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Cable Tech

IDC Sees Modest FTTP Growth

What's the potential for a boom in FTTP (fiber to the premises)? IDC's got some numbers. The research firm points out that the number of users worldwide who access broadband services via fiber connections direct to their homes or businesses is quite small and that by 2007 the number will have doubled but will still be modest.

The firm reports that in 2002, 2.9 percent of the 58 million-odd broadband connections worldwide were made via fiber, using either passive optical networks (PONs) or point-to-point links like Ethernet. In contrast, more than 97 percent of folk used cable modems, DSL, or fixed wireless to get their data.

By 2007, IDC forecasts, broadband connections will more than double, and so will fiber links: of 209 million connections, 9.9 percent, or about 20 million, will be fiber.

While 20 million is a large number, it needs to be put into context. Today, there are more than 50 million DSL users worldwide (see DSL Heads for 60M Users). So by 2007, the number of fiber subscribers will still be less than half of DSL volume in 2003.

Table 1: Fiber as Percentage of Worldwide Broadband Connections, 2002 to 2007
2002 2003 2004 2005 2006 2007
Fiber share % 2.90% 3.30% 4.10% 5.60% 7.60% 9.90%
Total broadband connections 58M 84M 114M 147M 179M 208M
Source: IDC


These figures don't assume any input from the U.S. RBOCs, according to Sterling Perrin, senior research analyst at IDC. Their plans for fiber installation are the subject of ongoing speculation. Light Reading sources, for instance, say the RFP issued this summer by BellSouth Corp. (NYSE: BLS), SBC Communications Inc. (NYSE: SBC), and Verizon Communications Inc. (NYSE: VZ) could result in fewer than 60,000 fiber connections or more than 600,000 by 2004, depending on how serious the RBOCs prove to be about fiber (see FTTP Booty Tough to Peg).

Perrin is one of the skeptics. Without a "killer application," he says, RBOCs aren't likely to be aggressive in fiber rollouts. While consumer interest in video is increasing, new compression techniques are improving the outlook for DSL. Besides, RBOCs' DSL deployments are proving successful, providing a disincentive to rip out copper that's paying the bills and replace it with fiber that may or may not.

— Mary Jander, Senior Editor, Light Reading

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ftthexpert 12/4/2012 | 11:14:48 PM
re: IDC Sees Modest FTTP Growth 9.9% out of 209 million in 2007 are about 20 million and not 2 million. This gives to FTTP the biggest CAGR even by modest analysis.
gps 12/4/2012 | 11:14:47 PM
re: IDC Sees Modest FTTP Growth I have two reports on my desk. They are from different sources, but discuss the same topic: broadband deployment in Japan. According to both, Japan had approximately 531K FTTH subscribers as of July 2003. Projections are for more than a million FTTH subscribers by year end in that nation alone. This is in a country where ADSL and cable modem are ubiquitous, and population density enables ADSL speeds up to 20 Mb. Interestingly, there is no inane dialogue about a "killer app." Subscribers are running video on demand, music on demand, games, and just surfing the web. Broadcast video still comes via HFC and satellite. Voice is still wireless and twisted pair. There is no government-subsidized FTTH deployment, such as the oft-referenced "UTOPIA" project in Utah.

By the way, the sources of my reports are in Japan and about as credible as you can get.

Kind of contradicts the message from IDC doesn't it? So, what I want to know is this: Japan is leading the world in FTTH deployment, and they seem to be doing it with a business model that contradicts most of what we have seen in the U.S. Now, why is that? More importantly, why can't we read about it anywhere?

Perhaps our illustrous, well-paid, and overly-abundant analysts should put down the sports section and go do some research.

bonnyman 12/4/2012 | 11:14:45 PM
re: IDC Sees Modest FTTP Growth gps wrote about Japanese FTTH deployment in his post and notes "Interestingly, there is no inane dialogue about a 'killer app.'" and notes that many Japanese are just using FTTH for Internet access, not voice or broadcast video.

I agree about the "killer app" dodge.

When looking both the market dynamics and the technology of FTTH in North America versus other countries there are some differences to note.

In the U.S. and Canada, most homes are passed by cable and the majority of those homes subscribe.

In municipal FTTH overbuilds, there is no killer app -- it just turns out to be cheaper nowadays to build a FTTH system (if you already have a municipal power system) than a traditional HFC cable plant. Construction of these systems is driven more by lousy service from the incumbent than by any "killer app".

If you look at most of the municipal FTTH builds, a common denominator is the MSO -- it's usually Charter, Adelphia or Comcast running an old AT&T plant. You don't see much municipal overbuilding where there are fairly well-run Cox, Time Warner or Comcast (non-AT&T) systems. To a lesser extent, an unresponsive incumbent telco can also help drive these; a disproportionate number of municipal FTTH projects are in Qwest's service area.

So if one insists on a killer app, call it "not-Charter" or "not-Qwest".

