National statistics can be misleading when it comes to assess the situation of broadband in any given country, especially in the case of large countries like Brazil. The country has a population of around 200 million, and its fixed broadband penetration rate is 34% of households. However, this number hides huge regional imbalaces, some areas of the country, for instance, have penetration rates as low as 4%. One of the key challenges of the telecoms industry in Brazil is how to connect this population.
One of the problems is that large urban areas, like São Paulo and Rio de Janeiro, are natural magnets for investment from telcos, whereas the countryside is underserved, according to Ovum more than half of Brazilian cities with a combined population of 42 million inhabitants – close to the population of Argentina or Colombia – have only 500,000 fixed broadband subscriptions, a penetration level similar to the Brazilian average about 10 years ago.
Even though part of this demand is met via mobile broadband, these same cities are among the ones with lowest wireless telecommunications density, so, even considering that mobile broadband is experiencing strong growth in the country, there is a huge disconnected population. The expansion and improvement of the existing infrastructure, especially aiming at these underserved areas, would have the potential to bring digital inclusion to almost a quarter of the Brazilian population. So, it is clear that the country would benefit from a coordinated effort from the public and private sectors to expand fixed broadband infrastructure in those areas.
Among the challenges to expand broadband in the country, a key one is the size of the country, for instance, building a fibre backbone that serves cities in the Amazon region, in the Brazilian North, is not only expensive but also complex, so, there is limited offer and prices are high, in many places, satellite is the only option.
The private sector alone also has little incentive to make the necessary investments alone, huge income inequalities in the country means that GDP per capita in areas with low broadband density is three times lower than in the cities with higher density.
Other Latin American countries, like Colombia, Argentina and Uruguay have addressed this situation by launching national broadband plans, even though each plan has its own particularities, all of them involve some level of investment from the government in the deployment of the infrastructure, following the trend, the Brazilian government announced plans to connect 90% of Brazilian cities to a fiber network, but it still needs to publish more details about the project.
Another challenge is the small footprint of advanced technologies such as FTTx, which account for just 3% of Brazilian connections. Faster technologies are only slowly improving the speed profile of the Brazilian market, as such, only 15% of connections are above 12Mbps.
All in all, investment has been limited to the higher income areas of Brazil, like Sao Paulo and Rio de Janeiro States, even so, that did not prevent the market to grow by 8% from 2013 to 2014. This shows an interesting potential in the case those unattended areas are included in investments plans by either the government and/or the private sector.