The policy of opening up the Brazilian market to the outside world, at the beginning of the 90s, led companies in various industries to close down. The telecommunications components industry practically vanished. The solution that some companies found to remain in the market was to change or extend that operating field – this was the case of Asga Microeletrônica, which produces equipment for telephone network access and was one of the first participants in the Technological Innovation in Small Companies Program (PIPE) that FAPESP launched in 1997. The project, which is close to completion, was given the name of 16xE1 Multiplexer and Optical Modem with Technological Innovation.
Located in Paulinia, 118 km from São Paulo, Asga managed to overcome years of losses and become a reference point in the telecommunications market. It was the first Brazilian company to develop and produce an optical multiplexer, the MMO 16xE1, equipment that turns electrical signals into the luminous signals used in optical fiber telephone transmission. According to Asga’s own estimates, this market will turn over around US$ 25 million this year in Brazil and US$ 80 million by 2004.
Exports in packages
With 90 employees and revenues of around R$ 25 million forecast for this year, Asga already accounts for 60% of the total number of optical multiplexers sold in this country. Among its customers are operators such as Telefônica, Telemar, Telecentrosul and the mirror companies (companies set up to compete with the privatized ex-state monopolies). In addition, the MMO16xE1 has recently begun being exported as part of a package of complete solutions sold by a multinational company.
Asga does not hide the secret of what it did to arrive at its enviable position: investment in research. Over the last ten years, it has invested around US$ 25 million, much of it spent on research into, and development of, new technologies and new products.
Founded in 1989 by a group of former professors at the physics department of the Campinas State University (Unicamp), the company began manufacturing optoelectronic components for telephone equipment, such as the multiplexer. With the opening of imports and the arrival of internaional competitors, it had to diversify its business and it invested in the manufacture of complete network access equipment for telephone exchanges, including large companies’ PABX (private automatic branch exchange) equipment.
From 1992 to 1994, the company underwent falls of up to 70% in its revenues, but it invested at R$ 2.5 million in projects. Finally, in 1995, the company earned its first profit in of the decade. In the four following years the company grew by 30%.
“We switched from the components market to the equipment market and we managed to overcome the crisis by investing in technology”, says the president, José Ellis Ripper Filho. From Rio de Janeiro and 61 years old, Ripper took his degree in electrical engineering, is in has a passion for physics, and lived for nine years in the United States, where he did his doctorate at the Massachusetts Institute of Technology (MIT).
In Asga’s new phase, the first equipment to be developed was a G703 standard, electro-optical converter of electrical signals for fiber optics, known as elo-2 (link-2 or little link) and later called an optical modem, the name that later spread around the telecommunications industry. In 1996, the company won a large contract for the supply of the optical modem to various telephone operators, then state-owned companies, such as Telegoiás and Telebahia, and it introduced various improvements to its products.
The function of the MM16xE1 optical modem multiplexer is to collect the electrical signals arriving at a telephone exchange, convert them into a light beam and transmit them to another exchange through optical fibers. “It is as if it were public transport, which in this case carries various electrical signals in a single beam of light at the same time”, explains Rege Romeu Scarabucci, Asga’s research and development director and the project coordinator. When they arrive at the other exchange, the signals are converted back again into electrical impulses and they continue on their way.
“The equipment can transmit a large number of high-quality signals”, says Scarabucci. The MMO16xE1, called in Asga the 16E1, can carry 480 lines in a single beam of light at the same time, at a speed of 34 Mb/s (megabytes per second). These lines can carry voice, data, and images.
Scarabucci says that the main innovations introduced in the project are to measure the performance in real time and the cross-connect function. While the performance measurement measures the quality of the signal all the time, the cross-connect function enables channels along a given route to be introduced or removed, as well as guaranteeing the working of the system in the event of any optical fiber breaking. In addition, the 16E1 enables the measurement of the optical transmission power, reception and error rate there may be in the system.
The project’s first phase has been completed and the second is expected to end in November. To complete the projects, it remains to add software for managing the SNMP (Simple Network Management Protocol) system to the 16E1, which will be open to other systems and have international coverage, intended for managing telecommunications equipment and that of Internet service providers. “The 16E1 project was very grueling, since we faced various difficulties, for example: learning to design equipment with the latest generation of chips, as well as using them to obtain the best system performance”, says Scarabucci.
