Issue: 05/09

Fibre to the Home Europe 2009 Conference

February 18 , 2009

ATUG Opinion this week is a summary of the Fibre to the Home Council Europe 2009 Conference. Presentation materials and reports available from the Council’s website at
http://www.ftthcouncil.eu/resources/newsroom/studies/studies/?cid=31&catid=4

ATUG is holding a Focus Forum on Fibre Network Deployments, Costs and Regulatory frameworks led by J. Scott Marcus, a Senior Consultant for WIK-Consult GmbH on 5th March in Sydney. To register Click Here. ATUG will make a summary of the discussion available to all members through ATUG This Week.

There are many important questions arising from the NBN process:

Can we ensure efficient investment?
Is duplicate infrastructure the same as competitive infrastructure?
How much risk is there?
How should risk be priced in access prices?
How open is the “Open Access”?
What role for regulation?

The FTTH Council Europe conference provided much recent information on these and other issues:

Global Ranking released at FTTH Council Europe Annual Conference, Copenhagen, 12th February 2009
http://www.ftthcouncil.eu/documents/press_release/GlobalRankingPressRelease-FINAL-12.02.09.pdf

The number of economies where fibre to the home has established a significant and growing market presence has nearly doubled over the past 18 months, according to an updated global ranking issued today by the FTTH Councils of Asia‐Pacific, Europe and North America.

The ranking, issued twice a year since 2007, was released today at the FTTH Council Europe’s annual conference in Copenhagen, Denmark. It tracks the level of FTTH market penetration in economies where more than one percent of households are connected directly into high speed fibre networks. In all, 20 economies met this threshold, up from 14 in July 2008 and 11 in July 2007.

The growth is largely due to the entry of several European countries in the ranking, as fibre to the home deployment begins to expand across that continent and the total number of FTTH subscribers in Europe approaches two million.

Asian economies maintained their leadership in FTTH market penetration, as South Korea (44% of the market), Hong Kong (28%), Japan (27%) and Taiwan (12%) continued to hold the top four places respectively.

Meanwhile, Japan remains the overall leader in terms of the number of fibre-connected homes at 13.2 million, followed by the United States (6.05 million) and the People’s Republic of China (5.96 million).

Yankee Group – Next Generation Access Services (Study of 20 service providers including TransACT)
http://www.ftthcouncil.eu/documents/studies/Analysis_of_Service_Portfolios.pdf

Key Learnings - Economic and Business Model

A number of FTTH operations are already profitable
Service prices vary widely across geographies
NGA ARPUs are reliably 30% above DSL ARPUs
Broadband itself is a profitable product (in fact the most profitable for many players

Usage and Network Impacts

FTTH users currently use 5-10 times as much access line capacity as DSL users
FTTH-only operations tend to be net contributors of traffic to the wider internet
Peering and transit dynamics are evolving driven by NGA

Services and Innovation

HD is a key driver for adoption and the target for service providers is to deliver 2+ simultaneous HD streams
The SOHO market is underserved with NGA service and seems top be regarded as a low hanging fruit
Video-communications are seen as a crucial service and enabler of wider-economy services but are still underdeveloped

IDate Update on fibre deployments in Europe
http://www.ftthcouncil.eu/documents/studies/Market_Data-December_2008.pdf

The panorama of FTTx deployments in Europe as of December 2008 shows that

The FTTH market in Europe continues to grow Especially in terms of Homes Passed (+27%) reaching around 11.2 million
Subscribers shows a +25% growth but are concentrated in 6 countries
Dynamism of countries like Netherlands (with Reggefiber’s leadership) and France (FTTB/DOCSIS 3 deployed by Numericable to nearly 3.5 million homes)…but also Norway, Sweden, Denmark and Spain where Telefonica started an important roll out
Dynamic Eastern Europe countries like Slovenia (2 players involved), Slovakia
Major FTTH/B plans announced in Greece, Portugal
Main European incumbents are deploying or will soon deploy FTTH/B: France Telecom, Telefonica, Telecom Italia, Belgacom, KPN, Swisscom… others are still mainly positioned on VDSL: BT, Deutsche Telekom…

OVUM - Study (Sweden) on the Socio-Economic Benefits of Fibre
http://www.ftthcouncil.eu/documents/studies/Socio-Economics_Study.pdf

1. The provision of fibre at a municipal level is regarded as having positive benefits on health, education and other public services. These benefits range from reduced telecom costs to more efficient and new services. This is particularly true in rural areas where limited resources and distance are barriers to service quality

2. There is a strong belief that there are a number of indirect benefits derived from fibre rollout. These range from bringing communities closer together to stimulating new ways of working. This is particularly true in more isolated areas

3. To date, there is very limited evidence of any distinct social or economic benefit on any significant scale from fibre provision to individuals’ homes. Today, there are virtually no services that can only be delivered over fibre-based broadband. But fibre is regarded as essential for future-proofing

4. However, there are a handful of cases where FTTH is linked to improvements specifically in rural areas, where very high-speed broadband is key for remote workers in certain verticals or the relocation of higher GDP individuals who are fibre advocates

The study also reported that in Sweden:

Market deregulation provided an opportunity for municipalities to bring their telecoms costs down by building their own networks between public buildings/municipalities with cheaper costs due to technology. The adoption of open access model leading to more competitive prices.

Market Forecast – Europe February 2009
http://www.ftthcouncil.eu/documents/studies/Market_Forecast.pdf

There will be 20.5m FTTH households at the end of 2013, with Russia and France leading the way, and Sweden and Slovenia leading on household penetration

FTTH slowed down in Europe in 2008, but despite the credit crunch we expect compound annual growth rate will top 50% between 2008 and 2013

Key leading indicators for FTTH deployment have turned negative, leading us to moderate our forecast from last year, with many countries more than a year behind the original schedule

The US is now about four years ahead of Europe on average in FTTH maturity; Japan is about 8-10 years ahead

Strong European demand for bandwidth to support key devices and applications remain strong drivers for FTTH

Level of economic development is not the main factor for high FTTH penetration: there is plenty of activity in eastern territories with lower GDP

Household penetration will top 30% by 2013 in advanced European nations, but remain below 5% in several important countries

No one type of operator will dominate: unlike in other global regions, the incumbent national telco will not be the dominant provider in many European countries

The FTTH Council’s Deployment and Operations Committee released an Update of the FTTH Handbook - http://www.ftthcouncil.eu/documents/studies/FTTH_Handbook.pdf