Brazil’s spectrum choice in auctioning new personal communications services licenses could be an important decision for the GSM community as it struggles to gain inroads into Latin America.
The Brazilian telecom regulatory authority, Anatel, plans to auction new PCS licenses as early as this year, but it has made no decisions about what frequency the new licenses will operate on. It recently held a heavily attended public hearing to seek comment on whether it should issue licenses in the 1800 MHz band or the 1900 MHz band.
What frequency Anatel chooses could have bearing on whether Global System for Mobile communications technology can gain a larger foothold in Latin America, a region where Time Division Multiple Access technology dominates and Code Division Multiple Access technology is making strides. Brazil is Latin America’s largest market and promises strong growth in the years ahead. Penetration in Brazil doubled between 1998 and 1999 from 4.7 percent to 8.7 percent, said Jamilla Xible, program manager for The Yankee Group’s Brazil market strategy services.
If Anatel chooses to auction frequency in the 1800 MHz band, it automatically makes GSM the mandatory technology since TDMA and CDMA equipment aren’t available in this band. While GSM equipment is available at the 1900 MHz band, vendors would compete with TDMA and CDMA vendors as well. Also, TDMA|and CDMA|systems at 1900 MHz would be interoperable with existing TDMA and CDMA networks.
“Anatel is trying to figure out if they want to make GSM mandatory for this market,” said Xible. “Companies there are defending both sides.”
The GSM Association and the Global Mobile Suppliers Association both have urged Anatel to reserve the 1900 MHz band for third-generation services and auction spectrum within the 1800 MHz band. Doing so would align Brazil closer with Europe and most other parts of the world that, under International Telecommunication Union recommendations, have reserved the 1900 MHz band for 3G services. Latin America historically has closely aligned itself with North America, which already has allocated the 1900 MHz band to PCS operators.
“The 1900 (MHz) band is right in the middle of what the European community is going to be allocating for 3G,” said Vincent Wang, manager with Deloitte Consulting’s Latin American practice. “Where does 3G go then? They want to make the world as ubiquitous as possible.”
GSM technology, the world’s dominant technology, is struggling in Latin America. The Yankee Group reports that GSM technology covers just about 5 percent of Latin America’s and the Caribbean’s total pops. Some GSM vendors in recent months have been aggressive in trying to persuade Latin American regulators to open the 1800 MHz band for PCS. Vendors like Siemens AG, Alcatel and Nokia want to protect their product lines in the GSM 1800 market.
But the GSM community has been dealt some recent blows. Argentina’s recent licensing regulations favored the incumbent operators that already had chosen TDMA and CDMA technologies. Argentine operator Unifon also switched its technology selection from GSM to CDMA for its predominately fixed wireless service, said The Yankee Group.
“Brazil is the largest market in Latin America,” said Xible. “If GSM is established there, it would have a huge impact on the entire region.”
Naturally, the CDMA Development Group and the Universal Wireless Communications Consortium are pushing Anatel to license spectrum in the 1900 MHz band, which would allow operators to choose from all three technologies. A number of incumbent operators also feel their investments in TDMA and CDMA systems will be best protected at the 1900 MHz band, say analysts.
“There are a lot of questions over what the business case is at 1800,” said Richard Downes, UWCC’s regional director for Latin America. “They’d be creating a separate parallel network not interoperable with the current network.”
Analysts expect international roaming between North America and Latin America to greatly increase. Today, 32 percent of all outbound landline long-distance minutes go to the United States, said Yankee Group’s Xible. This shows what the needs for roaming are, she said.
“Aligning with the U.S. should be more important than with the rest of the world because of roaming,” said Gorge Fuenzalida, senior manager with Deloitte Consulting’s Latin America practice. “Roaming isn’t too big yet, but will grow. Most traveling from Latin America is done to the United States.”
The GSM camp argues that GSM tri-mode handsets-ones that operate at 900 MHz, 1800 MHz and 1900 MHz-will solve the need to roam to the United States. And vendors are working to create dual-mode handsets to operate on TDMA and GSM systems. TDMA and CDMA groups, however, say that such dual-mode handsets envisioned are a ways off and will be expensive for the consumer.
U.S. GSM operators Omnipoint Corp. and VoiceStream Corp., which hope to consummate their merger this quarter, have hinted of their interest in Brazil. Terry Phillips, head of Omnipoint’s media relations effort, said Omnipoint doesn’t favor one frequency band over another.
“The vendors clearly are the ones concerned about what frequency to use because they want to build equipment,” said Phillips. “From a service provider perspective, in our market, it really doesn’t matter as long as the handsets are available.”
