Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Tuesday, March 17, 2020

SME providers lead the way in the Brazilian broadband market

With the deployment of fiber optics and good customer service, small local and regional companies have achieved a prominent place in the interior of the country and have now started to venture into large cities, in clear competition with large operators.

With 9.88 million subscribers in a market of 32.56 million, the so-called PPPs (Small Port Providers) of fixed broadband service, at the end of last year, led the only Brazilian telecommunications market with growth during 2019. Multiple factors led to crystallize a movement started in recent years and that will surely continue to grow in the coming years, especially in the interior of Brazil, but also in large cities.

A clear example of the Brazilian fixed broadband market is what happened last December. While large operators (Claro, Vivo, Oi and TIM) lost 217,000 subscribers, PPPs added 150,000 new clients to their services, a trend that has also been seen in recent years as constant. Specifically, while the general fixed broadband market grew 4.5% in 2019, PPPs registered a 31.7% increase in the number of subscribers.

It should be taken into account that at the end of 2018 the Anatel (National Telecommunications Agency) changed the concept of PPPs, and instead of considering companies with less than 50,000 subscribers as such, started considering those with a market share of up to 5%.

The reasons. There are several data that explain this escalation of SME providers. From a technological point of view, the fundamental factor is the deployment of fiber optics to the home (FTTH). In addition to being an investment that is within their means, it allows them offering a quality service to clients from small municipalities that previously depended on the arrival of one of the large companies in the sector to be able to access the Internet or pay TV and with services that, among other cases, were deficient due to low speed.

These small companies - more than 9,500 - are already present with fiber optics in 2,633 municipalities throughout the country and it should be clarified that in 875 of them they are the only providers of FTTH, which is equivalent to 15.7% of the municipalities throughout the country, with the clarification that no SME has the conditions or obligations to offer wholesale services.

Evolution. In total, by the end of 2019 FTTH had become the main technology to provide fixed broadband, with around 10 million accesses, of which about 5.8 million belonged to PPPs. At the end of 2018, the sector registered 5.82 million fiber optic accesses.

Accesses through metal cables (xDSL) totaled 10.3 million at the end of last year (2.7 million less than at the end of 2018). Clients via coaxial cable remained at 9.5 million (almost the same as a year ago), while accesses via radio fell from 2.32 million to 2.17 million. Satellite accesses grew from 189,000 to 267,000 subscribers. 

Another fundamental factor for the growth of small Brazilian providers is the closeness and prompt attention of their clients, which differentiates them from large companies. It should be considered that those clients from small inland municipalities, where in most of the cases have problems with almost all public services; the emergence of a private provider that offers the Internet with the latest technology, speeds similar to those offered in large cities, and which, in addition, solves the clients’ problem, are convincing conditions for these citizens. Precisely, this dynamic also drives the appearance of PPPs in large cities, where they have started to operate with great success, competing with large operators.

This situation is corroborated by satisfaction rates of customers of the fixed broadband service –annually produced by Anatel-, where it recorded that in 2019 there was a general improvement in that index, with growth in the northern states and only some discontent was verified in the state of Paraná.

In this quality survey carried out by the regulator, it found that the worst perceptions of users of fixed broadband were registered in the areas of "telephone service" and "problem solving capacity", traditional weak points of large operators, which even surpassed in dissatisfaction the items of "operation" and "collection". Of course, the large operators took note of what is happening and already in 2019 increased the pace of their investments in FTTH and days ago the main managers of Claro, Vivo, TIM and Oi, stated that their main objective in 2020 will be FTTH.

It should be noted that in the 5G spectrum tender, for the first time there will be a 100 MHz reserve in the 3.5 GHz band for regional providers, which is a demonstration of the importance of Brazilian telecommunications PPPs.

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