Head of Research, Telecoms Business Unit, IDATE
Telcos have ambitious Vectoring rollout plans, with some aiming to have between 25% and 30% of VDSL2 lines covered by 2017.
Vectoring and bonding are starting to be deployed in certain countries, even if the technical and regulatory constraints would seem to point to only small-scale rollouts. G.Fast is the next generation standard being examined today. The report we released provides readers with an update on the latest technological developments in VDSL2.
VDSL2 & Co: ever more promising technological developments
VDSL2 has begun to be implemented, and several telcos have based their ultra-fast broadband strategies squarely on copper infrastructure right up to the customer premises. If VDSL can deliver theoretical speeds of around 50 Mbps near the exchange or cabinet, Vectoring, which consists of reducing noise among the lines, makes it possible to double that speed to 100 Mbps. Bonding, meanwhile, consists of using several copper pairs, either to double speeds for users in the vicinity of the exchange, or double the distance at which a 50 Mbps connection is available. In both cases, however, performances are very quickly affected by the subscriber’s distance from the exchange or cabinet.
G.Fast, which is the future standard currently under examination, and due to be approved in
2014, offers a theoretical speed of 1 Gbps, but noise cancellation capabilities are even stronger.
Growth of VDSL subscribers worldwide between December 2010 and June 2013 (million)
Still only small-scale implementation of VDSL2 and its successors
In mid-2013, customers subscribing to a VDSL2 ultra-fast broadband service represented 19% of the world’s FTTH/B subscribers. The vast majority of deployments have been performed by AT&T in the United States, which is reporting 26 million VDSL2-ready households and more than 9 million subscribers. AT&T continues to bank on these solutions, and is now offering pair bonding to eligible customers.
Western Europe is the second biggest VDSL market, accounting for 35% of the world’s subscribers as of mid-2013.
Will this drive a shift in the ultra-fast broadband market?
VDSL2 and its successors have a clear set of advantages, starting with savings on rollouts. Telcos would not need to deploy optical fiber from end to end, and can use the existing last mile of their networks. They would also save on customer premises installations, which cost them a great deal of time and money.
The performances offered by these new solutions appear to be coming more and more in line with those delivered by FTTH (at least in its current iteration), but only under optimal conditions. So this is not a solution that can be made available to everyone. Plus, VDSL Vectoring does not enable physical sub-loop unbundling, in which case bitstream remains the only option for sharing access to the network – something that not all market players want, as is the case in France, for instance.
As a result, even if the development prospects for the VDSL market remain optimistic for the coming years, we do not expect it to cause a major upheaval in the ultra-fast broadband hierarchy, with FTTH/B continuing to be the architecture of choice.
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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
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.
Head of Satellite Practice at DigiWorld IDATE
Africa, a new growth opportunity?
IDATE has just published its study “Satellite Ultra-Broadband in Europe & Africa” which explores the latest developments in broadband and ultra-fast broadband markets in Europe and Africa. After a detailed examination of the dynamics of these areas, in both fixed and mobile markets, the report delivers strategic and figure-backed responses to the question of the current and future role of satellite in the race to deploy broadband and ultra-fast broadband. The report comes with its own database including the set of indicators analyzed for all the areas studied.
Maxime Baudry, project manager of this study and co-header of the satellite practice at DigiWorld IDATE, shares his point of view about the actual situation of the Satellite Ultra-Broadband:
“Satellite technology has made enormous progress in recent years, boosting the average downlink speed from 3 Mbps in 2008 to 10-18 Mbps in 2012, and raising traffic caps from 2 GB to 10-20 GB (in some cases even unlimited). It thus seems set to even tackle DSL gray zones, which only a few years ago seemed inaccessible.”
He adds: “On the ultra-fast broadband front, however, satellite is lagging behind: while large-scale rollouts of FTTx and LTE, and even LTE-Advanced between 2012 and 2020 will offer observed download speeds of 30-70 Mbps (and even 200-300 Mbps with LTE-Advanced), the most advanced satellite developments make it possible to supply “only” 50 Mbps, and even then not before 2015 at the earliest. To be able to offer such speeds, satellite technology may well switch to frequency bands even higher than the Ka band.”
Africa, a new growth opportunity?
- Africa’s fixed broadband market is still extremely limited, with an average density of 3.4% of households in the region at end-2011.
- With limited fixed infrastructures, operators are focusing all their efforts on mobile broadband, often only deployed in the most profitable urban areas.
- Over the past three years, however, the region has seen major rollouts of underwater cables, boosting subscriber speeds. Africa’s capacity at end-2011 is estimated at 22 Tbps versus 4 Tbps at end-2009.
- Satellite ultra-broadband remains a tough market in most countries of Sub-Saharan Africa, where barriers to entry remain very high, such as low ARPUs, poor literacy rates (30% to 40% of the population), low electrification (10% of the rural population) and low PC penetration (often below 5% of households)
- Extremely high equipment prices caused by high customs barriers remain a major handicap.
- Against this backdrop, only a few countries seem to present any real short-term potential: South Africa, Kenya, Nigeria and countries in North Africa.
Promising market outlooks
IDATE estimates that between 2012 and 2016 the number of satellite broadband subscribers in Europe will increase by 29% annually.
Africa will post the sharpest growth, a region where the telecoms infrastructure is much more restricted than in Europe. We estimate that the launch of solutions costing 20-30 EUR a month in Africa, such as YahClick and IP Easy, are likely to attract a tier-one clientele with incomes well above the majority of the population, eager to acquire a fixed broadband access solution that is superior to traditional landline connection and often at a cheaper price (excluding the expensive equipment cost which, at around 600 EUR, is inflated by customs barriers). However, areas of uncertainty remain in this market, especially over the future technical and economic performance of fixed infrastructures after the deployment of numerous underwater cable and terrestrial backbone projects funded by the World Bank.
Eastern Europe, the market that seemed to offer most potential at the outset, has failed to take off, with subscriber bases remaining very limited. Several reasons explain this failure: it is a tough market with extremely low ARPUs, making it hard for satellite services operators to make sufficient profits. Also, most countries have invested in mobile infrastructures (LTE already deployed in many countries, including Hungary, Lithuania and Poland), sidelining satellite. Lastly, operator distribution networks revolve around small business operations, while in Western Europe they usually rely on major operators such as Orange, SFR, Swisscom and Deutsche Telekom.
Western Europe has not seen very high growth either. Two countries, France and Germany, continue to make up most of the subscriber base, while operators have managed to boost subscriber numbers quickly via government programs to reduce the digital divide, such as Avanti in Scotland and Eutelsat in Italy. The German market though does now seem to be losing subscribers to other technologies, particularly LTE deployed in rural parts of the country.
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