Of all the factors that affect the business case for fibre in broadband access networks, the competitive and regulatory factors are among the most critical. Are there government supports or incentives to promote broadband? Will the operator have to share facilities? If so, how are the rates determined and how will this affect revenue? Is there a well-established CATV industry or other competitor already offering broadband services? In addition, there are many market factors. What television viewing habits must be addressed? How many channels must be carried? How much will the consumers pay for TV or for Internet? Finally, there is a large group of network and infrastructure factors. What is the housing density? How long are the loops? Are there suitable rights-of-way for cable and equipment? Must the streets be dug up? How old is the existing copper plant, etc.?
The result has been a range of approaches from aggressive FTTH deployment, as in the case of Verizon, NTT East, or NTT West, to more conservative strategies that patch together triple-play offerings by using existing facilities, including satellites for video services, as in the case of Qwest, Telstra, or Telecom Italia. When the approaches and the subscriber numbers for hundreds of network operators are added together by main technology, the result is shown in the column chart below, with fibre-to-the-premises (FTTP) and fibre-to-the-building (FTTB) representing 11% of all broadband access lines. The FTTP and FTTB subscribers also represent 2% of the world’s wireline telecom subscribers.
AT&T executives have said consistently that they cannot justify the expense of FTTP. Verizon has come to a different conclusion, even though the two companies are governed by the same federal regulations and many of the same state regulations. Both compete with CATV multiple system operators and CLECs in their major markets. The difference in approach reflects how they have weighed the expenses and the risks. AT&T has concluded that its FTTN architecture, used with switched digital video, delivers adequate bandwidth for the foreseeable future. In its June quarterly financial statement, however, AT&T reported only 50,000 subscribers to its U-Verse digital video service. Although AT&T has been building its FTTN networks for more than two years, the technologies it planned for IPTV took more than a year to get de-bugged and ready for mass deployment.
The Australian government is eager to promote new investment in broadband access, especially for rural areas. In June, it awarded a consortium of operators other than the incumbent Telstra a license to deploy a network based on WiMAX technology, and it provided partial funding. Telstra has voiced its opposition to that award. A broadband license for urban areas will be subject to a separate decision, but the federal government will not provide financial support. Telstra has said it has designed a nationwide FTTN network, but it has expressed concerns about unbundling requirements. This has led to contentious disputes over how much must be invested and how much is really at risk if other operators are able to pay wholesale fees to Telstra and resell broadband services to end-users. At mid-2007, the situation was at an impasse and pending federal ruling.
In the UK BT has embarked on one of the telecom industry’s most ambitious network upgrade plans (21CN) – spending about US$20 billion to replace the circuit-switched network with an all-IP network.
Milestones of this plan include:
The result will be a core and access node network having 50 to 100 core-IP-router nodes and about 5,000 access nodes, all linked by fibre. But the plan as initially conceived is to retain twisted-pair copper cable for the distribution and drop facilities, using ADSL2+. Like other incumbent operators, BT has been concerned that a FTTH program would be capital-intensive and might be subject to unbundling requirements, so that it would have to make the facilities available to competitors.
Canada’s ILECs compete with CATV operators and other LECs. The ILECs are experiencing access line erosion due to these competitors and also mobile cellular services. Canadian regulatory policies now allow the ILECs to enter video-service markets. As a result, Bell Canada, representing almost two-thirds of Canadian households and wireline subscribers, has formulated a plan to start with FTTN and upgrade to FTTH in subsequent years. The two-stage upgrade is designed to provide a rapid entry into video markets. The cabinets deployed at the FTTN nodes can later be re-used to upgrade the network with fibre-based PON systems. FTTN construction has been underway, with remote VDSL DSLAMs being installed in access nodes and buildings for the past two years.
The world has been watching a dramatic battle over the unbundling requirements in Germany. The nation’s incumbent telco, Deutsche Telekom, benefited when the German parliament acted in opposition to EU telecom policies late last year and passed a law that exempted DT’s planned FTTN network from unbundling require¬ments. The EU has filed suit against the German government in the European Court of Justice. DT plans to spend about Euros 3 billion on a high-speed network, using FTTN / VDSL to offer IPTV in 50 cities. After deploying this technology in 10 cities, DT has shifted to ADSL2+. This represents a lower-cost alternative, but still allows DT to rollout IPTV services. The current strategy appears to be pursuit of new video customers, but with a smaller investment, while the regulatory uncertainties are being addressed. The Court of Justice suit is scheduled for the latter part of 2007. Meanwhile, the German telecom regulator has tried to resolve the impasse: it has decreed that DT should allow competitors access to cable ducts in which fibre optic cables could be installed, and where space isn’t available, DT would have to permit competitors access to existing cable. In the regulator’s view, this approach would promote greater competition by allowing competitors to build their own access networks at a reasonable cost, but DT’s response has been less than enthusiastic.
There are many cases that show it is not only the largest incumbent telcos that can justify FTTH. Telekom Slovenije, the incumbent operator in Slovenia, has said it will invest more than US$600 million on a multi-year program to upgrade its entire nationwide network with FTTH, using an active Ethernet architecture. The country has a population of 2 million and about 0.8 million access lines. The FTTH project is slated to reach 300,000 homes by 2010 and the remainder during the next decade.
In 2003, the FCC ruled that FTTH projects would be exempt from unbundling require¬ments. The FCC’s rationale for this ruling was a desire to stimulate investment in new broadband infrastructure. Verizon pursued FTTH construction most aggressively, ramping up to a rate of 3 million new homes passed per year from by 2006. Verizon has said it will continue building its network at this rate until 2010, when it will have passed 18 million homes. In the three years of construction completed so far, Verizon has achieved its construction targets on schedule, and it has consistently reported that the rate of subscribers to its FiOS service is meeting its expectations. In its Q2 2007 financial reports, Verizon said that it had passed the milestones of one million Internet data subscribers and a half million video subscribers. Currently, Verizon is signing up 2,600 new FiOS video subscribers per day.