Utilities Key to Euro FTTH
And 2004 could see some significant advances for European FTTH, with the Netherlands offering the most hope for vendors waiting for some action. There is a glimmer of hope that an operator consortium may plan a nationwide rollout there worth billions of dollars.
But that may be some way down the line. Yankee senior analyst Jonathan Doran says there are signs of green shoot growth in the European FTTH market driven largely by utility firms, though they won't provide the services to end users. Predictably, the incumbent national operators are "paying lip service to FTTH, investing only in dribs and drabs."
These utilities will look to build the infrastructure, then lease the capacity, says the Yankee man. In many instances it's not realistic financially for the same company to own the fiber and be the service provider, he says. The general model in Europe will be for one company to own the infrastructure in a certain area and then a number of service providers to run their services over it.
This will involve a lot of cost up front without the prospect of a quick return, but Doran says this is well suited to utility players. "They have a longer-term view of returns on investment than telecom companies," he says. "And that model makes more sense, as the burden of the original cost is then shared by all the service providers using the fiber. It also fosters greater service competition, and allows a greater opportunity for specialized services, such as TV and video over fiber."
In addition, some countries have regulatory constraints on whether the same company can own the fiber and provide the communication or entertainment services.
The incumbents, as usual, are "treading very carefully with innovative technology. They've invested in DSL technology and don't want to cannibalize that. It doesn't make much sense for them to invest in fiber just now," though they'll do what they need to for any regulatory purposes.
So where has there been progress to date? Not for the first time, Sweden is leading the way, on the back of a national drive to take broadband to the nation. Now there are a number of municipal fiber networks, and the government is putting pressure on the long-distance utility providers to lay fiber that can interconnect those local networks.
But even with such emerging competition, the incumbent carrier TeliaSonera AB (Nasdaq: TLSN) has only invested sparsely. It has just a few thousand direct fiber customers, but even such minimal involvement means "it has done much more than many other European national telcos."
Sweden is also home to one of Europe's most innovative alternative operators, Bredbandsbolaget AB (B2), one of the few alternative operators to have invested in fiber and deliver the services across it (see B2 Innovates to Deliver VOIP).
The other high-profile European startup that owns its own infrastructure is Italy's FastWeb SpA, which has been putting the pressure on Telecom Italia SpA (NYSE: TI). FastWeb's ongoing development has helped speed up the incumbent's broadband rollout and service innovation, including TV over DSL plans for 2004 (see FastWeb Piles On the Users, TV Over DSL Over Italy , Telecom Italia Deploys Juniper BRASs, and Telecom Italia Adds More Cisco).
As for new builds in 2004, there are plans for FTTH rollouts in Norway and Denmark in the coming year, says Doran, while the other encouraging prospect is the Netherlands. Dutch regulatory conditions are favorable, says Doran, while the intense competition between Dutch incumbent KPN Telecom NV (NYSE: KPN) and a number of alternative DSL and cable modem service providers is leading to a potential national alliance for a shared ownership of FTTH infrastructure. While KPN is stalling -- it has had a trial project in The Hague for some time now that looks like a way to deal with political and regulatory demands -- regulatory pressure and the combined market strength of the cable operators could force KPN to make a move and share in a nationwide construction project.
If that project comes to fruition, it should spark a scramble in the vendor community. Doran says an unidentified Dutch consultancy has estimated that a national FTTH rollout in the Netherlands would require a €7.5 billion (US$9.22 billion) investment.
Meanwhile, FTTH is "not even on the radar" in the U.K. and Germany, where the incumbent operators are very dominant in the DSL markets. BT Group plc (BT) (NYSE: BTY; London: BTA) is not even embracing VDSL, usually the intermediate step towards FTTH, says Doran, while Deutsche Telekom AG (NYSE: DT) is too strong in the DSL and ISDN markets, and the competition from the cable companies is still weak.
— Ray Le Maistre, International Editor, Boardwatch