The public auction of the fifth generation (5G) mobile network in Brazil will be carried out by the National Telecommunications Agency (“ANATEL”), the governmental entity that holds jurisdiction over the implementation, regulation and operation of telecommunication networks and services in Brazil.
The purpose of the auction is to grant licenses for the use of radio frequencies that support the provision of telecommunication services through 5G networks. The draft of the auction notice that was made available by ANATEL in February 2020 for public consultation (Public Consultation No. 09/2020) indicates that licenses will encompass four main frequency bands, as follows:
(i) 700 MHz band: Comprised of two national lots, ranked as primary and secondary, the latter being directed to municipalities of up to 100,000 inhabitants in the relevant coverage areas. This license will be valid until December 2029 (as opposed to the others, which are subject to a 20-year term), renewable upon payment or assumption of additional obligations. This band is typically associated with 4G technology networks;
(ii) 2,300 to 2,350 MHz band: 20-year term license, renewable upon payment or assumption of additional obligations. This band is widely compatible with mobile services and 4G technology networks. Conversion of this band to 5G is considered possible within the medium-to-long term;
(iii) 3,300 to 3,700 MHz band: 20-year term license, renewable upon payment or assumption of additional obligations. One regional lot will be directed to small providers and new entrants only. This band is the most compatible with 5G technology networks, thus enabling its immediate utilization; an
(iv) 24.3 to 27.5 GHz band: 20-year term license, renewable upon payment or assumption of additional obligations. This band supports 5G applications with low latency, high speed and limited coverage.
The licenses will be conditional on coverage or transport network implementation commitments by the winning bidders. Commitments may include, depending on the frequency band, making 4G or 5G voice and data available in locations not covered by such technologies; making 4G voice and data available on federal highways not covered by such technology; implementation of an optical fiber backbone or backhaul that enables connection from at least one point in the central district of municipalities not covered by such technology to an Internet Exchange Point (IXP) that meets the requirements defined in ANATEL’s General Plan of Competition Goals (PGMC); and, to enable the use of the bands on a secondary basis, sharing the spectrum with third parties by means of public offers of the right to use the radio frequencies.
Licenses will be granted based on the highest bids in the auction. The final version of the bidding notice will set forth the minimum price offer for each band. ANATEL expects to collect around R$20 billion in the auction, as reported to the media by the rapporteur of the project, ANATEL’s director Vicente Aquino.
In Brazil, federal infrastructure projects such as the 5G auction are eligible for qualification within the federal government’s Investment Partnership Program(“PPI”). PPI was created by Federal Law No. 13,334 of 2016 to expand and accelerate public-private partnerships and to ensure institutional stability and legal certainty for infrastructure investors.
Pursuant to PPI Resolution No. 88/2019, the Council of PPI issued an opinion favorable to the qualification of the 5G auction under the program. The actual qualification of projects depends on the ratification of the resolution by the president of Brazil, upon the issuance of a decree.
Once qualified, the project gains priority and strategic status within the infrastructure agenda of the federal government. From a practical standpoint, the qualification of the 5G project in PPI fosters competition in the auction; the project’s PPI status draws both national and international attention.
The next steps for the project include the conclusion of feasibility studies mainly done to define the minimum price for the offer for each radio frequency band; the release of a public consultation report, with the analysis of the contributions received; the submission of feasibility studies and drafts of auction notices and licenses for approval of the Federal Audit Court (“TCU”); and, finally, the publication of the auction notice.
Under the original timeline of the project, the auction was set to occur in the second half of 2020. However, at the end of May 2020, ANATEL acknowledged a potential delay, as field tests had to be interrupted due to COVID-19. The auction is expected to occur in the first half of 2021.