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.
Director of studies, DigiWorld by IDATE
FTTx generates a higher ARPU than traditional broadband
On the occasion of the upcoming Broadband World Forum in Amsterdam on 16-18 October and the official announcement of the European FTTH panorama during the FTTH Council Europe conference this Monday in Brussels, IDATE presents some of its latest results on the Fixed Ultrafast-Broadband (UFB) market.
UFB increasing its share of the broadband market everywhere
Ultra-fast broadband rollouts will no doubt accelerate from 2011 to 2016. Several national programmes (in Australia, New Zealand, Singapore, France, the United States…) have very specific UFB coverage targets, even though standard broadband is still very prevalent in most regions. In a great many countries, broadband systems cover only a fraction of the population and bringing access to the rest of the country is a top priority for a number of governments. Despite this ultrafast access is expected to increase its share of the total broadband market significantly, in all three of the major regions – the EU-27, North America and APAC – and this in terms of both revenue and customer numbers.
At the end of 2011, 9% of broadband subscribers in the EU-27 were connected via UFB access, and so represented 17% of the broadband market value. This split will stand at 34% and 61%, respectively, at the end of 2016.
At the end of 2011, 26% of broadband subscribers in North America were connected via UFB access, and so represented 43% of the broadband market value. This split will stand at 47% and 68%, respectively, at the end of 2016
At the end of 2011, 23% of broadband subscribers in the Asia-Pacific region were connected via UFB access, and so represented 71% of the broadband market value. This split will stand at 32% and 80%, respectively, at the end of 2016.
In each of the major regions, ultra-fast broadband accounted for a greater share of broadband market revenue than ultra-fast customers did of the total broadband subscriber base. This means that the ARPU generated by ultra-fast broadband access products is higher than the ARPU generated by other broadband technologies.
In all three regions, the rate at which UFB customers increase their share of the total broadband customer base will be greater than the rate at which UFB revenue increases its share of the broadband market as a whole. This means a relative decrease in ultra-fast broadband access revenue from 2011 to 2016. Ultra-fast broadband ARPU will tend to come in line with average broadband revenue. This average per-user revenue, which includes both broadband and superfast broadband access products, is expected to increase slightly as the number of UFB customers grows. This will be true, to varying degrees, in all three regions.
This trend will likely grow over time as the broadband market is gradually taken over by ultra-fast broadband technologies, which will continue to be deployed on a large scale to achieve maximum coverage. Meanwhile, the ultra-fast broadband market will start to enjoy steadier growth once new services are available only on FTTx systems. Of all the UFB sales models, it is premium and even enhanced offers that appear to generate the highest ARPU for superfast access providers.
Extract of IDATE's in-depth study "FTTx services – Supply-side strategies: monetizing the networks", publication date September 2012