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Designing Brazil’s New Regulatory Model for TelecommunicationsTen Principles to Foster Balance and Enable Sustainable Infrastructure Investment

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January 2017

Marcos Aguiar, Júlio Bezerra, Nuno Gomes, Maikel Wilms, and Eduardo Canabarro

Designing Brazil’s New Regulatory Model for TelecommunicationsTen Principles to Foster Balance and Enable Sustainable Infrastructure Investment

2 Designing Brazil’s New Regulatory Model for Telecommunications

AT A GLANCE

A new regulatory model that promotes the financial health of Brazil’s telecommu-nications companies in their present-day competitive and technological context is crucial to helping this essential platform achieve sustainability. But to be effective, the revised regulatory framework must embody principles that are action oriented, economically viable, and designed to maximize the impact of investments.

Nations Grow with Their Telecom SectorTelecommunications can be a powerful engine for economic growth nationwide, and the health of this sector is crucial to the country’s overall economic vitality.

Broadband Service Falls ShortBroadband penetration rates and service quality in Brazil are extremely uneven, with investment highly localized in the most economically rewarding areas and neglected in most others.

Investors Need More from Their InvestmentsCapital flow in the telecom industry skews too strongly toward government, which has the effect of discouraging private investment by offering investors too weak a return on their investments.

The Boston Consulting Group 3

Brazilian operators’ return on capital employed (ROCE) has been falling steadily and is now at 4.8%, well below the cost of capital (approximately 15%).

Regulatory models must pass the acid test of economic equilibrium/sustain-ability, in light of the market and technological reality. Regulatory frameworks

that fail the test need to be revised—urgently and diligently. A regulator’s bench-mark action involves proactively anticipating such trends and market movements before and as they materialize, in order to limit the risk of economic imbalance. This proactive effort is particularly important in telecommunications, given the fast pace of the industry. The Brazilian telecommunications giant Oi filed a judicial request for financial recovery on June 20, 2016, bringing heightened public atten-tion to the review of Brazil’s regulatory framework in telecommunications. The new model’s economic and social implications make this a crucial time for public and private stakeholders.

The fixed-line concession, Switched Fixed Telephone Service (STFC), was defined at a time (1997) when fixed voice represented 70% of the industry’s connections. To-day, it represents less than 15% and is rapidly declining (by more than 8%, year on year). Unfortunately, telco regulations centered on fixed voice are obsolete. In a broader context, fixed voice today is merely one choice in the vast spectrum of op-tions available to users. The telco sector provides a fundamental platform in the daily lives of several million people, as well as a powerful engine for economic ac-tivity. Access to voice and data connectivity, particularly broadband, has become as essential as electricity. For this reason, having a financially healthy telecommunica-tions sector is critical to developing, improving, and sustaining that platform to sup-port the country’s economic turnaround.

Our analysis shows that the Brazilian operators’ return on capital employed (ROCE) has been falling steadily and is now at 4.8%, well below the cost of capital (approximately 15%). The low level of return limits operators’ investment capacity, which in turn penalizes Brazilian society as a whole. This financial situation se-verely limits operators’ ability to address the increasing internet traffic demands and sophistication of their client base, with potential negative effects for all of Bra-zil. Further aggravating the situation is the emergence of new digital competitors, whose services tend to impose additional demands on the telco platforms while operating under less burdensome regulations themselves. A new regulatory model designed to promote the financial health of telecommunications companies in their present-day competitive and technological context is crucial to helping this essential platform achieve sustainability.

Historically, the regulatory model in Brazil has promoted universal access to tele-communications services. It is therefore quite natural that some participants in the


current discussion see the review of the model as an opportunity to address the deep social inequality that exists in access to broadband. It will be important, how-ever, to adopt a model that focuses first on making broadband access more widely available and then on making such access universal, adjusted to the country’s eco-nomic and social realities. Questions such as the baseline data transfer speed that should be available to a specified percentage of the population are key, but other aspects—such as the degree of infrastructure sharing and spectrum availability—can significantly affect the level of investment needed to provide widespread access to fixed and mobile broadband. Our estimates indicate an investment range of R$100 billion to R$200 billion in the network over the next ten years, depending on the model’s coverage/penetration ambition and investment efficiency. That range compares to a typical annual investment of approximately R$14 billion by operators in this type of infrastructure. The identified annual level of investment represents the sum of all investments, not only broadband-related ones, which is remarkable in the context of returns that fall below the cost of capital.

The solution to the problem, in part, is to revise the regulatory framework. As a contribution to this effort, we propose ten principles for a successful revision. These principles share three features:

• They are action oriented.

• They promote an economically viable model.

• They emphasize efficiency to maximize the impact of investments.

We have divided this document into four parts. First, we evaluate the impact of the telecom sector on the growth of nations. Second, we assess the investment needs of and challenges for the telecom sector in Brazil, with regard to both the mobile in-frastructure and the fixed infrastructure. Third, we navigate the delicate financial situation of the sector and of the telecom ecosystem in Brazil. And fourth, we pro-pose a set of ten principles that should guide the revision of the regulatory frame-work, to prepare it for future requirements and challenges.

The Telecommunications Sector as a Platform for Economic GrowthIn a study published by BCG in 2014, we evaluated the factors underlying Brazil’s economic growth over the period from 2001 to 2013. During this period, the coun-try’s average growth of 3.3% per year in gross domestic product (GDP) came pri-marily from growth in the labor force (which increased by 2.6% per year); produc-tivity growth contributed far less ( just 0.7% per year) to the change in GDP. (See “Creating Value in Brazil’s No-Growth Environment,” BCG article, November 2015.) Structurally, this foundation for growth is not sustainable and tends to culminate in increased inflation and economic slowdown. Other emerging countries have been much more effective than Brazil at generating productivity gains to fuel economic growth. Whereas productivity gains accounted for 22% of economic growth in Brazil from 2001 to 2013, the corresponding figure for China over the same period was 89%; and for India, 83%.

Our estimates indi-cate an investment

range of $R100 billion to R$200 billion in the network over the next ten years, depending on coverage/penetra-

tion ambition and investment efficiency.


This lengthy period of economic growth with reduced productivity gains was fol-lowed by economic stagnation in 2014 and by recession in 2015 and 2016. Even if the modest productivity gains of 2001 to 2013 were not the only factor leading to Brazil’s current economic crisis, reversing this trend is crucial to sustainable growth in the next economic cycle. Among the barriers to productivity growth, infrastructure issues stand out. In this respect, investment in telecommunications infrastructure is essen-tial, due to its multiplication effect in other sectors and in the economy as a whole.

