Prsentation PowerPoint

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• FTTH Worldwide Status
• French Case Business Model issues
• IP CITIES 2008
• 12th November 2008, Paris

Roland MONTAGNE Head of Broadband
Practice r.montagne_at_idate.org 33 6 80 85 04 80
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Agenda

• FTTH worldwide Status Strategy
• Leaders US Asia
• European Situation
• FTTNVDSL vs FTTH Key parameters
  Countries
• FTTH French Case
• Broadband Picture Local Bodies actions
• FTTH Business model
• Regulatory Legislative actions for FTTH
• June 2008 FTTH Picture
• Conclusion Dynamics for FTTH

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FTTH Leaders Status Strategies
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FTTH/B Global Picture APAC Strong leadership

• Nearly 85 of Worldwide FTTH/B subscribers at
  end 2007 are in Asia
• In Asia at end 2007, estimated figure for FTTH/B
  Homes Passed 61 millions. to be compared to the
  nearly 5 million in Europe

FTTx subscribers at end 2007
Source IDATE and FTTH Council Europe
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FTTH Worldwide Status Strategies leaders

• Japan the FTTH leader
• More new FTTH/B subscribers than new DSL
  subscribers since April 2005
• 13.08 Million FTTH/B subscribers at 2Q08 and
  still around 800 000 new FTTH subscribers each
  quarter . Nearly 40 are FTTB
• At 2Q08 total Broadband subscribers reached 29.33
  Million with DSL counting now less subscribers
  (12.29 M) than FTTH/B
• Attractive prices, closing the gap with ADSL
  tariffs aerial deployments
• Governments proactive approach to FTTH
  deployments 30 Million FTTH subscribers in 2010
  as a ambitious initial objectiveobjective
  revised in November 2007 at 20 Million FTTH
  subscribers in 2010
• But.
• - A few IPTV subscribers in Japan (less than 250
  000)
• - MIC to force NTT to open up its FTTH network
  at advantage prices for competitors NTT market
  shares on FTTH is nearly 72 compared to 37 on
  DSL !

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FTTH/B in Japan Coverage

• A FTTH/B coverage of 85 of the population

Source MIC
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Hong Kong Broadband Study Case

• HK BB will expand his network from 1.4 M Homes
  Passed today by mainly FTTB to 2 M Homes Passed
  by 2010 (90 of HK SAR population), deploying
  also FTTH
• HK BB as a new entrant in the market decided to
  launched FTTB to differentiate FTTH is the only
  solution to be more competitive than PCCW
• HK BB wants to inverse the Digital Divide and
  his network is targeting mainly residential zones
  of HK SAR where the density is high
• HK BBs objective is to Commoditize bandwidth,
  i.e make its 25-100 Mbps the mass market industry
  standard for HK
• Total investment to build a 1.4 M household FTTB
  network 2.5 billions HK
• A 1 Gbps offers was launched in April 2005 and is
  available in all the network
• ARPU increased over 60 in 18 months, while churn
  rate reduced to 1
• HK BB used perfectly HK SAR demography by
  deploying FTTBCat5e, now FTTH is needed to
  guaranty future services and keep going to
  differentiate on the market

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Hong Kong Broadband Study Case

• Maintain CAPEX level below EBTDA policy
• Hong Kong demography allows EUR 88 per home
  passed!!
• Uplink traffic is 3 times of downlink traffic

Source HKBN
Source Weekly statistics from HKBN
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FTTH Worldwide Status Strategies leaders

• USA FTTH is the unique solution for RBOCs
• Power of Cable operators Time Warner, Comcast,
  CableVision launching 30 or 50 Mbps offers
• At end 2Q08 Verizon has signed 2 million FiOS
  FTTH subscriber and has nearly 1.4 Million FiOS
  TV subscribers
• At end 3Q07 Verizon has passed 8.5 M Homes,
• By 2010, the FiOS network will have passed 18
  million homes, or about half the households
  Verizon serves
• ATT (more FTTN oriented) and Verizon launched
  Fibre access for delivering HDTV Triple Play
• FioS ARPU of 130 USD revenue up 53 compared to
  1Q08
• Churn is very low for FiOS TV Subscribers 1.12

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FTTH Worldwide Status Strategies leaders

