DTT in emerging countries : Can spectrum sales finance the digital transition?

Jacques Bajon


Jacques Bajon, Head of "Video Distribution" Practice

In developing countries and emerging economies, wireless broadband represents a fundamental path to eradicating the digital divide that exists in regions that are still not covered by wireline infrastructure, and especially sparsely populated rural areas.

The digital switchover of terrestrial networks and the associated digital dividend provide a unique opportunity for broadcasters to expand their services, for consumers to gain access to a broader selection of programming, for the market to meet the growing demand for new wireless communications services, and for governments to optimise the overall use that is made of the scarce resource that radio spectrum represents. All for the sake of socioeconomic progress. In developing countries and emerging economies, wireless broadband represents a fundamental path to eradicating the digital divide that exists in regions that are still not covered by wireline infrastructure, and especially sparsely populated rural areas.

Is integrated broadcast-broadband the answer?

Despite the existence of several international agreements, the transition process is not progressing at an even pace across the global. New arrivals to the process are up against tremendous challenges, while also benefitting from the experience of their predecessors and technological leaps forward – such as the combination of DVB-T2 and MPEG-4 – which help alleviate some of the hurdles. Key ingredients of successful planning include consideration of the national situation, along with clear policies and objectives from the government and real cooperation between the various stakeholders.
It is a well-known fact that the digital dividend is a driving force between the transition, but new questions have arisen recently over a second digital dividend in the 700 MHz band in Region 1 (i.e. Europe, Africa and the Middle East). So the telecommunications and media industries will need to cooperate more closely on the spectrum issue.

The digital transition: global scorecard

A global economic approach needs to be taken in the planning stage to tackle the goals of the transition, and the means being deployed to achieve them.
In developing countries where the switch to digital terrestrial television (DTT) has yet to begin, digital set-top boxes represent the biggest cost item. A large percentage of households in these countries will need to receive subsidies to be able to buy these new devices.
Additionally, the size of the network investment will depend on several factors, such as the number of multiplexes involved. By the same token, technical coverage will need to be adapted to each country according to the geographical distribution of its citizens, as costs can increase exponentially when seeking to cover a large swathe of the population.
Communication campaigns are also vital, to educate the public on the digital transition. They need to be rolled out gradually, and be especially concentrated during the period immediately prior to the transition from one technology to the next.
In addition to financing set-top boxes and running information campaigns promoting the transition to digital, public monies may be required to help TV channels during the transitional phase. The period of simulcasting will be one of additional broadcasting expenses that will not necessarily be compensated by revenue and, for incumbent channels, will also be a time of increased competition. Veteran broadcasters will have to upgrade all of their equipment and installations when the switchover occurs.
The revenue earned on the sale of licences to digital dividend spectrum can help meet the public financing needs created by the transition. It is vital that a global approach to the process be taken – one that involves both the television and telecoms universe. These two sectors can enter into a mutually beneficial virtuous circle.
Public-private partnerships to allocate digital dividend revenue to the transition
Governments need to be financially involved in DTT rollouts, and in the transition process as a whole. The economic surplus generated by a better allocation of frequencies and related services creates solid prospects for ROI in the medium term.
The digital switchover is thus an ideal opportunity to create public-private partnerships. The foundations are already in place, with the arrival of new private sector players from the world of both telecommunications and broadcasting.


How to meet the broadband needs 
of public safety users?

Frédéric Pujol, Head of the radio technologies & spectrum practice, IDATE

Frédéric Pujol
Head of the radio technologies and spectrum practice, Idate



In its latest report, part of the Spectrum service, IDATE details existing spectrum allocation for public safety services. It presents the requirements for broadband services and the corresponding spectrum needs of public safety users. The use of commercial LTE networks by public safety users is analyzed and the mobile broadband strategies for PPDR players are evaluated.

Public protection and disaster relief (PPDR) is the general designation given to a range of public safety services broken down into: Day-to-day operations (category ‘PP1’) or routine operations; large emergency and/or public events (category ‘PP2’) for larger events; and disaster relief (category ‘DR’) caused by either natural of human activity. PPDR is not a commercial service.

