Brazil's neutral fiber networks: The state of play

Neutral fiber networks began to flourish in Brazil around mid-2021 due to both economic and commercial factors. 

On the one hand, carriers were looking to monetize assets and raise funds from the partial segregation of their physical infrastructure, as was already happening with their datacenters and towers. At the same time, they saw the potential of a new revenue stream.

In partnership with investment funds, leading operators bet on the rental of their installed fiber infrastructure for the provision of fiber-to-the-home by internet service providers (ISPs) and third-party carriers.

The three main players in this segment are V.tal, I-Systems and FiBrasil, each with a main operator as partner and different service offerings.  

Since its birth, the segment has grown and large contracts have been signed, but it really never took off as initially expected. This is partly due to doubts of operators and ISPs about issues such as remuneration for network use, dealing with end-customers in the case of technical fiber problems, and competition with operators that are partners of the neutral networks.

Based on comments from their CEOs at recent events, BNamericas looks at the current status of each of the networks and their main goals.

V.TAL

Controlled by funds linked to local investment bank BTG Pactual, it reports over 22mn homes passed with fiber optics that are served by 450,000km of fiber backbone.

V.tal was created in 2021 from the separation of Oi’s fiber infrastructure assets. The Brazilian telco remains as minority partner and its anchor client.

In addition to Oi, V.tal reports having around 80 contracts with other carriers and ISPs for renting the network to provide FTTH services, according to its CEO Felipe Campos.

Most of these contracts have not been disclosed publicly. Among V.tal's known clients are operators TIM and Sky, in addition to ISPs Vero and Ligga. Vero was V.tal's first client after Oi, while Sky is present in over 200 cities using V.tal's network.

Campos is bullish on the neutral network business, saying V.tal is expanding at a monthly rate of over 10% in terms of homes passed. This means that if the company was a traditional FTTH operator it would be the fastest-growing player in the market.

In addition to the fiber backbone, V.tal operates over 26,000km of submarine cables in the Americas via its Globenet subsidiary. It also owns datacenters in Brazil and Colombia.

Despite its positive outlook, the likely acquisition of Oi's fiber client base by V.tal is raising doubts among some of its customers regarding the competitive conditions once the wholesale company gets to fully own a retail operation.

Looking ahead, Campos said V.tal is focusing on providing ISPs with solutions other than fiber, such as street-level solutions (SLS), distributed antenna systems (DAS) and indoor coverage. In the last area, V.tal is providing indoor connectivity infrastructure for the Ligga sports stadium in Paraná state.

Campos also said that V.tal is “very attentive” to the private networks segment and is applying AI internally for process management, among other use cases.

In 2022, V.tal unveiled a 2025 investment plan of 30bn reais (US$5.31bn) with the goal of reaching 32mn homes passed.

FIBRASIL

FiBrasil, a JV created following the 2021 sale of 50% of Telefônica Brasil’s fiber unit to Canadian fund CDPQ, is present in 151 cities in 22 states, with over 4.6mn homes passed with fiber, according to its CEO André Krieger.

The company, which has Telefônica’s Vivo as an anchor client and partner, now reports 40 contracts with ISPs and carriers, but does not provide details about these clients. Last year, it reported having around 50 contracts. 

Among the known customers are Sky and Vero, which also lease V.tal’s network. According to Krieger, the customer base includes several medium-sized and large ISPs. 

FiBrasil began operating with around 1.6mn homes passed and aimed at reaching 5.5mn in four years. 

After more than three years, Krieger says neutral networks are much more economically advantageous for operators than investing in fiber construction but he recognizes that the model is still in a phase of maturation and consolidation. 

Unlike V.tal, which offers the possibility of taking fiber to the home for their ISP customers, FiBrasil only takes fiber to the pole, or the last-mile connection. It also offers ancillary services like advanced Wi-Fi, which is the responsibility of the ISP in terms of the client relationship.

BNamericas has learned that FiBrasil is betting on a migration of V.tal customers, including some who use both networks, after the purchase of Oi’s fiber client base.

For the near future, FiBrasil sees 5G reinforcing the fiber business and vice versa. Without providing details, Krieger says the company has worked with certain operators in the area of fiber-to-the-site, bringing fiber to 5G transmission equipment.

FiBrasil has also used AI internally for network and traffic management and for issues related to inventory, according to the executive.

I-SYSTEMS

A JV between tower company IHS Towers and TIM Brasil, I-Systems has approximately 8mn homes passed with fiber, 2mn of which were added in the past two years, according to CEO Fernando Barros.

The network is present in 41 cities in 10 states, reporting 30 contracts with carriers. The São Paulo metropolitan region is currently the company’s main focus and growth area.

In 2022, I-Systems said its goal was to reach 8.9mn homes passed by the end of 2024. TIM, with close to 954,000 FTTH accesses as of August, is I-Systems’ main client. 

Despite claiming to have dozens of contracts in place, I-Systems offers even fewer details than its competitors about the customer base. Among the known customers is Sky, which is also a client of V.tal, FiBrasil and American Tower.

I-Systems says it has an advantage over its main competitors by having a tower and wireless infra company as a partner, IHS.

This would allow for synergies in the provision of telecom infrastructure with fiber towers, DAS, SLS and data processing at the edge, the so-called micro or far edge. The micro edge datacenter models covered by I-Systems are mostly cabinets with power of around 10kW.

As for the deployment model, I-Systems offers its clients fiber connectivity up to their customers' homes.

On the technology front, it is using AI to automate and manage processes, according to Barros, who also sees AI as a major fiber driver due to increased traffic and data processing.