• USA RBOCs vs Cable
• On the last quarters, Cable is recruiting again
  more new subscribers than RBOCs
• and DOCSIS 3.0 is coming.
• But consumers like FiOS TV quality

Verizon Customer satisfaction survey September
2007
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FTTH European situation
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FTTH in Europe - Overview Projects

• IDATE has identified 201 FTTx projects in Europe
  of which 88 are new initiatives since mid 2005
• Some significant FTTH/B VDSL European
  deployments at end 2007

Source FTTH Council Europe / IDATE 2008
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FTTH in Europe - Overview Global Figures

• End 2007, 1 Million FTTH/B subscribers in the EU
  31 and around 4.9 Million Homes Passed
• A growth of 23 in terms of subscribers and 79
  in terms of Homes Passed compared to June 2006
• End of 2007, Deutsche Telekom covers 8 millions
  homes in Germany with FTTN VDSL compared to 2.9
  millions at mid 2006
• End 2007 around of 19.2 Million Homes Passed with
  FTTx including VDSL FTTLA in Europe and 1.2
  million FTTx subscribers

Source FTTH Council Europe / IDATE 2008
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FTTH in Europe - Overview Players

• Municipalities and Power utilities continued to
  initiate FTTx projects in 2007
• but significant deployments come now by
  alternative operators
• Adding Fastweb (Italy), B2 (Sweden), Illiad/Free
  Neuf Cegetel (France) and T2 (Slovenia) FTTH
  subscribers at end 2007, we reach nearly 50 of
  the European FTTH subscribers base
• Open Network Models are often chosen by
  Municipalities

Source FTTH Council Europe / IDATE 2008
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FTTH in Europe Open Access Model - Sweden
Source IDATE
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Familje Bostader Housing Company in Stockholm

• Exemple of Open Network Business Model Familje
  Bostader

Source IDATE - FB
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FTTH/B subscribers in Europe by country
Source IDATE

• Here FTTx means Fiber-to-the-Home or
  Fiber-to-the-Building or Fiber-to-the-Office or
  Fiber-to-the-Dormitory
• Excluding VDSL / VDSL2, FTTC, FTTN deployments
  by incumbents
• Excluding FTTLA deployments

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FTTH/B Home Passed in Europe by country
Source IDATE

• Here FTTx means Fiber-to-the-Home or
  Fiber-to-the-Building or Fiber-to-the-Office or
  Fiber-to-the-Dormitory
• Excluding VDSL / VDSL2, FTTC, FTTN deployments
  by incumbents
• Excluding FTTLA deployments

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Key points and FTTH Dynamics for Europe
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Key points FTTx in Europe

• The panorama of FTTx deployments in Europe at end
  2007 shows that the FTTH market in Europe
  continues to grow
• Especially in terms of Homes Passed (79)
  reaching around 5 million
• Subscribers shows a 23 growth but are
  concentrated in 5 countries
• Dynamism of countries like Norway (FTTH
  subscribers x 2.5 in 18 months)
• Involvement of 4 leading Broadband players in
  France in deploying FTTH/B and key role played by
  the Government and ARCEP
• Dynamic Eastern Europe countries like Slovenia (2
  players involved), Slovakia, Czech Republic and
  Poland
• Nevertheless
• With a little more than 1 million FTTH/B
  subscribers at end 2007, Europe is still largely
  lagging behind the US (2 million FTTH
  subscribers) and Japan (11 million FTTH/B
  subscribers)
• Strong Barriers remains in Europe
• Facilitate access to MDU for operators,
• Mutualise Civil Engineering costs
• The Business Case of FTTH outside Urban and
  Suburban areas?
• Regulation inertia what ex ante remedies EU
  will propose? Exact Role of the European Telecom
  Market Authority?

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FTTH Dynamics for Europe

• We have seen encouraging signs recently for the
  Future of FTTH in Europe
• In major European countries like Germany where
  three major City Networks announced ambitious
  FTTH rollouts (Munich, Hamburg, Cologne)
• In the UK where Government intervened to promote
  the deployment of FTTH in front of the reluctance
  of the main British players and now we have BT,
  Virgin Media, Sky and Carphone Warehouse FTTC
  oriented announcements
• Large Incumbents announcing that they will
  rollout FTTH in the near Future (Telefonica,
  Telenor) and others that first choose to deploy
  VDSL, are now launching FTTH deployments (KPN) or
  considering launches
• Infrastructure companies confirmed that they will
  also play a leading role in the future of FTTH
  deployments ReggeFiber in the Netherlands or H20
  networks in the UK
• Finally, Municipalities and Utilities will play a
  leading role especially in the Nordics and
  Benelux through Open Access Model. Local Bodies
  will be also be key players in order to mutualise
  civil engineering related costs

