Fichier 287


The fiber market

The fiber market

U302040 medium

Heterogeneous deployment

FTTH is now predominant worldwide in terms of both investment budgets and the number of subscriber lines. Asia is the trailblazer leading the way, as illustrated by its numerous national development programs, the dynamism of local players and affirmed consumer demand. The situation is more contrasted in Europe and North America due to greater technological fragmentation (VDSL, cable, etc.). But the situation is fast evolving...

IDATE reports1 that there were 505 million wireline VHSB connections worldwide at the end of 2016, which is more than the half the total wireline broadband Internet base. Two-thirds of these VHSB users are on FTTH (see the box), well ahead of cable (20%) and VDSL (12%). Yet great disparities exist between countries and regions.

Asia, a pioneering market still driving FTTH

Asia has always led the way on FTTH, driven by ambitious national projects and proactive industrial policies adopted as early as the 1990s in South Korea, Japan, Singapore and Australia2. Moreover, Asian countries have high population densities, high-rise residential buildings and a tradition of aerial cables less expensive than buried ones. The fiber explosion was also aided by the early arrival of new players driving down access subscriptions and stimulating strong bandwidth demand through triple-play offers and immensely popular online games and user-generated content. At the end of 2016, most of these countries had an effective fiber penetration rate3 of 66% to 95%. Gigabit offers have been commonplace for several years.

Other countries too are benefiting from government incentives to develop broadband and thereby the national economy: Malaysia since 2008, Vietnam since 2016 and the Philippines since 2017.

The example of China remains the most significant: its "Broadband China" plan has led to massive infrastructure investments and made the country the world FTTH leader as early as 2013. Operators continue to invest, even in rural zones, while lowering their tariffs and promoting services and content.

China’s dynamism and ongoing deployments across Southeast Asia are sure to make 2017 another year of strong growth. Eyes are now turning to India where the local telecoms troublemaker RelianceJio introduced its JioFiber offer to coincide with the important annual Hindu "Diwali" festival in October 2017.

American telcos and cablecos racing to gigabit speeds

In the United States, in the past wireline VHSB has been sold essentially by cable operators, with patchy coverage of about 137 million homes of which 60 million were effectively connected via FTTx/Docsis 3.0 at the end of 20164. In comparison, only 13.7 million homes were on FTTH at that time (up 16% year-on-year) out of a total of 30.4 million passed (connectable) homes5. The FTTx footprint remains limited for two reasons: first, the big telcos (AT&T, Verizon, CenturyLink, Frontier) concentrate on the densest zones, and secondly, in some areas they have opted for other connection technologies. It is interesting to note that over the last three years a thousand small but very aggressive local players have installed almost half of all new connections in the counttry6.

The race to Ultra Broadband (UHD) started in 2010 when Google announced its Google Fiber plan to roll out 1 Gbps networks through local partnerships. Although its offering launched in 2012 has not been as successful as expected7, the market is nevertheless seeing a race to ultra-high speeds, stimulated by changes in consumer behavior, including cord-cutting and increasing use of OTTs. Google’s ambitions have also obliged telcos to modulate their strategies. AT&T, who initially placed its main hopes on FTTN+VDSL, started to deploy FTTP in 2014 in order to launch 1 Gbps offers. Verizon finally followed the crowd with the launch in April 2017 of its new "FiOS Gigabit Connection" offer in eight east coast states8. A year earlier, it had unveiled its "OneFiber" plan with a $300m budget to replace copper by FTTH over 6 years in Boston. In the end this plan will become a 5G radio link9, which will limit connection costs and make it possible to challenge the cablecos’ hegemony10 on large residential buildings. To reinforce its professional and wholesale offerings, Verizon acquired XO Communications with its fiber network in February 2017. In April 2017, it decided to buy at least $1.05 bn (€887 m) worth of optical fiber from Corning over three years to improve its network.

Western Europe finally wakes up, but fiber is still a minority technology

After years of hesitation, fiber is at last taking off in Western Europe, with 16.4 million FTTH/B lines at the end of 2016 a 50% increase over two years. Of all homes served by fixed-line VHSB, 26% are now on FTTH compared to 30% on VDSL and 46% on cable (FTTx/Docsis 3.0)11. Eastern Europe (including Russia) is a long way ahead due to its underdeveloped cable services and the mediocre quality of its copper networks. FTTH accounted for 80% of all wireline VHSB connections at the end of 2016.

