FTTHForum 2011 IDATE Roland Montagne

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FTTx Markets: Global perspective Eastern Europe drivers

Roland MONTAGNE

Director Telecoms Business Unit

[email protected]

+33 6 80 85 04 80

Budapest, 9th November 2011

FTTH Forum 2011

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Agenda

► FTTH Worldwide Status & Strategy

- Global Figures

- Leaders: Japan, US

- Australia NBN

► European detailed situation: Eastern Europe focus

► Global Drivers for FTTH

► FTTH/B Forecasts up to 2015: Eastern Europe will lead in EU

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FTTx Worldwide Status & Strategies: Figures

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FTTH/B Global Picture: APAC Strong leadership

6 M 6.7 M

30.7 M 0.25 M

FTTH/B subs worldwide from June 2010 …

7.3 M 10.2 M

49.5 M 0.4 M

… to June 2011

FTTx means FTTH/FTTB, FTTN+VDSL, FTTLA, FTTx+LAN

Global FTTx market: 112 M subscribers at June 2011, 61% being FTTH/B

Asia is still the leading market (73% of worldwide FTTH/B subscribers at June 2011)

Europe, including Russia, is progressing, in particular thanks to Eastern countries (~ 15% of worldwide FTTH/B subscribers at June 2011)

USA: a little slow down in deployment from telcos in 1H11, but acceleration from local authorities due to the Stimulus BB program awards

LATAM and Middle East potential Source: IDATE

<0.3 M

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Rank Player Country Technology & architecture FTTx subscribers

1 China Telecom (*) China FTTH & FTTx/LAN EPON LAN/DSL 20 000 000

2 China Unicom (**) China FTTH/B GEPON/EPON & FTTx/LAN 15 000 000

3 NTT Japan FTTH/B GEPON 14 724 000

4 KT South Korea FTTB EPON/GEPON 5 016 709

5 Verizon USA FTTH BPON/GPON 4 082 000

6 AT&T USA FTTN/VDSL2 2 751 000

7 ER Telecom Russia FTTB 2 716 000

8 SK Broadband South Korea FTTB/LAN GEPON 2 136 208

9 Chunghwa Telecom Taiwan FTTB GEPON 2 044 683

10 KDDI Japan FTTH/B EPON/GEPON 1 833 000

FTTH/B Global Picture: APAC Strong leadership

Top 10 FTTx players worldwide at end 2010

Source: IDATE •(*) Among which 7 million FTTH/B subscribers and 13 million FTTx/LAN subscribers

•(**) Among which 5.5 million FTTB subscribers and 9.5 million FTTx/LAN subscribers

•7 Asian telcos among the 10 leading players worldwide

•2 Chinese operators leading the ranking!

•1 Operator from Russia

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FTTH/B worldwide Status & Strategy: leaders

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Japan

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FTTH: Worldwide Status & Strategies: leaders

Japan: the FTTH leader

More new FTTH/B subscribers than new DSL subscribers since April 2005

Nearly 20.8 Million FTTH/B subscribers at June 2011 and 46 Million Homes

Passed... 1 million new FTTH subscribers last 6 months …. Nearly 40% are FTTB

subs

At June 2011, FTTH/B subscribers represent 60% of total Broadband subscribers and

more than 90% of the population is already covered!

Attractive prices, closing the gap with ADSL tariffs… aerial deployments

Government’s proactive approach to FTTH deployments: 30 million FTTH subscribers in

2010 as a ambitious initial objective…objective revised in November 2007 at 20 Million

FTTH subscribers in 2010…has been reached!

But not specific services….

….with a few IPTV subscribers in Japan (probably around than 1.5 million)

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NTT

Strong domination on FTTH/B

Indeed, retail price for SDU was 5 460 Yens, was only around 10% more expensive than

wholesale offer.

But MIC has forced NTT to open up it’s FTTH network at advantage prices for competitors:

since June 2008, NTT East for example decreased his wholesale price of 14%.

