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
Head of the radio technologies & spectrum practice, IDATE
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.
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
Base case = FTTH/B+FTTLA+VDSL2+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.
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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.
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.
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.
Head of the Telecoms Business Unit at IDATE
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Director Telecoms Business Unit
Munich, 15 February 2012 – Europe (EU-35) reported a solid 28% increase in the number of FTTH/B subscribers in 2011. FTTH/B coverage continues to progress fast in Europe with a yearly growth of 41%. This confirms that expanding FTTH/B coverage is still the top priority for players. There were nearly 5.1 million FTTH/B subscribers in the EU-35 at end 2011, and nearly 28 million homes passed.
“Main European economies are now on tracks for FTTH/B: France presents a 34% growth in terms of subscribers in 2011, and Spain is progressing fast being very near to enter FTTH Global Ranking2,” says Roland Montagne, Director of the Telecom Business Unit at IDATE. “2011 has been a crucial year for Germany concerning FTTH. Even is the number of subscribers is still very low, competition led by local players backed by municipalities and also large deployments of DOCSIS 3.0 has forced DT to get involved on FTTH. This engagement should be a real starting point for FTTH in the country.”
“Among CIS countries, because of its specific demographic features, Russia leads the way in terms of FTTH/B subscribers and homes passed – and the potential of the Russian market is huge, with 4.5 million FTTH/B subscribers and 12.3 million homes passed at end 2011”, comments Valérie Chaillou, lead FTTx analyst at IDATE. “Ukraine is also home of more than half a million FTTH/B subscribers, and we expect to see new players becoming involved in FTTH/B deployments in the near future.”
Current status of FTTH/B rollout projects at the end of 2011
As in previous years, IDATE has been commissioned by the FTTH Council Europe to provide an overview of the status of FTTH/B rollouts across Europe at the end of 2011. To date, the Institute has identified around 260 FTTH/B projects in the EU-35.
The first type of player to become involved in FTTH/B deployments was alternative carriers which singlehandedly account for 55% of FTTH/B homes passed in Europe. Alternative carriers have performed rollouts in France, Italy, Germany, Sweden and in Eastern Europe (Slovakia, Slovenia, Romania, and Bulgaria).
We include cable companies in this category as they are often involved in large-scale FTTB network rollouts – with examples that include Numericable in France and ER Telecom in Russia. Cablecos have the advantage of not having to negotiate building-by-building to access homes since the coaxial outlet is already installed plus, in a great many instances, the civil engineering to pull the fibre to the foot of the building has already been performed.
Another category of stakeholder is local authorities and regional power companies (which are often owned by public authorities). While this category represents only 13% of homes passed for fibre at the end of 2011, it accounts for the largest number of FTTH/B projects, most of which are small scale ones – covering only a local territory. Their involvement will probably increase in other countries such as Italy but also France, and the UK through national programs.
These players can encounter difficulties when taking on the business of operator which usually has no correlation with their core responsibilities. To help alleviate these difficulties, we are seeing some of these small-scale rollouts being grouped together to form a network – with examples that include Stedenlink in the Netherlands, Netixopen in Finland and, in the form of an ISP, Waoo in Denmark.
This allows the parties involved not only to pool their expertise but also to create a brand and to build alarge customer base (to attract TV broadcasters, for instance). The other category of player worth mentioning is incumbent carriers which account for 33% ofFTTH/B homes passed in Europe. Virtually all of Europe’s incumbent carriers are either now involved in FTTH/B rollouts, are gearing up to it or are in the planning stages. Even those who originally opted for an FTTN+VDSL solution, such as KPN, Swisscom and now BT and Deutsche Telecom, are turning their attention to FTTH – in many cases as a result of the growing competitive pressure created by cable companies’ and local authorities’ fibre initiatives.
Excluding Russia, which leads the FTTH/B market in terms of subscribers and homes/buildings passed thanks to its demographic make-up (4.5 million FTTH/B subscribers alone), Sweden is still the leading market with 644,000 FTTH/B subscribers at end of 2011. This leadership could be challenged in the near future by countries such as France, which is already home to nearly 630,000 FTTH/B subscribers. Other countries are also reporting strong growth and are now positioned in the top 10 in terms of number of homes/buildings passed. This is true for Ukraine, Romania and Portugal which ranked 3rd, 5th and 6th at end of 2011. We should also mention that Spain is progressing fast, being very near to enter FTTH Global Ranking. Indeed with nearly 171.000 FTTH/B subscribers at end 2011, Spain is presenting the highest growth in 2011 (+184%). Scandinavian countries, and notably Sweden and Norway, still lead the way in Europe in terms of penetration rate – with 39.5% and 59.7%, respectively. Nevertheless it is now in Eastern Europe where we found also high penetration rates: Czech Republic with 42.4%, Hungary with 39.6%, Turkey with 26%.But the situation across Europe as a whole is still quite disparate as countries like Italy or France are still reporting low penetration rates (13.8% and 10.6%, respectively, lower than the EU-35 average which reaches 18.4%). Regarding the technology deployed, Ethernet is still players’ first choice across the EU-39, and represented 70% of all FTTH/B rollouts at end of 2011. As concerns network architecture, FTTB still accounted for 59% of rollouts at the end of 2011. Players are favouring an FTTB configuration as it allows them to avoid the issues that come with installing fibre on private property, and especially MDUs – i.e. having to negotiate with each property owner.