The telecommunications industry is a key lever of economic growth, especially as a means to increase productivity, in that it encourages expanded adoption of technol-ogy and increased levels of automation in society. The BCG e-Friction Index, pub-lished in 2015, ranks 65 economies according to different types of e-friction (factors that hinder online interaction and exchange, and thus constrain economic activity): infrastructure-related friction, which limits basic access; industry and individual friction, which affects the ability of companies and consumers to engage in online transactions; and information friction, which reflects limitations in the availability of and access to online content. In this index, Brazil ranks a modest 52nd.

Studies undertaken by the Organization for Economic Cooperation and Develop-ment (OECD) and the World Bank indicate that greater broadband penetration has a positive impact on the GDP of nations, increasing the growth rate of this indicator by between 0.2 and 1.2 percentage points (pp) for every 10-pp increase in broad-band penetration.1 A study by Ericsson titled “Analyzing the Effect of Broadband on GDP” indicates that increasing a country’s average broadband connection speed can positively influence GDP growth, with each doubling of average access speed yielding a 0.3-pp increase in GDP growth.2

A calculation of the average impact of a 0.7-pp increase (the average interval of the World Bank and OECD data, for each 10-pp increase in penetration) in the growth rate of Brazil’s GDP suggests that the cumulative 10-year impact of universal broad-band on the Brazilian economy would exceed R$1.4 trillion, from 2016 to 2025.

In addition, although correlation does not prove causation, a high level of correla-tion exists between GDP per capita and internet penetration levels. We analyzed the evolution of these two indicators for 26 countries over approximately 10 years—and in 24 of them, we found a very strong correlation (a coefficient of 0.85 or high-er). Recognizing the telecommunications industry’s impact as a driver of the broad-er economy, many countries have taken steps to stimulate development of the sector. (See the sidebar, “Government Initiatives to Improve the Telecommunications Industry.”) Examples of such measures are the creation of state-owned companies focused on infrastructure, retrofeeding of structural funds in the telecom sector, and changes in regulatory intensity in response to market conditions. These experiences may not be fully applicable to the Brazilian reality, but they generated positive re-sults and may be relevant to the current moment of the telco industry in Brazil.

Given the challenges of constructing the Gigabit society in Europe, BCG has been working with the European Telecommunications Network Operators’ Association (ETNO) to modernize regulations to unlock investment along five lines, as detailed in Five Priorities for Achieving Europe’s Digital Single Market (BCG report, October

A calculation suggests that the cumulative 10-year impact of universal broadband on the Brazilian economy would exceed R$1.4 trillion, from 2016 to 2025.


2015): optimum market structures; spectrum policy modernization; regulation that drives investment; enabling network quality and specialized services; and same ser-vice, same rule for “over the top” (OTT) content providers and operators. Several of these concepts also apply to the Brazilian reality.

Telecommunications in Brazil: Challenges and Investment NeededBrazil trails other countries in penetration rates and quality of service, especially with regard to users’ fixed broadband and connection speeds. (See Exhibit 1.) As Exhibit 1 indicates, fixed broadband universalization did not occur in Brazil. In-stead, people who already had access to the internet—especially members of the wealthier classes A and B—experienced significantly improved service quality, while many members of classes C, D, and E, remained unconnected to the internet.

This lack of across-the-board progress is particularly striking given that Brazilian consumers are among the world’s most avid users of web services such as social

Many nations have sought to invigo-rate their telecommunications indus-try, recognizing its economic relevance. Governments in some countries have adopted very active postures to promote the dynamism of the sector. Here are six such national efforts:

• Australia conducted structural separation to provide broadband to the entire population. This approach eliminated the need for operators to invest in infrastruc-ture, and the country now charges users for access to its single physical network, managed by an entity called the National Broad-band Network.

• Canada offers an example of adjusting regulatory intensity. In the mid-2000s, it began gradually deregulating markets where the level of competition virtually elimi-nated any chance of service disruption. In parallel, it gradually

reduced collection rates for sector funds, which now stand at about one-fifth of the rates prevailing in the early 2000s.

• Colombia provides a benchmark for the use of sector funds. With autonomous (that is, government- independent) management, the FONTIC (Colombian Communica-tions Fund) maintains the highest levels of transparency for taxpay-ers and reinvests almost all of the revenue it collects each year by leveraging a reverse auction system through which any private entity may submit projects and benefit from fund resources.

• Malaysia exemplifies simultane-ous state action on supply and demand. Through public-private partnerships, Malaysia conducted an aggressive program of broad-band expansion to noneconomi-cally viable areas. In parallel, it

GOVERNMENT INITIATIVES TO IMPROVE THE TELECOMMUNICATIONS INDUSTRY


networks, seeing a high value in communication services. A survey conducted by BCG in 13 countries whose economies are among the world’s largest indicates that the level of consumer surplus (the difference between the value attributed to the consumer service and the actual cost of the service) perceived by Brazilian consum-ers is 87% (meaning that the perceived value is about seven times higher than the cost incurred), giving Brazil a ranking of fourth on this measure, ahead of countries such as the United States and Japan. (See “Follow the Surplus: European Consum-ers Embrace Online Media,” BCG article, April 2013).

Recent developments suggest that Brazil’s network infrastructure needs will signifi-cantly increase. This is due in part to the country’s ongoing digital transformation, including the increasing availability of digital services, the emergence of the Internet of Things (IoT), and the rise and growth of OTT companies. The Cisco Systems re-port “VNI Mobile Forecast Highlights, 2015–2020” forecasts that video traffic over the Internet will grow almost threefold in Brazil from 2015 to 2020 (it also predicts that video on mobile devices will grow tenfold during the same period).3 In this sce-nario in which digital services enjoy increased relevance, demand, and scope, it will

launched an initiative to stimulate demand, providing free laptops and free internet service in select regions of the country, expanding digital government services and launching digital education programs for people in rural areas. This policy tripled the nation’s level of broadband internet penetration in just three years.

• Rwanda plans to develop its 4G LTE network infrastructure through a single company, in addition to providing 3,000 kilometers of fiber optics and the necessary spectrum. Operators and mobile virtual network operators (MVNOs) will use the network to compete in providing the service. The govern-ment aims to bring the mobile internet to 95% of the country’s population, especially in rural areas, and to become a regional hub for information and communi-cations technology (ICT).

