Analysys Mason: Big spending on tap for FTTx in developed economies

Most of the outlay will come from Western Europe, where operators are forecasted to lay out $25.9 billion over the next five years, according to FTTx roll-out and capex in developed economies: forecasts 2012–2017. A pan-European push to enable access to what the region calls “superfast” and “ultrafast” broadband services via a combination of FTTH and fiber to the cabinet (FTTC) combined with VDSL in the local loop is now underway. Countries where the major operators rely heavily on the latter will be in better shape, the report asserts.

“Given the as yet untapped potential of copper over short distances, we wonder whether it is really sensible at this stage to take fiber right to people’s homes,” says Rupert Wood, author of the report and lead analyst for Analysys Mason’s Fixed Networks research program. “Sticking rigidly to FTTH runs the risk of delivering next-generation access to a largely urban or well-to-do elite, while delaying delivery to other users and potentially losing customers. This may come to look both commercially and politically unacceptable.”

Operators who use an FTTC strategy generally will be able to offer broadband services to a greater percentage of their footprint in the next five years, the report states. Such speedy deployment also will put these operators in a better position to compete with alternative broadband providers from the cable and 4G mobile world as well, Analysys Mason says.

Regardless of how it is achieved, the deployment of next-generation access (NGA) networks makes business sense, the report adds. In Europe, for example, take-up rates for telcos of 25% or more in covered areas seem “perfectly achievable” in five years despite the current slow start, the report states. The report points to a regulatory environment that has encouraged competition – and a resulting decline in ADSL service prices – as one reason for Europe’s lackluster take-up rates.

However, while service cost is always a significant factor in determining take-up rates, it may not be the most critical. Income levels of potential subscribers and how poor the previous service may have been can be more telling, the report suggests.

Finally, the report also suggests that those who doubt the demand for 100-Mbps access speeds are missing an opportunity. “Supply of bandwidth probably will create demand, but not necessarily in ways that are helpful for operators’ service-oriented approaches,” says Wood. “Few real-time video services require anything like these bandwidths, but those simply wanting faster-than-real-time download and upload will always be happy with more speed.”

In light of this fact, some FTTH operators have successfully positioned their services as non-value-add utility offerings, which leaves a wide space for over-the-top players to fill, the report adds.