Why neutral fiber network I-Systems is yet to close ISP contracts

Created in November 2020 as a JV between Brazil’s TIM and tower company IHS Towers, fiber neutral network I-Systems is yet to sign leasing contracts with third-party telcos and internet service providers for the use of the network.

In contrast, neutral network V.tal, created by Brazil’s Oi and funds linked to BTG Pactual and GlobeNet, reports 32 contracts with ISPs for the use of fiber infrastructure, with more in the pipeline.

For now, I-Systems is focusing on getting the infrastructure in order before approaching potential tenants other than TIM, TIM’s CEO Alberto Griselli told BNamericas. “It will sign up ISPs, eventually it will.”

I-Systems has focused on deploying last-mile fiber to TIM. As JV partner, TIM owns 49% of I-Systems and IHS the rest.

IHS paid 1.09bn reais (US$208mn) to TIM and made an initial contribution of 233mn reais to I-Systems. IHS will contribute an additional 350mn reais to I-Systems in annual installments over three years.

“We essentially outsourced the fiber deployment from the ONT [optical network terminal] to the premise. All the rest behind that, the backbone and the backhaul, is ours, remains with us. By relying on I-Systems to do the last-mile for us, we exchange capex for opex,” said Griselli on the sidelines of TIM’s São Paulo 5G launch event.

I-Systems is deploying fiber to TIM at a pace of roughly 50,000 homes passed per month, he said, and the expectation is to ramp that up to around 100,000 in the short term.

Previously, TIM said it expected to reach 8.9mn premises passed with fiber in 2024 through the JV.

V.tal, in turn, is at a pace of about 400,000 premises passed with fiber per month. It also claimed to have 7mn homes and small businesses passed with fiber in Brazil by July, with plans to reach 20mn this year and 34mn through 2025.

The difference, said Griselli, is that while V.tal relies on a 400,000km national fiber backbone inherited from Oi to build up the last-mile network, TIM’s backbone is much smaller and concentrated in São Paulo and Rio de Janeiro.

Telefônica Brasil, for its part, targets 29mn homes passed with fiber by 2024, of which 6mn are expected to come from its FiBrasil JV with Canadian pension fund CDPQ. 

5G ROLL-OUT

TIM launched 5G in the 3.5GHz band in São Paulo with 850 dedicated antennas, reaching all the city’s districts and 91% of the population. 

Overall, the company has 1,150 towers/sites – structures where antennas are attached – in São Paulo. Of these sites, 850 have 5G antennas now operational, CTIO Leonardo Capdeville said.

By the end of August, it should reach 1,000 sites, with 1,150 sites having operating 5G antennas in the coming months. 

The company also claims 2.4mn 5G-compatible smartphones are operating in its network, compared to 2.6mn reported by rival Claro.

TIM is maintaining its main suppliers for 4G, Ericsson and Huawei, for the 5G roll-out, at least for the first phase of the service.

Capdeville said that around 55% of the 5G antennas TIM has deployed in cities where the service was launched were provided by Ericsson and 45% by Huawei.

Contracts usually vary per geography and country regions. 

As such, the 5G antennas deployed in Brasília, Belo Horizonte, João Pessoa and São Paulo were provided by Ericsson, whereas Huawei supplied the ones for Porto Alegre.

The next state capitals to have the 3.5GHz band cleared for 5G use by telcos are expected to be Curitiba and Rio de Janeiro. In both cases, TIM’s provider will be Huawei.

TIM does not disclose capex for these antenna roll-outs. Overall, it intends to invest 4.8bn reais this year and 14bn reais in the 2022-24 period. The 5G deployment capex falls under both guidances.

Asked about 5G activation in non-capitals still in 2022, Capdeville said it would depend on clearance by regulator Anatel and by the technical bodies overseeing the 3.5GHz band technical clearance. 

These bodies are focused on clearing the spectrum for commercial use in all state capitals to meet the September regulatory deadline for 5G launch in these cities, as established in the spectrum auction rules.

But Capdeville said TIM might bring 5G forward for private networks in other cities in the meantime.

“In terms of the private indoor networks, we have it easier [regarding technical clearance] because it has restricted coverage [compared to public commercial 5G networks]. Other than that, we depend on the spectrum clearance process. And Anatel's schedule is now all focused on the capital cities,” Capdeville said at the event.

In São Paulo, the public 5G network will be available to TIM's customers with compatible phones, free of charge, in the non-standalone format – that is, with dedicated 5G spectrum in the 3.5GHz band but using the network core of 4G technology.

TIM ensures user experience in terms of speed will be the same as in standalone 5G (SA), which uses dedicated spectrum and 5G network core. However, the non-standalone format will not offer the low latency promised in the SA format.

To have this full experience, TIM's customers with compatible devices must sign up to a booster plan, with extra data allowance and other features, free of charge for the first 12 months of contracting.