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FTTH vs VDSL Key parameters - Countries
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FTTx Technology choice in France? Copper Loop
Copper Local Loop structure in France
Source IDATE

• Subscribers (d) average distance from SC 700
  to 800 m 300 m in Germany 420 m in the UK
• Subscribers (dd) average distance from the
  local exchange
• 29 of lines at less than 1 Km
• 39 of lines at less than 1.5 Km
• 52 of lines at less than 2 Km

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FTTx Technology choice in France? Copper Loop
Performances of the French copper network

• If all the Central Office (CO) are equipped with
  ADSL2 50 of the population eligible at 10 Mbps
• If all the CO are equipped with VDSL2 less than
  10 of the population eligible at 50 Mbps
• If all the Street Cabinet (SC) are equipped with
  VDSL2 less than 20 of the population eligible
  at 50 Mbps

• The SC is not the right place of arrival for
  Fibre in a VDSL approach in France the  Curb 
  or the  Building  is better

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FTTH vs VDSL Italian VDSL particularity
Source Telecom Italia
Average copper loop length boost VDSL potential
in Italy
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International benchmark Dwelling Type in Europe
In Europe, countries like Spain, Italy, Germany
are well positioned for FTTH It will be more
expansive to deploy FTTH in the UK for example
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French Case Broadband Picture
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The regulation of Broadband has encouraged
investment

• Competition through infrastructures has fostered
  the development of broadband
• the geographic extension of local loop unbundling
  has encouraged France Telecom to equip all of its
  MDF (Metallic Distribution Frames) for ADSL
• France has joined European leaders in terms of
  penetration
• and is in first place for "triple play"
• Regulation has made this increase in investments
  possible
• local loop unbundling gives operators technical
  and economic control
• "bitstream" serves as a geographic complement
• Municipal intervention assists this dynamic
  especially in low density regions

Source ARCEP
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Local Bodies action in France (1/3)

• Local Bodies an important role allowing CLECs to
  access to an alternative infrastructure
•  Région   regional backbone (Alsace,
  Limousin,)
•  Département  optical fiber to connect France
  Telecom MDF and allowing Unbundling for CLECs
•  Ville   optical fiber roll out in  Zones
  dactivités  for Enterprises and also for
  school, hospitals,and now constructions/renting
  of ducts for FTTH rollouts
• Today Local Bodies are playing a leading role for
  Broadband Growth in France and development of
  competition.
• The role of Local Bodies in Unbundling is more
  and more important today 33 of Unbundled lines
  are available following a Local Body action (RIP)

Broadband market share in France (June 2008)
Source IDATE
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Local Bodies action in France (2/3)
Dunkerque
Debitex
Délégataireretenu
Sipperec
Arras
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Gonfreville- lOrcher
SAN Sénart
CG Hauts de Seine
CA Seine Eure
Moselle
CG Bas-Rhin
Oise
Manche
Procédure en cours (AAPC lancé)
Meuse
Eure
15
CA Caen la Mer
CR Alsace
Meurthe et Moselle
CG Haut-Rhin
Yvelines
Seine et Marne
Côtes dArmor
Hte Marne
Projet THD
Loiret
Belfort-Montbéliard
Sarthe
Loiret
5
Quimper
Bourgogne
Maine et Loire
Besançon
Nièvre
Vannes
Cher
Jura
Rennes
Tours
Angoulême
Cosne sur Loire
Auvergne
CR Guadeloupe
Charentes-Maritime
Limousin
Loire
Limousin
Périgueux
Isle dAbeau
Clermont-Ferrand
Chalon / Saône
CR Guyane
A 75
Gironde
Bordeaux
Drôme-Ardèche
Lozère
CR Martinique
Aveyron
CU Creusot Monceau
Lot et Garonne
Voiron
Agen
Gard
Tarn
CR Réunion
Toulouse Sicoval
Hérault
Grand Toulouse
Corse
CA Pays dAix
Haute Garonne
Pau
Ariège
Rodez
Source IDATE à mi 2008
PA Iris 64
PA DSP WiMAX
Castres-Mazamet
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Local Bodies action in France (3/3)

