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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Head of the Telecoms Business Unit at IDATE
220.8 million FTTx subscribers in the world by the end of 2011
IDATE proposes a watch service for the fiber market and publishes half-yearly the key data of this market for the world - including 70 countries, 150 key actors and forecasts until 2016. The global market for FTTx access continued to grow in 2011. The total number of FTTx subscribers by the end of 2011 was more than 220.8 million, with sustained FTTx growth of 25% in the second half of 2011.
“FTTH/B architecture remains by far the most common in Europe but not in North America (6.2 million VDSL subscribers) or in Asia/Pacific (124.5 million FTTx+LAN subscribers). In late 2011, there were 77 million FTTH/B subscribers in the world compared to about 250 million homes passed by FTTH/B”, says Roland Montagne, Head of Telecoms Business Unit at IDATE. “Changes in the high-speed broadband 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 high-speed broadband coverage, to meet a potential significant change in demand. This worldwide trend, however, varies from country to country”
The FTTx key markets situation
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 were14% 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 high-speed commercial policy is still relatively unconvincing. Note that the Ukraine retained its 10th place position.
This ranking remained relatively the same as that shown in mid-2011, except for the change in rankings of Sweden and France.
Be aware that the strong growth of high-speed broadband in the United Arab Emirates could result in it breaking through into the top 10.
FTTx operators worldwide ranking
As Asia/Pacific largely dominates the FTTH/B market, with more than 75% of the total number of subscribers, the players also dominate. Actually, there are 7 Asian operators among the Top 10 players in terms of the number of FTTH/B subscribers worldwide.
The leader continues to be the incumbent Japanese operator, NTT, with more than 16 million FTTH/B subscribers in late 2011. It is closely followed by the two primary Chinese operators, China Telecom and China Unicom, who are also involved in the deployment of FTTx+LAN architecture. However, if you take into account all FTTx architectures, these two Chinese operators outscore by far NTT, which has seen relative stagnation in its high-speed broadband subscriber base. The Chinese market seems to offer very strong growth in fibre optic deployment. For example, between June and December 2011, China Unicom increased by 177% the number of homes passed by its FTTH/B network and its competitor saw a growth rate of 80% in homes passed by FTTH/B.
Nevertheless, leadership in Asia/Pacific is relative. Strong growth in China requires stable markets. For example, due to its lack of innovation in the services it proposed, SK Broadband in South Korea faced a churn rate for FTTH/B of 6% over the second half of 2011, compared to 15% between the end of 2010 and the end of 2011.
The leading American operator, Verizon, has more than 60% of FTTH/B subscribers in the United States. Its growth was relatively stable throughout the second quarter 2011 with an increase in its FTTH subscriber base of 8% but it still garnered a 5th place position of the top 10 FTTH/B players worldwide. In addition, Verizon is concentrating more on the acquisition of new subscribers instead of expanding it fibre optic network.
For Europe, only one country made the rankings list, Russia due to its ER Telecom and Beeline operators. Their fibre strategy is based on acceleration of their coverage as well as an increase in their FTTH/B subscriber base.
Head of the Telecoms Business Unit at IDATE
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