FTTH News

Telecom Italia (NYSE: TI) COO Marco Patuano said on Friday that spinning out wireline network is an “interesting” idea, while confirming that it is conducting discussions with a state-backed financing body to collaborate on new broadband projects.

“There is a dialogue that continues,” Patuano said in a Reuters article. “The possible separation of the access network into another company is an option that both (Telecom and Cassa Depositi e Prestiti) are looking at with interest.”

News of a potential spinoff should be of no surprise as Franco Bernabe, Telecom Italia’s CEO, who said in April it was considering spinning off its wireline network as a way to pay down debt and expand its investments in its own nationwide FTTH network.

TI’s network, according to the Reuters report, is worth about €9-€15 billion ($11.6-$19.4 billion).

Patuano’s statement comes on the heels of an agreement Telecom Italia signed with Swisscom’s Fastweb just last week to build a hybrid fiber/copper Fiber to the Cabinet (FTTC) network to bring higher speed broadband services to more premises throughout Italy.

Fastweb’s Swisscom dedicated €400 million ($516.8 million) to fund the FTTC project, which it said will bring broadband services 20 percent of Italian homes.

Under the terms of the agreement, Fastweb will build out fiber connections to each cabinet and then use VDSL to deliver services to homes and businesses via Telecom Italia’s copper network infrastructure.

Because the new FTTC network is being built as an open access network, other interested service providers could participate.

Ovum says in its new "Market Share Alert: 2Q12 FTTx, DSL, and CMTS" report that sales of PON and VDSL2 gear grew strongly in the second quarter of 2012. Within the PON space, a general shift from passing customers to connecting them means that OLT shipments are losing steam, however.

The market research firm notes that the shift from DSL-based access networks to fiber to the home (FTTH) and building (FTTB) continues. Where carriers don't want to completely abandon their copper cables, they're installing VDSL2 equipment. The two trends mean that DSL sales overall in 2Q12 shrank, but VDSL2 sales reached a record 6.3 million ports. VDSL2 represented 57% of all DSL shipments in North America, and 43% in EMEA, Ovum estimates.

Meanwhile, the shift towards FTTH/FTTB customer connections can be seen in the fact that 2Q12 marked the first year-over-year decline in global PON OLT port shipments in more than three years.

With much of the action in China, vendors from that country dominated port shipment share during 2Q12, as the table below indicates.

Ovum notes that just because you ship the most ports doesn’t mean you make the most money.

"The division that has opened up recently between PON volume and revenue trends continued in 2Q12 due to price wars, particularly in China, and will have an impact on vendor results and strategy," says Kamalini Ganguly, analyst, Network Infrastructure Practice. "The conversation in fixed access tends to be around shipment volumes, but the focus should really be on revenues and profits. The PON price wars in China and elsewhere are not sustainable. Revenues are not keeping pace with growth in volumes. Vendors – even Huawei – are being pickier about projects and markets. If price pressures continue, there may be more vendor consolidation like that of Calix's acquisition of Ericsson's PON portfolio."

Meanwhile, CMTS sales were more similar to DSL than PON quarter on quarter, but such softness is not unusual at this time of the year. Shipments are still high — up 10% from the same quarter in 2011, Ovum notes. "CMTS annualized shipments in North America and EMEA are at their peak," offers Ganguly.

Cisco, ARRIS, and Motorola were the market share leaders in port shipments during the quarter, according to the report.

The Middle Eastern state of Qatar has bold plans in place to overhaul its communications infrastructure with a massive fibre buildout, as part of the country’s Vision 2030 project which aims to transform the country through investment in advanced technologies into a knowledge-based society.

Ahmed Al-Sulaiti, CTO of Qatar National Broadband Company (Q.NBN), tells us about the progress his team has been making.

What progress has QNBN made so far with its deployment?

As one of the many pilot projects, more than 4,000 units in one of the major Real Estate Development projects in Qatar-Barwa City are now connected with fibre-to-the-home (FTTH) infrastructure delivered by Qatar National Broadband Network Company (Q.NBN).

Q.NBN has recently signed milestone agreements with operators in Qatar. The first agreement was signed with Qatar Telecom (Qtel), and builds on the relationship and cooperation established between Q.NBN and Qtel last year.

Under this new agreement, Qtel will supply Q.NBN with duct network access and access to other passive telecommunications infrastructure over the next 20 years.

Another agreement has been signed with Vodafone, and is the first such wholesale agreement to enable a licensed telecom operator to use Q.NBN's network to deliver telecom services to customers. As such it is an important step towards establishing Q.NBN's commercial offering in Qatar.

