Prsentation PowerPoint

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FTTH the European update Introduction ONE
2006 Session 2 Cannes, 24 September 2006


Roland MONTAGNE Head of Broadband
Practice r.montagne_at_idate.org
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Agenda

• FTTH Worldwide Status
• FTTH Why?
• Rami Houbby, FTTH Council Europe, Allied Telesis
• FTTH Technology choice?
• David Payne, BT
• FTTH Costs?
• Roy Rubenstein, FibreSystems/Lightwave Europe
• FTTH recent developments in Europe
• FTTH Forecasts for Europe in 2015

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FTTH Worldwide Status
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FTTH worldwide status Japan the US

• Japan the FTTH leader
• More new FTTx subscribers than new DSL
  subscribers since April 2005 (100 K a month)
• Since June 2005, with over 3.2 million
  subscribers, FTTH has overtaken cable and is now
  Japans number two broadband access mode
• 5.6 million FTTx subscribers at 2Q06 55 FTTB
  45 FTTH
• Very attractive prices, closing the gap with
  ADSL tariffs, with virtually no difference for
  apartment dwellers (but still around 40 higher
  for individual dwellings)
• Regulation both copper pair and fibre optic
  unbundling Aerial deployments
• Governments proactive approach to FTTx
  deployment 30 M FTTH subscribers in 2010
• Very few IPTV subscribers in Japan but a lower
  churn observed for FTTH subscribers
• USA FTTH is the unique solution for RBOCs
• Length of the local loop and domination of Cable
  Modem on broadband access
• Power of Cable operators Time Warner, Comcast,
  CableVision launching 30 or 50 Mbps offers
• By 1Q2006 Verizon had passed around 4M homes
  for fibre and counted 350 to 400 000 FTTx
  subscribers. Expected for end 2006 6M Homes
  passed and 900 000 FTTx subscribers
• Regulation no unbundling for RBOCs deploying
  Fibre in the access
• Less than 0.5 million FTTx subscribers at 2Q2006
  (estimation)
• ATT (more FTTN oriented) and Verizon launched
  Fibre access for doing HDTV

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FTTH worldwide status Europe

• Mid of 2006, less than 800 000 FTTx subscribers
  in the EU 18 (23 vs June 2005)
• Mid of 2006, around 2.7 millions Homes passed in
  the EU 18 (10 vs June 2005)
• ? A global penetration rate of more than 28
• Mid of 2006, Deutsche Telekom covers 2.9 millions
  homes in 10 major cities in Germany with FTTN
  VDSL2

Source IDATE
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FTTH Why?
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Services need for very high Broadband ?

• Residential market
• A demand today quite well satisfied by download
  rate proposed ADSL2 but
• A few specific applications needing more
  Bandwidth HDTV, video services, blogs, personal
  content exchanges,
• A growth of the needs concerning Bandwidth but
  also Symmetry this will be driven by
  simultaneous usages in the home that have already
  started with Triple Play

Minimum bandwidth requirements
Source IDATE
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FTTH Technology choice?
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Status of FTTx technologies

• Two distinct solutions possible for expanding
  fibre optic coverage

Passive network
Source IDATE/Lucent
Source  IDATE/Lucent
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FTTN solutions identified risks

• Risks of interference between ADSL2 and
  VDSL/VDSL2
• ADSL2 gt up to 2.2 MHz
• VDSL/VDSL2 gt from 1.1 to 30 MHz
• Several solutions can be implemented to remedy
  the situation
• Frequency separation use of VDSL2 at
  frequencies above 2.2 MHz, albeit delivering
  lesser performances
• Balancing traffic on frequencies below 2.2 MHz
  to limit performance loss (under consideration
  for the VDSL2 standard)
• Asymmetry of VDSL/VDSL2 solutions

• VDSL DSLAM localisation
• local exchange?
• switch, premises?

• Equipment
• Upgrading the required DSLAM, depending on their
  location, to be able to deliver value-added
  services such as 2-3 TV channels per user.

