According to mid June reporting from the Dow Jones Newswires, Telecomunicacoes Brasileiras SA, or Telebras, is attempting to reinvigorate an informal governmental plan to provide affordable nationwide broadband Internet service. The long term plan — which Telebras estimates at Real5.7 billion — would initially extend broadband data service to 22 cities over the next two years.
If the federal government approves the plan Telebras would receive Real3.2 billion ($1.8 billion) in capital investment over the next two years to begin implementation. As a former governmental monopoly, Telebras must first receive federal government approval for a change in its statutes to proceed. Telebras says that should its petition be approved within one month, it could begin organizing and implementing the plan in 60 days.
Telebras believes that this plan in which it would operate the backbone would encourage local operators and smaller providers to compete to deliver better service for end users. The largest of the local operators include: Telecomunicacoes de Sao Paulo SA, or Telesp, Net Servicos de Comunicacao/Embratel (NETC), Tele Norte Leste Participacoes SA, or Oi, CTBC and GVT Holding SA.
The initial 22 cities under discussion, however, constitute less than one percent of Brazil’s 4,278 cities. The local providers question whether the government should be spending money on duplicating existing broadband backbones. Moreover its not out of the question that the plan would foist most if not all of the risk on the local operators by requiring them to: 1) build out suitable broadband infrastructure in the distribution or last mile segments of the local loop, and 2) force providers, particularly in higher income areas, to compete on price, further eroding margins. Furthermore Telebras, under this plan as sole backbone provider, would gain immediate incremental revenue by providing transport for this Internet service. Telebras said in the newswire reporting that the only reason the local providers complain is to protect margins and to stop broadband from further eroding voice revenues.
