Fiber in Europe bucks economic trends

As the industry gears up for the FTTH Council Europe’s 2013 conference in London February 19-21, Lightwave European Correspondent Kurt Ruderman asked fiber-optics analyst Richard Mack of CRU International to evaluate the European scene in 2012 and to discuss his outlook for fiber and cable in 2013, particularly as it relates to FTTx in Europe.

Lightwave: What were the key developments that shaped the European fiber-optics market in 2012?

Mack: Even though several important economies in Europe were struggling with recession, the region's optical fiber and cable industry fared reasonably well in 2012 – better than in 2009, when the recession had a greater effect on telecom capital spending.

For one thing, the large fiber and cable firms have broad-based businesses. That is, they have sales organizations in other regions, and in many cases there are subsidiary or joint-venture factories in other regions. Exports of optical cable by Europe's factories were higher in 2012 than in 2011.

One development in 2012 was that we saw the effects of consolidation. It was first full year of the new Prysmian Group, which combines Prysmian and Draka. The group's new product and marketing campaigns highlighted the combined product family for telecom, including FTTx applications.

Tyco and ADC, which merged about the same time as Prysmian and Draka, progressed with the consolidation of their strengths in interconnect and passive hardware.

There were important developments in the optical cable industry’s product portfolio, especially innovation aimed at FTTx applications. This has been a key segment in terms of market growth, and the manufacturers have addressed new opportunities with new cable designs and features aimed at making the cable easier to install.

In the fiber industry, bend-insensitive fiber has become well established for cables to be installed in MDU buildings for FTTH. There are several new cable concepts for simplifying the installation of fibers inside buildings — ways to attach the cable to walls, ways to enter the cables and break out fibers for each floor of a building, etc. ITU standard G.657.A2 fiber has become well accepted for inside-building applications, and ITU G.657.A1 is being widely used in outside-plant applications.

Another important driver for fiber came from continued growth in 4G mobile usage, which requires more backhaul and backbone capacity, as well as fiber-optic systems for cell towers, including pre-terminated cable systems, and hybrid power-and-optical cables for linking the radio heads

On the technology side, there was also impressive progress with 100-Gbps transmission systems. Equipment manufacturers, such as Alcatel-Lucent, Ciena, Huawei, Infinera, NSN, and others, announced 100-Gbps system deployments on both terrestrial and undersea cable routes. In both markets, the systems have been used to upgrade the capacity of previously installed fiber-optic cable, not only new fiber.

Lightwave: Why was 2012 a reasonably good year in fiber compared with the region's economic condition?

Mack: We would not say that the fiber business is entirely immune to the poor health of Europe's economy (GDP growth, etc.), but we would point out that fiber is also driven by other factors that are far more positive than GDP trends – bandwidth growth, the EU's drive for broadband connectivity (the EU Digital Agenda), efficiencies in data transport for rail, utility, and other infrastructure, etc. One good example is Spain, which is among the European markets with weakest GDP growth, and where the incumbent, Telefonica, went ahead with plans to deploy FTTH in Barcelona and Madrid to improve its infrastructure, boost revenues for broadband services, and to improve its operating expenses.

Lightwave: How did 2012 compare to 2011?

Mack: The amount of cabled fiber (multimode and singlemode) installed in Western Europe rose 5% from 2011 to 2012. This was far better than the negative growth in GDP. The amount installed in Eastern Europe dropped from 2011 to 2012 by 3%, due to a downturn in Russia's demand. The amount of cabled fiber installed in the Eastern European markets excluding Russia showed an increase of 15%. In addition to the increased quantity of cable, 2012 saw progress in a wide range of application environments, requiring a diverse array of fiber and cable types for FTTH, FTTB, blown installation, etc. This drove R&D into new small-diameter cable types, easily installed cables, etc.

Lightwave: What were the big European projects in 2012?

Mack: Even though Russia's demand was down, the FTTH projects underway in Moscow and other Russian cities were still big projects, using a lot of fiber. Russia's demand was still more than 6 million fiber-km in 2012, even though Russia's demand in 2012 was down more than 10% from 2011, which was a very strong year in Russia.