• Very important investments for operational and
  ongoing projects
• More than 1.9 billion Euros potentially invested,
  financed at 50 by public funds
• More than 1 700 Economical zones connected by
  optical fiber
• A significant impact on Unbundling for CLECs
• En of June 2008, 3421 MDFs were unbundled by
  CLECs covering 71.2 of the population.
• In 2007, 50 of the new unbundled MDFs were
  opened because of a local body network (RIP)

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The role of Local Bodies Network (RIP) in France
More than 4 M homes in France reached for
Unbundling thanks to a Public Network (17 of
Homes) Rural zones coverage
Source ARCEP March 2008
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FTTx Business Model
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General structure of the model
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FTTH CAPEX variables
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Dwelling-unit type

• Density
• Vertical structures

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Civil engineering and cable costs based on
population density for GPON technology ( per
outlet) Source IDATE
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Civil engineering and cable costs based on
average number of apartments per buildingfor
GPON technology ( per outlet) Source IDATE
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FTTH cost model French case
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FTTH cost model French case Base option

• Base option Greenfield deployments main cities
  then residential areas

Number of Homes SME/SoHo (million units)
Amortization of network component
(1) Cities of more than 200 K inhabitants (2)
Total for France 30 million units

• Technologies GPON and Ethernet P2P
• Deployment 2006 to 2015 for a coverage of 40
  of the population
• In 2015 11.9 million homes passed and 5.3
  subscribers representing a penetration of 17.8

Coverage evolution
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FTTH cost model French case Base option

• Results Base Option For an ARPU of 50 EUR /
  month incl. VAT
• Total investments between 10.4 billions EUR
  (GPON) and 11.3 billions EUR (Ethernet P2P) over
  10 years
• On the 10 year period cost
• per Home Passed 879 EUR for GPON and 950 EUR for
  E-P2P
• per subscriber 1 958 EUR for GPON and 2 118 for
  E-P2P
• Civil Engineering represents 70 of the costs

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FTTH cost model French case Base option

• Investments per year (in million EUR)

Equipment of residential areas
Equipment of suburban areas
Source IDATE

• Entering in residential areas in 2010 with
  individual homes has a strong impact in
  deployment costs
• Investment during 4 first years is 1 billion EUR
  to cover 1.7 million HP and 500 K subs.
• Next year you need to invest 1.6 billion EUR to
  double HP and subs. Base !
• Per Home Passed the cost in residential areas is
  between 1.5 and 2.5 times more expensive than in
  Urban areas or Suburban Building areas
• The renewal of ONT every 5 years (starting in
  2011) does not impact cost

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FTTH cost model French case Options

• Option 1 Paris with usage of passive existing
  infrastructure (Paris sewer)
• At 1/m/year it allows an economy of 30 compared
  to the Greenfield case
• In 2015 1.1 million homes passed and 0.5
  million subscribers
• Investment needed is 500 million EUR instead of
  700 million EUR
• Option 2 France (40 of the population) with
  usage of already existing ducts
• At 2/m/year it allows an economy of 50 compared
  to the Greenfield case
• In 2015 9.1 million homes passed and 2.6
  million subscribers
• Sharing of passive infrastructures (ducts,
  trenching,) will be key !!

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FTTH French case Regulatory Legislative
actions
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Alternative operators require access to civil
engineering

• For an operator deploying a FTTx network, access
  to existing civil engineering changes the
  economic equation considerably
• All operators are not on an equal footing
• Alternative operators can deploy only in limited
  cases like Paris, where sewers can be visited and
  pass under every building
• France Telecom deploys optical fibre in its civil
  engineering ducts inherited from the former
  monopoly
• Numericable is progressively replacing coaxial
  cable with optical fibre

France Telecoms ducts are an essential
infrastructure Access to France Telecoms civil
engineering must be guaranteed to allow all
operators to invest
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France Telecoms civil engineering has
availabilities

• ARCEP has audited France Telecoms ducts in some
  ten cities and around 1000 chambers
• The audit shows that civil engineering is
  available
• although availability is heterogeneous
• and will depend on engineering rules, in
  particular for desaturation
• a reference offer from France Telecom is
  available since September 2008

possibility of running optical networks
need to desaturate the civil engineering
Example of civil engineering availability in a
neighbourhood in Nice
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Law on Modernising the Economy (LME)