These municipal FTTH systems all offer triple play services with video being the biggest component for most subscribers, both as a percentage of the overall bill they pay and the attraction of signing up.

FTTH gear marketed in North America has to provide for a full channel lineup. Furthermore, most vendors' gear does not require rewiring the house with Cat 5 cable if the subscriber just wants basic cable. Many don't require set-top boxes for basic cable services either -- just for more advanced offerings. FTTH deployers competing with cable TV in the U.S. have to make it easy for everyone to be able switch to their services with a minimum of expense and hassle -- not just the early adopters. To break even, most municipal FTTH builds need about 40% of the homes passed to sign up for service. In most cases, they subscribe for the full "triple play" of voice, data, video.

Finally, I should note that most of these municipal FTTH systems are not very heavily subsidized. By law, most have to pay their own way and cannot draw on profits from the electric power side of the utility. Most have to pay the electric utility the same pole attachment fees that cable operators pay. Many are not financed with tax-exempt municipal bonds. Most, however, are financed with bond issues that require backing from either the city in general or the electric utility if the broadband venture defaults.

Many other countries don't have as extensive a deployment of cable TV. A much higher percentage of the population lacks cable TV and/or uses direct broadcast satellite service.

We've looked at two different Japanese FTTH vendors' gear that lacked any coax connector for video on the side. One did not even mount on the side of the house but rather went inside the house, requiring the installer to run fiber inside the house. There was no provision for cable TV service. The only video available was high speed video over IP.

Yet as gps points out in his post, people in Japan are subscribing to FTTH as fast as they can get it at their home. And at much lower prices than in the U.S. -- perhaps $20/month.
bonnyman 12/4/2012 | 11:14:44 PM
re: IDC Sees Modest FTTP Growth In his excellent and provocative post on FTTH in Japan, gps writes
"So, what I want to know is this: Japan is leading the world in FTTH deployment, and they seem to be doing it with a business model that contradicts most of what we have seen in the U.S. Now, why is that? More importantly, why can't we read about it anywhere?

Perhaps our illustrous, well-paid, and overly-abundant analysts should put down the sports section and go do some research."


Many other countries don't have as extensive a deployment of cable TV as the U.S. A much higher percentage of the population lacks cable TV and/or uses direct broadcast satellite service.

We've looked at two different Japanese FTTH vendors' gear that lacked any coax connector for video on the side. One did not even mount on the side of the house but rather went inside the house, requiring the installer to run fiber inside the house. There was no provision for cable TV service. The only video available was high speed video over IP.

Yet as gps points out in his post, people in Japan are subscribing to FTTH as fast as they can get it at their home. And at much lower prices than in the U.S. -- perhaps $20/month (see the links below).

In answering gps' question about the Japanese business model, I can think of several things to look at:

1. Since outside plant material and construction costs make up 80% to 90% the total cost of a FTTH deployment, it would be interesting to see what construction labor costs are in Japan. I would expect fiber cable costs to be identical or slightly higher in Japan.

2. The "cost of capital" (financing costs) for Japanese companies has historically been lower than that for U.S. companies. That can have a big impact on companies' willingness to invest in projects with long payback periods. Some of the players are large Japanese power utilities which are very financially strong.

3. Population density of course makes it easier to deploy FTTH. The average municipal FTTH project in the U.S. has about 50 homes per mile of cable; it would be interesting to know the number for Japan.

4. I wonder if the FTTH developers are earning additional money over and above the basic subscription fee, perhaps by selling video on demand.

5. The electronics portion of the project can cost less if all that's offered is Internet access -- no voice or broadcast video.

Anybody out there have any answers?

A.B.

Here are some English language links to Japanese FTTH news:
Kansai Electric:
http://communityfiber.blogspot...

Internet Intitiative Japan (IIJI)/Chubu Electric's pricing:
http://communityfiber.blogspot...

608,000 Japanese FTTH subscribers as of August:
http://communityfiber.blogspot...

KDDI's FTTH pricing and service plans:
http://communityfiber.blogspot...

NTT's FTTH plans (see the comment someone posted in response):
http://communityfiber.blogspot...

Japan Times article on FTTH in Japan:
http://communityfiber.blogspot...
opto 12/4/2012 | 11:14:41 PM
re: IDC Sees Modest FTTP Growth To understand the situation in Japan, consider this:

> NTT's stranglehold on access has kept competition to a minimum. They are the only game in town because that is the way the government has kept things through regulations and red tape. (It is completely different situation in wireless, where there is tremendous choice due to many different types of services.)
> Cable TV in Japan has had problems getting rolling due to foreign ownership restrictions and content scarcity. In 1996, penetration was under 5% while in the US it was 63%.
> foreign ownership is key, since most of the expertise to build out cable TV comes from the US, where it was invented. Restrictions up until 1996 kept it at 20%, but since then it has been raised.
> content is a problem for Japan since most Japanese do not understand english, unlike the majority of the rest of the educated world. Thus only content developed for Japanese market is successful.