• Singapore acts directly on demand and supply of telecom-munications services by focusing on increasing productivity in three areas: e-government, e-education, and infrastructure development. E-government platforms became a catalyst for new technology adoption by the population and increased the efficiency of services provided. The government also provides high-quality education with an emphasis on ICT, making use of one of the world’s best education systems. Finally, the country has the highest penetra-tion of broadband in the world, thanks to regulator and govern-ment funding for network develop-ment through a model that uses three layers of structural separa-tion: passive infrastructure, active and distribution infrastructure, and downstream operators.


be necessary to speed up the broadband universalization process by providing ade-quate service levels and ensuring that mobile networks have adequate capacity.

Brazil’s vast geographical dimensions and its widely varying levels of consumer density (with high concentrations of users in urban areas and low concentrations in rural areas) pose a significant obstacle to increased penetration, especially outside the major urban centers. Socioeconomic differences in the country’s population and the concen tra tion of wealth in a limited number of urban centers result in a very uneven distribution of demand for telecommunications services, viewed from the perspective of potential revenue generation. The concentration of demand in the more affluent areas of larger cities encourages vigorous competition there; but it also leads to a relative dearth of services in areas that operators find economi-cally unattractive, such as in peripheral areas of urban centers and in the nation’s interior. Between these extremes, situations of intermediate attractiveness require careful, highly individualized assessment.

BCG analysis based on Capturing Retail Growth in Brazil’s Rising Interior (BCG report, April 2015) reveals that approximately 44% of total operator revenues (both fixed and mobile) comes from about 1% of the country’s area. (See Exhibit 2.) Dealing with this disparity calls for formulation of an investment model for providing uni-versal access to broadband that is different from models motivated by the existence of economically attractive demand.

FEW BRAZILIAN HOUSEHOLDS HAD CAPABLESTREAMING INTERNET CONNECTIONS IN 2010

FOUR YEARS LATER, MUCH HAD CHANGEDPRIMARILY FOR THE HIGHER SOCIAL CLASSES

18

52

85

52

8

16

13 11

10

13

9 8

6

10

6 6

10

9

5

61

30

10 141100

75

50

25

0Brazil

4

DE

25 3

2

2

C

5

5

B

3

A

23

No internet

≤256 kbps

>256 kbps–1 Mbps

>1–2 Mbps

>2–4 Mbps

>4–8 Mbps

>8 Mbps

Connection speed by household breakdown, 2014Connection speed by household breakdown, 2010

10

35

76

97

70

13

14

88

15

15

67

25

22

9

23

9 17

0

8

0

25

50

75

100

0

6 32

A Brazil

4

DE

11

C

21

B

QUALITY OF SERVICE HAS IMPROVED PRIMARILY FOR THE A AND B SOCIAL CLASSES

Sources: CETIC; IBGE; BCG analysis. Note: Calculations are based on people from households with income who responded to the questionnaire. The social class percentages in the population are considered similar to those identified in 2015 (A = 3%, B = 23%, C = 48%, D/E = 27%), in line with ABEP criteria.

Exhibit 1 | Access to Fixed Broadband in Brazil Is Not Universal


The consensus view is that improving Brazil’s telecom infrastructure and achieving higher levels of connectivity will require substantial investment over the coming years. Nevertheless, the actual level of investment required may vary widely, de-pending on the project’s level of ambition and its degree of investment efficiency. We evaluate seven factors likely to have a major impact on the required investment volume for expanding telecommunication services in the coming years.

Three of those seven factors relate to the investment in fixed infrastructure:

• Desired Penetration. The difference between supplying broadband to 65% of households and supplying it to 95% of households is large: the cost per house-hold skyrockets as the penetration percentage increases. BCG cost modeling and observed levels of telecommunication investment in OECD countries indicate that the per capita investment required to expand broadband penetration beyond 70% of the population is three to five times higher than the per capita invest-ment to increase access up to that level. Providing fixed infrastructure to 90% of households is a challenge for even the richest and most developed countries. Australia, which originally focused its broadband universalization plan on fixed technology, later changed it to serve remote locations via mobile technology.

• Delivered Speed. The connection speed provided is another critical cost element. Delivering fixed broadband at 10 megabits per second (Mbps) costs far less than

100%

80%

60%

40%

20%

0%Other cities

in the central-west,north, and northeast

Other citiesin the southeast

and south

18.6%

Cities with500,000+

inhabitants

1.3%

Othercapitals

1.1%0%

São Paulo andRio de Janeiro

85.8%

100%

100%

43.6%

34.3%

16.6%

Revenue Area

44% of revenues generatedby ~1% of area

80% of area (low density)generates only 14%

of revenues

JUST OVER 1% OF THE AREA OF BRAZIL ACCOUNTS FOR HALF OFTHE COUNTRY’S TELCO INDUSTRY REVENUES

Sources: POF 2008–2009; BCG Brazil CCI RDE study.

Exhibit 2 | Most Operators’ Revenue Comes from a Very Limited Area


does delivering it at 50 Mbps or 100 Mbps. Depending on geography, each step change (from 10 to 50, for example, or from 50 to 100) can entail a substantial step-up in costs—sometimes more than three times higher to connect each household. This happens because technologies such as VDSL can provide 10 Mbps (in settings where copper quality is not compromised) while leveraging much of the currently installed copper infrastructure. But FTTH, which supports speeds of 100 Mbps and higher, requires a new network parallel to the existing copper one. An intermediate scenario, using FTTC technology, partially leverag-es the existing copper network and can deliver speeds of from 30 Mbps to 50 Mbps. Thus the different levels of network construction that may be undertaken affect both the cost and the implementation speed of universal broadband: the smaller the delivered-speed goal, the cheaper and faster the broadband univer-salization. In defining appropriate broadband levels in different regions to optimize the investment required, it is important to bear in mind that a connec-tion speed of 10 Mbps can deliver a large number of key features, especially those promoting increased business competitiveness and productivity. Today, speeds above 10 Mbps are most useful for handling content from high-definition video streaming services—but even high-quality video download models are viable at 10 Mbps, as shown in Exhibit 3. Future evolution of compression

0

10

20

30

40

50

523 21

23

5

5

2

10

102

1

5

11

18

Ultra-high-definitionvideo

High-definitionvideo

Webconferencing

Digitalvideo

Socialnetworking

IP voicecalling

30

8

10

10

3

48

8

81 1

Max Min

Current bandwidth needs for internet activities (Mbps)

A UNIVERSAL CONNECTION SPEED OF 10 MBPS WOULD HANDLE PRODUCTIVITYRELATED INTERNET ACTIVITIES NATIONWIDE

Cloud storage Internetbrowsing

Standard-definitionvideo

Short-formvideo on demand

E-mail

Sources: BCG; Futuresource; broadbandtvnews.com; OptaNet; Federal Communications Commission. Note: HD data rates vary in part because of different existing HD formats (720p, 1080i, 1080p). High-efficiency video encoding (HEVC) will reduce bandwidth demand for 4K by 40% to 50%.

