© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Benoît Felten Principal Analyst [email protected] A World of Fiber
Nov 22, 2014
© Copyright 2007. Yankee Group Research, Inc. All rights reserved.
Benoît FeltenPrincipal [email protected]
A World of Fiber
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 2
France and the United States: A Love Story
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 3
Agenda
• FTTx in Europe
• Some conclusions on FTTx deployment dynamics
• How is this applicable to the US?
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 4
Sources: Fiber to the Home Council – End 2008
Fibered Europe
Sweden910k homes passed
400k subscribers200+ municipal networks
450 Service Providers over Open Access Model
Norway275k homes passed
180k subscribersVertically integrated utility
networksIncumbent (Telenor) stepping
up deployment
Finland420k homes passed
50k subscribersIncumbent (Elisa) deploying
selectivelySome municipal networksDenmark
620k homes passed90k subscribers
Energy companies deploying aggresively
Netherlands575k homes passed
170k subscribersMunicipal networks in large
citiesIncumbent (KPN) planning open access deployment
France4500k homes passed
180k subscribersIncumbent, two competitors
and cableco deploying
Spain300k homes passed
30k subscribersA few regional projects.Incumbent (Telefonica)
cautiously rolling out
Portugal200k homes passed
~15k subscribersCompetitive operator rolling
out
Germany280k homes passed
60k subscribersMunicipal projects in Cologne,
Munich and moreIncumbent deploys VDSL2
Slovakia430k homes passed
20k subscribersIncumbent (Orange) rolling out
Slovenia280k homes passed
50k subscribersIncumbent (Telekom Slovenje) and
competitive operator rolling out
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 5
Regulatory Models
Infrastructure Competition with sharing of in-building deployment
Unbundling of the fiber-loop with no bitstream obligation
Infrastructure Competition with n regulatory oversight of >30Mb/s
market for the next two years
Bitstream only delivery model over FTTN and FTTH infrastructure
Pole and duct sharing, no open access obligation over fiber
Regulatory approach
Significant debate over the nature of in-building deployment: single fiber (Orange) or multi-fiber
(Free) slows down deployment.
In addition, KPN subsidiary Reggefiber is offering bitstream access wherever the network is
deployed already.
Despite favorable conditions, Telefonica deployment is still uncertain.
Bitstream FTTN model is still not clearly defined. OFCOM working on Active Line Access product
which would be a form of Ethernet Bitstream.
Duopoly has maintained high price levels and limited service penetration (Verizon has ~20%
take-up)
Comments
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 6
Framing the Regulatory Agenda
• Announced Open Access on passive and active layers
• Went significantly beyond OPTA’s expectations in terms of allowing competitors on own network
• Initiative is to preserve network business in the face of cable and muni-fiber competition
• Announced a strategy of roll-out with 4 parallel fiber strands to every home (aggregation level unclear)
• Lobbies regulator for a symmetrical measure to be impose to competitive roll-out
• Initiative is to ensure universal access with owned or operated fiber and avoid costly and complex unbundling obligations.
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 7
FTTH Business Model Fundamentals• Take-up has a stronger impact
on payback than ARPU.
• Payback under 10 years is virtually impossible without at least 30% take-up (more reasonably 40%).
• The current generation of services (triple-play) is probably not sufficient to attract customers en masse, especially if FTTH is priced higher.
• Service differenciation (Sweden) or price equivalency (France) are crucial components to driving high take-up and making the business model work.
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%35
45
55
65
75
0
5
10
15
20
25
30
35
40
45
50
55
Payb
ack
(yrs
)
Take-Up (%)
ARPU
(EUR
)
Sample FTTH Payback Periods(w. 1000 EUR/home costs and 45% gross margin)
0-5 5-10 10-15 15-20 20-25 25-30 30-35 35-40 40-45 45-50 50-55
Sou
rce:
Yan
kee
Gro
up, 2
008
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 8
Incumbents embracing Open Access?
<< In hindsight, KPN made a mistake back in 1996. We were not too enthusiastic to be forced to allow competitors on our old wireline network. That turned out not to be very wise.
If you allow all your competitors on your network, all services will run on your network, and that results in the lowest cost possible per service. Which in turn attracts more customers for those services, so your network grows much faster.