  • Current non-broadband PPDR systems mainly use the 400 MHz and the 700-800 bands worldwide. Spectrum above 1 GHz supports also a variety of PPDR operations for temporary use only.
  • Regarding spectrum requirements, PPDR users face the challenge of different interests within countries whether or not spectrum should be reserved for PPDR applications.
  • Broadband-dedicated PPDR spectrum is expected to be allocated mostly in the 700 MHz with complementary frequencies below 1 GHz for specific countries (800 MHz) and above 1 GHz (1.4 to 5 GHz frequencies). At 700 MHz, coexistence is mainly with television broadcasting/digital TV and commercial broadband networks in Europe.
  • According to PPDR user groups, a minimum of 2 x 10 MHz for broadband PPDR spectrum should be reserved, similar to what was allocated in the USA. Additional country specific spectrum needs to be calculated.
  • The question of allocating broadband PPDR spectrum through auctions is also being debated.

PPDR services can be provided through dedicated PPDR systems or commercial cellular networks.

  • The challenge is to enhance the LTE and LTE-Advanced standards to meet PPDR requirements. However, in the short term, extended LTE and LTE-Advanced capabilities and standards (Direct Mode, Proximity Services and Group Communications System Enablers, resilience and VoLTE) will not be in operation.
  • Dynamic use of shared broadband PPDR spectrum with predictable QoS is also a key potential capability considered through Temporary Licensed Access (LSA/ASA).

In conclusion, we have identified the following options for PPDR players wishing to get access to mobile broadband capabilities :

1.    Build and run an own dedicated broadband PPDR network
2.    Use a dedicated broadband PPDR network run by a private operator
3.    Use a narrow band PPDR network + MVNO agreement for broadband services
4.    Use a dedicated commercial mobile network or Use a standard commercial mobile network
5.    Use a dedicated commercial mobile network which operates specific PPDR spectrum

Potential candidate bands for broadband PPDR spectrum by region


Source: IDATE

More information about "Public Safety Report" study.


Ultra-fast broadband world market




Head of Research, Telecoms Business Unit, IDATE


Ultra-fast broadband revenues will grow by 95% over the 5 next years to reach 182 billion EUR in 2017

We have released the latest issue of our World FTTx database, which is part of our ongoing service covering the ultra-fast broadband market. It provides key data on this market across the globe, covering more than 70 countries and 150 key players, and providing forecasts up to 2017.

Valérie Chaillou, FTTx lead analyst at IDATE, notes “growth perspectives remains still high when superfast technologies (For definition of superfast platforms we have considered here 3 main architectures: FTTH/B, FTTN and FTTLA) represent 22% of broadband access subscriptions at mid-2013, and we expect ultra-fast broadband revenues will grow by 95% over the 5 next years to reach 182 billion EUR in 2017”

Compared growth of VDSL and FTTH/B subscribers, 2012-2017 & Breakdown of Ultra-fast broadband technologies, at mid-2013

Source: IDATE, December 2013

• Eastern Europe will see its take up rate increase from 28% to 49% in 5 years, much higher than in Western Europe during all the period, from 21% at end 2012 to 32% at end 2017.

• FTTH/B is the leading ultra-fast broadband solution, far from FTTLA then VDSL : FTTH/B represents 66% of FTTx subscriptions at mid 2013, compared to 22% for FTTLA and 12% for FTTN+VDSL

• But the regional breakdown is very heterogeneous
- FTTH/B is clearly the technology of choice in APAC whereas
- FTTLA is leading the ultra-fast broadband market in Western Europe and North America.
- VDSL is a technology of choice for several European incumbents.
- Latin America and Middle East countries are at the very beginning of their NGA rollouts: they will participate to the global growth of superfast broadband more and more in the coming years.

• There are still questions from large players regarding the opportunity to deploy FTTH/B or VDSL, mainly in Europe.
- Several parameters are to be taken into account among which, of course, the required investment. Nevertheless FTTH/B rollouts did progress in certain European countries which are encouraging at a time when EU Telcos are seeing their margins shrinking.
- Some players are betting on the future capacities of copperbased networks.

Top 10 FTTx worldwide players, at end 2013

Source: IDATE, December 2013

FTTH Operators ranking: 6 Asian and 4 American telcos make up the world’s Top 10

Only one player involved in large FTTN+VDSL deployment among them (AT&T), then two cablecos
upgrading their infrastructures to FTTLA (Comcast and TWC). 7 operators among this top 10 have choosen the FTTH/B technology.

