5G auction symbolized geopolitical dispute, says president of Anatel

Scheduled for this Thursday (4), the 5G auction exceeded the sector’s expectations with the entry of 15 companies. The event is considered a milestone for connectivity in Brazil, but the arrival of technology has also become a symbol of the geopolitical dispute, in the assessment of Leonardo Euler de Morais, president of Anatel (National Telecommunications Agency), which ends its term on the date of the auction .

“Although the cybersecurity issue precedes IMT 2020 [padrão internacional para a quinta internet móvel], the 5G ended up symbolizing this discussion. The level of connectivity increases so much that this issue becomes more critical,” says Euler.

The political construction of the auction was marked by the US offensive against the Chinese Huawei, which supplies equipment to telecommunication operators. Donald Trump’s government influenced business partners not to allow the construction of 5G networks with the company’s devices, alleging industrial property theft and espionage. Successor Joe Biden maintains the same policy.

Huawei’s technology, however, is already present in networks in Brazil. The exchange would delay the auction and burden operators. The alternative presented by Minister Fábio Faria (Communications) was the construction of a private 5G network for the government, in which the company should not participate.

Non-collective for the Federal Government, the auction will sell the licenses for the 700 MHz (megahertz), 2.3 GHz, 3.5 GHz and 26 GHz frequency bands for R$ 45.7 billion, to be paid in a commitment to investment by operators. One of the commitments includes building the government network.

Euler recognizes that 5G arrives before the economically attractive regions, such as large cities, but says that the auction was “completely designed to make digital inclusion”, with the deployment of 4G in 31,000 km of highways discovered today and connectivity in schools.

Anatel will be responsible for supervising the operators’ investments in the coming decades.

“We are charging less and saying that there is an investment obligation, and we have to provide a financial guarantee to achieve these goals,” he said.

5G is usually associated with autonomous cars and other applications that are still far from reality. What is practical in the short term? 5G will reshape society and productive means. It is a technological platform that leverages other technologies, such as artificial intelligence and robotics. It’s not just about speeding up, as happened in the transition from third to fourth generation internet. It involves interconnected objects in agribusiness, for example, which represents 25% of GDP, and even more futuristic applications, such as remote surgery.

The challenge in the late 1990s was to connect households, then came the cycle of connecting people, and now comes the third phase, which is connecting things. But let’s get it right: 5G is in its infancy, it’s still a while before applications emerge. In the transition to 4G, who could think of applications like Uber or iFood? Steam engine, electricity and the internet have promoted changes across all value chains. Maybe 5G fits into this concept.

One of the operators’ commitments is to cover areas that are currently not served with 4G, which is welcome in a scenario of inequality. But given the evolution of technology, won’t these areas quickly lag behind places that receive 5G? That’s why the notice has a non-collection bias. We have four notices in one, there are four radio frequency bands inserted in the notice.

The 700 MHz and 2.3 GHZ bands only have an ecosystem for 4G equipment. Then we have the 3.5 GHz band, the main 5G gateway, and the 26 GHz band, whose propagation condition is very restricted and the models are still exploratory.

I highlight that, from 2001 until now, Fust has collected R$ 25 billion in nominal terms. All this amount was used to make a surplus or to minimize the primary deficit. In the United States, there is a fund with the same name and with practically the same charge. Do you know how much they used in 2018 and 2019 to bring broadband infrastructure and encourage demand in areas lacking economic attractiveness? $8.5 billion and $9 billion. This was the reason why Anatel sent a draft bill to review the Fust, which was approved. I hope it will be unlocked going forward and used in the sector.

This hurdle of Fust is old. It’s old. In the absence of Fust, we’re going to make the biggest bid notice in the agency’s history. The opportunity cost of the block that has the 700 MHz band is R$2.8 billion. Instead of charging this amount, we charge R$160 million. With this difference, we will cover with 4G more than 1,000 stretches of federal highways, totaling 31,000 km, thinking about the flow of agricultural and industrial production, integration routes and rural areas along the highways. In the 2.3 GHz band, we will have several obligations for towns and villages that do not have infrastructure.

Can you explain this division? Brazil has 22 thousand locations, according to the IBGE, and they are divided into the main district (5,570) and non-headquarters (16 thousand), which are villages, agglomerations and towns. Of these 16 thousand, 10 thousand do not have cell phone coverage. We will cover over 9,800 with established obligations. We are charging less and saying that there is an investment obligation, and you have to provide a financial guarantee to achieve these goals.

And the 5G, in the 3.5 GHz band, will also demand obligation. First in capitals, where there are more people, and then in places with more than 500,000 people, then 200,000, even cities and municipalities with less than 30,000.

Evidently, it will arrive before the big urban centers. Of the host districts, about 1,000 do not have high-capacity data transport infrastructure (backhaul communications). The notice foresees obligations to reach 600 of these municipalities with backhaul.