We also saw progress in FTTx deployments in several important markets. Last year in Turkey, both Turkcell Superonline and Turk Telecom were installing FTTH systems. In the Netherlands, KPN is progressing city-by-city with its FTTH programs at a healthy pace. Ukrtelecom has FTTH projects in Ukraine. In the UK, BT Openreach, which mainly is installing FTTN and using FTTH for a small percentage of premises passed, is ahead of schedule with its multi-year program.

Lightwave: What are the top European fiber markets?

Mack: In terms of the amount of cabled-fiber (in fiber-km) installed, the top 10 markets in order of size are Russia, Germany, France, the UK, Turkey, Spain, the Netherlands, Italy, Switzerland, and Ukraine. These 10 accounted for 74% of all fiber installed in Western and Eastern Europe. (In this segmentation, Eastern Europe includes all of the former Soviet republics.)

Lightwave: What are the big drivers for fiber?

Mack: The main driver is broadband service for residential customers and small-and medium enterprise premises. Simply put, fiber lets the service provider offer faster Internet service. For residential customers in some countries, IPTV is an important component of the broadband-services menu. Fiber also lets the service providers gain some operational benefits.

Broadband services over FTTx networks have been the main driver for fiber optics in Europe for several years now. It is also the same driver in much of Asia, North America, and parts of Latin America, and Australasia. In India, Africa, and other parts of Latin America, backbone routes are a more significant driver. In China, mobile infrastructure has been the biggest driver (accounting for the most fiber and the most growth in recent years), although FTTH is also a major factor in the China market.

Lightwave: What were the big obstacles to fiber deployment in Europe in 2012?

Mack: Generally, the obstacles for fiber deployments have to do with cost, competition, and government policies. The cost problem is that VDSL can meet the EU Digital Agenda targets in many locations, and it gives a conservative carrier a safe way to offer broadband with less risk of stranded investment or having to share fiber infrastructure. When the new vectoring technology and the somewhat older pair-bonding technologies are used with VDSL, the bit rates can meet the Digital Agenda targets. In some countries, there is also a competitive CATV-industry offer for broadband, based on DOCSIS technology.

In France, for example, Iliad-Free cut back its FTTH deployments, possibly due to a new focus on mobile in 2012. SFR's demand was down a little, and Orange (FT) was flat. The complex regulations imposed by ARCEP in recent years may have contributed to the slower progress, as the carriers are required to explore joint investment or mechanisms for sharing infrastructure, depending on whether the deployments are in one of several types of "zone" or regions of population density.

Lightwave: What is the outlook for 2013?

Mack: The main observation about the European market is that it is a highly diverse group of about 50 countries. There are some small markets, such as Andorra, Iceland, and Jersey, that have been aggressive with FTTH. There are some large markets, such as Germany and UK, that have been conservative with FTTH, and more willing to pursue FTTN and "partial-fiber" access network architectures. The largest market, Russia, has been aggressive with FTTB, and recently with FTTH, and this has made it the largest market in Europe — more than twice the cabled fiber installed per year as the next largest in recent years.

In 2012, there were some signs for stronger commitment to spending on fiber in 2013 among key carriers in Germany, Italy, and Spain. With progress in these markets, along with a resumption of growth in Russia, and steady progress in other markets such as Turkey, Netherlands, Switzerland, and France, there is the potential for an increase of 5% to 10% in the amount of cable installed.

Telefónica will invest €300mn in fibre by 2015

Spanish telecoms giant Telefónica plans to invest more in its fibre broadband networks in major cities like Madrid and Barcelona this year, and also increase its fibre footprint in smaller cities like Bilbao and Seville.

In Madrid, the telco plans to extend its fibre-to-the-home (FTTH) network to new areas of the city like Alcorcón, Las Rozas, Boadilla del Monte, Villaviciosa de Odón, Torrelodones, Galapagar, Algete, Coslada, Valdemoro and Torrejón de Ardoz.

In Catalonia, the extra injection of funds will see the city of Gerona connected to fibre, as well as some of the larger towns and cities around Barcelona, such as Badalona, Hospitalet de Llobregat, Sabadell, Castelldefels y Rubí.

Smaller cities poised to receive new fibre networks this year include Bilbao, Córdoba, Cádiz, Málaga, Pamplona, San Sebastián, Seville, Zaragoza and Valladolid.

Telefónica currently has around 300,000 subscribers to its fibre broadband services, with 22,000 added last November – a monthly record for the company.

