More Investment Needed to Boost Brazil’s Fragile Telecom Infrastructure

Brazil’s middle class likely to surpass 120 million next year.

Filipe Pacheco                                                 

Ana Maria Cruz de Souza is busy hunting for a laptop computer at a crowded shopping district in downtown São Paulo, the biggest city in Brazil.  The 47-year-old woman says she wants to present the laptop to her 13-year-old daughter, Clarice, as a Christmas gift. She is also seeking to buy a tablet for Gabriel, her 16-year-old son born of her second marriage. They all live within a 25-kilometers radius of the central São Paulo, in the suburban Eastern zone of the city.

“I don’t know how to use the laptop or what the tablet is all about. But the prices are good, and Santa Claus is going to bring them,” Cruz de Souza said with a proud smile on her face.

Ana Maria belongs to “C” class family –– the term that has lately become popular in Brazil to categorize the lower-middle class people whose number is expanding by the day. Given the figures released by the government, there are more than 105 million lower-middle class people in Brazil, and as many as 40 million people have joined this group since 2002. More than anything else, middle class people have become the engine of Brazil’s economic growth. Given the speed at which Brazil is growing its wealth, the number of middle class might reach 118 million in 2014, say analysts.

It is because of this expanding middle class population technology products are seeing a huge demand in today’s Brazil.

Internet Popularity

Data from IDC consulting firm show that about 4 million computers were sold in the country in the third quarter this year, of which 61 percent were laptops and 39% were desktops. During the first six months of the year, 7.8 million computers were sold in the country. For tablets the numbers are far more impressive. The demand for smaller computing devices has grown 233 percent, and 2.9 million units have been sold so far this year.

Brasscom, the Brazilian Association of Information Technology and Communication Companies, says middle class families are in a buying spree of hardware devices such as computers, notebooks, cell phones, tablets and smartphones. When it comes to services internet is the most sought-after one. “In an indirect way, other IT services will be more and more used, from electronic government to e-commerce,” said Nelson Wortsman, Brasscom’s director for infrastructure and digital convergence.

Cable TV, pre-paid cell phones and the Internet are the three major services Brazil’s C Class families have long been in love with, say Brasscom officials who recently conducted a study to ascertain the consumer behavior of middle class families. As of August this year, 62.5 million Brazilians had signed up for mobile broadband service hoping to access the Internet while on the go.

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Poor Telecom Infrastructure 

Worstman sees an urgent need for improving Brazil’s telecom infrastructure and says the demand for broadband will be eight times more than in 2011. Today the average speed of internet connections in Brazil is 1.8 Mbps, which is far slower compared to the global average of 2.3 Mbps.

“Mobile devices allow people to stay connected all the time. And the investment needed for installing mobile broadband network is far smaller than wireline network, which takes longer time to be installed,” Wortsman added.

Brasscom has urged the government to offer incentives to telecom carriers willing to invest in the country’s broadband services sector. Brazil’s poor telecom infrastructure is widely blamed on the government’s unwillingness to invest more in R&D centers. Brazil spends between 1 and 1.8 percent of its GDP on research and development. But that’s a pretty small amount compared to other countries like South Korea, which sets aside nearly 3.74 percent of its annual revenue for investing in R&D.

Wortsman says government is doing all it can to extend 3G and 4G services to remote rural areas and towns that are sparsely populated. “Government is already working with Anatel, the national agency for telecommunications,” he says. Wortsman called on the government to reduce tax on broadband services and drive up demand for the Internet in the country.

“I bought the laptops, now I am going to purchase a smartphone,” says Cruz de Souza. “I do know I’ll end up just using it to call my family… but one day I might try the internet, who knows,” she said before bursting into laughter.