RIO DE JANEIRO, BRAZIL – Brazil is at the heart of the 21st-century cold war, with the coveted auction to take over the country’s new cell phone frequency, 5G. The dispute for a new communication band in the technology market has the two wealthiest nations in the world clashing: the United States and China. At stake is a market that can attract up to R$180 billion (US$36 billion) in investments for Brazil, a country that has more cell phones than inhabitants – 225.3 million devices for 209.5 million people.
At the heart of this competition are the Chinese Huawei and non-US companies, which rely on the affinity and, in some cases, on the pledge of funding from the Donald Trump government. This is the case of Swedish Ericsson, Finnish Nokia, and South Korean Samsung. They, like Huawei, are equipment and services providers for companies like Vivo, Claro, Tim, Oi, and Algar. This quintet has shown interest in being part of the auction, according to market reports and Jair Bolsonaro’s government officials. Currently, they operate 3G and 4G networks.
The third generation of mobile networks, the 3G, began to expand in Brazil in 2007, and enabled the “transformation” of cell phones into mini portable computers with internet comparable to the broadband in homes and offices. It was responsible for popularizing mobile internet access and reaches 95 percent of the 5,570 Brazilian municipalities. The 4G stage, which came to Brazil in 2012 and has enhanced data traffic and increased speed up to 100 times, reaches 75 percent of the country’s cities.
The 5G emerges as an improvement on the preceding generation: it pledges to keep everything connected simultaneously, not only computers and cell phones, but also TVs, refrigerators, cars, washing machines, and security cameras. This is what has been christened the internet of things (IoT), up to 20 times faster.
Among experts, it is almost a consensus that granting a new frequency to operators is a matter of national security and therefore should be subject to redoubled caution by governments. “It’s the 21st century Cold War because it’s about choosing the technological data standard. It’s so important that we see presidents of several nations debating these issues,” says Flavio Basílio, the ex-secretary of the Ministry of Defense.
Five blocks of frequencies will be auctioned in Brazil for telecommunications companies to operate 5G. The frequencies to be auctioned are like roads that are now blocked, but that, once authorized by the government, the “cars” – or data – will be able to travel through them.
Restrictions on Huawei have been common across the planet since the US government vetoed the Chinese company’s participation in its market. The argument is that Huawei is unable to ensure the security of its equipment, which would endanger the reporting of sensitive issues, including government, defense, public security, and foreign relations, as well as communication among ordinary citizens, such as messages exchanged by messaging apps or e-mails.
Suspicion is refuted by company spokespersons in several countries. “The allegations are unfounded. Our growth over the past ten years demonstrates that governments, operators, and partners had every interest in assessing Huawei very intensively,” says the company’s global director of cybersecurity and solutions, Marcelo Ikegami Motta.
With the exception of the United States, in other countries where 5G is present, Huawei is involved. The company is the largest in the sector and has operations in 170 countries in the supply of equipment and technology for cell phones and Internet networks.
Last week, the United Kingdom decided to prevent local telecommunications companies from hiring Huawei’s services and equipment. In addition, it decided that devices currently in operation should be phased out by 2027. Canada, Australia, New Zealand, and Greece tend to follow the same path or at least impose restrictions on the Chinese company.
President Donald Trump stepped up his attacks on Huawei in 2018 when company executive Meng Wanzhou, daughter of founder Ren Zhengfei, was arrested in Canada on charges of alleged violations of US sanctions law. Since then, the company has been accused of spying for the Chinese government and stealing secrets from competitors. As a result, Americans threaten to block intelligence partnerships with governments that do not limit Huawei’s participation in their auctions.
Since Bolsonaro’s Brazil has an extremely close political alignment with the United States, the argument among experts and politicians in Brasília is that the Planalto Palace is considering the option of restricting Huawei’s operations in its market, something that would be unprecedented. “The American government is setting an example of economic nationalism. Here the same thing could happen,” says economist Arthur Barrionuevo Filho, professor at the Getúlio Vargas Foundation.
Before Bolsonaro, Brazil was oblivious to this geopolitical debate. The government never established guidelines and let the operators regulate themselves -in the liberal economic primer- as long as they purchased legalized equipment. “In telecommunications, Brazil has always let the market choose,” explained ex-secretary Flávio Basílio.
He was among the participants in the initial technology auction process under President Michel Temer’s administration, between 2016 and 2018. It was the opposite of what occurred in the defense area, when the country opted for the Swedish Gripen fighter from SAAB or the French nuclear submarine from DCNS. In these cases, there was an explicit concern for security.