In 1998, the product was launched on the market and the company achieved average sales of 200 units a month. In two years, production doubled and the equipment became the company’s leading product. Currently, around 400 multiplexers a month are sold, accounting for 60% of Asga’s sales, which amounted to R$ 15.5 million in 1999. The 50% growth expected for this year is because of the boom of the mobile phone market, which requires the sector’s infrastructure to be expanded.
Ripper took part in the launch of the PIPE in 1997 and made a speech on behalf of the small businesspersons. “FAPESP’s initiative of the small company program was excellent, but I believe that it is time to re-examine a few points”, he says. In his opinion, the changes in the telecommunications sector happen very fast and the present model of the PIPE does not keep up with the needs of industrial development. “I believe that the project could achieve better results with a few conceptual changes, such as appraising the projects just once, while releasing the money in stages”.
Asga has another project underway in the Technological Innovation in Small Companies Program. It is developing a much faster multiplexer, the STM-1, with the capacity to carry 1,890 channels in a single beam of light at a speed of 155 Mb/s. The STM-1 is designed for the same market segment as the 16E1 and uses SDH (Synchronous Digital Hierarchy) technology. “The STM-1 is important, because it will consolidate Agsa in the communication transport services field of access to public networks”, says Scarabucci. It can be used inside telephone exchanges, in mobile phone base stations, and by Internet service providers.
“It is quite a sophisticated product, and only a handful of foreign companies have mastered its technology”, he explains. The project’s first stage was recently completed, by carrying out a feasibility study, some tests of the main circuits and a survey of the needs for the control and management of the equipment.
The second stage takes place at the same time as the manufacturing of access equipment with SDH technology, to be used mainly in mobile phone base stations. A new modem is also being developed, using the same technology, for use in systems distributing voice, data and Internet services. Asga expects to place the STM-1 on the market in the first half of next year. The production manager, Laércio Bonon, is an example of the enthusiasm there is in the company. “I feel very proud of being part of a team that develops and produces high-technology equipment, even more so in a country where this sector has almost no support”, he concludes.
Rege Romeu Scarabucci, 62, is a graduate and postgraduate in Electrical Engineering at the Aeronautical Technological Institute (ITA). He did his doctorate in Telecommunications at Stanford University (USA). In 1999, he was awarded the Santista Prize as Scientist of the Year in the telecommunications field for the development of technology and equipment.
Project 1: Development of the 16xE1 Multiplexer/Optical Modem with Technological Innovations.
Investment: R$ 46,000 and US$ 180,770.
Project 2: Development of the STM-1 Multiplexer for Optical Access Networks.
Investment: R$ 226,300.
A good time for the telephone business
Brazil is considered one of the most sought-after markets in the world in the telephone industry. The country is going through major expansion and it is estimated that by 2003 investment in the sector will come to R$ 80 billion, or 12% of the world market, assessed at US$ 626.5 billion. Of this total, US$ 119.7 billion is estimated as being spent on equipment and the remaining amount, US$ 506.8 billion, on services.
Today, the structure of the present reality in Brazil, which will hold true for a number of years, is based on building infrastructure and on installing equipment, a niche to be exploited by big and small companies that sell products with added value. By next year, the operators that have taken over the 12 companies in the Telebrás System will have to deliver a further 15 million fixed telephone lines, amounting to 33 million handsets.
It is estimated that in 2003 there will be another 40 million handsets, which means market growth of 20% a year. The Brazilian Electronics Industry Association (Abinee) calculates that by then, there will have been investment of R$ 67 billion in purchasing new equipment. Just to compare, in 1999, according to the Telecom 2000 yearbook, sales of telecommunications products in Brazil were US$ 11 billion.
In the mobile phone field, the numbers are also big. Companies see growth of 40% in their subscriber base for this type of service. The opening of the C Band alone, in the months to come, will turn over around R$ 7 billion. As well as the telephone market, the country has great potential in a number of services with pent-up demand, such as data, text and video, and trunking services.
The potential of the Brazilian telephone market is attracting large international manufacturers of telecommunications equipment, such as Motorola, Nortel, Siemens and Ericsson (see the Production Line section on page 49). These companies are setting up their plants in this country or are increasing their existing investment to take advantage of the advantageous period through which Brazil is going. Most of these companies have set up chiefly in Greater São Paulo and in the Campinas and São José dos Campos regions.