More data on our FTTx Whitepaper Updated with 2014 figures

More information on Worldwide panorama of FTTx rollout Status report & database


Next Gen Networks : reaching the DAE


Head of Research, Telecoms Business Unit, IDATE

Deployment costs & access market revenue in Europe

The goals set by the European Commission for ultra-fast broadband (UFB) are ambitious. By 2020, they aim to provide all European households with ubiquitous coverage of 30 Mbps and 50% of households with 100 Mbps access.

Cost of NGN deployment for reaching the goals of the DAE

NGN deployments are underway in all countries of the European Union but are progressing at very different rates from one country to the other. Some governments have created national programs that lay down their own goals to try and accelerate deployments, through both private operators and public players. IDATE has published a report in which NGN deployment costs have been modeled according to various scenarios. We will look closely at three of these: the "Base Case" scenario, which considers a gradual evolution of current NGN access; the "Vectoring" scenario, which anticipates improvements in copper-based technologies to reach the speeds laid out by the DAE; and the "FTTH" scenario, in which FTTH/B would be deployed on a massive scale and would provide the most future-proof performance in terms of speed. This last scenario is itself analyzed according to two different options (90% or 100% FTTH coverage), which lead to significantly different costs. The cumulative costs of these scenarios between 2011 and 2020 range from 71 to 230 billion EUR.

Cost comparison of NGN deployment scenarios en Europe

Total cost and cost per capita for next gen networks deployment in Europe

Source: IDATE

Revenues tied to the UFB access market

In parallel, IDATE has also conducted a study to evaluate the value of the UFB access market. This study is based on a thorough analysis of UFB services offered by key players in markets that represent different degrees of UFB maturity. This analysis allows us to identify different types of delivery model that may include one or more goals (maintaining positioning, increasing ARPU, reducing churn, unbundling withdrawal, etc.). The commercial positioning of operators will thus match a given delivery type that will depend on the level of competition, in particular. From there, it is possible to determine what the trends will be in terms of UFB ARPU over the coming years and thus assess one of the two key variables of access revenue. The other variable is the number of UFB subscribers, which should continue to grow relatively steadily through 2020 if we take all technologies into account. According to our estimates, the UFB access market is expected to reach 48 billion EUR by 2020.

Costs vs. revenues: Which scenario should we prioritize?

Despite some very interesting revenue potential (combined revenues exceed the cost of the most expensive scenario by 2020), the FTTH scenario is not really feasible (regardless of the coverage option considered) because cable operators—whose infrastructures offer faster speeds, are less expensive to upgrade and offer very good performance—will continue to play a major role in this market. The Base Case scenario seems to be a more feasible option in that it represents a continuation of what currently exists, namely a combination of technologies and accelerating deployment. However, it also presents risks, particularly the possibility of slow migration of broadband subscribers to UFB. Whichever scenario is implemented, operators will still need to invest significantly in deployment while reserving some investment for generating demand, without which their expected revenues cannot be achieved.

This analysis is an extract from our FTTx market insight which we propose within our ongoing monitoring of the worldwide FTTx market.


Focus on FTTx in the UK


Head of Research, Telecoms Business Unit, IDATE

Inventory of the British NGA market

The British NGA market is quite complex. On the one hand, two national players, BT and Virgin Media (now acquired by Liberty Global), have deployed their FTTN networks and already reach 20 million households who can access to at least 20-30 Mbps. On the other hand, several local players have decided to get involved in FTTH (more often called "FTTP" in the UK) as they consider that this is the infrastructure of the future and that they cannot wait for national players to get involved.

Then, the government is also involved through the BDUK programme (mainly for FTTx in rural areas) but only BT and Fujitsu can apply to tenders launched by local authorities and then indirectly benefit from public funds. However, at mid-2012, Fujitsu withdrew itself from two tenders (Cumbria and Wales), considering that it would be too difficult to attract RSPs to provide services over the infrastructure in those areas.

BDUK is also involved through the very recent launch of the "super-connected cities" project, aiming at ensuring the coverage of areas in large cities that would not be concerned by private investments.