An open network is not charity from us, in the long run it simply works best for everybody. >>
Ad Scheepbouwer (CEO, KPN)
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 9
Opening Dark Fiber
Opening Ducts
Regulatory responses for open access
ServicesOpening Lit Fiber
Opening Services
• oligopoly in major cities / dense areas• monopoly in tier 2 cities• patchwork network
• the « new » unbundling• oligopoly everywhere the network goes• one network or patchwork network?
• richer choice for customers (on paper) • numerous SP ecosystem (10s)•economy of bitstream?
• richer service environment• plethoric SP ecosystem (100s)
likely outcome
regulatoryapproach ex.
• Sweden
• UK• Netherlands
• Netherlands
• Spain• France
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 10
Exploring a new Open Access Model?
Vertical Integration
Network
Services
Unbundling
Passive AccessInfrastructure
Services
ActiveWholesale
Services
ActiveWholesale
Bitstream
Active Wholesale
Services
Passive AccessInfrastructure
Services
?
? Wholesale
Serv
ices
Passive AccessInfrastructure
Serv
ices
Serv
ices
Serv
ices
Serv
ices
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 11
Net Neutrality, NGA Style
• An attempt at defining net neutrality: « a guaranteed amount of customer-to-IX capacity dedicated to internet usage ».
• Hard to deliver in the copper world • all services use a single logical circuit
• « Easy » to deliver in the fiber world • services can be delivered over separate
lambdas.
• Verizon FiOS already uses this technology to deliver TV and broadband on separate logical streams.
• HKBN offers guaranteed capacity to the IX or your money back!
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 12
How is this applicable to the US?
• Is this applicable to the US ?
• Objection #1: The US is not like the rest of the world• Incumbents in the US do not have majority share• Ubiquitous Cable Penetration is unique to the US• US Wireless Competition is fiercer than elsewhere
• Objection #2: Which network needs to be the monopoly network?• Why should telcos be the ones who are “forced” to open up?• Smaller networks cannot be open access because of economies of
scale issues
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 13
Duopoly dynamics?
0
5
10
15
20
25
30
35
40
Denmark
Netherl
ands
Norway
Switzerl
and
Icelan
d
Sweden
Korea
Finlan
d
Luxe
mbour
g
Canad
a
United
Kingdo
m
Belgium
Franc
e
German
y
United
Stat
es
Austra
liaJa
pan
Austria
New Z
ealan
dSpa
in
Irelan
dIta
ly
Czech
Rep
ublic
Hunga
ry
Portug
al
Greece
Poland
Slovak R
epub
lic
Turke
y
Mexico
Source: OECD
Other
Fibre/ LAN
Cable
DSL
OECD Broadband subscribers per 100 inhabitants, by technology, June 2008
OECD average
• The US lags behind in terms of broadband penetration.• Could this be because of a less than efficient duopoly rather than
in spite of “vibrant duopoly competition”?
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 14
Price and penetration are correlated
• North American Prices per Mb/s download of NGA wireline broadband are the highest in the world.
• Price doesn’t explain everything, but the correlation between price and adoption doesn’t have to be demonstrated.
• In a duopoly, neither of the players are interested in lowering the prices. Pr
ices
per
Mbp
s do
wnl
oad
(Nor
mal
ised
USD
)
0 0,5 1 1,5 2 2,5 3 3,5 4 4,5
APAC
EMEA
NAM
By
Geo
grap
hy0 0,5 1 1,5 2 2,5 3 3,5 4 4,5 5
FFTN
DOCSIS 3.0
FTTH/B
By
Tech
nolo
gy
Source: FTTH Council & Yankee Group
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 15
In Conclusion
1
2
3
Open Access makes economic sense for private players everywhere in the world
Vertically integrated NGA deployment will not happen with private money in a 3-5 year investment timeframe
Designing a profitable wholesale model for broadband is crucial to NGA deployment
4 Net Neutrality, NGA style is a first step to ensuring service competition.
F2C – March 31sth, 2009© Copyright 2007. Yankee Group Research, Inc. All rights reserved. Page 16
Please visit our website:
www.yankeegroup.co
m
Thank you for your interest!
Benoît [email protected]: +3 618 243 189