DigiWorld Institute by IDATE
Roland Montagne - Director Telecoms Business Unit - firstname.lastname@example.org
Jeremy GEORGE - Tel+33 (0)6 10 607 808 - email@example.com
Director Telecoms Business Unit
Montpellier, France – Within its on-going monitoring of the World FTTx Market, the DigiWorld Institute by IDATE publishes twice per year FTTx market’s key figures covering 70 countries and over 150 market players with forecasts up to 2016. At mid-2011, the worldwide growth rate in terms of FTTH/B subscribers remains high with more than 54% between mid-2010 and mid-2011 to reach a total of close to 67 million subscribers in mid-2011. Furthermore, the number of Homes/Buildings-passed worldwide accelerates increasingly, with an impressive rate of more than 47% between mid-2010 and mid-2011 which leads to nearly 179 million homes connected to fiber in mid-2011.
Worldwide FTTx market at end of June 2011 – FTTH/B remains the most widely used network configuration
The global FTTx market continued to grow in the first half of 2011, with a subscriber base that increased by around 15%: as of June 2011, there were more than 112.6 million FTTx subscribers around the world. This rate of growth was nonetheless well below the roughly 39% increase of the previous six months which saw a massive rise in FTTx subscriber numbers in China – a growth spurt that has since levelled off. FTTH/B remains the most widely used network configuration, accounting for over 67 million subscribers worldwide out of a total of roughly 179 million homes passed.
An analysis of the figures for the first half of 2011 reveals a certain levelling off of the global ultra-fast broadband market’s growth momentum. The strong increase in FTTx subscriber numbers during the previous six months could be attributed mainly to the Chinese market whose carriers released more information on actual penetration levels for their superfast broadband offers.
The increase in the number of homes passed is once again higher than the increase in actual subscribers, which confirms that rollouts continue to be a priority for a great many players, as they anticipate a massive uptick in demand further down the road. This is true around the globe, although situations do vary from country to country.
China has consolidated its number two spot behind Japan (if we discount the country’s FTTx + LAN subscribers). There is nevertheless a real gap in the two countries’ growth rates for December 2010 to June 2011 which stand at 14% and 5% for China and Japan, respectively. If this trend continues, it will not take long to have an impact on global rankings – and we can expect to see China overtake Japan for top spot in the not too distant future.
Russia continues to be the biggest FTTH/B market in Europe, with close to 5.2 million FTTH/B subscribers as of mid-2011. Sweden is still in the top 10 but its figures have progressed very little from six months earlier. France has been making real strides but ISPs there are still having trouble persuading broadband customers to switch to FTTH/B, and penetration rates (i.e. percentage of homes passed that actually subscribe) are still low. Meanwhile, in the rest of Europe, the countries in the East and West will soon fall behind developing nations which have much greater potential for growth.
The top 10 ranking for the biggest FTTH/B subscriber bases as of June 2011 is therefore very similar to the one for the end of 2010 – the only notable change being the fact that India has pulled ahead of Sweden.
Looking at the top players, all types of new-generation network combined, Asian carriers still head up the rankings, occupying seven of the top 10 positions in terms of FTTx subscribers.
China’s two main carriers now occupy the top two spots – ahead of Japan’s longstanding market leader, NTT – and they are expected to widen their lead in the coming months thanks to their rollout plans, and the fact that NTT’s subscriber base is not expected to grow that much further. The Asian market is especially disparate: China is experiencing a massive growth spurt while other markets are levelling off. Plus, a few carriers are even having to contend with losing their ultra-fast broadband customers to the competition – a prime example being SK Broadband in South Korea, whose subscriber numbers shrank by a whopping 14% during the first half of 2011.
Meanwhile telcos in the US, and especially AT&T, continue to enjoy steady growth and have been able to strengthen their position in the internet market with respect to cable companies which are gradually upgrading to DOCSIS 3.0.
Over in Europe, only Russia’s ER Telecom has made it into the top 10 rankings – coming in at number eight.
DigiWorld Institute by IDATE
Roland Montagne - Director Telecoms Business Unit - firstname.lastname@example.org
Jeremy GEORGE - Tel +33 (0)6 10 607 808 - email@example.com