CANTO Weekly Newsletter – BNamericas 03/06/15

Global carriers jumping on LatAm’s first encrypted phone bandwagon – Regional

Spectrum will be the new oil, says Ericsson CTO – Regional

Regulation holding back multimillion smart grid deals in LatAm, says Ericsson – Regional

Latin American countries top affordable internet index – Costa Rica, Peru

Unveiled by the company on Sunday, the Samsung Pay platform is featured in the company’s newly-launched flagship S6 and S6 Edge phones, but the system will initially be available only for US and Korean customers, starting in the second half of this year.

“Talks with all the ecosystem players for the launch of Samsung Pay in Brazil are still preliminary, and banks are more conservative on that,” Ricardo Barbosa, Samsung Brasil operations director, told journalists at a conference on the sidelines of the Mobile World Congress (MWC) in Barcelona.

According to Barbosa, the development of an m-payment ecosystem in the region depends not only on the availability of solutions, but also on a “culture of use” by merchants and consumers.

Samsung Brasil telecoms director Roberto Soboll considers that Brazil is significantly ahead of the US and other developed markets in terms of penetration of Near Field Communication (NFC)-enabled terminals – more than 90% of Cielo’s POS are NFC-ready, for example – but the country requires jumpstart for use of the technology to take off.

The executives expect use of mobile phones as e-wallets to gradually mature in the region over the coming years.

Operting bith with NFC and magnetic stripes, Samsung Pay is featured in the new Galaxy S6 smartphones, but will be available for transactions only in the US and Korea, on H2. Credit: Samsung

THE TECHNOLOGY

Samsung Pay is expected to go head-to-head with Apple Pay, presented last October by the US rival.

However, while Apple’s system is solely based on contactless NFC, Samsung Pay allows transactions to be made with points-of-sale (POS) running both NFC and magnetic stripes using proprietary technology called Magnetic Security Transmission (MST). MST “reads” the magnetic field generated by the stripe.

Samsung has argued that mobile wallets have had extremely low acceptance with merchants utilizing conventional magstripe terminals and that only 10% of credit card terminals accept NFC. Samsung says the combination of the two technologies will allow consumers to pay for goods at approximately 90% of all existing POS terminals.

To boost the partnership ecosystem for Samsung Pay, the company has closed deals with American Express, Bank of America, Citi, JPMorgan Chase, and U.S. Bank.

Payment networks Visa and Mastercard are also working with Samsung. The latter’s MasterCard Digital Enablement Service (MDES), for example, enables MasterCard consumer credit and debit cardholders from participating banks to use Samsung Pay.

Global carriers jumping on LatAm’s first encrypted phone bandwagon – Regional At least two global telecoms carriers with Latin America-wide operations are in “advanced talks” with Brazilian security company Sikur regarding the sale of GranitePhone, Latin America’s first smartphone built from scratch for security and unveiled at the Mobile World Congress in Barcelona, Sikur CEO Cristiano Iop told BNamericas.

The GranitePhone is currently in the online pre-order process and according to Iop will be available for sale in the third quarter of this year in Brazil, Mexico, Chile, Colombia, the US, Qatar and the United Arab Emirates, all countries where Sikur has offices.

Sikur, part of the 300-company Brazilian holding Ciberbras, expects around 80,000 devices to be sold in 2015.

Initially, the idea was to develop just a highly secure mobile platform, called Sikur, which would come embedded in third-party smartphones, Iop said. The Sikur project was conceived before the NSA espionage scandal broke, but received a major boost after Edward Snowden’s leaked documents showed the US had eavesdropped on Brazilian President Dilma Rousseff’s phone communications, the CEO admitted.

The company was encouraged by global handset manufacturers, to whom it showcased its software to develop its own phone, Iop said. A year later, the GranitePhone started to become a reality.

“It’s been a hit. We’ve been seeing interest from governments and corporations from a wide array of countries, from Latin America to Germany and South Africa, from governments to companies,” said Iop.

The phone will be manufactured by a global OEM, and Sikur is currently evaluating three of them, he said.