NTT market shares on FTTH (combining both NTT East and NTT West) nearly

reaches 75% at end 2010

Source : IDATE, according to MIC

NTT

74%

USEN

3%

KDDI

9%

Others

5%Power

Companies

9%

NTT mainly targets SDUs:

61% vs 39% MDUs at end

2010

10

USA

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FTTH: Worldwide Status & Strategies: leaders

USA: FTTH is the unique solution for RBOC’s

Power of Cable operators: Time Warner, Comcast, launching 30 or 50 Mbps offers

CableVision proposing a 101 Mbps offer … more than twice what Verizon's much-

touted FiOS offers (50/20 Mbps)

At June 2011, Verizon has nearly signed 4.5 Million FiOS FTTH subscribers and

has about 3.8 Million FiOS TV subscribers

At June 2011, the FiOS network on commitment to pass 18 million premises (15.7

passed to date) or approximately 60 percent of total households in areas currently

covered by Verizon’s wireline network (objective is to reach 70%)

Initial Target: 18 million homes passed by 2010, has not been reached …Now LTE

is being deployed

AT&T (FTTN oriented) and Verizon launched Fibre access for delivering HDTV &

Triple Play

Churn is very low for FiOS TV Subscribers: around 1%

2Q11: FiOS ARPU ~ $150

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FTTH: Worldwide Status & Strategies: leaders

USA: FiOS TV Packaging & Pricing – Example

FiOS TV plans (April 2011)

Verizon claims now to be the 6th largest cable operator in the USA

Source: Verizon – April 2011

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Overview: Projects

2 large telcos involved in FTTx deployment

Large cable companies migrating their infrastructure to Docsis 3.0 since 2008

~ 65.5 million homes covered today!

FTTH/B

~4.1 million subscribers

15.6 million Homes Passed

FTTN+VDSL

~2.75 million subscribers

27 million Homes Passed

Municipalities and utilities more and more involved in FTTx deployments in the context of

the National Broadband Plan

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Australia NBN

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Telstra joins the NBN

In June 2010, and after a long dispute, Telstra signed an agreement with the federal government which is due to be finalised by end 2011

Telstra will provide access to its passive infrastructure, decommission its copper network and decommission its cable broadband service, as long as the NBN is deployed

The deal could potentially provide Telstra with a post-tax net present value of about AUD 11 billion

By this agreement, the government had been seeking a commercial arrangement with Telstra to avoid the need for a duplication of infrastructure for the national roll-out of its NBN

Under the deal, NBN Co will have access to Telstra’s backhaul fibre and its network of poles, ducts and wires

Telstra has also agreed that as the government’s planned network is rolled out, it will migrate it’s customers to the new fibre network

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NBN Corporate plan: Key Assumption: Environment

Coverage (FY2021):

NBN Co will cover all premises within Australia, of which:

93% will be covered by FTTP; and

4% will be covered by Wireless (at least 12 Mbps) and 3% by Satellite

NBN Target for June 2013

Total capital expenditure for the network will be $35.9 billion (26 b EUR), of which $ 1.3 b for Replacement & Maintenance

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National Broadband Plans: Worldwide picture

Mix of new and existing players

Mix of technologies: Copper, Fiber, Wireless

Source: Alcatel Lucent

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FTTH: Detailed European situation

Focus on Eastern Europe

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Background of the Study

► IDATE has been commissioned by the FTTH Council Europe to provide a

comprehensive overview of FTTH/B deployments in 39 countries in Europe (1) (9th edition)

► Methodology used

• Desk research

• Direct contacts with FTTH players (questionnaires, phone interviews)

• Information exchange with FTTH Council Europe members

• Direct contacts with IDATE’s partners in several European countries

► Objectives: to provide a complete summary of the status of FTTH/B in

Europe, twice a year

• Identification of new projects

• Characterization of each project: organization initiating the project, Key

parameters& Figures (Homes and Buildings passed), Technical parameters,

Financing & Business model

• We distinguished FTTH/FTTB and FTTN (FTTN/C+VDSL, FTTLA, FTTx+LAN)

(1) When referring to Europe we take into account EU 35: EU 27+ Andorra, Croatia, Iceland, Israel, Norway, Serbia, Switzerland, Turkey.

When referring to EU 39 we take into account EU35 + 4 CIS Countries: Belarus, Kazakhstan, Ukraine and Russia.

