Fitch injects reality to EC fiber goals

Fitch Ratings is applying some reality to European Commission targets for fiber deployment, claiming the goal of 50% penetration of 100Mbps services by 2020 is simply unviable.

The ratings agency states fiber access will likely only be feasible for private firms setting up in densely populated areas, due to lower cost-per-user and predicted higher take-up of high-speed services in those areas. It notes several incumbent telcos are already spending €1 billion to €2 billion each to deploy fiber in heavy population centers to combat growing competition from cable operators, but claims the EC’s goals will require at least three times the investment.

Fitch estimates the total cost of deploying fiber to the home throughout France and Germany at €30 billion and €40 billion respectively. In addition, it believes the EU is being optimistic in expecting an injection of €6.4 billion of public cash to generate up to €100 billion of investment from the private sector, given current market conditions.

“It implies a leverage of over 15-times in a sector where there remain serious doubts about take-up rates and whether customers will pay substantially more for a faster broadband service,” a statement reveals.

Heaping more misery on European plans, Fitch notes that even if the €100 billion figure is achieved, it will still fall short of the total required investment.

The ratings agency also notes that consultations into cutting copper access prices, which were opened by Digital Agenda commissioner Neelie Kroes on Monday, fail to look at the bigger picture of increased pressure on telco’s top lines. The firm predicts operator’s revenues will fall in 2012 and then remain flat in 2013, and continued pressure on operating margins.

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