Long-Distance Battle in Brazil

Paulo Rebêlo
Wired News
April 2001

If you have a relative living abroad, you probably pay a higher phone bill every month. How about calling for free, and at the time you want?

That’s happening in many Latin American countries, especially Brazil.

“The most difficult issue (in talking with relatives abroad) is the bill; everyone knows that,” said André Ribeiro, a 27-year-old commercial representative in Rio de Janeiro. “No one talks for only a minute or two.”

VoIP — voice over Internet protocol — offers the ability to call anyone using a PC with an Internet connection. The call can arrive directly in the phone equipment at very low rates. Sometimes, for free.

VoIP in Latin America is not only providing lower rates, but also big headaches to licensed phone operators — companies that are losing huge sums in business revenue.

Currently, any Brazilian company is prohibited from allowing VoIP communications, but the rule seems to be ignored. The prohibition will be rescinded on Dec. 21, 2002. Companies providing VoIP use independent channels which are mostly located in Asia and the United States. And they trespass licensed channels used by local operators.

Brazil’s phone operators with international long distance -– Embratel and Intelig — constantly have promotional rates and fees, but they can do very little against VoIP, especially when the companies are based outside Brazil.

Embratel and Intelig say VoIP amounts to “phone piracy.” These companies provide phone-to-phone calls using independent links.

“We’re doing everything we can to stop pirates. Since they’re not paying Brazilian taxes as they should, the Federal Police and the government are at our side,” said Geofrey Biddulph, international director for Embratel.

Mostly, the phone companies complain and lobby to Anatel — National Agency of Telecommunications. But Anatel sometimes seems to be sympathetic toward VoIP.

Marcelo Pereira, Intelig’s director of international operations said that phone piracy is harming Intelig’s development as a whole.

“We’re trying to convince governments and alert users. It’s our intention to ban pirate VoIP companies with Anatel’s help,” Pereira said. “Our investment was made with millions of dollars; we can’t accept this.”

The bottom line is that VoIP seems to have reached a point of no return in Latin America. Newspapers used to be filled with ads offering VoIP and similar services. “I decided to test VoIP after constant ads in the technology media,” Ribeiro said.

“Many companies are providing services without the legal permission to do it,” Biddulph said. “It’s a piracy in the phone system.”

According to Biddulph, many hotels in the country are using illegal phone-to-phone calls. “The pirates are cheating on many businessmen offering long-distance calls at a lower rate, because they (pirates) aren’t paying taxes as they should.”

Some VoIP providers outside Brazil, such as Dialpad and Ligados, provide PC-to-phone calls from Brazil to the United States and Canada, at no cost to the consumer.

Iphone and Net2Phone demand a monthly fee in order to call internationally, but at prices way lower than those charged by Embratel and Intelig.

Net2Phone has a translated version of its software in Portuguese and prices in reals, the Brazilian currency. Net2Phone also has a partnership with Microsoft Network. Users can make calls through their MSN Messenger.

Using Embratel, a call from Brazil to the United States costs around U.S. 60 cents per minute.

“It’ll be hard to find a solution that satisfies Embratel/Intelig. They’d have to lower their revenues a lot,” said Lilian Moura, a computer science student from Rio. “I intend to always call my relatives in U.S. using Dialpad. It’s completely free, anytime. Why not call?”

In the III World Politic Forum of Telecommunications, which was held in Switzerland during March, Anatel’s president Renato Guerreiro said that Brazil defends the legalization of VoIP — by considering the users’ interest, not operators, manufacturers or governments.

Embratel’s official statement argues that both Embratel and Intelig might be losing about $15 million each month. Estimates indicate that 40 percent of phone traffic in Brazil is pirated.

Last year, Embratel identified 23 companies that it said were pirating phone usage.

But many VoIP users seem to be unaware of the ongoing issue.

“I don’t believe they can do much about it,” said Moura, who uses a 33.6 KB modem to make the calls.