Neutral networks can change the internet in Brazil | Telecommunications

Oi’s restructuring brought to light the concept of neutral networks for the Brazilian daily life. The operator wants to transform Oi Fibra’s entire infrastructure into a company open to other internet providers. The model was defended by competitors such as TIM and Vivo, who also plan to venture into the format.

This type of network allows several operators to operate with the same infrastructure, which will allow them to optimize investments and increase broadband internet competition in Brazil.

What are neutral networks?

O Tecnoblog talked to Rogério Takayanagi, vice president of Strategy and Transformation at Oi. He explains: “Neutral networks are networks that can be fixed or mobile and that serve several telecommunications operators in a non-discriminatory way”.

For the executive, the format resembles the sharing of mobile phone towers, which is widely adopted in Brazil, defended by operators and encouraged by Anatel itself. “This type of sharing (…) helped to prove the value of the model for the sector”.

In practice, a neutral operator allows several companies to use the same infrastructure, which can be optical fiber, metallic cables, mobile networks and even satellite. A company interested in becoming an internet provider can simply rent the capacity of that network and cover entire cities without spending a cent on its own network.

Example of neutral network (Image: Henrique Pochmann / Tecnoblog)

For the end consumer, the service is transparent and the user does not even need to know that he is connected to a neutral network. All service, from installation to technical support is done by the contracted operator. Several companies are able to operate on the same cable thanks to technologies such as VLANs, which allows the creation of virtual networks at the link layer.

It is important to remember that neutral networks are completely different from virtual operators, that parent companies resell existing infrastructure without network control and management. “Neutral networks are characterized by making high investments in telecommunications infrastructure and selling this capacity to several‘ tenants ’. This way, it not only manages to have access to capital in a more economical way, but also optimizes the use of the built infrastructure ”, says Takayanagi.

Large operators need fiber

The demand for fixed internet is growing in Brazil. Anatel data from August 2020 show that the country had 34.3 million broadband accesses. In the same period last year, there were 32.9 million modems and in 2018 we had 30.8 million contracts.

Accesses grew considerably thanks to small providers, which played an extremely important role in the popularization of optical fiber in Brazil. In 2018, 18.6% of all connections in the country used the FTTH format; in 2019, the number jumped to 31.5%, and now the optical fiber has reached 41.3%.

However, the major operators have not yet managed to reach the same level of fiber: in 2018, Claro, Oi, TIM, Vivo and Algar had only 10.9% of accesses with fiber; in 2019, the number jumped to 19.2%, while in August 2020 there are 27.5% of FTTH connections.

It looks like a big rise, but that number is inflated by the disconnections of copper: together, these large operators lost almost 5 million fixed broadband customers with legacy technology between 2018 and 2020.

Oi already understands that the speeds offered in copper do not meet consumer expectations, it stopped selling new accesses with xDSL technology and concentrates almost all efforts in the construction of the fiber network. Vivo has also been overlapping the copper network in the areas of GVT and Telefônica de São Paulo, but very slowly.

Oi team building Oi Fibra network. Photo: Lucas Braga / Tecnoblog

Oi team building Oi Fibra network in Belo Horizonte. Photo: Lucas Braga / Tecnoblog

The only major operator that is in a “comfortable” position is Claro, which uses coaxial cables in most municipalities. The adopted technology allows to deliver download speeds comparable to those of optical fiber thanks to the DOCSIS 3.1 standard, but with the burden of low upload speeds and electromagnetic interference, which do not occur in the fiber. The company itself already adopts fiber in the incoming locations – and I do not doubt that in the distant future it will start to serve the most profitable regions of large cities with FTTH.

In any case, large operators need fiber to contain the drop in accesses and remain relevant in the telecommunications market. The adoption of the neutral network model gives companies a chance to maximize their investments, either by increasing the occupation of fiber ports or by renting neutral infrastructure from other companies.

TIM CEO Pietro Labriola said at a news conference that the company already has more than 20 non-disclosure agreements for building a neutral network. “It has a purely financial partner and an industrial partner”, commented the executive when differentiating investors and infrastructure companies. In the past, the executive has not ruled out that TIM becomes a customer of InfraCo – that is, the operator could rent Oi’s neutral infrastructure to reach more customers.

Neutral networks optimize investment

Neutral networks bring advantages, both for the owner of the infrastructure and for those who rent. Takayanagi affirms that the adoption of the neutral model allows a reduction of costs for all involved: “This allows the company to unlock its investments, attract new investors, accelerate the capex and the expansion of the fiber network ”.

The executive also points out that the expansion of the service should contribute to digital inclusion in the country. “Through this model, we reduce redundant investments in transport networks. With this, service providers can focus their investments and attention on their core service. I believe that we will have better competition with higher quality and competitive prices ”, says Takayanagi to Tecnoblog.

It is certain that with more competition, the network would be more “full”. When asked how the user experience can be compromised, Takayanagi says that sizing criteria must always predict demand.

“The idea of ​​having a greater occupation is to reduce idleness, to seek synergy in investments and not to occupy the networks beyond their capabilities. For example, instead of launching two fiber optic cables along a highway, you can launch just one and put more powerful equipment on the ends to serve more than one customer ”, says the executive.

Solving urban problems

A hypothetical massive adoption of neutral networks could solve some urban problems, such as the big mess generated by the power pole cables. Here, it is important to note that the energy utilities are the owners of these poles, which are rented to operators to hang their telecommunications cables.

Aneel standards allow each pole to have a 50 cm strip to accommodate up to five attachment points for telecommunications services. However, there are places where a single operator alone exceeds the allowed capacity, and there are also regions where there are more than five ISPs.

A lot of telecommunication cables hanging from a power pole

This is a common post in Belo Horizonte, which is not even so full. Complicated, right? (Image: Lucas Braga / Tecnoblog)

With poles so full, new operators find it difficult to install their infrastructure, since the energy company will not rent their poles while current companies exceed the maximum capacity. That is why several small providers use the poles irregularly and have already had their cables cut.

With several operators sharing the same fiber optic cables, it would be possible to remove several wires from the power poles. Incidentally, this is the suggestion of Anatel’s Competition Superintendence, which suggests a neutral operator to deal with the occupation of these posts. Otherwise, the agency estimates a cost of R $ 20 billion to reorder telecommunications cables in 1,400 cities in Brazil.

Neutral networks in other countries

In order to become a neutral provider, Oi decided to adopt the company’s structural separation. InfraCo will be the isolated production unit responsible for the construction and management of the fiber network, while ClientCo will be the owner of the operator’s customers. Rogério Takayanagi said that Oi is inspired by operators from countries like Australia, India, Italy, United Kingdom and Czechia.

However, the structural separation of an existing operator is not the only existing format. It is possible to create a neutral network from scratch, with no telephone companies involved, in which the provider or the customer pays the rent for the fiber infrastructure.

Illuminated optical fiber. (Image: Visor69 / Pixabay)

Illuminated optical fiber. (Image: Visor69 / Pixabay)

In Italy, Open Fiber is an agnostic company that takes optical infrastructure to hundreds of cities and serves more than 150 different internet providers. Not all are available in any municipality, but each company has different plans, values ​​and quality of access. The fiber currently supports speeds of up to 1 Gb / s for the end consumer.

Another interesting example is Utopia Fiber, which operates in the United States in selected locations in the state of Utah. The company charges a monthly fee of $ 30 from the broadband customer who wants to use the network. Internet access is charged separately by the provider. Each operator has its own price, access quality and additional services, which offer speeds from 250 Mb / s to 10 Gb / s.

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