• Operating costs
• Active equipment

• Future-proof architecture?
• FTTN then FTTH, or FTTH at the outset? A
  difficult choice

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Study case Local copper loop in France
Source IDATE

• Subscribers (d) average distance from SC 700
  to 800 m 300 m in Germany
• 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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Study Case Performance of French copper network

• If all the 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 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 the  Curb  or the
   Building  is better

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Ethernet P2 vs PON in Europe

• Technical architecture of European FTTx
  deployments Ethernet still outnumbering PON
• But PON selected for several major projects since
  2005
• in Spain, the government of Asturias has chosen
  an Open Access Network GPON for its
  infrastructure
• Among the latest deployment, EnergiMidt, a Danish
  power utility has also selected a BPON technology
  18 000 home passed mid 2006
• Also in Denmark, SEAS-NVE is deploying BPON while
  SEF is deploying EPON
• France Telecom is testing FTTH / GPON since
  several months

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FTTH costs?
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Study case Cost Model for FTTx in France (1/2)

• Base option Greenfield deployments main cities
  then residential areas
• 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
• Results total investments between 10.4 and 11.3
  billions euros over 10 years
• Civil Engineering represents 70 of the costs
• EBIT positive in 2012
• Entering in residential areas in 2010 with
  individual homes has a strong impact in
  deployment costs

Investments per year (in million EUR)
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Study case Cost Model for FTTx in France (2/2)

• 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
• Option 2 France with usage of ducts already
  existing
• 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
• Mutualisation is the key access at existing
  passive infrastructure

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FTTH recent developments in Europe
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FTTH recent developments in Europe

• The regional government of the Asturias project,
  Spain
• Based on an open GPON access network
• Fibre deployment begun in June 2006, the target
  for the Government of to Asturias is to cover
  over 30,000 homes by the end of 2008.
• France Telecom pilot project announced
• FTTH pilot in the Hauts-de-Seine department and
  in Paris region, covering several thousand
  households
• According to France Telecom, FTTH is a matter of
  strategic investment its future depending on
  upcoming regulatory decisions
• The Amsterdam Municipality CityNet
• Based on an Ethernet access network
• 25,000 homes connected by the end of 2007

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FTTH recent developments in Europe

• The Vienna city Councils FTTH project
• Based on an open Ethernet access network
• FTTH pilot begun in 2006, the Vienna city
  Councils FTTH network will cover over 50,000
  homes by the end of 2006.
• Erenis, in Paris (France)
• Based on an Ethernet access network FTTBVDSL
• 85,000 homes connected at the end of 2006
• CiteFibre, in Paris (France)
• Based on a FTTH access network
• 100,000 homes connected at the end of 2007

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Free FTTH announcement for France

• 4 M home passed through 2012 for a total
  investment of 1 billion euros
• FTTH architecture Ethernet P2P
• Deployment limited to Paris and suburbs and some
  main cities boroughs Paris recently announced
  that renting prices will be reduced for usage of
  Public Domain (25 to 90)
• No civil engineering but usage of Paris sewer
  system in accordance with Paris policy
• Opening of FTTH services at the beginning of
  2007
• One condition Local Exchanges will be equipped
  if at least 15 of the lines are Free subscribers
• FTTH network will be open (parts or total
  network) to other operators Ethernet
  architecture will facilitate this
• Same monthly price 29,99 euros !
• 50 Mbps Internet access
• Unlimited telephony to fixed phones and some
  international destinations
• New optical Freebox
• To attract building owners a free offer for
  every home passed
• Digital Terrestrial TV
• Narrowband Internet access
• Phone lines
• Optical Freebox (deposit needed)

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Free FTTH announcement reactions

• France Telecom its too soon
• ADLS2 is sufficient for today Triple Play
  services
• HD TV, main driver for FTTH, is not already
  available in France
• Economy of the project
• Free will be 100 independent no more LLU
  renting fees
• Free will propose new value added services
• Free will target not only Residential but also
  Business Units
• IDATE cost model for France
• - 2010 3.5 M homes passed and 1.1 subs for an
  invest/Home passed of 260 (1087 for connected
  subs)
• - 2011 5.3 M homes passed and 1.8 subs for an
  invest/Home passed of 260 (1018 for connected
  subs)
• So this is not very far from Free calculation
  !!   250 eur / Home passed (1300 /connected
  subs.)
• FT raised the negotiations difficulties when
  entering MDU, furthermore 4 hours of technician
  needed in average for connecting a home

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FTTx Forecast for Europe
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Country potential for VHS

• VHS rollout estimates
• Level of concentration
• Number of nuts5 in a urban area means the number
  of cities where pop density gt 500 inhabitants per
  km²
• Suburban (Pop. density between 100 and 500
  inhabitants per km²)
• Potential coverage
• Number of inhabitants living in a urban/suburban
  area
• Government support for VHS
• State and local authorities involvement in VHS
  (e.g. leasing dark fibre from municipalities, or
  government incentives for VHS)
• Consumer demand for VHS
• Populations potential willingness to subscribe
  to VHS broadband

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Country potential for VHS

• Country rating
• Overview of potential VHS coverage in the
  countries being examined
• Coverage expected to be high in Finland,
  Denmark, Norway Sweden (mark gt 7 points)

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When are players likely to invest in VHS
broadband?