“LEAVE” YOUR OWN DEVICE

The GranitePhone clearly goes in the opposite direction to the bring-your-own-device (BYOD) trend, which consists of companies upping investments in mobile security but allowing employees to use personal gadgets in the workplace.

Targeting these corporate BYOD opportunities, global mobile players have worked to raise the bar of security in their top consumer smartphones. In Barcelona, for example, Samsung’s S6 launch marked the expansion of its Samsung Knox mobile enterprise solutions suite, with new features and partnerships with global mobile device management (MDM) systems. On Tuesday, GSMA named the S6 as the most secure phone of the year.

To respond to that, GranitePhone tries to contemplate both worlds: a totally blocked version, with cutting edge encrypted text messaging, voice, group chat, email communications and bans on external apps that is aimed at governments; and a second one that will have the same features but allow the installation and use, in a separate field, of some popular apps

The company has not yet closed any deals yet with governments, but that is expected to change soon, according to Iop. The company has had meetings with the federal police and the defense and justice ministries of Brazil, all bodies that already use Sikur software in their applications.

Expansion plans include opening units in London and Singapore in the second half of this year, Iop added.

Spectrum will be the new oil, says Ericsson CTO – Regional Spectrum could become more valuable than oil in the coming years as this limited resource is the base upon which future societies connect and operate, Ericsson’s CTO Ulf Ewaldsson said on Wednesday.

By 2020 there will be 9.5bn mobile subscriptions and 8.4bn mobile broadband subscriptions, he predicted.

The trend towards the internet of things has already started with the automobile industry taking the lead and this will extend to every industry from mining to transport, according to Ewaldsson.

So “spectrum is the fuel for the network society,” he said.

However, similar to oil there is a limit to how much spectrum there is and the telecommunications industry will increasingly have to go to greater lengths to mine new spectrum and become more efficient in its use, said Ewaldsson, who was speaking to reporters during the Mobile World Congress in Barcelona.

With the evolution of 5G technology that will require unprecedented levels of carrier aggregation where several frequency bands can be combined to increase speeds.

Ulf Ewaldsson, CTO, Ericsson, presenting at Mobile World Congress

TO CHARGE OR NOT TO CHARGE, THAT IS THE QUESTION?

However, how governments will make that spectrum available will vary from country to country. Many countries have opted for the traditional auction model, often charging very high sums to operators to use the spectrum while others charge almost nothing but attach strict performance requirements such as deploying services in isolated areas, Ewaldsson said.

Chile is a case in point and a good role model for Latin America, according to José Otero, Latin America president of mobile technology association 4G Americas. But it is important that governments think carefully about the impact of either method to ensure the network and the consumer benefit and that they are not just using spectrum as a means of bolstering treasury coffers.

“There has to be a balance in what you do with the deployments. You either opt for promoting coverage, which is the fastest way to benefit the population, or you charge for the spectrum, but often that money is not reinvested in telecommunications,” Otero said.

Charging operators a lot for spectrum is based on the assumption they will recoup their investment from the revenue from subscriptions. But Otero cautioned on applying in emerging markets a model that is used in developed nations, where users spend a lot more on telecommunications.

“In the UK, Germany or the US you have an average income that is five, six times higher than in Latin America, so the return on investment is different.”

“Also you have to consider that developed nations have many more suburban markets, something you don’t have in Latin America.”

Otero referred to the spectrum recently awarded in Ecuador to Claro and Movistar where the government prided itself in claiming that it was the most expensive spectrum auction in the region.

At the same time, the country will impose strict regulations, with operators being taxed in proportion to the number of subscribers they have. This, says Otero, could be counterproductive because operators will seek to clean low ARPU customers off their networks, keeping only the most profitable ones and thus not benefitting the poorer segments of society.

Regulation holding back multimillion smart grid deals in LatAm, says Ericsson – Regional The utilities sector offers the largest business opportunity in Latin America for applying smart technologies. However, the lack of regulation and timeframes for making infrastructure smarter is slowing adoption, Jo Arne Lindstad, VP of Ericsson’s industry and society division for Latin America, told BNamericas.

