Brazil is one of the most keenly watched growth markets for wireless technologies, and because its regulatory situation remains fluid, many platforms are fighting for the ear of the operators. Some have already indicated that they may not favour 3G for their next generation build-out in all markets, opening the door to WiMAX and other alternatives.

With this in mind, Intel Capital has set up a $50m fund to invest in the country's hi-tech economy, with a particular focus on WiMAX. The chip giant's venture capital arm has already invested $35m in Brazilian companies since 1999, including TelecomNet and Neovia. Latin America is becoming increasingly important as traditional markets for Intel's chips saturate, and in January CFO Andy Bryant said revenues from the region offset sales in North America in 2005.

Intel plans to spread the money among a variety of companies, but the primary focus is to stimulate uptake of wireless PCs and other devices using WiMAX and Wi-Fi.

According to new research by Maravedis, there will be 768,000 accumulated broadband wireless subscribers in Brazil by 2010, of which two-thirds will be WiMAX. The 3.5GHz auction will take place in July and regulatory changes in the 2.5GHz band will make it technology neutral, supporting 3G or WiMAX from 2007. Large operators will be the main investors, and could spend as much as $300m in four years. Among the likely investors are Telemar, Brazil Telecom, Embratel and Telefonica,all testing WiMAX.

About 70% of the uptake will come from residential users lured by portability, while the main adopters of fixed services will be businesses, said Maravedis, with the key tipping point being a sub-$100 subscriber unit.

Fixed line operators have an obvious interest in adding portability and expanding coverage with wireless, but the key issue will be whether cellular operators will also adopt WiMAX alongside - or even instead of - 3G. Growth in Brazilian cellular communications is rapid, with the total number of subscribers rising around 40% a year, to make Brazil the fourth largest cellular base by subscriber numbers in the world.

The operators are investing accordingly - for instance, TIM Brasil, a unit of Telecom Italia Mobile, is investing $2.5bn in Brazil in 2005-6 to increase network coverage and quality of service. Its main rivals are Claro, part of Mexico's America Movil; and Vivo, the largest of the three, which is a joint venture between Spain's Telefónica and Portugal Telecom.

There are low levels of interest in 3G compared to many territories. TIM Brasil, Vivo and the fourth cellco, Oi, said in a statement a year ago that they aimed to recover some of their existing investment in GSM/GPRS before moving to 3G (although TIM and Claro have EDGE) and that their priorities were wider spectrum for basic services, and a rapid move to high value services such as video.

The Brazilian operators want a solution that will enable them to deliver mobile broadband in a shorter timeframe than 3G will enable - either because of Anatel's reluctance to set any timescale for auctioning 3G spectrum, or their own economic pressures.

They are also cost sensitive - the cost of buying spectrum and building 3G networks is likely to be at least as much as operators have spent to date, said Luiz Eduardo Falco, president of Oi, a unit of Brazilian phone company Telemar, which won its first mobile license in 2001.

Brazil has already been the most active Latin American nation, along with Mexico, in promoting broadband fixed wireless services and testing portable or mobile extensions.

The Brazilian administration has a program called Service of Digital Communications (SCD), which aims to bring internet access to remote areas. Intel is working with government agencies and will have a WiMAX pilot, probably in partnership with Siemens, running by the end of this year. The network will not only serve rural communities but will generate most of its revenue from business users and providing services to ISPs and hosting companies.

Also in Brazil, Neotec, a consortium of mobile operators, has tested a NextNet-based system in urban areas, in the MMDS spectrum that many Brazilian operators own for television services, and Samsung has trials of its pre-802.16e technology Wi-Bro running in the country.

Decisions by the major Brazilian players, on how they allocate resources and build-out between 3G and broadband wireless spectrum and technology, will not only shape the next generation network for one of the most rapidly growing wireless economies, but will send out clear signals to operators facing similar decisions, in other parts of Latin America and elsewhere.

Around the world, IntelCapital has invested about $4bn in 1,000-plus companies since 1991. In Latin America, it has signed 19 deals worth $59m in Argentina, Chile, Colombia, Costa Rica, Venezuela and Mexico since 1998.

This article originally ran in Wireless Watch, a publication of Rethink Research. Reproduced with permission. For information on the weekly Wireless Watch Newsletter and other Rethink Research products and services, click here.