The telco is budgeting around €300mn for this extra push to expand its fibre networks between 2013 and 2015.

Strategy Analytics: Homeowners willing to pay for connected home services

Operators of fiber-to-the-home (FTTH) networks could find success beyond triple-play service provision. Strategy Analytics says its 4Q 2012 survey of broadband households in France, Germany, Italy, the UK, and the U.S. has identified surprising interest in and willingness to pay for remote monitoring and control systems in addition to professionally monitored interactive security services.

Over 50% of households without security are willing to pay for professionally monitored services if combined with monitoring and control capabilities, according to Strategy Analytics' Smart Home Strategies (SHS) advisory service report, "Smart Home Systems: Consumer Adoption and Attitudes."

Strategy Analytics' research also revealed significant willingness to pay for remote healthcare and energy management services if the price is right. Potential adoption of smart home services is highest in the U.S., UK, Germany, and Italy and less so in France, with the exception of retail DIY monitoring and control. Remote healthcare services have the greatest market potential in Italy, providing that recurring fees are kept under $10 per month.

"The percentage of broadband households with both the interest in and willingness to pay for selected connected home solutions is higher than expected," said Bill Ablondi, director, Smart Home Strategies advisory service, Strategy Analytics. "We believe that growing smartphone and tablet use is accelerating consumers' desire to be connected to everyone and everything important in their lives, including their family and homes."

The research quantified fees consumers are willing to spend for the selected services and the attitudes and behaviors most indicative of potential adoption.

The percentage of broadband households willing to pay for selected smart home capabilities in the US and major Western European countries is as follows:

  • 55% are willing to pay for self-monitored security
  • 54% are willing to pay for professionally monitored security
  • 47% are willing to pay for remote monitoring and control
  • 32% are willing to pay for remote healthcare services
  • 30% are willing to pay for remote energy management.

North American FTTH market worth $4.7B by 2017, says RVA

Market research firm RVA LLC predicts in a report released today that direct investment in North American fiber to the home (FTTH) deployment will reach $4.7 billion annually by 2017. Altogether, the market will be worth $18 billion across the next five years, RVA asserts. Meanwhile, operators will see FTTH services revenues grow to $4 billion by 2017, almost half of the cumulative $9 billion North American service providers will see over the same fiber-year period.

The report, North American Fiber to the Home and Advanced Broadband Review and Forecast to 2017, tracks both FTTH deployments and consumer demand for high-bandwidth services. The report states that deployment growth will continue over the next five years despite the wrap-up of the ARRA broadband stimulus program, the evolution of the FCC’s Universal Service program to the Connect America Fund, and potential continuation of past economic uncertainties. Market expansion will come via what an RVA press release described as “a diverse group of small to large providers” who will supplant Verizon as the primary market catalysts. Meanwhile, the deployment focus will shift from overbuilds to greenfield applications over the five-year forecast period, RVA says.

On the user end of the equation, RVA also expects the number of subscribers for high-bandwidth services ranging to the 1-Gbps will increase rapidly. These high-bandwidth users will create an important market for for application, software, and programming developers.

Windstream sees strong FTTT uptake

Windstream (Nasdaq: WIN) may not be a wireless operator itself, but it has become a key member of the wireless ecosystem as a provider of Fiber to the Tower (FTTT) backhaul services.

Speaking at the Citi Global Internet, Media & Telecommunications Conference in Las Vegas, Jeff Gardner, CEO and President of Windstream, said that in 2012 the provider improved its methods to deliver FTTT.

“We made a lot of progress with our ability to quickly turn these up for our customers and begin generating revenue,” he said. “In 60 percent of the markets, we are the incumbent so the failure to win those contracts would have meant two things: letting another competitor in and losing all of the TDM revenue that we get today from the circuits that we provide to wireless carriers.”

By the end of 2013, Windstream will complete the majority of its FTTT buildouts in both its traditional legacy regions and in new regions it entered through the various acquisitions it made in recent years.

About 40 percent of the service provider’s FTTT contracts are in these new regions. While Windstream has been providing traditional TDM-based backhaul in its own legacy markets for a number of years, it bolstered its out-of-market wireless backhaul capabilities when it purchased Kentucky Data Link (KDL) in 2010.

“When we bought KDL in 2010 we got a long-haul network, which really made us a logical bidder for some properties outside of our footprint today,” Gardner said.

