Category : News

In the latest update to the Fiber to the Home Council’s FTTH ranking, Spain is one of the fastest growing fiber nations in Europe while the UK is the slowest. The FTTH Council Europe offered a preview of its official data at the NextGen 12 conference in London ahead of the official announcement next week.

Spain is one of two new countries to join the European FTTH ranking this time around, the other being Luxembourg. That brings the total number of countries in Europe with more than 1% of households subscribing directly to fiber connections to 22 out of a possible 39 (the ranking also includes Russia and the Commonwealth of Independent States, or CIS).

Overall there are now about 5.95 million FTTH subscribers in the EU35 countries and the study also counted a further 6.3 million in the CIS region. This corresponds to a modest increase of about 16% in the number of subscribers connected across the EU35 during the first six months of 2012.

To put this into context, the Asia Pacific region had 58 million FTTH subscribers at the end of June 2012, while the FTTH Council North America recently announced that the number of FTTH subscribers on that continent had passed 9 million (see “FTTH Council Americas releases FTTH market numbers”). Europe is still a minor actor on the world stage when it comes to FTTH.

The fact that Spain, a major European economy, has joined the ranking is a source of delight for the Council. It is always harder for a country with a large population to do well in the ranking because the position is determined as a percentage of the total homes in the country.

Progress in Spain has been driven mainly by the Spanish incumbent, Telefónica, although cable operator Ono and Orange Spain have also been investing in FTTH. By the end of June 2012, Telefónica had passed around 1.7 million homes, giving it the distinction of having the largest FTTH network deployed by an incumbent operator in Europe.

Following some pilots projects in 2007, Telefónica decided in 2010 to roll out FTTH across the cities of Barcelona and Madrid. The operator is taking FTTH very seriously, says Carlos Bock, a broadband consultant in Spain. “This year they finished covering Barcelona and they are almost done in Madrid as well,” he wrote in his blog. “The next step is to push hard and invest €1.2 million over the next three years to cover 50% of the Spanish population.”

However, other major economies like the UK and Germany are still noticeably absent from the ranking, and the situation is unlikely to change anytime soon, the Council reports. In fact, the UK was singled out as the country with the lowest FTTH penetration in the whole of Europe: just 0.05% of households take a fiber subscription.

Despite the fact that the government has announced its intention to have the best superfast broadband network in Europe by 2015, the UK has no large-scale FTTH deployment plans. “We see a big gap between the so-called ambition of the UK government to have the leading broadband infrastructure in Europe and the actual targets of the plan,” said Nadia Babaali, communications director of the FTTH Council Europe. “We should be talking about gigabits, not adding a few megabits onto a DSL connection.”

One crucial missing element is competition. In countries like Spain, cable operators and alternative telcos have decided to upgrade or expand their networks, which has forced the incumbent to change its approach. Although the UK has a competitive retail broadband market, at the wholesale level the access market is dominated by the incumbent. While BT’s next-generation access roll out does include some FTTP, the majority of its investment is focused on FTTC (see “BT launches FTTP service, promises 300 Mbps next year”). Small local projects can claim more FTTP subscribers than BT, but none of them have the scale to challenge the incumbent.

With its annual conference taking place in London early next year, the FTTH Council Europe is keen to drive home the message that the UK needs to step up its efforts on FTTH or risk being left behind in the digital economy. “The infrastructure is needed now because it takes time for people to connect and it takes time to develop the services and applications that power the digital businesses of the future,” said Babaali. “Let’s get out of this chicken and egg situation [consumers and businesses can’t demonstrate demand for services that aren’t yet available], and recognise that this is our future.”

The consumption of broadband services is exponentially growing, with the sheer unpredictability of demand making it difficult to determine the network capacity operators’ need to satisfy their customers with the best experience at the lowest cost.

India has very low broadband penetration (net broadband additions per two months is 0.1-0.2 million – i.e., 18 million mobile connections per month), which provides a huge opportunity for the optical fiber networks to be deployed in fiber-to-the-x (FTTx) configurations in the urban/semi-urban scenarios. Moreover, increased adoption of applications such as e-medicine, video conferencing, e-Learning, security surveillance, et. al., will increase capacity/bandwidth requirements.

The Indian government has set a target of 48 million broadband connections for a sample of 241 million households by 2012 for which the number of connection with contention ratio is 1 million, which requires core bandwidth (at 3 Mbit/s) speed totaling 3000 Gbit/s.

Right of way delays due to significant variability in policies across states is a current challenge in the market. One of the big problems facing telecom operators is the cost associated with gaining permission to build new ducts and lay the fiber, with an estimated 70 percent of the cost of building a fiber-to-the-home (FTTH) network eaten up by payments to local authorities and the organizations involved in digging up the roads. Gaining access to buildings is also a major hurdle – one that could lead to high-speed broadband access networks being deployed in local pockets, rather than being widespread.

In the last decade, Indian service providers, both public and private, have together laid over one million kilometers of optical fiber across the country. However, most of the fiber is concentrated in metros and Tier-1 cities, while rural and suburban communities have limited access to telecom services. It has been estimated that the existing optical fiber network will have to be augmented by another one million kilometers to ensure nationwide connectivity to consumers and businesses throughout India. Government optical fiber initiatives such as NKN, NBN, SWAN and NOFN will play a major role in closing this gap, while making the network future-proof for a full basket of high-bandwidth applications that will be the mainstay of modern telecom networks.

