Brazilian and European ICT: overview, trends and perspectives

September 22, 2010

Elena Scaramuzzi - Cullen International

elena@cullen-international.com

Sources: IBGI, IMF, Eurostat , European Commission, Anatel, Telebrasil

Brazil and EU snapshot

Brazil EU-27

Population 192m (84% urban) 497m

Political organisation 26 states + federal district 27 member states

GDP US$1.57 trillion (2009) US$16.4 trillion (2009)

(4 countries representing 63%)

Exp. growth 2010: 5.5% (IMF)1H 2010 : + 8.8% (IBGI)

1% (IMF, Eurostat)

GDP per capita PPP US$ 10,500 US$ 29,700

Fixed teledensity 21.5% ~40%

Mobile penetration 95% (+16%) 122% (+3.5%)

Broadband penetration 6.3% pop. 24.8% pop.

Telecoms revenues as % of GDP 5.7% of GDP 2.8% of GDP

C

Broadband: Brazil and EU• Brazil: 21% of households

15% above 2 Mbps

• “banda larga popular” currently offered at US$18

• Europe: 60% of households.

85% above 2 Mbps

0 50 100 150 200

EU-27

BR1

BR2

BR3

BR4

Indicative broadband prices (US$)

20+ Mbps

4-8 Mbps

2-4 Mbps

lowest

Sources: EU-27 Van Dijk Management study, 2009 (median prices, PPP Incl. VAT)

Brazil: operators’ websites. Exchange rates: 1 US$= BRL1.77 and €1.3

Sources: EU-27: European Commission;

Brazil: Ministry of Planning

fixed BB affordability and penetration

0

5

10

15

20

25

30

0 1 2 3 4 5 6 7 8

% p

en

etr

ati

on

by p

op

ula

tio

n

cost of fixed broadband as % of monthly income

EU-27

Russia

Brazil

India

China

Notes: Cullen International estimates based on data from ITU, Telebrasil, and European Commission.

Size of circles reflects size of population

BRAZIL:Regulatory environment and policy debate

Key players in Brazil– mobile & fixedOwnership market data fixed mobile

Mobile market share: 30.4%

Fixed market share: 27%

Mobile market share: 19.7%

Fixed market share: 49.9%

Mobile market share: 24.5%

Fixed market share: n/a

Mobile market share: -

Fixed market share: 4.2%

Mobile market share: 25.4%

Fixed market share: 15.3%

Source of market share data : Anatel, Sep. 2010

Brazilian national broadband plan

• National broadband plan adopted in May 2010 (Presidential decree 7,175)

• Priorities, specific targets and actions to be defined by the Digital Inclusion Committee

• efficient use of spectrum to facilitate and reduce cost of wireless broadband

• Proposed targets:

(*) CI estimate

Source: Ministry of Planning’s website

Broadband

households

(million)

(% of total

households)

Lowest speed Retail target

monthly prices

(BRL)

2014

35.2 61%* 512-784 kbps 35 (US$ 20)

39.8 69%* 512 kbps

(with download limitations)

15 (US$ 8.5)

(with government incentives)

Main responsibilities

National broadband plan Planning and governance Operations Regulatory control

Responsible entity Digital Inclusion Committee Telebrás ANATEL

Tasks • definition of priorities and schedule

• promotion of public-private partnerships

• technical definition of broadband access

• monitoring and evaluation

• Define and identify “underserved areas”

• management and operation of national fibre backbone

• offer of wholesale access services on non discriminatory terms

• retail broadband offer to users in “underserved areas”

• foster competition, free initiative and broadband offer

• stimulate deployment of convergent services

• impose sharing of infrastructure

• solve disputes

• manage public resources (incl. frequencies) aiming to reduce costs

Source: Presidential decree 7,175 of May 12, 2012

Regulatory environment - BrazilImposed? On whom? Available in practice?