• Current level of national penetration
• Assumption high level of BB penetration likely
  to fuel a VHS broadband battle
• Incumbents strategy
• Assumption incumbents involvement is key for
  VHS take-up. Incumbent likely to adopt VHS
  broadband if
• Market share on broadband market is low and/or
  (BT)
• Share of net adds is low (DT)
• LLU and alternative operators strategies
• Assumption we believe that incumbent will more
  likely invest in VHS in countries where LLU
  take-up is strong ( of DSL lines)
• LLU is strong in France, the Netherlands and
  Sweden
• Competition with cablecos
• Assumption a high degree of competition between
  telcos and cablecos is likely to drive adoption
  of VHS broadband
• Strong competition from cablecos in Austria,
  Belgium and the Netherlands
• Little competition in France and Germany
• No competition in Italy and Greece

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When are players likely to invest in VHS
broadband?

• Country rating
• This gives us an idea of when players will
  implement VHS
• First expected to rollout VHS are the
  Netherlands, Sweden and Finland (mark gt 12 points)

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Abandoning xDSL for FTTH?

• Local loop length breakdown
• Assumption incumbent more likely to choose FTTH
  (PON E P2P) than upgrading xDSL if their local
  loops are long
• Short loops xDSL will be upgraded progressively
  to FTTxVDSL
• Long loops more favourable to FTTH rollout
• Short loops (estimated 70 of lines lt 3km)
  Spain, Italy
• Long loops (estimated less than 50-55 of lines
  lt3km) France, Germany, UK
• Average number of lines per MDF
• Assumption a high score means that an average
  MDF covers a large number of line and is thus
  favourable to an xDSL rollout
• Average number of lines per MDF is high in
  Belgium and the Netherlands
• Average number of lines per MDF is low in
  Finland and Sweden

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Abandoning xDSL for FTTH?

• Country rating
• This gives us an idea of operators likelihood
  of switching to FTTH, or of keeping DSL as their
  main VHS technology
• Rating more VDSL oriented lt3lt more FTTH oriented

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VHS BB market overview

• VHS potential take-up across Europe
• Classic broadband, led by ADSL, will remain by
  far the leading means of access
• In Europe, replacing classic BB with VHS will
  begin in earnest in 2010/2012
• VHS will represent around 19 of Western
  Europes total BB base by 2015.
• FTTH will be the first VHS broadband technology,
  with on average 11 of Europes total BB base by
  2015.
• VDSL will represent 8 of Europes total BB base
  by 2015.

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Key points Europe Key Questions

• As of mid-2006, the VHS market is gaining
  momentum in Europe, with less than 800,000 FTTx
  subscribers and 2.7 million homes passed
  concentrated for the moment primarily in Northern
  Europe and Italy.
• Including VDSL Europe counts 5.6 million homes
  passed mid 2006
• Rami What will be the drivers to see FTTH
  explosion in Europe?
• If Ethernet is currently the most widely-used
  technology, several recent major deployments have
  opted for PON (Denmark, France Telecom test in
  France).
• Leading incumbents starting to deploy FTTNVDSL2
  solutions on a large scale (Deutsche Telecom,
  KPN, Swisscom, Belgacom, TDC) others like
  France Telecom look at FTTH/PON architectures
• Dave Whats the better option for FTTH
  deployments?
• In Europe, 2007 will be the year of regulatory
  adjustments to take account of FTTx and for
  testing the different technologies leading to a
  series of major rollouts in 2008 but cost
  remains an issue
• Roy Is economics still the sticking point to
  roll out Fibre in Europe?

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Round Table Key Questions

• What will be the role of content providers in
  FTTH? Do they have interests in delivering HDTV
  on Fibre?
• Regulatory issues what is the good position?
  Regulatory holiday? Sharing of passive
  infrastructure (ducts, Fibre)?
• Who will lead FTTH developments in Europe? The
  role of Municipalities and Local Bodies will be
  essential?
• Maturity of the FTTH technologies? What are the
  reasons for choosing Ethernet P2P or PON
  architectures for an operator?
• Wireless technologies will play a role in VHS
  deployments?
• Access to the Buildings could be a major barrier
  in Europe solutions?