JOHN WILLIAMSON FTTX BENEFIT
with about 75% conversion of premises passed, is the result of an alliance of local electric utilities in rural Norway selling under the brand Altibox, and is effectively a local fixed line monopoly. The second is the Reykjavik power company which sells only fibre and no services - not even Internet access - to end users. It basically picks up a utility charge every month for either 500 Mbits/s or 1 Gbits/s access, and end users choose ISPs, TV providers and so on independently. “Utilities are treated very differently from telcos by financial markets, and this benefits them,” said Wood. Wholesale/retail alliances between network owners and service providers – such as that between CityFibre and Vodafone in the UK – also seem to work well. These two recently announced a long-term strategic partnership designed to bring ultrafast Gigabit-capable full fibre broadband to up to five million UK homes and businesses by 2025. The duo say that this deal provides Vodafone UK with access to a superior product at a lower cost, and with better service conditions than the regulated wholesale terms offered by the incumbent operator for access to its legacy copper broadband network. “It is consistent with Vodafone Group’s capital-smart fixed infrastructure strategy that aims for an optimal mix of build/strategic partnership/ CAPACITY AND CONTENT The capacities offered by particular FTTH/ FTTP technologies vary significantly. The widely-used GPON supports 2.4 Gbits/s downstream and 1.25 Gbits/s upstream, typically shared over 32 or 64 lines. The newer XGS-PON, being adopted by operators such as China Telecom, Korea’s SK Broadband and Telefónica, offers 10 Gbits/s symmetrical and asymmetric10 Gbits/s downstream/ 2.5 Gbits/s upstream. NG-PON2 initially offers 40 Gbits/s downstream and 10 Gbits/s upstream, and could go to 80 Gbits/s each way. Given the availability of a workable bandwidth threshold, probably as important as FTTH/FTTP capacity is the attractiveness of the services and applications run over fibre. “Consumers don’t buy bandwidth,” said Kelly. “Consumers buy entertainment and functionality – things that are going to improve their lives.” Kelly envisages a virtuous cycle in which there is a repeating process of benign policies and regulation sponsoring increased investment in high capacity FTTH/FTTP which, in turn, stimulates innovation in applications, services and new consumer electronic devices that need and can use the higher capacity. In practice there may be no FTTP/FTTH “killer app”. “Perhaps the best case is not a service at all: just bandwidth for faster upload and download of files”, ventured Wood. wholesale/buy approaches in fixed broadband”, says a joint statement.
Labour costs are also a consideration. “Another factor is supply of labour. Telefónica and Portugal Telecom were in a strong position in this respect when they started rolling out FTTH at the bottom of a recession,” said Wood. “Deutsche Telekom, for example, would be in a weak position now in a booming German economy if it wanted to do FTTH.” BUILD COSTS COME DOWN In practice, FTTH/FTTP build costs are reducing. In Europe, for instance, the EU’s Broadband Cost Reduction Directive (2014/61/EU) is billed as being able to save up to 30% of high-speed Internet roll-out costs. The Directive includes measures such as the sharing of physical infrastructures, including those operated by utilities, the efficient co-ordination of civil works, and streamlined permit- granting procedures. “Things like duct sharing and pole sharing are having a huge impact with regard to reducing that deployment cost and the time to deploy,” said Kelly. “Where useable ducts exist in Europe, for example in Spain and Portugal FTTH roll- out has been low-cost and rapid,” added Wood. “FTTH costs about three or four times more per premises passed where there is no useable infrastructure – where existing copper lines are simply buried – than where there is.” Also contributing to lower FTTH/ FTTP deployment costs are technical innovations such as higher useful PON split ratios, equipment scale economics that accompany continuing fibre roll-outs worldwide, and the use of build practices such as micro-trenching. This last is one focus for Italy’s Open Fibre, which, in partnership with public sector investment house Cassa Depositi e Prestiti and the City of Pisa, is building an FTTH network to service the inhabitants of Pisa. Government subsidies could also change the economics of deeper fibre deployment. This is an idea recently Bundesverband Breitbandkommunikation e.V. (BREKO). One element of BREKO’s multi-point plan for the realisation of an optical fibre-centred future is for the German authorities to make available €1,500 voucher subsidies to citizens and business people to incentivise them to take direct fibre connections. BUSINESS MODEL DIVERSITY In parallel with decreasing deployment costs, a number of different FTTH/FTTP business models have been implemented in different locations. Utility-owned new FTTH roll-outs have had some success, said Wood, and he offered two Nordic examples of where utilities have made the first move, re-used their own infrastructure where possible, and got very high conversion rates in excess of 50%. One, a high-cost, high-ARPU model floated by the German association of alternative service operators,
COPPER BOTTOMING OUT? The performance capabilities of copper networks has been transformed by enhancement and vectoring techniques, and especially the development of the G.fast protocol. Analysys Mason’s Wood believes that broadband copper technologies will have a role for some time but only in specific contexts. These include inside MDUs, where there is a lot of interest in North America and the Asia-Pacific region, and in geographies such as Australia and Switzerland where there are convenient distribution-point locations to site G.fast DPUs. In the wider landscape, even though copper performance has improved dramatically over time, Kelly said that the various technologies will come under capacity pressure in a few years hence. “From a headroom point of view, fibre is the only future-proof approach,” he said. Wood also thinks that with advanced copper technologies, along with 5G fixed wireless (another potential FTTH/FTTP competitor) there could be a worry about long-term OpEx. Kelly made an interesting connection between fibre and 5G. “Without deep fibre there isn’t going to be any 5G,” he speculated. DIFFERENT BUSINESS CASE ‘SWEET SPOTS’ As might be anticipated, there is no “sweet spot” in terms of demand aggregation projections for making a viable business case for FTTH/FTTP deployments. This will depend on variables such as the cost to the network builder/ operator, how much infrastructure can be re-used, and what types of dwelling are targeted. So, for example, Wood says Altibox alliance members have a 65% trigger because it’s deploying in very high cost areas. Meantime, Reggefibre, now part of KPN in the Netherlands, has 30% to 35% trigger.
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ISSUE 11 | Q4 2017
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