Carrier selection √(LD only)

All fixed and mobile operators

√(LD only)

Carrier pre-selection X - X

Fixed RIO √ Fixed operators with SMP √

Mobile RIO X - X

LLU √ Fixed operators with SMP X

Bitstream access X - X

WLR X - X

Fixed number portability √ Fixed operators √

Mobile number portability √ Mobile operators √

National roaming X - X

MVNO access X - X

Cost accounting obligations √ Fixed operators with SMP and mobile operators

√

Cost-oriented pricing √ Fixed operators with SMP and mobile operators

X

Convergence• Broadcasting of TV content on a fixed telephone network requires a local cable TV

concession

• ANATEL recently suspended a limitation on the number of cable TV concessions which could be awarded in the 900 municipalities of Brazil

Two restrictions remain:

1. providers of public fixed telephony can only obtain cable TV concession outside the areas where they provide fixed telephony.

2. foreign ownership restrictions apply to companies offering cable TV services. At least 51% of the voting capital of Cable TV companies must be Brazilian owned (legal basis: Cable TV Law of 1995).

NB: A bill put forward in 2007 proposes to lift current restrictions on the provision of cable TV services by fixed telcos (approval still pending). Telcos cannot broadcast on IPTV (current offers are only for VoD). No restrictions on pay TV services on satellite.

Europe:Regulatory environment and policy debate

Broadband targets: EU

Coverage targets:(all Europeans should have)

take-up target:(% of households with above 100 Mbps)

2013 basic broadband access(speed not defined)

-

2020 at least 30 Mbps broadband 50%

Targets set out in the European Commission’s Digital Agenda

Three complementary measures to provide broadband for all EU citizens and stimulate the roll out of Next Generation Access networks:

• Commission communication on Broadband• Commission recommendation on NGA networks• Commission proposal for a multiannual Radio Spectrum Policy Programme (RSPP)

Policy targets in EU member states

Source: Cullen International – WE Telecom service (Sep. 2010)

Note: size of circles reflects size of population

EU countries that have plans setting a minimum speed targets for at least 95% of the population

NGA plans, coverage, and take-upGermany: FTTC – VDSL2

investment by the incumbent. Local

initiatives (FTTB and VDSL2, FTTH, and HFC)

France: plans by incumbent, alternative ,

and cable operators. FTTH and HFC deployments.

United Kingdom: plans by incumbent and one cable operator (Virgin). FTTH,

FTTC and VDSL2, HFC.

Netherlands: plans by incumbent and two cable operators. FTTH, FTTC, VDSL, HFC deployments.Also local independent

NetCo deploy FTTH

Belgium: FTTC – VDSL2 investment by the

incumbent, and HFC deployments by one cable

operator (Telenet).

Spain: plans by incumbent (FTTH, FTTC+VDSL2), and one cable operator (ONO)

via HFC deployments.

Source: Cullen International – WE Telecom service (Sep. 2010) **UK: Separate FTTH and FTTC figures for BT’s NGA plans by 2015 are not available.*SE: Figures on FTTC (VDSL) and DOCSIS 3.0 deployments are not available.

Approaches to NGA regulationIncumbent NGA NRA main focus Passive remedies Active remedies

FTTH/FTTC/HFC passive/active ducts Fibre /copper

unbundling

In buildingfibre

Fibre Copperand fibre

Cable

DE ✔ (SLU for FTTC only)

✘ ✔ ✔ ✘

FR ✔ ✔ ✔ ✘ - -

FI ✘ ✔ ✔ ✔ - -

IT ✔ (dark fibre) - ✔ - -

ES ✔ (SLU for FTTC only)

✔ ✔ ✔ ✘

NL - ✔ - ✔ ✔ -

SE ✘ ✔ ✘ ✔ ✔ -

UK ✔ (SLU for FTTC only)

- ✔ ✔ -

Source: Cullen International – WE Telecom service (Sep. 2010)

Key: ✔ remedy has been imposed or proposed✘ NRA has stated the remedy should not be imposed

growth perspectives

Discussion ...

investment stimuluscompetition

bundled offers

regulationequipment

www.cullen.com.br

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