Speaking on the sidelines of the Mobile World Congress conference in Barcelona this week, Lindstad said the Swedish company has honed its focus on three core areas to develop smart solutions in the region: smart cities (which consist of transport and public safety), utilities and financial services.

While the transport and public safety sectors currently provide the most opportunities, utilities promise deals of an unprecedented magnitude, although the sales cycle is slow, he said.

“A smart grid solution for a CFE, a CPFL, or an Eletropaulo can be worth hundreds of millions of reais, big deals,” Lindstad said, though he added that smart grid contracts in the region have been few and far between to date.

“Utilities transformation has been relatively slow in Latin America because there is no regulation yet in place. It’s not like Europe or the US where there are clear deadlines for when the networks have to be smart,” according to Lindstad.

The executive said that in Brazil, authorities have been more preoccupied with other, more critical issues than modernizing, such as water and power shortages.

“This is starting to change partly because of the problems they’ve had. If you can start to balance the demand for power a bit more you don’t get outages,” Lindstad said.

He also sees big opportunities in Mexico, where the power distribution sector is due to be liberalized under the new sector reform laws.

SOLAR POWER

Lindstad also expects in 2017-19 more countries to start allowing the general public to install their own solar cells and sell power back to the grid, a concept known as net metering.

He said Brazil and Chile are strong candidates to be early adopters in this regard. In Chile, a net metering law is already in place. But to allow consumers to contribute energy to the grid will require smart grid and smart meter technology.

“You can’t deliver electricity back to the grid if the grid isn’t prepared for this. You have to install smart meters that can measure how much electricity is going each way,” Lindstad said, adding that some European countries made the mistake of installing meters that only measured one-way traffic meaning they had to reinstall them when they started allowing net metering.

Lindstad said that photovoltaic systems are becoming cheap enough to make business sense. In addition, a solar plant can be set up in nine months compared to years of planning and construction to build a hydroelectric dam.

Latin American countries top affordable internet index – Costa Rica, Peru An independent regulator and strong social policy are key to making the internet affordable in emerging markets, senior Latin American telecoms officials say.

Latin American countries have scored high in an index measuring the affordability of the internet in emerging markets, taking six of the top 10 spots and with Costa Rica winning outright followed by Colombia in second place, Peru fifth, Brazil (6), Ecuador (8) and Argentina (9).

The report, published by the Alliance for Affordable Internet (A4AI), and presented at the Mobile World Congress in Barcelona this week, showed that more than 2bn people in emerging markets are priced out of the internet.

The report that includes 51 developing and emerging nations finds that a fixed broadband connection costs the average citizen in these countries approximately 40% of their monthly income, eight times more than the affordability target set by the UN Broadband Commission in 2011.

Mobile broadband is cheaper but still double the UN threshold, averaging 10% of monthly income – about as much as developing country households spend on housing.

Women and those in poor and rural communities are the least likely to be able to connect affordably.

BEST PRACTICES

However, some Latin American countries have been exemplary in what they have done to address the situation.

Speaking on a panel, Costa Rica’s deputy telecoms minister Allan Ruiz said that abolishing the country’s army early last century had freed up valuable resources to be spent on social benefits.

Costa Rica was among the last countries in Latin America to liberalize its telecoms market, doing so in 2009 but has kept state-owned ICE, which is still the largest operator.

While Costa Rica had extremely low calling rates before 2009, there were lengthy waiting lists to obtain a phone.

“In 2009, we had low cell phone penetration of 60%, the lowest in Central America. Following liberalization we now have 150% penetration,” Ruiz told BNamericas.

The report demonstrated the link between policy and lower prices, underscoring five key elements: a national broadband plan, a pro-competition environment, efficient spectrum allocation, models that encourage infrastructure sharing, and widespread public access through libraries, schools and other community venues.

Gonzalo Ruiz, chairman of Peru’s telecoms regulator Osiptel, commented that having an autonomous regulatory body, as is the case in Peru, is key to driving good policy.

He stressed Peru’s national fiber plan, which was awarded to Mexico’s TV Azteca in 2013 and will see the deployment of 13,400km of fiber.