Work on the infrastructure is scheduled to kick-off in July, and we aim to have maximum fibre coverage by 2015.

What key services will the network be used to deliver?

Q.NBN will focus solely on the deployment of network infrastructure, providing equal and open access to operators to offer choice for the end-user and efficiently leverage existing and new infrastructure in Qatar.

What impact will the network have on Qatar’s role in the MEA region’s ICT industry?

Qatar National Broadband Network Company (Q.NBN) is a shareholding company wholly owned by the government, with a mandate to enable accessible high-speed communications with the right cutting edge technology platform across Qatar.

Q.NBN, one of the first government initiatives of its kind in the region, reflects Qatar’s Vision 2030 to transform the country through investment in advanced technologies into a knowledge-based society and make Qatar the best connected country in the Gulf Cooperation Council (GCC) and one of the best connected in the world.

Through its visionary and collaborative approach to the market, Q.NBN will help to empower the nation with broadband fibre access to citizens and businesses alike in line with the Qatar ICT Strategy 2015. Q.NBN serves the wider digitisation agenda of the country.

The next generation fibre optics network which is the alternative to copper will become exponentially faster, bringing community and enterprise benefits of enhanced delivery of services, cost savings, increased competitiveness and improved sustainability.

Market research consultancy Ovum predicts good things in the long term for the optical network hardware market, thanks to increasing bandwidth demands from data centers. Sales of fiber-optic network systems will grow at a 5% compound annual growth rate through 2017, to reach $20 billion, according to Ovum's new "ON Forecast Report: 2012-17."

"The new bandwidth driver is data centers. Large-scale data centers continue to be built out – both the multi-tenant, carrier-neutral variety and private data centers," says Ian Redpath, principal analyst in Ovum's Network Infrastructure practice. "The data centers are being placed in brand new locations, creating brand new optical networking demands. For example, the new Facebook data center at Lulea, Sweden, near the Arctic Circle, will require terabits of bandwidth. These new demands are not unique to Lapland – they are emblematic of a trend unfolding in multiple European and North American locations."

Latin America will offer the most opportunity, Ovum believes, because of modernization efforts to improve regional connectivity to support mobile and broadband access network deployments. Meanwhile, North American demand for optical network systems will show what it terms "solid growth" thanks to Tier 1 deployments of 100-Gbps technology.

The Asia-Pacific market will continue to expand as well, although not at the same explosive rate as the past five years. "In China, the optical network market has trebled in size over the past 5 years and continues to grow. Much of the core backbone was built in support of early generations of mobile technology, but there is still a wave of high-speed fixed broadband and next-generation mobile to come," predicts Redpath.

And Ovum even expects good news from the EMEA market despite its current macroeconomic problems, as deployments will continue in Russia, the U.K., Eastern Europe, and Africa. For example, Russian network operators want to supply pan-Asian capacity connecting the Far East to Europe overland. The southeast U.K. is another hotspot, with over 150 data centers outside of central London that require high-bandwidth interconnection.

"All told, the global optical network market is at a very interesting point in its evolution. New demands are arising just as the industry's latest technology offering is coming to fruition," concludes Redpath.

Verizon's (NYSE: VZ) FiOS service continues to be a shot in the arm for its wireline side, as the carrier posted a 2.5 percent year-over-year rise in consumer wireline revenues in Q2 2012, with 65 percent of those generated by FiOS. Wireline operating revenues declined 3.1 percent to $9.9 billion.

Overall, Verizon's total operating revenues climbed to $28.6 billion, or 3.7 percent more than the second quarter of 2011.

Second quarter earnings per share climbed to 64 cents, a 12.3 percent increase from last year and 5 cents higher than the first quarter, the company said. Verizon generated $7.8 billion of free cash flow in the quarter which, Executive Vice President-CFO Francis Shammo said, was "more than twice the amount we generated in the first half of 2011."

While FiOS was credited with rebooting the flagging wireline business, the fiber optic service showed a substantial decline in year-over-year video and data subscriber additions. Video subs grew by 120,000 compared to 184,000 a year ago; data subs were up 134,000 compared to 189,000. Both fell below market and Verizon projections.

On the other hand, the carrier added 350,000 more digital voice residence connections compared to 218,000 last year. Non-FiOS residential connections declined 199,000 in the quarter which, while a 6.6 percent decline, represented an improvement over the 240,000 line loss posted last year.

Shammo, in a Q&A with analysts after the earnings announcement, blamed the slower growth on seasonal factors, including an "unusually high move season in the month of June compared to prior second quarter."