Whatever the project, FTTH/B is not, and will not be, the main architecture deployed in the UK. This has been much more the case since BT announced its "FTTP on demand" pilots: the incumbent does not plan to roll out FTTP any more unless the demand is clear from end users.

199,000 FTTH/B homes passed and 17,000 FTTH/B subscribers at end-2012
• Very low take-up rate: 8.5%
• Several local players are involved in FTTH/B rollouts but they generally cover restricted territories; some interesting business models are emerging such as the B4RN and Fibre GarDen ones, involving people from the communities.
FTTN+VDSL from BT and FTTLA + DOCSIS 3.0 from Virgin Media are the leading architectures regarding superfast broadband in the UK:
20,000,000 FTTN2 homes passed,
3,341,000 FTTN subscribers.
• This will not change in the coming months if we consider the current strategy of BT
regarding FTTH roll outs ("FTTP on demand").

This analysis is an extract from our FTTx market insight which we propose within our ongoing monitoring of the worldwide FTTx market.


LTE World Summit – The 700 Mhz Band

Frédéric Pujol, Head of the radio technologies & spectrum practice, IDATEFrédéric PUJOL
Head of the radio technologies & spectrum practice, IDATE

IDATE reveals Latest
World LTE Market research


Sustained growth expected to hit 915 million LTE subscribers worldwide by the end of 2016, and the first billion will be exceeded during 2017.

IDATE, leading analysts and European Internet thinktank, today announced the main trends shaping the world’s mobile markets: networks, devices and services. At the LTE World Summit in Amsterdam (June, 24-26) IDATE provides its latest analyses and forecasts for the world LTE market, and insight into the 700 MHz issue.

World LTE Market forecasts

By the end of 2016, IDATE’s forecast predicts more than 915 million LTE subscriptions worldwide. Asia-Pacific is expected to represent a sizeable 41.6% of the total, North America 21.6%, Africa/Middle East 7.5%, Eastern Europe 4.9% and Western Europe 15.8%.

LTE is now mainstream with major deployments in every geographical area. The TD-LTE ecosystem is still waiting for a decision from China and can anticipate seeing the first LTE Advanced networks during the second half of this year. The 700 MHz band with the APT band plan has already been allocated in countries such as Australia and Japan with intense regulatory activity expected in Europe, Middle East, Africa and Latin America around this new frequency band.

LTE subscribers worldwide (in thousands): Ranking by country at 2016

World LTE forecasts

Source: IDATE, LTE Watch Service, March 2013

The 700 MHz band: A new harmonised frequency band for LTE?

With IDATE’s latest report addressing the 700MHz band issue, this question for future usage of our mobile services must be considered.

The growth of mobile broadband traffic is putting pressure on mobile networks and is driving the need for more spectrum in sub-1 GHz frequency bands for LTE and LTE-Advanced networks. Harmonisation across many geographical areas is crucial as it would enable significant economies of scale for LTE devices and would facilitate international roaming. The first Digital Dividend has already provided new spectrum for the mobile sector. Notably, the 700 MHz band in the USA and the 800 MHz band in Europe are today used for commercial LTE services.

Following the 2012 World Radiocommunication Conference (WRC-12), the 700 MHz now appears the most promising option for a harmonised frequency band across Asia-Pacific, Europe, Middle East, Africa and Latin America. IDATE anticipate further discussions at WRC- 15 and technical conditions have to be defined in Europe before then.

First and second Digital Dividends, worldwide

first and second digital dividend by geographical area

Asia-Pacific taking th lead in digital dividends

The Asia-Pacific region is taking the lead in this field and has already defined the ‘APT band plan’ which is likely to be adopted in Latin America, Africa, Middle East and Europe. This plan is not compatible with the US plan, which was defined before the 2008 auction and does not allow any compatibility or roaming for future LTE handsets. The 700 MHz band with the APT band plan could become a harmonised frequency band for LTE worldwide.

The 700 MHz band corresponds to the first Digital Dividend in the USA and in Asia-Pacific, whereas it could become the second Digital Dividend in the EMEA region. At WRC-12, African and Middle Eastern countries requested that the 694-790 MHz spectrum be allocated for mobile broadband services.

