The main argument used by the incumbent local exchange carriers (ILECs) in negotiations with the Government and Anatel on this year?s tariff review is that they have invested heavily to provide universal access and that Brazil now has substantial excess capacity in fixed-line telephone networks.
Telemar has invested 4.3 billion Brazilian Reals more than projected by the BNDES privatization assessment report, which forecast 16.8bn BRL, according to Ivan Ribeiro de Oliveira, Telemar?s VP for corporate strategy. Moreover, lower-income groups C and D account for 90% of network expansion, Telemar currently has 2 million idle lines, and ?in March roughly 10,000 public payphones neither made or received a single call,? he said.
Camila Tápias, Telefonica?s special assistant for regulatory affairs said that if the top decile of the ILEC?s best customers were ?poached? by competitors, it would be forced to reformulate prices to adapt to the new market situation, and universal access could be jeopardized as a result. ?Only 35% of our customer base spend more than the average bill, which is 37 Brazilian Reals per month [now about 13 US Dollars]. The remaining 65% are subsidized by the top 10%,? she said.