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Europe: No rush to roll-out FTTH August 24, 2006

Posted by Jasper in Uncategorized.
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[From telecommagazine]: With Japan sitting on top of the world’s FTTH (Fiber-to-the-Home) connections league, and the North American market beginning to pick up some momentum courtesy of Verizon’s push on IPTV and FTTH, Europe looks set to lag well behind in the coming years.

According to figures supplied by Ovum, Japan had 3.8 million FTTP (Fiber – to – the – Premise) connections for the consumer by the end of 2005. By contrast, Western Europe had 705,000 FTTP connections and North America 543,000. Ovum defines FTTP as including FTTH and FTTB (Fiber-to-the- Building) plus LAN.

By the end of 2009, Ovum calculates that of a total world FTTP subscriber base of 29 million (admittedly not a large number in itself), Japan will have a 32 percent share, North America a 22 percent share, China 16 percent, and Western Europe a meagre eight percent.

“The big question, leaving aside any concerns about regulatory uncertainty, is whether in fact operators in Europe really need FTTH at all,” says Jonathan Coham, an Ovum analyst. “The shorter copper loops [compared with the US] makes intermediary solutions, such as FTTN [Fibre-to-the- Node/Neighborhood] plus ADSL2+ or VDSL, very attractive as they give anything between 25-50 Mbps on the downlink. That should be more than enough for providing triple-play packages over the next five years or so.”

Jean-Pierre Lartigue, vice president of marketing at Alcatel’s access division, concurs that FTTH is not at the top of operators’ agenda in Europe. “We’re in deployment mode in the US but, in Europe, this year will be a time to assess the economic viability of FTTH. I would still expect to see some commercial FTTH rollouts by operators in Europe next year.”

Lartigue wouldn’t be drawn on naming names but his outlook may be optimistic, particularly if the EC continues its tough stance on incumbents by refusing them ‘regulatory holidays’. Deutsche Telekom has already announced that it has stalled its FTTN plus VDSL rollout plans in Germany until it can get regulatory assurances that it won’t have to wholesale access to its high-speed network at prices set by the regulator.

Assuming that incumbents do roll out FTTN plus VDSL, however, the reasons for doing so won’t necessarily be to increase speeds to the subscriber beyond ADSL2+ (a maximum of 24 Mbps). It will rather be to increase coverage of ADSL2+ performance.

According to Lartigue, only 20 percent of copper loops in Western Europe are short enough to get the maximum speeds that ADSL2+ can provide. As such, to gain wider coverage of ADSL2+ type speeds, it will be necessary to push fiber deeper into the network.

Telefónica, Spain’s incumbent telephone operator, fits into this strategic category. It’s the operator’s intention to start commercial rollout of VDSL2 — in combination with Fiber-to-the-Node — in Q3 2006. “We need to increase our high-speed broadband access coverage,” says Fernandez Vega, Telefónica’s access solutions manager. “Not only as a way to try and increase ARPU but as a defensive move against increased competition.”

Vega even suggests that VDSL technology is being over- hyped by suppliers, which makes it unlikely — at least in the short term — that Telefónica would be able to offer speeds higher than ADSL2+ even if it wanted to. “Vendors of VDSL solutions are making promises far in excess of what the equipment can actually deliver,” he says. “Instead of 100 Mbps or 50 Mbps, we’re seeing actual VDSL2 performance [in our trials] going as low as 25 Mbps.”

Of course, if High-Definition TV (HDTV) gains in popularity, then the economics of FTTH might make more sense. But Vega, for one, is cautious. “We can do an HDTV triple-play with ADSL2+, no doubt about it,” he says. “But with the introduction of new [and interactive] services, the need for more bandwidth becomes obvious.”

Ovum’s Coham adds: “The circumstances for FTTH in the US are a lot more favourable than in Europe. There are no local loop unbundling requirements, customers are willing to pay a lot for entertainment services, the loops are longer [making DSL technology less tenable] and there are no regulatory restrictions on aerial delivery of the fiber. This drastically reduces the cost of FTTH compared with digging holes in the ground.”

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