Exhibit 3 | Most Applications Today Work Well at 10 Mbps


technologies will increase the range of services deliverable through lower-speed services, counterbalanced by the emergence of new services, as has historically been the case. Also, a network upgrade after five to seven years is likely to be cheaper in terms of net present value than an immediate direct upgrade.

• Fixed Network Duplication Level. Because fiber cables have so great a data- carrying capacity, providing fixed broadband does not require establishing a parallel fixed infrastructure. In terms of construction cost, it is more economical to have just one fixed network per location. But many markets have parallel fixed networks, with more than one phone or cable company that has its own infra structure competing in the same locality. Such competition with duplicated infra structure raises the cost of infrastructure, but it also uses market forces to regulate price levels and customer service and to promote constant technological updating. Some markets, however, such as those in the UK and Australia, have little fixed infrastructure duplication. Having only one fixed network provider lowers the cost of network construction but requires other instruments to regulate price and service levels and to promote technological evolution. The main instruments used in these cases are regulated wholesale access and structural separation, in which the company that owns the infrastructure operates only at the wholesale level, and there is competition in the provision of end-user service. In Brazil—in a simplified view—duplication of fixed networks and infrastruc-ture competition exists in rich areas of major urban centers, but a single infra-structure without competition prevails in other locations. In recent years, the frontier area—where there is competition for infrastructure—has advanced with investment in fixed network expansion by cable companies (for example, Net) and broadband companies (for example, GVT/Vivo and TIM Fiber). This expan-sion of the profitability frontier, however, reaches a natural limit in areas where the population’s socioeconomic composition makes having more than one company competing with its own infrastructure financially unfeasible. In areas without network duplication, we have in practice a noncompetitive model because there is no effective instrument of regulated access in the Brazilian market. Consequently, in defining Brazil’s fixed broadband universalization model, it will be important to specify which model to implement in areas that are unattractive for investment—to reduce costs, regulate service and price levels, and preserve the incentive for technological evolution. Particularly relevant will be the conjunction of this model with the ones designed for areas in which competition does not pose a problem and for the frontier zones.

Four other factors will influence investment in mobile infrastructure:

• Availability and Use of Spectrum. Efficient allocation and use of the mobile- phone-dedicated spectrum are key elements in determining the amount of investment required. The greater the amount of spectrum available for mobile telephony, the higher the capacity of each base station (BTS), meaning that fewer new BTSs will have to be installed to address traffic increases (thus lowering the investment). Recognizing the need to address the emergence of mobile services in their plans, other countries have invested in spectrum reviews. The International Telecommunications Union (ITU) estimates that the rise of IoT and increased mobile traffic will necessitate the allocation of about

In areas without network duplication, we have in practice a noncompetitive model because there is no effective instru-ment of regulated access in the Brazil-ian market.


1,300 MHz of spectrum to mobile services in 2020, which is approximately twice the amount currently available for mobile in most countries, including Brazil.

• Average Consumption per User. The main driver of investment in mobile networks is the volume of data they must handle. Data consumption is growing by about 70% to 80% per year. The expanding volume of data demands greater available capacity, which means increasing the number of BTSs. Today, Brazil has about 80,000 base stations—one for every 2,500 inhabitants, a ratio well below that in developed countries (the United States, for example, has a base station for every 1,600 inhabitants) and below the ratio that the ITU deems appro priate (one BTS for 1,000 to 1,500 inhabitants). Increasing the number of base stations will require a massive investment, as well as the optimization of processes governing access rights for the installation of thousands of new base stations. The growth in data volume is largely due to increased consumption per user—most notably of video, especially HD video. According to the Cisco Systems study, “VNI Mobile Forecast Highlights, 2015–2020,” video will account for 75% of data traffic on mobile devices in 2020.4 Another feature of mobile data consumption is that a relatively small number of heavy users consume most of the data. In some instances, 1% of users may account for 30% of data traffic. Given the standard structure of data plans and an ecosystem in which most users consume only a portion of their plan allotments, heavy users do not pay extra for their disproportionate data consumption; instead, in effect, the other users subsidize them. Uncapped data plans, or plans with limits well above the amount that an average user requires, might aggravate this problem. Reducing the impact of video-heavy users who do not pay proportionately for their data usage would benefit society as a whole. An example of private-sector action is T-Mobile’s Binge On model, in which the service provider adjusts the quality of the video transmission according to the size of the mobile screen; this approach reduces the volume of data used in streaming video without degrading the viewing quality of the video, since a small screen does not benefit from HD broadcasting. Doubts about what the country’s internet law (Marco Civil da internet) allows may hinder adoption of similar measures in Brazil. The country has, however, introduced fixed broadband caps. Regulatory support for this type of initiative can help control a data explosion that disproportionately benefits a few individuals at high cost to the rest of society.

• Level of Mobile Infrastructure Duplication. Mobile infrastructure sharing among operators is another important factor in determining the level of invest-ment required. The greater the degree of sharing, the lower the level of mobile infrastructure investment required and the greater the benefit to society. Mobile network sharing can occur at various levels, ranging from towers to spectrum. An international example of sharing is the Mobile Broadband Network Limited, a joint venture established in 2007 between EE and Three to roll out a joint network in the UK. A national example from Brazil is the RAN sharing agree-ment between TIM and Oi for the deployment of 4G, which received an award at the Mobile World Congress 2016. According to the operators, this type of network sharing can reduce the investment needed by between 20% and 40%. The role of the regulator will be key to removing any regulatory barriers to continued and expanded infrastructure sharing. For example, if in the future an

Today, Brazil has about 80,000 base stations—one for

every 2,500 inhabi-tants, a ratio below

the ratio that the ITU deems appropriate

(one BTS for 1,000 to 1,500 inhabitants).


operator intends to shut down an idle 2G network in some area, transferring traffic to another operator’s network, it will be necessary to adjust the current regulation on coverage obligations associated with the 2G spectrum.