The Ministry of Communications and the National Telecommunications Agency show that there is no governmental consensus on potential limitations to Huawei. The Ministry did not rule out a possible veto, and said there is no decision on the issue because it depends on the consideration of several other state bodies, such as the Office of Institutional Security and the Ministries of Economy and Foreign Affairs. Meanwhile, the agency states that “there is no interference by public authorities in the selection since it is an issue that concerns the area of private relations between companies.”
As it resembles software more than hardware, the 5G network is more vulnerable to attacks because the development is based on computer programs, not necessarily on equipment. For instance, to “wiretap” 4G network communication a fraudster would need to install an interception device on a cell phone antenna. In the case of 5G, all it takes is to enter the network where it is installed and gain access to confidential data from thousands of equipment using it. Roughly speaking, it would be like installing viruses on computers to copy the files saved on the device. Remotely, a hacker could have access to this data, if the network were not secure.
According to experts, despite all of the American pressure, there is no guarantee that the companies of choice in the United States are 100 percent secure. “There is a US concern about losing hegemony, so they act that way,” says engineer Fábio de Miranda, coordinator of INSPER’s Computer Engineering course. In his opinion, Brazil should not exclude Huawei from the process. “As a peripheral country and not as close to such exacerbated political tensions, ideally we should focus on the cost and performance of technology and ensure an audit of the equipment,” he said.
According to the company’s internal data, Huawei currently supplies products to almost half of the Brazilian market. In arguing that it should not be restricted, the Chinese company says that its technology today is 1.5 times faster than its competitors and that its equipment uses 30 percent less power, says Motta.
Billion-dollar figures
The Brazilian Ministry of Communications and the National Telecommunications Agency (ANATEL) plan for the auction to occur no later than June 2021. Initially, it should have occurred in the first half of 2019, it was deferred to March 2020, but political pressure on ANATEL from broadcasters postponed the deadline. One cause of the dispute was the use of a frequency that could interfere with the transmission of about 12 million satellite dishes.
As a result, the government decided to step back. It deferred the process review in the regulatory body and launched a public consultation to prepare a new public notice that would not interfere with the frequency of these satellite users, to the detriment of other potential 190 million customers. Then came the coronavirus pandemic, which paralyzed the world.
Ex-national telecommunications Secretary, attorney and consultant André Muller Borges, says he believes the time was not right for an auction, even before the pandemic, because the companies did not have the resources to join the dispute. “Operators are still completing and depleting the 4G investment that started in 2014. 5G is being pushed further ahead because they don’t need it and are unable to make this investment now.”
In fact, the financial issue is one of the most significant in the current situation. When it started to be considered in 2017, the Government estimated that it could raise between R$20 and R$30 billion with the auction. Currently, the amount has been revised because the auction modeling has not yet been defined. “The public power has to decide if it will value the optimization of the revenue raised with the auction, the rate for the user or the expansion ability of this service in the national territory. Only then will we know the price,” says Sergio Paulo Galindo, executive chairman of the Brazilian Association of Information Technology and Communication Companies (BRASSOM).
Asked about the subject, ANATEL replied that the pricing studies are still in progress. “The priority of this auction is to establish investment commitments for the expansion of access to telecommunications services by the population to the detriment of revenue aspects.”
And if the operators and the Government are still to agree on the prices to be discussed, another equipment supplier is pressing for the auction. Late last year, Ericsson submitted a study according to which the delay in the dispute would retard a number of investments in the country. The estimate was that the implementation of 5G in 2020 would attract R$180 billion over the next five years. Thus, for each year of delay, the country would lose R$25 billion in tax collection and equipment sales.
Worldwide obstacles
Sources from the US government have pointed out that in addition to the UK following Washington, there are talks with Poland, Denmark, the Czech Republic, Estonia, Latvia and Romania to also put up market barriers. Currently, the 5G service is available in South Korea, the pioneer, and in several regions of the United States, China, Singapore, Spain, Switzerland, Germany, France, and the Netherlands.
In Latin America and the Caribbean, 5G is still in its infancy. The technology works only in Uruguay, through a state-owned company. There are reports that smaller carriers are also operating in Puerto Rico, Suriname, Trinidad and Tobago, and the US Virgin Islands. Earlier this year, Chile announced that it was preparing its auction, while Argentina decided to start testing with Huawei.
Source: El País