Europe should not make the same mistake as it did with the 800 MHz band

Many observers insist that Europe should not make the same mistake as it did with the 800 MHz band - where the auctions took place without coordination leading to undesirable early starts in some countries with a limited range of compatible devices. The harmonisation process in Europe should be clear with precise technical parameters and a realistic roadmap taking into account the timetable of existing broadcasting services. 2020 seems to be a realistic target for the launch of LTE services in the 700 MHz band in Europe, but some countries, such as France and perhaps Germany, are already planning to organise auctions as soon as 2015 even though the spectrum will only be available at a later date.

Public safety networks want superior broadband services

Public safety networks, which want to support mobile broadband services, are also starting to use parts of the 700 MHz band in the USA and the UAE have already allocated spectrum for their use earlier this year. Discussions are under way in Europe to address this question.

Innovative auction format in USA

In the USA, the Federal Communications Commission (FCC) has suggested an innovative auction format, called ‘incentive auctions’. The objective is to change the use of UHF band (470-700 MHz) starting with the 600 MHz band and to enable new services on a licensed basis. The process would start with a reorganisation of the UHF band and a re-allocation for licensed mobile services, such as 3G and LTE.

Digiworld by IDATE Related Publications

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Digiworld Yearbook 2013 (May 2013)

Innovation searching for the digital gold mines

This latest DigiWorld Yearbook provides you, as always, with reference data and the analyses of IDATE experts of the most vital trends on the markets of telecoms, the Internet and digital media.

The 700 MHz frequency band (June 2013)

This insight focus on the adoption of the APAC plan for the 700 MHz plan. Will this frequency band become an harmonised one? Will Europe adopt this plan and benefit from the device ecosystem? Which timescale?


Soon published:


DigiWorld Economic Journal: C&S No.90, 2nd quarter 2013(June 2013)

The radio spectrum: A shift in paradigms?

Edited by J. Scott MARCUS, Gérard POGOREL & Frédéric PUJOL
Demand for the use of the radio spectrum is constantly and rapidly growing, not only as a means of carrying Internet traffic, but also for new or expanding use by the military, public protection and disaster relief, at the same time that more traditional applications such as aeronautical, maritime, and radio astronomy remain. Is spectrum policy entering a trackless wilderness, or can a new direction and a new set of paradigms be expected to emerge?

two exclusive interviews :

- Gilles BRÉGANT, CEO of ANFR (French national spectrum agency)

- Paul E. JACOBS, Qualcomm's Chairman & CEO Read the interview


Residential LTE vs. Satellite broadband

Maxime Baudry, Co-Head of Satellite Practice at IDATE

Maxime Baudry
Co-Head of Satellite Practice at IDATE

Perspectives for satellite broadband facing residential LTE offerings

Just as they did with 3G, telcos started to propose residential offers based on LTE, how does it compare with satellite broadband offers?

Residential LTE, a direct competitor to satellite broadband

ust as they did with 3G, telcos started to propose residential offers based on LTE. It’s notably the case of Verizon Wireless in the United States who proposes “Home Fusion” since May 2012, a service that allows households to access broadband via an outdoor LTE antenna installed on one of the walls of the building. The antenna is billed 200 USD but the installation is free. How does it compare with satellite broadband offers? Downloading speeds vary between 5 and 12 Mbps in average with a pricing range going from 60USD for 10GB of data to 120 USD Monthly for 120 GB. With similarities in pricing, downloading speeds and data caps, LTE is positioned as a direct competitor to Satellite broadband.

Residential LTE coming to Europe

In Europe, first LTE offers arrive on the market. The first to propose such services was Netcom, a filial of TeliaSonera, who was first to propose LTE in Norway. It offers 100GB of data for a monthly fee of 68 EUR. According to Netcom, it is very likely that this kind of solution could be considered as a substitute to DSL, especially when the monthly data cap exceeds observed traffic on DSL networks (An average of 30 GB per household). In germany, Vodafone proposes a similar offer since 2012, but this time it is differentiated with quality of service through network speed with prices starting from 25 EUR to 40 EUR monthly to have access to 50 Mbps and 30 GB.

Satellite Broadband: no more competitive?