• Speed of Mobile Device Evolution. The more quickly devices evolve to adopt tech nologies such as 4G and 5G future, the lower the cost of adding capacity will be. For example, the average cost of transmitting 1 megabyte of data through 4G is approximately 80% lower than the cost of transmitting the same quantity of data through 3G. But in order for investment in a 4G network instead of in a 3G one to make sense, the 4G handsets’ ecosystem must evolve—because as long as data traffic is growing on devices that do not support 4G, operators will have to make additional investments in 3G with a worse investment-to-capacity ratio and a lower life expectancy before obsolescence. Actions designed to stimulate the technological development of the devices can thus have great impact on the cost of capacity expansion in mobile networks.

BCG calculations indicate that, depending on the assumptions made with regard to the preceding seven factors, the investment needed to universalize fixed broadband (up to 90% coverage) and to expand capacity in mobile broadband falls into a range from R$100 billion to R$200 billion. (See Exhibit 4.) These numbers cover only the planning and installation of new infrastructure; they exclude the cost of maintain-ing the existing infrastructure and of acquiring the necessary spectrum.

The amplitude of the range illustrated in Exhibit 4 shows the importance of the choices to be made regarding the new telecommunications regulatory model. Those choices can promote or greatly hinder the process of expansion of fixed access and mobile capacity. At current investment volumes, it could take up to 14 years to cover this level of investment, assuming that the vast majority of the funding went toward broadband, which is not necessarily the case today.

• Promote fixed broadband at 30 Mbps to 50 Mbps speeds, with significant use of FTTC

• Expand infrastructure optimally, with a low level of network overlay

• Increase average data volume moderately • Reach a high level of infrastructure asset

sharing

• Promote fixed broadband at 100+ Mbps speeds, with significant use of FTTH

• Expand infrastructure with a high level of network overlay

• Increase average data volume aggressively

• Reach a limited level of infrastructure asset sharing

0

100

200

INVESTMENT IN BILLIONS OF BRAZILIAN REALS NEEDED OVER 10 YEARSTO COVER 90% OF THE POPULATION

R$100 BILLION(Lower limit)

R$200 BILLION(Upper limit)

Source: BCG analysis.

Exhibit 4 | Key features of estimated investment limits


But even maintaining current levels of industry investment is a challenge. Brazilian operators’ level of return on invested capital has fallen sharply in recent years and is unattractive today. If interested parties take no action to improve the operators’ fi-nancial attractiveness and encourage continued investment, the required investment period will have to be extended considerably. Conditions must be put in place for the sector to continue investing in areas of real value to users and to society as a whole (such as broadband expansion), releasing it from low- or no-value obligations.

Today, FUST and FISTEL, Brazil’s two largest sector funds, concentrate significant resources and could help solve structural issues in the industry, helping operators achieve higher earnings before interest, taxes, depreciation, and amortization (EBITDA)—for example, by fostering demand, facilitating cost reductions, reducing revenue taxes, or subsidizing investment in financially unattractive areas.

Exhibit 5 shows the evolution of the collection of FUST since 2001 and reveals that, on average, the contribution to the funds is about 5% to 12% of the entire industry’s annual investment. Regulation of these funds needs to be updated to optimize its use by the industry. For instance, the fund objectives do not cover the allocation of resources for universal broadband—but they do cover universalization of fixed tele-phony service, a goal that has lost much of its relevance in recent years. A financial report by the Chamber of Deputies indicates that regulators reapplied only about 1% of the collected FUST funds within the industry.

2013 2014 2015 Total

–99%

Investmentsmade by the

Government1

20102001–2009

1.8(6%)

1.9(7%)

0.2

2.7(12%)

8.6(6%)

1.7(5%)

19.5(7%)

1.8(6%)

2011 2012

1.0(5%)

(XX%) Contribution as % of industry investments

BALANCE AND EVOLUTION OF CONTRIBUTIONS TO FUST IN R$ BILLIONS

Sources: TeleBrasil; Executive Summary 2015, Chamber of Deputies.1Reports from the cited sources affirm that less than 1% was used by 2012.

Exhibit 5 | Telecom Sector Funds in Brazil May Be Put to Better Use


After analyzing proposals from other countries, and sector fund policies in other regions, we have identified three distinct (but not mutually exclusive) alternatives that could facilitate the use of the funds’ resources:

• Link Future Contributions to Resources Usage. Use an adjustable contri-bution mechanism that is proportional to the government investment in the previous year vis-à-vis the amount collected (for example, if only 10% of the amount collected is applied during a given year, operators’ required contribution in the following year will be limited to 10% of the value previously required).

• Establish Specific Projects in Advance for Funding. Link the resources received in a given year to the feasibility of specific projects, defined annually by a committee composed of several representatives (for example, government, associations, and operators) or through reverse-auction mechanisms.

• Adapt Regulations to Enable Indirect Retrofeed to the Industry. Adjust fund regulation to support actions that generate increased revenue or reduce costs to operators by reducing taxation on network equipment or on 4G smartphones and computers, for example, or by investing in online services and e–government.

A Sector in a Delicate Financial SituationA level of investment in the tens of billions of reals, as will be necessary in Brazil, is dauntingly high. But the current economic situation of the telecommunications in-dustry is quite complicated, as the recent request for judicial recovery of Oi amply demonstrates. Levels of return on capital employed (ROCE) in the industry have fallen in Brazil since 2011 and are now well below the weighted average cost of cap-ital (WACC) for all industries, which discourages new investment. (See Exhibit 6.)

To increase the ROCE to the level of the cost of capital, the telecom industry would need to increase the EBITDA margins to approximately 50% to 55%, which is well above current local and international levels. Hence, ROCE increases cannot come only from cost reduction efforts designed to increase the margin; they also require improvements in the ratio of revenue to capital employed. Any such increase in re-turn will not happen overnight, although it is essential to feeding the virtuous cycle of investment required to increase broadband penetration in the country.

Increased profitability will depend on the judicious use of multiple levers:

• Improvements in the productivity of industry assets, through structural and negotiated infrastructure-sharing mechanisms, with a positive impact on asset rotation (expressed as the ratio of revenues to asset base)

• Geographically focused or segment- and service-specific obligations, focused on areas in which maximizing capital expenditures (capex) and operating expenses (opex) yields real benefits to the affected population

• Industry consolidation, with gains in scale, and rationalization of competitive practices, with a direct impact on margins

ROCE increases cannot come only from cost reduction efforts designed to increase the margin; they will also depend on improvements in th ration of revenue to capital employed.