Gardner added that as it winds down its FTTT roll out, the investment will be reduced from $250 million to $125 million in 2014.

At the same time, the ongoing growth of wireless data and the opportunity to serve more than one tenant at each cell tower means that there will plenty of services to sell.

“The Fiber to the Tower model was built and justified with an assumption of there being only single tenant,” Gardner said. “Companies like American Tower have five or six carriers hanging off those towers so there are lots of opportunities to pursue.”

Like other telcos, Windstream has to also deal with the near-term revenue loss that results from the migration of copper-based TDM to fiber.

While Gardner admits the migration process is an issue, he said that because it has processes in place to more efficiently roll fiber to the sites it can mitigate TDM losses.

Although many wireless operators purchasing backhaul begin at a certain rate, what they pay to Windstream will increase as their customers’ data use grows. Unlike TDM-based circuits, which were designed mainly to accommodate voice, fiber will be able to meet these higher wireless data speeds.

“We’re building these sites much quicker than we did originally and the wireless carriers are grooming their sites more effectively,” he said. “Obviously, they want to take full advantage of their investments as quickly as possible, which means will take more an upfront on the TDM, but it also means that more traffic will get pushed to that fiber connection.”

FTTT continues to be a larger factor in Windstream’s wholesale revenue machine.

Although Windstream’s overall wholesale revenues declined $220 million year-over-year in Q3 2012, carrier service revenues rose 3 percent year-over-year to $162 million, a factor it attributes to ongoing fiber-to-the-tower installations for its wireless operator customers and other carriers.

NBN Co hits Australian National Broadband Network targets

NBN Co, the organization responsible for construction of Australia's National Broadband Network, says it either completed or at least began construction of the fiber to the home (FTTH) network in areas covering 784,592 premises by the end of last year. This total slightly exceeds its goal of 758,000 premises before the end of the year.

The Australian Government has charged NBN Co with constructing the fiber-based broadband access network to 93% of Australian premises by June 2021. The open-access FTTH network will support download speeds of up to 100 Mbps. The remaining 7% of Australian households will be served by a combination of fixed-wireless and satellite by 2015.

"The National Broadband Network is an ambitious project which requires the efforts of many people working cooperatively towards a common goal," said NBN Co CEO Mike Quigley. "To have achieved our year-end target is both pleasing for all involved and a clear indication that the NBN project is ramping up to full volume rollout."

"I particularly thank our network planning and design team, our contract managers, and our construction partners for their efforts. By working together to achieve this year-end outcome the combined project team has established the settings to reach the peak rollout target of passing over 6000 premises a day by 2015," Quigley added.

So far, four contractors are working with NBN Co to build the national fiber-optic network:

  • Silcar in NSW, Queensland, and the ACT
  • Visionstream in Tasmania
  • Transfield in Victoriad
  • Syntheo (a Lend Lease/Service Stream joint venture) in the Northern Territory, South Australia, and Western Australia.

NBN Co's next milestone comes in June 2013, when it hopes to pass an additional 286,000 premises

China mandates FTTH for newly-built properties

The Chinese governments wants all new properties to be equipped with fiber connectivity

The Chinese government is to make fiber-to-the-home (FTTH) connectivity mandatory for all domestic new-build residences. The country's Ministry of Industry and Information Technology will introduce the legislation from April 1, 2013 according to local reports.

The policy will only apply to regions of the country where a public fiber-optic telecom network is available, according to Chinese newspaper China Daily, and residence owners will be offered services from a variety of ISPs, in order to ensure customer choice.

China's government hopes to have 40 million families connected to fiber networks by 2015 according to a report in another Chinese national newspaper, Economic Information Daily.

The news follows forecasts from research firm Ovum that smart grids based on passive optical networking (PON) technologies are set to provide a $1.5-2bn opportunity for fiber and FTTx component and infrastructure vendors targeting China.

The construction of PON-based smart grids would enable fiber connectivity to residences in China. A major driver is expected to be the State Grid Corporation of China (SGCC) which is pursuing a smart grid project that could also be part of a plan to become a communications service provider. Ovum believes such projects would also benefit optical line termination (OLT) equipment vendors, optical network terminal (ONT) box manufacturers, component vendors and cabling manufacturers operating in China.