Considering this kind of offers, satellite broadband is no more competitive, neither on network speed nor on monthly data cap offered. Even though these new offerings materializes the LTE threat for satellite broadband we had foreseen, LTE coverage remains very limited. Anyhow, satellite will have to pursue its downloading speeds increase since 2008 if it wants to maintain a competitive advantage on this market.

Positioning of some satellite broadband offers in France, March 2013


Source: Digiworld by IDATE

Maxime Baudry
Head of the radio technologies & spectrum practice, IDATE

>More information about Satellite Ultra Broadband in Europe


Next Gen Access deployment

Roland Montagne

Roland Montagne

Head of the Telecoms Business Unit at IDATE


Measuring costs for each EU-27 member state to reach the Digital Agenda in Europe

In May 2010, the European Commission adopted its Digital Agenda policy programme. It was one of the first flagship initiatives of the EU 2020 strategy. It sets ambitious targets to provide all European households with ubiquitous coverage of 30 Mbps as a minimum and half of them with a subscription of 100 Mbps by 2020. IDATE has published recently a report providing different possible cost scenarios – with a breakdown by technology and by population density (urban, peri-urban, rural).

Today, some voices are raising concerns that the goals of the Digital Agenda (DA) will not be reached in many Member States as the necessary expenditure is beyond reach, especially in the current European economic situation. This is why this report focuses in particular on the cost of the Digital Agenda in reaching the ambitious goal of coverage of 30 Mbps and 100 Mbps, and further tries to clarify, per country, what it will be. It puts forward a theoretical model with the distinction of various scenarios involving distinct technologies, namely fixed and wireless.

"In several European countries, the rollout of FTTH networks has started and the European Union disposes already of a 40% NGA net coverage amongst all its member states. Indeed, copper local loop will ultimately be replaced by fibre, it being the medium that can guarantee an almost infinite bandwidth capacity for the future. Nevertheless, good quality copper, especially in Western Europe, and the current economic situation, could lead some telcos to consider other alternative scenarios involving VDSL, LTE or even satellite in Ka band", says Roland Montagne, Director of the Telecom Business Unit at IDATE. He adds: "The adoption of a FTTH-oriented scenario by telcos will not only depend on the amount of capex necessary but also on a viable business model. On this, telcos should be innovative not only with the services they propose but also on their pricing approach (tiered pricing) and their strategy regarding smart access."

Deployment costs by scenario

  • Four scenarios in different constellations have been modelled, including a full FTTH/B coverage scenario. Depending on the mix of technologies deployed, these scenarios will cost between 51 billion EUR and 229 billion EUR.
  • These amounts, whilst certainly substantial, are within the expected range and therefore come as a confirmation of the ambitious nature of the broadband objectives of the DAE.

*50% uptake
NOTE: Scenario names are chosen to reflect main technological characteristics, but do not express a preference for any given
technology to reach the broadband objectives of the Digital Agenda.
90% FTTH/B = 90% FTTH/B only + 10% LTE
Vectoring = FTTH/B+FTTLA+VDSL Vectoring+VDSL2+LTE)
Wireless = LTE+FTTH/B

NGA Costs model

In order to build our theoretical model of the costs of reaching the DA goals, IDATE started by drawing up several assumptions about ‘overlapping’ in each country with the aim of establishing the ‘net’ number of FTTx homes passed, and thus the effective level of NGA coverage. Consolidating this in the EU27 gives a net NGA coverage rate of 41% of European households in late-2011. Among the four fixed NGA architectures considered (FTTH/B, FTTLA+DOCSIS 3.0, FTTN+VDSL and FTTx/LAN), regarding our estimates at that time, FTTH/B accounted for 22%, FTTN+VDSL for 25% and FTTLA+DOCSIS3.0 for 50% of the European NGA coverage.

Using these coverage estimates as a baseline, IDATE modelled the investment required for each of the 27 Member States to reach the broadband objectives of the Commission's DA. We also took into account, nevertheless, for each Member State, the national broadband or ultra-fast broadband plans already launched, with their associated objectives of coverage up to 2020.

We then considered no duplication of infrastructure in our cost model. Indeed, the model's output shows the minimum cost of reaching the DA targets by rolling out one single network per coverage area1.