"But more importantly, I think that we have refocused more on our profit on the FiOS side …. (and) you saw some of the benefits there," he continued. "We are focusing on the profitability of FiOS. the profitability increase in wireline this quarter was really centered around FiOS, really progress that we made on a quarter-to-quarter basis."

Shammo also said that the carrier is accelerating its copper shutdown.

"From a FiOS-to-copper migration or copper-to-FiOS migration, we nearly doubled the amount of migrations that we did," said Shammo. "We're being as aggressive as we possibly can in these areas."

On the whole, the lower FiOS subscriber additions could have a ripple effect on Verizon's attempts to purchase AWS spectrum from a consortium of cable operators known as SpectrumCo and standalone operator Cox Communications. Linked to that purchase is a separate joint marketing agreement between Verizon Wireless and the cablecos where Verizon Wireless would resell cable service in its regions and cable operators would sell Verizon Wireless. That plan has come under attack from those who believe it would slow FiOS growth as a cable competitor.

The cable spectrum purchase deal and another planned purchase from Leap Wireless are "at varying stages of review by the FCC and the Department of Justice," Shammo said. "We continue to expect approval and to close those transactions this summer."

Shammo, in a prepared statement, attempted to readjust expectations for FiOS subscriber additions to a "more natural range" that falls 20,000 to 30,000 below the previous range of 180,000 to 200,000 net adds each quarter.

"We are confident that at these levels we can still maintain an increasing revenue growth trajectory and expand profitability," he said.

BT Openreach has formally debuted its set of Fiber to the Premises (FTTP) whole services, enabling competitive providers to higher speed fiber-based broadband services to their respective customer bases.

Offering a suite of speeds ranging from 40/2 Mbps to 330/30 Mbps, BT said this new set of wholesale products will “allow Communications Providers (CPs) to differentiate themselves in the market by offering a wide range of fibre products to suit the needs of small and medium businesses as well as bandwidth-hungry consumers.”

Until now, the FTTP services had been offered to competitive providers such as BskyB and TalkTalk on what it calls an “early market deployment” basis. Now, the new service will initially be available within the 15 exchange areas where BT has built out FTTP network infrastructure.

Beginning next spring, BT will make FTTP available “on demand” in areas that are already being served by its Fiber to the Cabinet (FTTC) network.

The service provider continues to make progress with its overall aggressive Fiber to the X (FTTX) roll out. To date, it has passed 10 million premises with an aggressive goal to pass about two-thirds of UK premises by 2014.

Mike Galvin, Openreach MD for Network Investment, said that while FTTC is a sound near-term method to provide higher bandwidth speeds over an existing hybrid copper/fiber network – some of the fastest in the world – and build propositions which help to grow the market for these higher-speed services.”

The European Commission (EC) is switching its fixed broadband focus from ensuring basic access for all to funding of fiber rollouts.

It claims good progress has already been made to ensuring basic broadband access for all citizens, a goal of the EC's Digital Agenda, and that the time has come to work out how to boost deployment of high speed networks instead. The Commission has opened a three-month consultation on proposals for public funding of fiber rollouts, and aims to adopt definitive guidelines in December.

"State aid control should support the Digital Agenda targets while maintaining incentives for commercial investments," says Joaquín Almunia vice president of competition policy at the Commission.

The proposals are more about clarifying existing broadband regulations, drafted in 2009, than radical change. They cover public backing of 100-Mbps networks, transparency in government-backed deployments, and generating investment in passive infrastructure.

Almunia alluded to the potential financial benefits of high-speed networks, explaining. "We need a dynamic framework for the application of EU state aid rules in this strategic sector that fosters investments." Such a strategy may include easing restrictions on rural investment, EC information states.

Digital Agenda commissioner Neelie Kroes issued a rallying call to member states over funding high speed networks in April, stating investment is essential to maintain growth in Europe's web economy, which she claims is growing faster than China's national economy. She predicted 5% of regional GDP will come from the digital economy within a few years

China Telecom is throwing its weight behind Alcatel-Lucent, as part of an effort to pass 100 million homes with fiber by 2015.

The operator has signed a €100 million deal with Alca-Lu covering fiber-to-the-home (FTTH) network deployment in all 31 Chinese provinces, as it seeks to connect 30 million subscribers to high-speed broadband within the next three years. The deal builds on a similar agreement signed in July 2011, covering fiber rollout in rural areas.

Alca-Lu's local Shanghai Bell subsidiary will deploy the infrastructure firm's GPON and EPON-compliant fiber network kit for China Telecom.

Rajeev Singh-Molares, president of Alcatel-Lucent Asia-Pacific, says the deal highlights the firm's strength in FTTH and the "rapid expansion of broadband in China."