Challenges for the convergence of telecommunications services in Brazil
The implementation of a new regulatory framework for the telecommunications industry in 1997 and the subsequent privatization of Telebrás (a holding of state-owned telecom companies) brought unquestionable benefits to Brazilian society. It began a cycle of investment in telecommunications infrastructure, fixed and mobile, which induced an increase of productivity in all sectors of the economy. As a result of investments, the number of connections reached 274.1 million in 2010, according to the study Brazil Total Telecommunications Services Markets, 2011 of Frost & Sullivan.
In order to gain scale and provide different services, we have seen between July 1998 and August 2011 the consolidation of dozens of providers of telecommunications services, resulting in market dominance articulated by six major groups: America Móvil (Embratel, Claro and Net), Telefónica, Oi, TIM, GVT and Sky.
Currently, these six groups, as a result of the regulation, require multiple licenses in order to provide each service offering; in addition, they are required to maintain different company registers for fiscal purposes, often incurring tax and operational inefficiencies, as well as keeping partnerships with other companies due to foreign ownership restrictions.
In order to step into service bundles for the residential market and complete solutions for the corporate market, simple tasks such as the unification of an invoice for all services to the consumer, become complex.
With the approval of a new legislation for pay TV services, eliminating some regulatory hurdles, and the implementation of a plan for the expansion of broadband, Brazil takes important steps for the beginning of a new wave of investment by service providers, which is likely to accelerate the phenomenon of convergence of services and increase the penetration of telecommunications services in homes and businesses in Brazil.
However, the challenges to service providers are relevant.
First, it will be necessary to update IT systems, including OSS / BSS, to support multi-service strategies. The importance of IT infrastructure to enable the offerings will grow. And the best provider that can customize services to the needs of each consumer will have competitive advantages.
Second, the providers will be challenged to develop pricing models and bundling strategies that are profitable over time. This especially applies to the pricing of broadband plans, especially those of new generation (FTTx, HFC, LTE), given that all the services are being deployed over IP.
The protection of the traditional business of the company should be accompanied by an appropriate pricing of broadband.
Going forward, in the case of mergers and acquisitions, the challenge will be to manage the clash of cultures and the differences in the incentives structure between firms. Vivo and Telefónica are already facing this challenge, and Embratel, Net and Claro will have to face it, should they be integrated.
Another relevant point is the redesign of customer-facing processes, including billing, installation and customer support, to support bundled offerings. If the offer is integrated, the customer support must also be. The management of quality indicators will also be important during the integration, so as not to affect the reputation of providers.
Finally, for companies that do not offer all services such as GVT, TIM and Sky, there will be the challenge of launching a service, or to complete the offering of multiple services through partnerships or resale of services. While companies are somewhat resistant to partnerships, due to the limited offering flexibility and interests of each party involved, the possibility of resale of fixed and mobile services (MVNO and unbundling) opens, in order to ensure competition in packages.
It is expected that with convergence the Brazilians can have access to more services with higher quality and lower prices, and that providers can obtain return on investment, creating a virtuous circle. The Government has an important role in mediating this relationship, ensuring stability for investment and stimulating consumption. Thus telecommunications services, now with broadband, may continue to be a vector of productivity increase for the country.
By Renato Pasquini, article published in TeleSemana on September 11, 2011 (http://www.telesemana.com/futurecom2011/2011/09/11/desafios-para-a-convergencia-de-servicos-de-telecomunicacoes-no-brasil/)