In Brazil, your internet provider may well be the mafia, police say

RIO DE JANEIRO, BRAZIL – (Reuters) Last year, as Rio de Janeiro residents holed up in their homes during the deadliest phase of Brazil’s Covid 19 outbreak, police detective Gabriel Ferrando says he received a tip that the local Internet service had been compromised by something suspicious.

Vast areas of Morro da Formiga, a poor neighborhood in the north of the city, were no longer accessible. When Ferrando questioned a technician from broadband provider TIM, who was tasked with fixing the outage, the employee, whose name he declined to give, said armed men chased him away with a warning not to return.

It turned out that a new Internet provider had claimed the territory: a company whose investors included an accused drug and arms dealer with alleged ties to Brazil’s notorious Red Command crime syndicate, according to Ferrando, court documents filed by authorities, and company records seen by Reuters.

Using stolen equipment, some of it from TIM, the newcomers soon had their Internet service up and running, Ferrando said. Residents could sign a contract with the new company.

TIM, a subsidiary of Telecom Italia SpA, declined to comment and referred all questions to the Brazilian telecommunications association Conexis. In a statement, the group called on the country’s law enforcement agencies to act to protect legitimate operators.

Ferrando, a veteran in the fight against Rio’s largest organized crime gang, is trying to do just that. In a sealed article documenting months of investigation, he called on prosecutors to file charges against the alleged pirates in February.

The prosecutor’s office did not respond to a request for comment. No charges have been filed.

Morro da Formiga is not the only municipality reporting problems. Reuters interviewed nearly two dozen telecommunications industry executives, law enforcement officials, technicians, academics, and Internet customers in Brazil and sifted through thousands of court documents filed by police.

The people and documents describe a brazen takeover of Internet services in dozens of neighborhoods in major Brazilian cities by companies linked to suspected criminals who are not afraid to use violence and intimidation to drive out their competitors.

The result is that tens of thousands of Brazilians rely on unreliable, second-rate broadband networks that industry and law enforcement officials estimate generate millions of dollars annually for suspected criminals.

Providers of pirate services can be unresponsive when service is blocked and impatient when a bill is not paid; some customers told Reuters. In the working-class neighborhood of Campo Grande, one resident described someone knocking on his door monthly to collect 35 reais (US$6.80) in cash.

The customer, who requested anonymity for fear of reprisals, said he was “pressured to pay on the day he chose without delay.”

It’s a reliable revenue stream that has become even more lucrative with the Covid-19 pandemic, as families are forced to learn, work and shop online.

In 2020 alone, the percentage of Brazilian households with Internet access increased by more than 12 percentage points to 83%, according to the latest data from Cetic.br, an information technology organization according to authorities and telecom executives, pirates also loot equipment and infrastructure, most of which they reuse for their makeshift networks.

Thefts and destruction of telecom equipment rose 34% year-on-year in 2020, representing direct annual losses of about R$1 billion (US$194 million), according to industry group Feninfra, which noted a further 16% increase in the first half of 2021.

THE ALLEGED SCHEME

The Brazilian telecommunications industry has been not alone in its struggle for years; criminal groups have controlled the distribution of cooking gas, drinking water canisters, and other basic goods in many low-income neighborhoods.

But by building their own broadband networks, the criminals are becoming more sophisticated, according to more than 20 tech, industry and law enforcement officials interviewed by Reuters.

The scam usually works like this: thieves steal or destroy equipment from traditional broadband operators, and when repair crews arrive, they are threatened by armed men who warn them not to return.

Last year, 105 no-go zones were set up in Rio alone for Oi SA, one of Brazil’s largest Internet providers. That number has quadrupled since 2019, according to the company.

Shortly after the service was disrupted, telecommunications companies linked to organized crime groups set up their own networks, using existing infrastructure.

In some cases, these groups are run directly by members of drug gangs, including Red Command or Pure Third Command, one of their main competitors. Others are led by militias, a criminal group made up of retired and off-duty police officers, or businessmen who pay bribes to eliminate the competition.

Often, the infiltrators are aided by corrupt employees of major suppliers who sell them stolen know-how and equipment, according to Antonio Pessanha, Rio’s public prosecutor, who told Reuters he is investigating criminal activity in the telecommunications sector in and around the city of Rio.

In a recent case, an employee of Claro, the local subsidiary of Mexico’s America Movil SAB de CV, offered to sell the company’s equipment to organized crime partners, according to a recorded phone call that Pessanha said came into the hands of his office through a court-approved wiretap.

He did not specify which criminal organization the call participants allegedly belonged to, nor did he identify the Claro employee or the other participants. The analysis is ongoing, and Reuters did not have access to the recording.

Claro declined to comment on the alleged incident.