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Background of the Study

EU 27 +

Andorra,

Croatia,

Iceland, Israel,

Norway, Serbia,

Switzerland,

Turkey

EU35 EU 35 +

Belarus,

Kazakhstan,

Russia, Ukraine

EU39

Austria

Belgium

Bulgaria

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Slovenia

Spain

Sweden

United Kingdom

EU 27

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Available results for EU39

Around 300 FTTx projects listed in EU39

Qualitative Quantitative

Source: IDATE for FTTH Council Europe

Number of Households/Business Units passed 340,000 FTTH/B homes passed at December 2009

355,000 FTTH/B homes passed at June 2010 (IDATE

estimates)

570,000 FTTH/B homes passed at December 2010

700,000 FTTH/B homes passed at June 2011 (IDATE

estimates)

FTTx subscriber base 11,600 FTTB and 51,000 FTTH subscribers at December

2009

84,500 FTTH/B subscribers at June 2010

103,760 FTTH/B subscribers at December 2010

120,000 FTTH/B subscribers at June 2011 (IDATE

estimates)

TEO

Figures

Technical parameters

MDU 60% / SDU 40%

Identification Operator/Organisation

TEO is the Lithuanian incumbent, leader in the national broadband market.

The FTTH Project launched by TEO is one of its most important network modernisation projects. From 2007 to 2010 , the

company planned to invest more than LTL 100 million (38.9 million USD) in the new optical access network in the context

of an Internet plan called "Zebra".

Key parameters

TEO first planned to connect the residents of the 5 biggest cities of Lithuania with FTTH, beginning with the provision of

fiber-optic Internet services in Vilnius.

At the end of 2010, TEO provides FTTH services to 86 percent residents of Vilnius, 95 per cent residents of Klaipėda, 75

percent residents of Kaunas, and more than half of Panevėžys and Šiauliai residents . It expects to expand this FTTH

network to fifty lithuanian cities which should represent an investment of more than LTL 70 million.

The total investment in the next-generation network should exceed LTL 325 million by the end of 2011.

At end 2010, there are 90,120 FTTH customers and 13,640 FTTB subscribers including 200 office buildings.

In a long term perspective, TEO expects to be able to provide services at the speed of several Gbps. In this line, from May

2011, it increased speeds of its FTTH services ranging from 40 to 300 Mbps without additional cost for residential

subscribers.

FTTH/B subscribers (*) FTTH/B Homes/Buidings

passed

Asturias 11 000 51 000

Telefonica 83 000 500 000

Orange na 10 000

Others (1) 7 130 na

Total FTTH/B 101 130 561 000

FTTN subscribers (**) FTTN Homes/Buidings

covered

Ono 270 000 7 000 000

Telefonica na na

Others (2)

Total FTTN 270 000 7 000 000

Total Spain (***) 371 130 7 561 000

June 2011

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Overview: Projects – players involved in Eastern Europe

Around 260 FTTH/B European projects at mid-2011

Source: IDATE for FTTH Council Europe

Some significant FTTH/B deployments

at June 2011

(> 200,000 Homes Passed)

Countries

FTTH/B

Homes/Buildings

passed (June 2011)

Bulgaria Blizoo Cable operator 1 100 000

Denmark TDC Incumbent 250 000

Estonia Elion Incumbent 210 000

Finland Telia Sonera Incumbent 600 000

SFR Alternative operator 550 000

France Telecom Incumbent 819 403

Free Alternative operator 450 000

Numericable Cable operator 4 500 000

Net Cologne Power utility 240 000

Wilhelm Tel Power utility 200 000

Hungary Magyar Telecom Incumbent 290 000

Fastweb Alternative operator 2 000 000

Telecom Italia Incumbent 550 000

Latvia Lattelecom Incumbent 357 485

Lithuania TEO Incumbent 700 000

Netherlands KPN/Reggefiber Incumbent 768 000

Norway Altibox Power utility 350 000

Portugal Telecom Incumbent 1 279 000

Sonaecom Alternative operator 300 000

Vodafone Alternative operator 200 000

Beeline/VimpelCom Alternative operator 8 900 000

Comstar UTS Alternative operator 2 000 000

ER Telecom Alternative operator 5 000 000

Orange Slovensko Alternative opertaor 320 000

T-COM/Slovak Telecom Incumbent 360 000

Slovenia T2 Alternative operator 310 000

Spain Telefonica Incumbent 500 000

Telenor Alternative operator 500 000

Telia Sonera Incumbent 320 000

Switzerland Swisscom Incumbent 275 000

Turkey SuperOnline Alternative operator 718 000

UK BT Incumbent 250 000

Ukraine Beeline/VimpelCom Alternative operator 3 000 000

Sweden

Portugal

Russia

Slovakia

Players

France

Germany

Italy

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FTTH in Europe – Eastern Strong Lead