The slower take-off in Western Europe is caused by strong financial and regulatory constraints on key factors such as duct sharing and total unbundling. Some operators have chosen to migrate to solutions better adapted to the local context, for example FTTC in the United Kingdom. Others have employed solutions that exploit the maximum capacities of copper. The decision of Belgacom, Swisscom, TDC and in particular Deutsche Telekom to deploy VDSL in the early years of this century has left them all at the bottom of the European FTTH/B rankings with a joint total of only 1.6 million fiber customers at the end of 2016 (source: IDATE)

Inversely, some Scandinavian and Baltic countries were very quick to adopt FTTH. At the end of 2016, 80% of Norwegian and Swedish homes and 100% of those in Lithuania and Latvia are passed by fiber. In fact, Latvia is the European champion in terms of fiber penetration in homes (45% in late 2016), ahead of Sweden and Lithuania (~41%)12. Since 2015, Spain and France are showing the way in Western Europe: together they accounted for almost twothirds of new fiber subscriptions and half the connectable base at the end of 2016. Telefonica has been driving the movement since 2013 on the Iberian peninsula which had 4.9 million lines at the end of 2016. Fiber is now being deployed rapidly thanks to simplification of administrative procedures in 70 cities, lower installation costs in collective dwellings and urban management rules that often allow cabling across facades13. By July 2017, the FTTH base grew to 5.7 million lines, overtaking ADSL (5.6 million14) for the first time. Thanks to its early rollout, Telefonica is still the leader on fiber, but Orange is now moving fast and Vodafone recently concluded an alliance with Telefonica.

In France, following clarification of the regulatory context15 in 2013, operators restarted their FTTH deployments in an increasingly competitive market. Regarding marketing, Orange and SFR were the first to propose promotional 3-play offers to incite ADSL subs to migrate to fiber with, in most cases, free connection to the home. By the end of June 2017, Orange had 1.69 million FTTH subs and 7.9 million passed homes, compared to SFR’s 2.1 million VHSB subs and 10 million FTTH/B passed homes. While Orange takes its fiber all the way to the end-user, SFR stops at the bottom of the building (FTTB) in 90% of cases. Iliad (Free) and Bouygues, both of whom had slowed their rollout, have accelerated again since two years and in June 2017 they had respectively 420,000 (+68% year-on-year) and 171,000 (+150%) FTTH customers. Most operators are in phase with the national broadband plan which foresees 20 million fiber-connectable homes in 2022 (SFR is even aiming for 22 million).

Despite these good results, the climate has been tense since the beginning of 2017 with the new Macron government wishing to bring forward the date of nationwide broadband and high-speed broadband coverage by two years to 2020. French operators are claiming fiscal and financial compensation and there are several disputes between Iliad, SFR, Bouygues and Orange. In this context, SFR has said it will cover the entire country without public money, although it has not disclosed details of its roadmap and the credibility of its plan remains to be seen.

In other markets, the situation is evolving fast in reaction to regulatory or competitive constraints or opportunities. Germany has just allocated €4 bn to support local Public Initiative Network (PIN) projects in zones overlooked in the fiber-optic plans of Deutsche Telekom and cable operators. Italy has an ambitious plan that will cost the treasury €6.8 bn to bring VHSB to 85% of the population by 2022, and the United Kingdom launched a £400m fiber investment fund in July 2017.

Legacy players such as Deutsche Telekom and KPN still opt mainly for FTTN+VDSL, so the FTTH movement is increasingly driven by challengers. Vodafone, the most active since late 2015, continues to publicize its deployment of a European 1 Gbps network: in Spain (joint venture with Orange), in Ireland ("SIRO" joint venture with Irish electricity utility ESB), in Portugal (network sharing with multimedia company NOS), in Italy ("OpenFiber" joint venture with the utility Enel), in Germany (where two thirds of the lines will cover 100,000 businesses and 2,000 commercial and industrial parks by 2021). Vodafone has not yet announced a rollout in the United Kingdom where local and regional players such as Gigaclear, GTC and Hyperotic are already deploying FTTH. OpenReach, now legally separated from BT, has fixed a target of 10 million FTTH-connected homes by 2025.