Thus cable TV has not had a chance to make progress. Since NTT has little competition, high penetration is guaranteed.

In addition, Japan has some of the highest housing densities of anywhere in the world, mostly due to the fact that they are on an island and keenly aware of using space carefully, and also due to the fact that as a society, they have no issue with living closely spaced, unlike the US, where our ancestors migrated here specifically to have lots of open space. This density translates directly to a much lower cost/home to build.

In addition, as noted previously, cost of capital has been held artificially low by the banks/government, (at great expense to the general economy over the past 10 years). Cost of capital is a very important factor, dominating the rollout schedule, since once the plant is put in, it is a pretty much guaranteed annuity.

So, penetration is high, density is high, and the cost of capital is low. Very few places in the world have this scenario.

There is no way we can duplicate that here in the US, or in most other countries.
gps 12/4/2012 | 11:14:40 PM
re: IDC Sees Modest FTTP Growth Opto,

Good post and good points. It's quite true that population density aids the FTTH proposition for Japan (around 40% of the population is in MDU's). I would add that most infrastructure in Japan is aerial - much cheaper than underground. However, consider that this same population density enables ADSL speeds in excess of 20 Mb. Also, consider that labor rates tend to be a little higher in Japan than in most parts of the U.S. So, imagine that you are NTT: you have a stranglehold on the market, you can deliver 20 Mb over your existing copper last-mile infrastructure, and you are not in the video business (NTT is not deploying broadcast video over their FTTH). What, exactly, would be your motive to start deploying FTTH at a rate approaching 70K subscribers per month?

I think the answer is that NTT no longer has a stranglehold. The Japanese government initiated "e-Japan" in 2001. This resulted in significant deregulation, and opened the floodgates for competition. ADSL is basically a free-for-all. I have heard reports of as many as 50 ADSL operators in Japan. As for FTTH, NTT is by far the largest deployer. However, there are six other players on the significant deployer list. Usen is second to NTT. They deliver video on demand (Blockbuster type service) and high speed data. The next five major FTTH deployers on the list are all power utility companies. Interestingly, none of them are deploying broadcast video.

Couple this competitive environment with the fact that Japan has a decreasing number of land-line voice subscribers (wireless encroachment). It seems that the last frontier is high speed data, and the winner will be whoever gets there "first with the most."

There is room for debate on whether or not this level of competition is sustainable or healthy. However, I believe even NTT acknowledges that competition is the major driver for their FTTH deployment.

I'm not sure what lessons should be learned from Japan. But, I think conditions driving their market are worthy of more study and dialogue.

Your comments are appreciated.
dwdm2 12/4/2012 | 11:14:40 PM
re: IDC Sees Modest FTTP Growth "While consumer interest in video is increasing, new compression techniques are improving the outlook for DSL."

While a smart compression technique is helpful to shrink the data for transportation and then grow it back for using, when it comes to moving massive amount of data -- the most fantastic compression algorithm may not be nearly enough.

A parallel may be drawn with the hard disk technology and data compression. Prior to the advent of multi gigabit hard disks in affordable price, we used compression programs to increase the capacity. I remember a program called Stacker was very popular; it could compress to any proportions like 100:1. Nevertheless, even at its finest form, frequent file corruption was a reality.

The point is that when 100 GB disk is affordable, people do not care for the compression software anymore. Compression seems only a temporary solution. Is the best VCD any mach for the worst DVD?

Bottom line, if FTTP is available at the cost of DSL/Cable, who is not going to be interested? It is doable and will happen, as many have already predicted.

Cheers.
dwdm2 12/4/2012 | 11:14:37 PM
re: IDC Sees Modest FTTP Growth "The inertia of monopoly" is like a big ship in the occean without a powerful engine ... ;-)
lastmile 12/4/2012 | 11:14:37 PM
re: IDC Sees Modest FTTP Growth opto you said:

"In addition, Japan has some of the highest housing densities of anywhere in the world, mostly due to the fact that they are on an island and keenly aware of using space carefully, and also due to the fact that as a society, they have no issue with living closely spaced, unlike the US, where our ancestors migrated here specifically to have lots of open space. This density translates directly to a much lower cost/home to build."

Your statement is correct but I wish to add that here in the US we have at least a few hundred 'Japans' with housing densities comparable to anywhere in the world.

The big players have no competition. The inertia of monopoly is what is keeping the US from progress.

JMHO

strands555 12/4/2012 | 11:14:36 PM
re: IDC Sees Modest FTTP Growth re: "Japan has some of the highest housing densities of anywhere in the world... This density translates directly to a much lower cost/home to build."

The irony is that one of (single mode) fiber's greatest advantages is its ability to transport huge data rates at huge distances...unless of course you ruin the fiber's inherent "future proof" property by using TDMA PON and send the signal through a PON splitter that adds the equivalent of about 50km of loss.
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