• Tax rationalization, to reduce the taxes and duties on telecoms, with the goal of increasing demand, lowering the operational cost base, and accelerating the virtuous growth cycle based on investment

With regard to this last point, the tax levels imposed on the telecom industry in Bra-zil are among the highest in the world, matched only in countries that do not provide a desirable benchmark (such as Pakistan, Jamaica, and Tanzania). A GSMA report, “Digital Inclusion and Mobile Sector Taxation, 2015” points out that the total cost of mobile ownership (TCMO) is quite high in Brazil (33%) but is substantially lower in China (16%), the UK (20%), and India (23%).5 The share of taxes and fees in the value of mobile devices reaches 43% in Brazil, as against 14% in South Africa, 17% in China, and 19% in Germany.

These factors constitute barriers to greater demand for data services in Brazil and to modernization of the country’s mobile devices. Overcoming them would immensely improve the economic situation of the operators and would allow Brazilian society to benefit from emerging technologies that enable and accelerate access to mobile data.

Relatively low levels of return on capital and shareholder remuneration might indi-cate weak value creation for the sector as a whole—but that is not what we found in our research. In fact, the telecommunications sector generates significant value, but unfortunately with a severely asymmetrical distribution of the value among its main stakeholders. (See Exhibit 7.)

0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 1,1 1,2

4

16

12

8

NOPAT margin (%)1

Revenue/Capital employed2

20122013

2014

2015

Iso-ROCEcurves

+ ROCE

– ROCE

10%

8%

Radius proportional to market size (nominal)

4%

Average industryWACC of 15%

Profitability of telecom operators, 2012–2015

6%

RETURN ON EMPLOYED CAPITAL HAS DETERIORATED IN THE PAST SEVERAL YEARS

Sources: Oi, Telefonica, and TIM reports; S&P Capital IQ; BCG analysis.1(EBIT – Income tax)/Company revenues 2Capital employed = Total assets – Current liabilities excluding debt – Cash, equivalents & short-term investments – Long-term investments + Rent expenses

Exhibit 6 | The Telecom Industry’s Current ROCE Discourages New Investment


As indicated in Exhibit 8, the telecom industry’s total revenue levels decreased over the three years from 2013 through 2015. However, the rate of reduction in this sec-tor has been lower than the rate of reduction in opex, as operators have tried to in-crease their operational efficiency. This has exerted gradual pressure on EBITDA, leading in turn to lower levels of investment: capex levels have fallen sharply. The combination of negative economics has contributed to lower levels of free cash flow and industry profitability, compromising the ROCE.

Analysis of the flow of capital between these stakeholders (as illustrated in Exhibit 7 and on the right side of Exhibit 8), indicates that the government is directly cap-turing more than a third of the generated value, in the form of taxes on revenue, income taxes, or contributions to sector funds. Investors, meanwhile, receive 3% of the value generated. This severe imbalance must be corrected in order to oxygenate operators and to encourage significant investment to make broadband access avail-able to more Brazilians.

A final structural point relates to average revenue per user (ARPU) and average revenue per account (ARPA). These values are much lower in Brazil than in more- developed countries. Using reporting data from Ovum (“Consumer Broadband Sub-scription and Revenue Forecast, 2015–20”) and Bank of America (“Global Wireless Matrix 2016”), we estimated the average revenue per user:6

Personnel

Government

Infrastructure

Interconnection2 EBITDA1

Shareholders

Wages2

Revenuetaxes1

Cape

x ta

xes5

Dividends3

29B

11B 6B

Interest expenses2

5B

Capex1

Funds1

8B

Otherindustries

36BThird-party services4

11BRent and insurance2

Incometax1

4B

21BOthers6

Financialinstitutions

10B

58B

38B

Value retained by telecom shareholders is relatively low,which may discourage investment

TELECOM INDUSTRY

8BCOGS2,3

3BAdvertising2

GOVERNMENT RECEIVES A DISPROPORTIONATE SHARE OF THE VALUE CREATED

3B

Sources: Teleco; Telebrasil; CNI; Operators reports 2015; BCG analysis.Note: All values are from 2015.1Telebrasil report.2Estimates extrapolated from Oi, Telefonica, and TIM results.3Cost of goods sold.4Total includes sales taxes, call center, postal, consulting, and other expenses.5Estimated (civil construction taxes ~10.6%).6Total includes materials, network maintenance, other taxes, provisions, estimated losses, and Anatel taxes.

Exhibit 7 | The Industry’s Capital Flow Is Highly Asymmetrical


x%

38

23

34

10

5

Directtaxes and

deductions1

204

193

Grossrevenue1

865

Cash flowbeforecapital

structure

15

Workingcapital

change3

9

Interest2 +dividends2

11

6

Capex1

29

Incometaxes2

4

EBITDAOpex1

100

Netrevenue1

138

Telecom industry value creation in Brazil, 2015 (R$ billions)

Interconnection2

ICMSFunds

Other

GOVERNMENT PERSONNEL INFRASTRUCTUREOTHER

INDUSTRIES

TOTAL8

FINANCIALINSTITUTIONS SHAREHOLDERS

• Taxes:1 58B• Funds:1 8B• Capex taxes:5 3B• Income tax:2 4B

R$73B 38%4

• Capex1

R$29B 15%4

R$194B 100%

• Services:2 36B• Other:6 15B• Rent:2 11B• COGS Adv:2, 7 11B

R$72B 37%4

• Interest2

R$5B 3%

• Dividends2

R$6B 3%4

• Wages1

R$11B 6%4

–11%–14% –17% –23%

Inflation 2013–2015:~18%

Var. 2013–2015(real values)

% grossrevenue –32% % net

revenue –72%

%EBITDA –11% –74% –29% –24% –38%

–28%

THE GOVERNMENT CAPTURES R$73 BILLION 38% AND INVESTORSR$6 BILLION 3% OF THE TOTAL VALUE CREATED

Sources: Teleco; Telebrasil; CNI; operators reports, 2015; BCG analysis.Note: All values are from 2015.1Telebrasil report.2Estimates extrapolated from Oi, Telefonica, and TIM results.3Estimates (extrapolated from Tim, Vivo and Oi); does not discount cash.4Percentage in relation to gross telecom revenues, excluding interconnection.5Estimated (civil construction taxes ~10.6%)6Includes materials, network maintenance, other taxes, provisions, estimated losses, Anatel taxes.7Advertisement.8Does not include interconnection.

Exhibit 8 | Value Capture by Different Telecom Stakeholders


• For fixed broadband in Brazil, this revenue (calculated in US dollars) is $25 per user per month, while in Japan the corresponding figure is $39, and in the US $52.

• For mobile in Brazil, the average revenue (again in US dollars) is $6 per user per month; in Malaysia the average is $13, in Switzerland $37, and in the EU $20.