Source: IDATE for FTTH Council Europe

At end of June 2011

EU39: 10.2 million FTTH/B subscribers with 69% in Eastern EU EU27: 4.1 million FTTH/B subscribers with 36% in Eastern EU

CIS (Russia, Ukraine, Belarus, Kazakhstan): 5.6 million FTTH/B subscribers

EU39: 39.8 million FTTH/B Homes Passed with 55% in Eastern EU EU27: 23.4 million FTTH/B HP with 30% in Eastern EU

CIS (Russia, Ukraine, Belarus, Kazakhstan): 14.7 million FTTH/B HP

Average Take Rate higher in average in Eastern EU :

- EU35: 18.3%

- Russia 44%, Hungary & Czech Rep. 37%, Slovakia 32%, Lithuania 27%, Slovenia 26%, Bulgaria 24%

- but … Ukraine 15%, Poland 14%, Romania 5%

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FTTH in Europe - Players

►3 main categories involved in EU35 FTTH/B deployments

Source: IDATE for FTTH Council Europe

Municipalities &

Utilities

• More numerous

• Local deployments only

12% of total FTTH/B

Homes Passed at

June 2011

Alternative

operators / MSOs

• Most dynamic

• National or local

deployments

55% of total FTTH/B

Homes Passed at

June 2011

European

incumbents

• Challenged on BB

• National deployments

33% of total FTTH/B

Homes Passed at

June 2011

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Europe’s FTTH/B leaders

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0

1 000 000

2 000 000

3 000 000

4 000 000

5 000 000

6 000 000

Russia

Sweden

Fran

ce

Ukrain

eIta

ly

Lithua

nia

Norway

Nether

lands

Bulgaria

Hungary

Portuga

l

Slova

kia

June 2009 June 2010 June 2011

FTTH/B subscribers evolution

Source: IDATE for FTTH Council Europe

Market with still a huge potential: +

954 K subs. In 6 months!

East. EU New

entrant, dynamic

markets

►Countries > 200,000 FTTH/B subscribers at mid-2011

27

New FTTH/B subscribers 1H11

Source: IDATE for FTTH Council Europe

►Top 5 countries

► France

► Portugal

► Bulgaria

► Netherlands

► Spain

+87,300

+71,000

+69,000

+43,000

+41,149

(Russia: + 964,000)

28

0

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

12 000 000

14 000 000

Russia

France

Ukrain

eIta

ly

Romania

Portugal

Sweden

Lithuan

ia

Bulgaria

June 2009 June 2010 June 2011

FTTH/B Homes Passed evolution

►Countries > 1 million FTTH/B Homes Passed at mid-2011

► 5 countries in Eastern Europe

Source: IDATE for FTTH Council Europe

Large network overlapping

between main players

2 players covering same

buildings in 15 cities

Segmented

markets

Largest rollout by

incumbent

29

►Small growth in Italy, France, Sweden ► With respectively 4%, 5% and 5% HP growth in 1H2011

► Further rollouts planned in Italy on a national scale to be confirmed

► Already good coverage in most dense areas, notably in France (FTTB)

►UK’s accelerated coverage (>x2) reveals strong

ambitions

►European coverage supported by Eastern countries ► Hungary : +172% during 1H2011

► Poland : +77% during 1H2011

► Estonia : +35% during 1H2011

FTTH/B Homes Passed trends

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FTTH/B Homes Passed in total HH

►Number of Homes Passed not representative of

effective coverage (HP in total households)

• Only 2 countries > 50%

Top 6 countries in

terms of HP in total

households

Andorra: 100%

Lithuania: 97%

Bulgaria: 39%

Portugal: 48%

Latvia: 41%

Source: IDATE for FTTH Council Europe

Slovenia: 39%

31

FTTH/B leading countries

►Pioneer Sweden always heading European FTTH/B market in terms

of number of subscribers, but is getting really challenged by

growing markets (France, Ukraine)