We are holding an auction with R$50 billion in grant value that will not be paid in cash, R$47 billion will be paid in investment commitment. It is the largest auction in Latin America and I believe it is among the three largest on the planet, due to the amount of spectral resources.

If operators do not comply with their obligations, Anatel is the one who supervises. But companies manage to delay administrative processes, as is the case with a band in the 3G notice that has not been activated until now. Isn’t that a big risk? This case has a peculiarity, they did not find equipment to fulfill their obligations. Then we decided that they would have to cover it with other technologies or other radio frequency bands, and they are doing so. The board of directors has already decided to retake the track. But that’s not what happened on other tracks. In my tenure, what I tried to do was to convert litigation into productive investment. Last year, we signed the first two TACs in the agency’s history. The first was with TIM, a reference value of around R$650 million, with additional investment commitments. It had to take 4G to 350 municipalities –in the North, Northeast and North of Minas Gerais– where there was only 3G.

The private sector considers the auction a public policy on connectivity, but the third sector presented a representation contrary to the notice in the PGR. Among the notes, they say that public notice increases inequality and that 5G will not reach areas with little financial attractiveness. We are taking 5G to remote areas too. It is a fact that in the first year the obligation is related to capitals. 5G comes later, but it will. Operators are committed to investing 5G in the notice for the 3.5 GHz band. 4G is in the 700 MHz and 2.3 GHz band. I respectfully disagree completely. This notice has been referenced around the world.

Another criticism concerns the speed of part of the rite. TCU minister Aroldo Cedraz, reviewer, requested 60 days for analysis, reduced to one week… I’m not going to go into the TCU dynamics, but say that the process was rushed in terms of analysis, by no means. We sent data to TCU at the end of March, the decision was made in August. I would even like to praise the agency’s technicians, they are a reference in the ITU [União Internacional de Telecomunicações] in terms of spectrum pricing. I understand that it is often up to the third sector to make the criticisms, it is legitimate and their role, but to say that the public notice is not completely designed to make digital inclusion [não é certo].

In fact, the public notice talks with citizens, with economic recovery, with infrastructure, as it has commitments related to roads —with priorities for BRs 163, 364, 242, 135, 101 and 116— and with education. All resources that will be derived from the 26 GHz band will go to schools’ connectivity. We made an agreement with BID and the Lemann Foundation to help MEC introduce the schools.

​Is it up to the MEC to define priorities from now on? What is the perspective of connecting all public schools? The MEC has a deadline to present this to Anatel. We are opening a very expressive window of resources, we are going to put this entire arsenal of information and study at the service of the MEC. From the moment he establishes the schools, it is up to a responsible group to implement this.

Many who are considered connected to the internet in the poorer classes have restricted access to social networks, such as Facebook and WhatsApp, because operators release these applications on prepaid plans. How do you rate this model? We need to discuss taxes on the telecommunications sector within the scope of the tax reform. You can’t talk about a data-based economy in which you tax this service just as you tax demerit goods like tobacco and alcoholic beverages. Brazil’s tax burden, not considering sectorial funds, is approximately 43% in the telecommunications sector. Worldwide, the average is 14%. Brazil is a complete outliner in terms of taxation. It is necessary to think about whether the tax burden on the sector reflects the essential nature of the service.

​Minister Fábio Faria says that the auction process involved a lot of politics, but it was geopolitical. What is your final balance? No one can disagree that cybersecurity, like the protection of personal data, is something that should be on the top agenda of a sovereign state. Although the cybersecurity issue precedes IMT 2020 [padrão internacional para a quinta internet móvel], the 5G ended up symbolizing this discussion.

The level of connectivity increases so much that this issue becomes more critical. Now, this discussion pervades geopolitical aspects, that’s where Itamaraty, economic and technical, comes in, which is where Anatel comes in. Within this sphere of action, we focus on technical equipment standards, approval and cybersecurity rules. If you look at the whole, not just the notice.

The construction of the government’s private network will be done by the operators, but will they be able to operate the network later or should it stay with Telebrás? This issue should be defined by the GSI [Gabinete de Segurança Institucional].

American companies have advocated the “open ran” concept [sistemas de hardware e software abertos a diferentes empresas], which is also a way to participate in the market. What is your opinion about this model? There was a very large market concentration. I have an analysis, which is the guiding vote of our cybersecurity regulation applied to telecommunications networks, in which I show how we went from a set of 12 vendors to practically three: a Finnish (Nokia), a Swede (Ericsson) and a Chinese (Huawei). This naturally decreases competition, which translates into price for providers that buy equipment and for end users.

Open ran’s biggest challenge is interoperability. I think the model will become a reality in a few years, but it is not up to the regulator, it is the technology that will define it. Anatel has to regulate so as not to obstruct this development.