> For more information about what we do, visit us online at: www.idate.orgwww.idate.org


Focus on the US telecom market


Yves Gassot
The United States’ telecommunications services industry posted consolidated sales of EUR 239 billion in 2011. Compare this figure to those of the related television services industry (116 billion) and the European telecommunications sector (248 billion for the EU-27). For the past two years or more, mobile services revenues (126 billion) have surpassed those from broadband and data (53 billion) and the shrinking fixed telephony segment (60 billion) combined.
Like most Western countries, the industry has experienced major upheavals in recent years. For decades US telephony had been essentially structured around a private monopoly. In 1982, as the result of an antitrust lawsuit, AT&T agreed to divest itself of its regional companies. It preserved its domestic and international long-distance activities but then had to fend off aggressive competition in those markets from MCI and WorldCom, while the regional companies remained very dominant in their local markets. Ultimately the heightened competition in long distance and the overinvestment that led to the bursting of the bubble (and the historic collapse of WorldCom) in the early 90s paved the way for the Baby Bells. After multiple mergers, including the ultimate absorption of MCI and AT&T, the Baby Bells grew up into the two market leaders: Verizon and AT&T.

While both American and European markets are hemorrhaging landlines (-9% per year in the US) and the related phone revenues, there are at least two differences on the US side:

  • The influence of cable, which is available to some 90% of households: In just five years, cable’s market share of new broadband subscribers has leapt from 40% to more than 80%. AT&T and Verizon are only competing where they have made massive investments to rebuild their access networks (U-verse for AT&T, mainly with hybrid FTTN technology, and FiOS for Verizon, with FTTH/B). Note that ARPU for these two operators’ triple play bundles in these areas is over USD 140, in stark contrast with the ARPU of triple play offerings in Europe . It is possible that the difference in television spending between the two regions is one of the particular challenges European operators face in achieving a satisfactory return on their FTTH investments. For many years Europe seemed ahead of the rest in broadband development with the success of ADSL, but cable’s ability to offer ever-higher data speeds (thanks to Docsis 3.0) and Verizon’s and AT&T’s newly built FTTx networks have turned the tables when it comes to super-fast broadband.
  • Strong mobile revenue growth: For a long time the mobile segment in the United States seemed to lag behind its European counterpart in terms of penetration rates, handicapped by the presence of multiple competing standards (CDMA, GSM, iDEN). But here too the tables have turned over the past two to three years. Verizon Wireless has established itself as the world leader in 4G (with more than 10 million LTE users as of Q2 2012), followed by AT&T, Sprint and MetroPCS rollouts now. Plus, while Europe’s revenues are shrinking by 3% to 4% per year, the US market continues to grow in value at a pace of about 5% annually. Several factors can explain this difference. First is the impact of the macroeconomic situation on the markets in the south of Europe, which has resulted in plummeting revenues in Greece, Spain and Italy. In France, the more recent entry of low-cost operator Free has further accentuated the downward trend in that market. But even in Germany revenues have slipped the past several years. In the States, on top of a strong subscriber growth rate (+6% per year), the increase in data revenue spurred by the smartphone boom has more than offset the drop in per-minute prices for mobile calling. This is much less true in Europe, where competition is much more competitive and the attrition rate is much higher , driving down prices. Thus in the one case we see ARPU continuing to trend upward (especially for Verizon and AT&T), while in the other case ARPUs seem doomed to slide further.

In these differences we can see why the markets’ valuation of telecom securities varies depending on whether they are looking at the big European operators or the North American market leaders.
Are US operators benefiting from a lack of competition, while Europe is handicapped by its more than 90 active mobile operators (EU-27)? This is a much-discussed point. According to the Herfindahl-Hirschman Index (HHI) the US market, which has four national operators and a handful of others with more limited coverage , is less concentrated than most national markets in the Old World, and much more so than the European market as a whole (if the entire 27-country Union were considered a true single market). Furthermore, if you consider the advantage of the economies of scale in a market as large as AT&T and Verizon have (each with more than 100 million customers), the absence of any truly pan-European operators seems to be a handicap.
Overall, though American operators too must face the major changes of an all-IP world where services and applications are shifting to OTT players, this market’s leaders appear to be in the best position to deal with these challenges.



