Anatel approves 5G bid notice
Scheduled for November 4, 2021, the auction will enable innovative technologies to be implemented in Brazil
At an extraordinary meeting on September 24, 2021, the Brazilian Telecommunications Agency (Anatel) board unanimously approved the bid notice for the auction of radio frequency bands that will enable fifth-generation (5G) technology to be implemented in Brazil. The document’s final version was published on September 27, 2021, and can be accessed here.
On a scale not seen before in Anatel’s history, the agency will auction the 700 MHz, 2.3 GHz, 3.5 GHz and 26 GHz bands, granting authorizations for either ten or twenty-year terms that can be renewed under regulations in effect at the time of their expiration. Considering the public price for the radio frequency band authorizations and the existing net value of the winning bidders’ obligations, the value of the 5G auction comes to approximately BRL 49.7 billion (roughly USD 9 billion).
5G’s socioeconomic potential is as significant as the size and complexity of the auction itself. Considered the main part of the 5G-compatible spectrum, the 3.5 GHz band’s availability marks the first step toward promoting other innovative technologies such as the internet of things, artificial intelligence and augmented reality.
Although it is known as the “5G Auction”, the lots awarded in the bid process also include radio frequency bands suitable for fourth-generation (4G) technologies, whose coverage will be expanded. Thus, 5G technology is expected to enable a new cycle of development in the country, as more and more locations become connected and the possibility of implementing new technologies with low latency and high-speed networks.
Anatel first started the 5G auction project in 2018. In February 2020, a public consultation concerning the bid notice was held, which the board deliberated on in November of the same year.
On February 25, 2021, Anatel approved the document and then sent it to the Federal Court of Accounts (TCU), which approved it on August 25, 2021. Anatel then evaluated the TCU’s recommendations, putting the matter to a vote at an extraordinary meeting on September 13 before it was approved on September 24, 2021.
Winning bidders’ obligations
The ‘non-collection auction model’ Anatel has adopted directs a great part of the funds collected toward investments in communication infrastructure and connectivity in unserved areas. For this reason, the winning bids that exceed the minimum prices corresponding to each auctioned lot will have the extra funds converted into additional obligations.
Therefore, those who win these lots will be bound to fulfill a series of commitments related to each radio frequency band, among which we highlight:
- Connectivity in public elementary schools
- The amount corresponding to 9 times the minimum value of the 26 GHz bands must be directed toward implementing connectivity projects indicated by the Ministry of Education. This initiative seeks to expand access to information and communication technologies (ICTs) for academic purposes in public elementary schools, in compliance with the Connected Education Innovation Policy, established by a recent 2021 law and a 2017 decree. To enable such projects to go ahead, the winning bidders of the 26 GHz band must establish a School Connectivity Administrator Entity (EACE).
- Integrated and Sustainable Amazon Program (PAIS)
Instituted by a decree enacted in 2021, the PAIS is an offshoot of the Connected Amazon Project, which the Brazilian Army has already implemented. The program aims to expand underwater fiber-optic telecommunications network infrastructure to connect people living in the Amazon’s main cities.
- The Federal Government’s Private Communication Network Project
- The project consists of creating a fiber-optic network for all Federal Government agencies and an exclusive mobile network for public use, in accordance with an ordinance issued by the Ministry of Communications. It is worth mentioning that because of certain TCU contributions and because Anatel’s commissioner Moisés Moreira demanded it as a condition for casting his vote, a decree was published on September 17, 2021, removing Telebras’ exclusive right to build private government networks. Third-party operators may now also provide such a service.
To make it possible for the winning bidders to meet their commitments, the 3.5 GHz Band Administrator Entity (EAF) will be created. Composed of the 3.5 GHz band’s winning bidders, the EAF will run PAIS and manage its funding, implement the government’s private network, and promote the clearing of the 3.5 GHz band.
Among other specific commitments, the winning bidders of the 3.5GHz band must vacate the radio frequency band adjacent to the spectrum fraction awarded, called Band C (from 3.7GHz to 4.2 GHz), migrating to Band Ku. Clearing Band C is necessary as 5G networks in this band can interfere with television receive-only (TVRO) signal transmissions.
However, during voting on adjustments to the bid notice, this item was deemed controversial as part of the board considered the July 2022 deadline for complying with the obligation to be too short.
In addition, the possibility of bringing forward the use of the 3.5GHz band in capitals that use mostly the digital signal (and would therefore suffer little from reception interference) has been suggested. Eventually, most of the Anatel board supported Moreira’s proposal to release the band on June 30, 2022, with a possible 60-day deadline extension for technical reasons.
Another issue that stirred debate concerned whether the specific order the 5G network coverage is rolled out should be relaxed. According to a draft of the bid notice presented by commissioner Emmanoel Campelo, certain winning bidders of national lots would be able to bring 5G to medium-sized cities sooner, while the original schedule prioritizes rolling out services to the state capitals first.
In the end, the board decided against relaxing the order of the rollout, siding with the counterargument that this could reduce competition for regional lots and drive out small Internet Service Providers (ISPs).
While analyzing the draft bid notice, the TCU added certain performance guarantee requirements. In addition to their financial contributions, the auction winners must also offer guarantees for carrying out their commitments, which will be passed on via the EAF.
As stated in the document draft, failure to fulfill commitments may result in a loss of authorization to exploit the Personal Mobile Service (SMP) and to use radio frequencies.
Requests for clarification and possible objections
Bidders wishing to request clarification or object to the bid notice must submit their arguments to the President of the Special Bidding Commission (CEL) within ten days of the publication of the document in the Official Federal Gazette.
For further information about this topic, please contact Mattos Filho’s Telecommunications practice area.