Optical fiber access will progressively penetrate deeper into the network and edge closer to the end-user. However, fiber laying is a time consuming process, so in the interim, multiple technologies such as xDSL, microwave and broadband wireless technologies (LTE) will continue to coexist in the first mile.

The Fiber-to-the-Home (FTTH) Council Americas released at its conference in Dallas its annual update of FTTH progress in North America. There are now 9 million homes connected by FTTH networks on the continent, with the number of homes passed reaching 24.3 million.

The number of homes passed has risen by 10% over the past six months, the council asserts. While Verizon far and away serves the most subscribers – more than half of the total – small incumbent telephone companies have taken up the FTTH mantle and represent the current engine for growth, according to the council's research.

"While large providers such as Verizon in the U.S., Bell and Bell Aliant in Canada, and Telmex in Mexico continue to be very important, small providers such as rural telcos, real estate developers, small competitive providers, and even rural electric co-ops are playing a key role in driving the expansion of fiber to the home," said Michael Render, president of RVA LLC, a market research firm that tracks FTTH deployment for the council.

To underscore the importance of smaller carriers in the FTTH space, RVA says that all but 8 of the nearly 880 FTTH service providers surveyed have fewer than 30,000 subscribers. A mere five have more than 50,000 access lines; 97% of carriers using FTTH have fewer than 10,000 access lines.

Which is not to say that large carriers other than Verizon have ignored FTTH. "In addition, other large providers are growing in importance," according to Render. "AT&T is increasing its deployment of FTTH in new developments, and the new Google Gigabit fiber deployment in Kansas City is now fully underway."

In a presentation Monday at the FTTH Conference in Dallas, Render revealed that the average FTTH service provider take rate in North America is 42.2% — a figure that rises to 44.2% in the U.S.

More than a half million households in North America enjoy Internet connectivity of 100 Mbps or more, according to RVA. Median tested download speeds were above 20 Mbps for FTTH subscribers, versus less than 15 Mbps for cable modem users. Upload speed on FTTH networks average more than 9 Mbps, while cable modem upload speeds are around 3 Mbps, RVA asserts. The cost per megabit for FTTH services is $2.64 RVA states, the lowest figure among alternatives such as cable modem, DSL, and wireless.

FTTH connections also are growing in Latin America, according to supplementary research presented at the conference. All-fiber networks now pass 4.2 million homes in the region, with 350,000 homes connected, according to research conducted by the consulting firm IDATE for the FTTH Council Americas LATAM Chapter. Mexico leads the region in FTTH connections, followed by Brazil. Chile and Argentina trail Mexico and Brazil by a significant margin, but show potential for growth as new deployments are underway.

"We found that the main fiber architecture being deployed in Latin America is FTTH, as opposed to fiber to the building, and that GPON is the preferred technology — involving more than 80% of the deployments in both cases," said Roland Montagne, director of the Telecoms Business Unit at IDATE.

Fran Shammo, CFO and VP of Verizon (NYSE: VZ), said that if customers want their FiOS Fiber to the Premises (FTTP), they should pay a premium.

Looking to up the revenue gain it gets from FiOS, the service provider increased prices on its FiOS service in the second quarter, a trend that Shammo reiterated will continue into the third quarter.

“On the revenue side of the house, we really concentrated this year on getting our price points equivalent to where the rest of the market was,” he said. “We were actually underpriced with a superior product to cable so the concerted effort was to do some price ups that will continue into to the third quarter.”

Beginning in the first quarter, the price increase effort has begun to pay off in terms of increasing FiOS profitability in the second quarter. Verizon reported that it had a 2.5 percent mass market revenue increase during Q2.

One of the other notable changes with FiOS in the recent quarter was that it had a significant speed increase on a number of its key data tiers and introduced a new 300 Mbps tier.

The service provider increased the speeds on three of its current levels: 25/25 increased to 50/25; 35/35 climbed to 75/35 and 50/20 rose to 150/65. A new speed tier, 300/65, doubles the current 150/35 top tier.

As part of its move to increase profitability of its FiOS service at a time when its DSL subscriber base continues to defect to cable in areas where the FTTH service is not available, the company began migrating some customers over to the fiber service.

“We are really on a concerted effort to really spend our capital and our dollars more efficiently from getting people off the copper network and onto the FiOS network,” Shammo said. “You have probably seen us shift a little bit between going after our growth adds and mining our base.”

Shammo added that it gets two benefits from mining that existing copper-based broadband customer base.

First, a copper customer who is classified as a “chronic customer”–who has two truck rolls to service the copper line during a six month period–will have those on-site service calls minimized by moving to FiOS.

“When you think about this customer, that’s four truck rolls a year, and I am losing money on that copper customer,” Shammo said. “If I can take that chronic customer and move them to FiOS, I deplete the amount of operational expense to keep that customer on and they get the benefit of FiOS Digital Voice, which is clearer, and put their DSL service onto a FiOS Internet where they realize the FiOS speeds.”

The second benefit is that Verizon is seeing voice and DSL customers bundle more FiOS services.

“What we are seeing preliminary is that even if we take a voice and DSL customer and move them, they are starting buy-up in bundles because they are seeing the value of the higher speeds,” Shammo said. “Then, we open up the sales routine to go after them for the FiOS TV product.”

This effort in the near-term may have had a negative effect on how many subscribers Verizon added in the second quarter, among other reasons.

During the quarter, the telco reported that video subscribers grew by just 120,000 compared to 184,000 a year ago, while data subs were up 134,000 compared to 189,000. Both video and data subscriber numbers fell below market and Verizon projections.

At the same time, 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.

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.”