(*) Amos Genish
The number of households, small and medium-sized enterprises with fixed broadband internet connections in Brazil (known as homes connected) exceeded 44.4 million in December 2022, with 64% of this total – 28.5 million – with fiber optic technology and the residual with other technologies, mainly copper, according to official data released by Anatel.
This market has two clear strands of growth: (i) migration of legacy technologies – such as copper to fiber, and (ii) the entry of new users. This perception is corroborated by recent historical data released by Anatel: broadband internet connection via fiber has grown by 18.4 million homes connected in the last 36 months. Despite the result already achieved, the fiber optic connection market still has room for development and growth over the next few years.
To this end, it becomes necessary to understand the verticalized model that prevailed until then in the telecommunications segment, characterized by the ownership of fiber networks or technology by Internet providers.
This way of acting, associated with the existence of more than 7 thousand Internet providers dispersed throughout Brazil, has brought some side effects and inefficiencies to the sector, mainly: a high overlapping of networks from different Internet providers, the over-occupation of poles and urban spaces where the fiber networks pass, as well as network occupancy rates that have had difficulty reaching take-up rates above 20-25%.
In addition, the construction of such proprietary networks means a high initial investment necessary for its implementation, greater time-to-market due to the procedures for obtaining licenses and authorizations and, as a consequence, a reduced addressable market for the player. This scenario becomes more challenging for providers in the face of the macroeconomic scenario and with higher interest rates.
At the same time, users have been demanding a higher volume of data traffic, especially due to the use of new technological resources such as streaming, 5G and internet of things (IoT). This increase has overwhelmed existing network infrastructure, resulting in the need for continued investment in infrastructure.
The recent entry of neutral networks in the Brazilian market allows the sharing of its infrastructure at the national level with different market participants, such as operators and internet providers, Tel-techs and even companies that do not currently operate in the sector. The performance of these players seeks to address the two challenges presented as follows:
- access to a broader addressable market linked to the capillarity of neutral networks and a more agile time-to-market with a minimal investment required, allowing a greater focus on serving its end users and as a measure to potentially preserve the return of operators and players in the sector;
- the use of this network is able to provide a greater data transport capacity, a higher transmission speed and lower latency compared to existing legacy networks.
In summary, the sharing of infrastructure by the neutral network can mitigate a relevant opportunity cost to its customers to have their own network and consequently, presenting a greater occupation, volume and efficiency of this model. As a consequence, we have the guarantee of greater rationality to the sector and better use of capital, which is reflected in greater benefits to internet end users in the country.
Through the development of this digital infrastructure, neutral networks can act as growth vectors for the high-speed internet business and the expansion of the fiber network, combined with the acceleration of digital inclusion throughout the country.
(*) Amos Genish is the CEO of V.tal