A high degree of correlation exists between price or ARPU and penetration, to the extent that the higher the operators’ level of revenue is, the greater their capacity and incentive to reinvest in the business and to provide increased access becomes. This is particularly relevant in a situation in which the associated cost structure (both opex and capex) considerably reduces a business’s economic attractiveness. Even telecom operators in emerging markets (which typically present lower levels of ARPU/ARPA) can be reasonably attractive to investors, if the environment re-flects a balance in obligations. Exhibit 9 illustrates the current situation for opera-tors, presenting data from mobile operations. Brazil has a lower EBITDA margin than most other countries—in part because of the low level of revenue per user or per account—but the country still needs massive investment in infrastructure, as shown by its having one of the highest levels of investment as a percentage of reve-nue in the world. The result is an anemic level of cash generation by the operators, and unimpressive dividends distributed to their shareholders.

The government can do quite a lot to improve the situation in this sector. In addi-tion, however, the operators control some variables that they can and should use to improve their financial situation and, by extension, their return on capital invested.

6040200 6040200 6040200EBITDA (% revenue) of mobile

operations (cumulative 2010–2015)

TurkeyUK

IndiaBrazil

FranceChileSpainChina

PeruArgentina

USASouth Africa

GermanyHong Kong

SwitzerlandRussia

CanadaItaly

PortugalMexico

CURRENT EBITDA MARGIN DISCOURAGES CAPEX INCREASES… ...GIVEN LOW AFTERINVESTMENT CASH FLOW

Capex (% revenue) of mobileoperations (cumulative 2010–2015)

SwitzerlandUK

ChileCanada

SpainHong Kong

IndiaFrance

South AfricaGermany

USAPeru

ArgentinaTurkey

ItalyMexico

PortugalBrazil

RussiaChina

(EBITDA – Capex)/Revenue of mobileoperations (cumulative 2010–2015)

TurkeyChinaBrazil

UKIndia

FrancePeru

ArgentinaChileSpain

USARussia

South AfricaGermany

ItalyPortugalMexico

Hong KongCanada

Switzerland

THE INDUSTRY’S FINANCES LEAVE LITTLE SPACE FOR INCREASED CAPEX LEVELS

Source: Bank of America Merrill Lynch Global Wireless Matrix, 2016.Note: Approximations for countries for which EBITDA and Capex were available. Revenue values refer to service revenues.

Exhibit 9 | Cash Generation of Mobile Telephony in Brazil Is Low


First, they must continue their efforts to maximize the efficiency of their operations (both in opex and in capex), a strategy that some operators have been pursuing ag-gressively. In addition, however, they must amplify their efforts in consumer educa-tion, responsibility, and consciousness in the design and assembly of service offer-ings, to discourage harmful practices by a few heavy end users—for example, by offering plans with adequate maximum usage limits or by charging for abusive use.

Finally, from the investor’s point of view, OTTs complicate the situation further. In recent years, OTT companies such as Skype and WhatsApp have undermined ex-tremely important sources of revenue for operators, seriously compromising their financial situation. The fact that these OTT companies do not face the same tax im-positions and regulatory requirements that telecom operators do (for example, they are not subject to quality-level monitoring, they have no obligation to supply emer-gency calls, and they enjoy greater flexibility in the use of user data) exacerbates the problem for traditional telecom operators. As levels of connectivity increase, it will become increasingly critical to ensure that equal conditions apply to players that, in practice, offer very similar services. Meeting this challenge will require regu-latory creativity, the goal being to provide balanced conditions for competition without imposing barriers to technological advances and their resulting benefits.

Principles for Revision of the Regulatory Framework The previous sections of this paper point to two major goals that a review of the regu-latory framework of Brazil’s telecommunications industry should attempt to achieve: (i) expand broadband access at the lowest viable investment level (closer to R$100 billion than to R$200 billion over 10 years); and (ii) correct the imbalance of capital flows to increase the level of return for operators, thereby increasing their ability to invest in structural changes to improve broadband access for the whole country.

We believe that the following ten principles offer crucial guidance in reviewing Brazil’s regulatory framework and gradually implementing needed changes:

1. Recognize the different levels of profitability in the different layers of service, and deploy symmetric regulation through the layers—either regulating OTTs or deregulating telecom operators to promote equal conditions for competition.

2. Allow and encourage infrastructure sharing (of antennas, backbone, and spectrum, for example) between operators, to encourage cost reduction.

3. Find an alternative to today’s policy of “indirect subsidy”—one that links the provision of service in economically attractive areas to some level of supply in economically unattractive areas. Alternatively, allow operators to act in areas of greatest interest to them, finding ways to increase the attractiveness of unprofit-able areas. Many of the implicit trade-offs of policies used so far have contrib-uted to the financial deterioration of the ecosystem, usually with less transpar-ent action by the regulator.

4. Apply different levels of regulatory intervention to different situations, and adopt flexible criteria for defining the appropriate level of intervention. Take

In recent years, OTT companies such as

Skype and WhatsApp have undermined

extremely important sources of revenue for

operators, seriously compromising their financial situation.


into account competitive and noncompetitive areas of the country, with differ-ent service levels, customer sophistication, competitive intensity, and financial return profiles, and—consequently—with different intervention levels.

5. Change the regulator’s role from industry supervisor (policeman) to capital flow promoter (venture capitalist), creating appropriate economic incentives and properly allocating the sector’s funds (using resources to develop infrastructure business cases in noneconomic areas, for example).

6. Make objectives rather than methods the regulatory focus. Interventions should aim to achieve real value for users, eliminating anachronistic universal service obligations (such as public payphones) and revising the level of fines and penalties levied on operators, in line with value to the user.

7. Launch initiatives that encourage internet adoption (such as stimulating infra-structure, work on affordability, and increased digital services in relation to government and local content) and the upgrading of mobile devices (4G net-work equipment and devices tax reduction), in order to create demand for operators and to reduce costs. (See “Internet for All”, BCG article, May 2016.)

8. Facilitate industry consolidation, using synergies to remove needless system costs and to prevent excessive and predatory competition from compromising the sector’s investment capacity.

9. Introduce ex post (rather than ex ante) regulation, to permit easier course corrections and to address disruptive emerging trends affecting the industry, such as OTTs.

10. Consider creating multiple-stakeholder committees to oversee the tasks of defining and applying regulation, in order to maximize the value generated for society and to ensure long-term economic sustainability.

These ten principles can serve as guidelines to help achieve several objectives:

• Formulate ways to drive social inclusion, either by introducing state-funded or subsidized infrastructure in designated regions or by establishing monopoly franchises in the wholesale layer and/or the retail layer.