►Hungary’s FTTH/B market is accelerating due to the multiplicity of

local players

►The CIS countries case: potential of the market confirmed and still

very huge for Russia and Ukraine

►A part from CIS, majority of subscribers concentrated in 7

countries

• Sweden, France, Italy, Lithuania, Norway, Netherlands, Bulgaria

• Around 59% of total FTTH/B subscribers in EU35

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FTTH/B leading countries

Source: IDATE for FTTH Council Europe (1) Number of subscribers in total Homes Passed

From the highest… In Scandinavian countries : 62% in Norway, 39% in Sweden

In Hungary (37%), Slovakia (32%) or Netherlands (32%)

In the Baltics : 27% in Lithuania

…to the lowest In France (10%), Switzerland (5%), UK (<1%)

But number of subscribers less relevant than Take

Rates (1)

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FTTH/B European technologies

Source: IDATE for FTTH Council Europe

► In December 2010, the main architecture deployed is still FTTB

► Regarding technology, players have mainly chosen Ethernet

► FTTB is the main architecture today deployed in Eastern Europe

FTTH 37% 34% 33%

FTTB 63% 66% 67%

PON 27% 26% 24%

Ethernet 73% 74% 76%

MDU 77% 76% 75%

SDU 23% 24% 25%

Dwellings deployed

(homes passed segmentation)Dec 2010 June 2010 Dec 2009

Main technology deployed

(homes passed segmentation)Dec 2010 June 2010 Dec 09

Main architecture deployed

(homes passed segmentation)Dec 2010 June 2010 Dec 09

34

European Ranking

►The Ranking includes countries of more than 200,000 households

where at least 1% of households are FTTH/B subscribers

►At June 2011

• 20 countries in the European Ranking

• Ukraine and Hungary new entrant

►Three Eastern European countries showed the highest

progression in the ranking from 2% to 4 % : Lithuania, Bulgaria and

Russia

►Major Western Economies such as Italy and France still at the

bottom of the Ranking

• Others like UK, Germany or Spain absent

35

European Ranking

Source: IDATE for FTTH Council Europe

European Ranking – June 2011

FTTB

FTTH

0%

5%

10%

15%

20%

25%

30%

Lith

uania

Nor

way

Swed

en

Slove

nia

Rus

sia

Bulga

ria

Latvia

Den

mar

k

Eston

ia

Hun

gary

Portu

gal

Net

herla

nds

Finland

Cze

ch R

epublic

Ukr

aine

Franc

eIta

ly

Turkey

Rom

ania

36

Global Drivers for FTTH

37

Global Drivers for FTTH

► A market driven by competition … as it is the case un the US and Europe, in several APAC countries Cable operators could be in the driving seat … especially in Eastern Europe

► Quality of Copper Local Loop influencing migration of Residential customers to Fiber – The case of Eastern Europe

►Mobile backhaul and LTE …

• Mobile operators are densifying their backhaul with the explosion of Mobile Broadband and Smartphones

• LTE base stations will need fiber and Femtocells at home also!

►Cloud Computing for SMEs • At the difference of the US, in Europe, SMEs can be close to the

residential areas

• Short latency of Fiber will allow Cloud Computing to target SMEs

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FTTH/B Forecasts up to 2015

39

FTTH/B Subscribers Forecasts up to 2015

Source: IDATE – FTTx Watch Service 2011

Regional FTTH/B subscriber growth between 2009

and 2015 Eastern Europe should see a

strong evolution and push North

America out of its 2nd place in

terms of number of FTTH/B

subscribers in 2012, with over 12

million subscribers against nearly

10.8 million in North America.

Asia will undoubtedly remain the

most dynamic region for FTTH/B,

be it only due to the size of its

populations. The area should have

135 million FTTH/B subscribers in

2015.

China and India, will experience

very high growth rates over the

next 5 years.

0

20 000 000

40 000 000

60 000 000

80 000 000

100 000 000

120 000 000

140 000 000

Latin America Middle East -

Africa

Total Western

Europe

Eastern Europe North America Asia Pacific

2010 2011 2012 2013 2014 2015

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Thank you!