• Encouraging investment in civil infrastructure
• Facilitating co-ownership decisions mandatory
  inclusion of all operators fibre offerings in
  the agenda of the next General Assembly tenants
  requests cannot be denied by the landlord without
  serious and legitimate cause
• Obligation to equip new housing with fibre all
  multiple dwelling units starting on 1 January
  2011 and MDUs with more than 25 homes starting in
  2010
• Property co-owners need to be reassured, hence
  the draft of a sample operator-landlord agreement
  imposed by decree by the Conseil dEtat and
  already proposed by ARCEP
• Promote competition on existing infrastructure
• Operators that enjoy significant power in the
  local sub-loop market are required to provide an
  access offer that allows subscribers to benefit
  from broadband and FTTH/B solutions
• Obligation to provide access to the installed
  line to other operators (outside the limits of
  the private property, except in special cases
  defined by ARCEP)
• Infrastructure managers and operators must submit
  information on the location and deployment of
  their network, without charge, to the State and
  to local authorities.

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FTTH French case picture
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FTTH/B deployments and announced plans

• 3 operators et 1 cable operator are involved in
  FTTH/B deployments

June 2008
Neuf Cegetel
Numéricâble
Free
France Télécom

• Mainly GPON technology
• Invest. 300 Millions up to 2009 (150
  Millions with SFR)
• Erenis MediaFibre acquisition
• Nearly 21 000 subscribers and150 000 homes
  passed
• Objective 1 million homes passed and 250 000
  subscribers end 2009

• FTTB Architecture then coax inside the building
  until the home
• Invest. 300 Millions up to end 2008
• More than 2.7 millions homes passed and 104 000
  subs.
• Objective 8 millions de homes passed at end
  2010

• EP2P technology
• Invest. 1 billion up to end 2012, 158 Millions
  en 2006-2007 (initially planned 300 M)
• CitéFibre acquisition
• Nearly 11 000 subscribers and 263 000 homes
  passed
• 2 fibers deployed per home
• Objective more than 10 millions homes passed up
  to 2012

• GPON technology
• Invest. 270 Millions up to end 2008 / 3 to 4,5
  Billions up to 2012
• 14 286 subs. and 344 513 homes passed
• Massive deployment starting in 2010 (1 year
  later as announced)
• Initial Objective 1 M Homes Passed end 2008
  (wont be achieved)
• Ducts offer and sharing of fiber inside MDUs

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France Telecom Orange FTTH offer
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Regulatory and Legislative actions for FTTH in
France

• Legislative measures taken for access to
  buildings and the obligation to share the last
  part Law LME since August 2008
• ARCEP launched technical work to implement
  sharing and issued recommendations for landlords
  and building managers
• Access to France Telecoms civil engineering has
  now entered the operational stage and a first
  reference offer available since September 2008
• The measure will be evaluated beginning of 2009

recommendations (guide, model agreement)
review
multilateral technical work
sharing of the last part
possible legislative measures
publication of an offer
2007
2008
access to France Telecoms civil engineering
operational monitoring of the civil engineering
offer
experiments
market analysis
Source ARCEP
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Conclusions
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Conclusion Dynamics for FTTH

• Competition
• Platforms competition Cable vs DSL is a dynamic
  factor
• TV players content providers will play a
  leading role
• Governments Regulators roles are essential
• Maturity of technologies
• PON P2P technologies are deployed Asia, US,
  Europe
• Dynamics/Complexity of the Digital Home
• FTTx ARPU potential New players
• New players are coming Housing companies,
  developers, Civil Engineering companies,
  Infrastructure companies,
• VOD, SVOD, HDTV.. First services to leverage the
  ARPU others to be invented for Residential as
  well as for SMEs

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Conclusion Challenges for Europe

• FTTH/B still limited in Europe compared to Asia
• Government role will be key Ultra Broadband
  National Forum needed
• To promote Ultra Broadband (FTTH/B) in the
  country
• A National Forum gathering all stakeholders
  French exemple has been a success

Source IDATE
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Soon !!!! www.digiworldsummit.com
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• Thank You!

Roland MONTAGNE Head of Broadband
Practice r.montagne_at_idate.org