• Develop strategies that focus on delivering fast broadband, by separating economic from noneconomic regions and by finding alternatives to the “indirect subsidy” policy.

• Craft methods to improve investment opportunities—and thus fuel a virtuous cycle of investment, growth, and penetration enhancement—by, among other things, allowing telecom consolidation and addressing taxation issues.

• Invest in new approaches toward improving business and government produc-tivity, by (for example) promoting modern technology platforms and encourag-ing e-commerce, e-government, and e-education.

Develop strategies that focus on to delivering fast broad-band, by separating economic from noneconomic regions and by finding alter-natives to the “indi-rect subsidy” policy.


As applied to the specific situation of the Brazilian regulatory model, regulators should consider this analytical framework:

• Differentiate the broadband regulation model into three market archetypes:

ǟ Highly attractive areas, in which competition for fixed infrastructure exists or soon will exist

ǟ Marginally attractive areas, which offer space for investment in broadband by one operator, but in which competition for infrastructure is not economi-cally viable

ǟ Nonattractive areas, with no economic incentive for investing in broadband

• Ensure investment in nonattractive areas through reverse auctions that leverage sector funds to make broadband economically feasible. Incentivize service quality and technological evolution in marginally attractive areas, gearing resources from “reversible assets” toward investment in areas that now have poor coverage.

• Proactively manage tradeoffs between connection speed, rollout time, and broadband universalization cost. In this regard, consider starting with lower speeds, to accelerate the process and reduce costs, and then upgrading gradually, instead of aiming for a “future-proof”’ infrastructure, bearing in mind that social inclusion and broadband-speed-driven productivity are very different objectives.

• Make fixed-infrastructure sharing more appealing by creating financial incen-tives to share in areas and network layers where duplication is undesirable.

• Reduce the universalization cost of residential broadband, allowing freedom in technology selection, including mobile technologies to supply stationary broadband.

• Eliminate all fixed-line regulations that have little or no practical value for society, as in the case of fixed-line obligations on public phones (TUPs) in locations where mobile coverage is available.

• Incentivize the sharing of mobile infrastructure by eliminating coverage obliga-tions in settings where sharing agreements are in place, to allow the partial disconnection and decommissioning of empty networks (for example, 2G).

• Reduce barriers to consolidation by reviewing the rules that govern transfers between operators and spectrum caps in case of market consolidation.

• Encourage penetration of 4G and newer-generation smartphones by applying differentiated tax incentives that will in turn reduce the amount of investment required to add capacity.

• Balance the playing field between OTTs and telecom operators, without inhibit-ing innovation, by removing constricting obligations from the operators rather than by creating new obligation for the OTTs.

Encourage penetra-tion of 4G and

newer-generation smartphones by

applying differentiat-ed tax incentives that

will in turn reduce the investments required

to add capacity.


The current regulation of Brazil’s telecommunications industry no longer responds to the challenges faced by operators or to the growing needs of end users. The reali-ty has changed significantly in recent years, and this sector vividly illustrates the drastic reconfigurations that new technologies can cause.

Inevitable but urgent adjustments must occur: both the delicate economic situation that the telecommunications industry finds itself in and the imbalance in value al-location that this industry generates demand immediate action. Nevertheless, it is important to avoid introducing many of the current regulation system’s negative aspects to any new broadband concession.

Solving these problems depends fundamentally on operators’ taking preventive ac-tions to control costs and to actively manage their customers’ usage behavior; but it also depends on pragmatic action by the government, which must consider the solution with a view to the future, and not try to re-create past negotiations or com-promises. In 50 years, the communications infrastructure rollout will seem as fun-damental to social development as was the nineteenth- and twentieth-century elec-trification process.

Several countries have recognized the critical nature of this undertaking and have acted to accelerate the assimilation of changes, regardless of their economy’s strength or level of wealth. They have embarked on a massive drive to meet the needs of their telecommunications industry, aware that their national development depends, more than ever before, on the dynamism of this industry. Brazil cannot af-ford to fall behind in this process.

Implementing a diligently formulated, forward-looking solution is critical. We believe that the process can be greatly enhanced through application of the suggested ten principles, and that the active participation of the involved stakeholders will be fundamental to capturing the many benefits to Brazilian society of a revised regu-latory framework. Time is of the essence, however, and the moment to act is now.

Notes1. World Bank, Global Economic Prospects: Technology Diffusion in the Developing World, 2008.2. Ericsson, “Analyzing the Effect of Broadband on GDP: A Study on the Socioeconomic Effects of Broadband Speed on the Economy,” 2013.3. Cisco Systems, “VNI Mobile Forecast Highlights, 2015–2020,” February 2016, http://www.cisco.com/c/dam/assets/sol/sp/vni/forecast_highlights_mobile/index.html#~Country.4. Ibid.5. GSMA, “Digital Inclusion and Mobile Sector Taxation, 2015,” 2015.6. Ovum, “ Consumer Broadband Subscription and Revenue Forecast, 2015–20,” January 2016; Bank of America Merrill Lynch, “Global Wireless Matrix 2016: Telecom Stocks Continue to Perform Well,” April 2016.

In 50 years, the communications infrastructure rollout will seem as funda-mental to social development as was the nineteenth- and twentieth-century electrification process.


About the AuthorsMarcos Aguiar is a senior partner and managing director in the São Paulo office of The Boston Consulting Group. You may contact him by e-mail at [email protected].

Júlio Bezerra is a partner and managing director in BCG’s São Paulo office. You may contact him by e-mail at [email protected].

Nuno Gomes is a partner and managing director in the firm’s São Paulo office. You may contact him by e-mail at [email protected].

Maikel Wilms is a director in BCG’s Amsterdam office. You may contact him by e-mail at [email protected].

Eduardo Canabarro is a project leader in the firm’s São Paulo office. You may contact him by e-mail at [email protected].

AcknowledgmentsThe authors wish to express their gratitude to Rodrigo Abreu, Patrick Forth, Wolfgang Bock, Tiago Freddi, and Gustavo Ferrari for their valuable contributions to this work. They would also like to thank Adriana Paranhos, Anna Damico, Bruno Zani, and Isabella Albernaz for their help with editing, diagrams, production, and distribution.

For Further ContactIf you would like to discuss this report, please contact one of the authors.

To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcgperspectives.com.

Follow bcg.perspectives on Facebook and Twitter.

© The Boston Consulting Group, Inc. 2017. All rights reserved.2/17

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designing brazils new regulatory model · 2019-11-25 · pace of the industry. the brazilian...

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