BRAZIL - TELECOMMUNICATIONS LICENSING CONDITIONS

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
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