratio is specified by the state.
The State of
Ceará is also amongst the most advanced in its efforts to ensure broadband access
for its citizens. In 2008, the state government decided to create its own fibre
optic and WiMax infrastructure, with the aim of providing broadband access in
cities. Coverage of 92% of the population was expected by July 2011. Known as
the Ceará Digital Belt*
(CDC), with an investment of R65m, a ring of 2500 km of fibre has been established
linking all 56 metropolitan areas. Free access is provided to all public institutions
in the state.
At the city level, the mountain municipality of Canela with about 40 000 inhabitants
near Porto Alegre has become a digital city role model. In March 2011 Canela
planned to open a 1 Gbps network, developed in partnership between city and
federal governments and private enterprise. The network has been established
mostly with support from the private sector in provision of infrastructure.