Momentum builds for FTTH

Elaine Chow, Ovum
05 Sep 2007

FTTx has been getting a lot of press lately. Incumbents worldwide have announced ambitious plans to 'fiber-up' their legacy access networks and bring fiber closer to the user. The results are broadband speed and bandwidth beyond that possible with xDSL, and with that, any imaginable media-rich, interactive service and application, from remote surgery and team gaming to movies on demand.

FTTH, which is often used interchangeably with fiber-to-the-premises, brings fiber all the way to the user's premises and promises virtually unlimited bandwidth, both upstream and downstream. The current theoretical bandwidth of FTTH is 1,000 Mbps although operators are seeking to achieve up to 100 Mbps for practical purposes - more than enough for two concurrent movies at full quality. FTTH is considered the most future-proof of access network architecture and is deemed the ultimate 'end point' of access network transformation.

The APAC region accounts for the majority of the world's FTTH builds today. Ovum believes that at the end of 2009, there will be approximately 13.8 million FTTH subscribers globally, 82% of which will reside in the Asia-Pacific region. Operators in China, Hong Kong, Japan, Singapore, South Korea, Taiwan and others are all involved in projects that take fiber to the home or at least closer to it. APAC FTTH activity is currently concentrated in Japan, South Korea and Taiwan.
Despite the exciting opportunities available, many Asian incumbents are still wary of jumping onto the FTTH bandwagon. While there is general agreement that FTTx will be the 'end point', there is less consensus on exactly when and what path this journey should take. These decisions require a detailed consideration of the business, regulatory and technology facets of FTTH.

FTTH, however, does not come cheap and a modest rollout can often cost hundreds of millions of dollars. The actual cost of a FTTH rollout will vary from country-to-country but current figures stand at about $1,500 per household. To provide a feel for the huge spend involved, Taiwan's incumbent operator, Chunghwa Telecom, plans to spend NT$60 billion ($1.83 billion) over the next five years for a fiber-to-the-building network that will initially connect about 25% of Taiwan's 7.4 million residences and offices.

Often the justification for the massive upfront investment for FTTH is in the savings of ongoing opex rather than the revenue opportunities that FTTH brings about given the uncertainty of new revenues derived from FTTH and/or the willingness or propensity of users to pay for the additional bandwidth.

Longer-term opex savings on the other hand can be significant and is estimated to be in the region of 40-60% compared to legacy networks. These savings are expected to be achieved through rationalizing multiple access networks and because fibre networks involve inherently less maintenance than copper.

Regulatory certainty

While FTTH advocates argue that the reduction in opex can in itself be sufficient justification for the migration to FTTH, public listed incumbents may not be quite as convinced or willing to put up with a large negative reaction on their share price resulting from such a risky investment.
Additionally, if an operator is obliged to continue to operate legacy networks because of regulatory constraints, these opex savings will not be achievable.

The regulatory environment can be a big influence on the decision to rollout FTTH especially where the business case is relatively weak.

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