The Worldwide Ultrafast-Broadband Market

Roland Montagne

Roland Montagne

Head of the Telecoms Business Unit at IDATE


FTTH vs LTE: 230 million compared to 900 million subscribers worldwide by 2016

Although there were only 9 million LTE subscribers worldwide in late 2011 compared to 220 million FTTx subscribers (88 million for FTTH/B and VDSL alone), momentum is rapidly growing in favour of mobile. In 2016, IDATE predicts that the number of LTE subscribers will exceed 900 million, compared to nearly 230 million for fixed ultrafast-broadband (FTTH/B and VDSL).

During the Ultrafast- Broadband Conference, co-organised each year by IDATE and the Aromates agency, IDATE teams will present perspectives on ultrafast-broadband (UFB) expansion. These forecasts are based on our team's worldwide continuous monitoring of investments being made by operators, country by country, project by project, and the current number of subscribers by technology. The debate can therefore be based on objective data, on this day of exchange between all parties developing these key technologies aimed at growth in new digital uses.

LTE, acceleration

Although there were only 142,000 LTE subscribers worldwide in 2010, by late 2011 that number had already increased to 9.3 million. "We expect that a significant share of LTE devices will support FDD and TDD by the end of 2013," stated Frédéric Pujol, Director of IDATE's "Mobile Network" Practice. Growth will also be stimulated by TD-LTE deployments in India, China and several other countries in Asia-Pacific, Latin America and the Middle East, as well as in Europe, though to a lesser extent.

Overall, there is definitely an acceleration in deployments that we are following, which will result in a higher than expected number of LTE subscribers, as we now expect to reach the goal of 900 million subscribers by 2016.

For Europe, the situation is different:

  • Take-off is taking longer than expected in Western Europe due to the late arrival of LTE smartphones and tablets using European frequencies. According to our forecast, Europe should have 150 million LTE subscribers by 2016.
  • Smartphones for 800 MHz and 2.6 GHz frequencies have been available since March 2012 in Germany and Sweden. Sweden already had nearly 100,000 LTE subscribers by late 2011. The anticipated arrival of smartphones in early 2012 should certainly drive growth in LTE subscribers in Germany.
  • For Spain, France, Italy and the United Kingdom, it has been confirmed that the first deployments will take place by the end of this year for commercial release in 2013.

FTTx, still very different growth

The global market for FTTx access continued to grow in 2011. There were more than 220 million FTTx subscribers worldwide by the end of the year (with nearly 56% using FTTx/LAN architecture in China) with sustained FTTx growth of more than 25% in the second half of 2011.

Roland Montagne, Director of IDATE's "Telecom" Business Unit underscored the fact that "FTTH/B architecture remains by far the most common in Europe but not in North America (6.2 million VDSL subscribers but nearly 78 million households covered by cable FTTLA + Docsis 3.0) or Asia/Pacific (124.5 million FTTx+LAN subscribers in China). In late 2011, there were 77 million FTTH/B subscribers worldwide compared to a total of about 250 million homes passed by FTTH/B."

Changes in the UFB market over the course of 2011 was marked by divergent trends demonstrated by the number of FTTx subscribers compared to the number of homes passed by FTTx. Priority remains with ultrafast broadband coverage, to meet a potential significant change in demand. This worldwide trend, however, varies from country to country.

Japan remains the world leader in terms of FTTH/B subscribers, followed closely by China. But in terms of growth, these two countries are experiencing distinctly different situations. China appears to be much more active, with a growth rate of 44% compared to 6% for Japan between June 2011 and December 2011. And this trend will only get stronger because, in the preceding half, the respective growth rates were 14% and 5%. This trend could soon result in China and Japan reversing positions in the worldwide ranking of countries with the most FTTH/B subscribers.

Even though the majority of countries in this ranking come from Asia/Pacific, the United States remains in fourth place, with nearly 8 million FTTH/B subscribers. For FTTH/B, a few European countries are holding their own alongside Russia, the leader in this region with 4.5 million FTTH/B subscribers in late 2011.

France is climbing in the rankings and is now higher than Sweden, a leading country but now having difficulty convincing the remaining households to convert to FTTH. Nevertheless, France remains a country where UFB commercial policy is still relatively unconvincing.

Roland Montagne
Head of the Telecoms Business Unit at IDATE

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