Report: Fibre in the Last Mile: the Business Case for FTTP and VDSL TOC

Summary

1. Exchange-based DSL will not be enough to support a full range of TV services

1.1 Operators have a range of options to upgrade the last mile
1.2 Faced with growing competitive threats, operators have to make long-term decisions now

2. FTTP may cost three times more per home than an FTTC deployment

2.1 Remote cabinet-based ADSL2+ is the next step beyond ADSL2+
2.2 VDSL2 expands the capabilities of cabinet-based ADSL2+
2.3 VDSL2 will cost EUR300- 400 per home passed
2.4 FTTP is typically deployed in point-to-point Ethernet or PON architectures
2.5 Video distribution introduces a further significant cost
2.6 FTTP will cost around three times more than VDSL2

3. Compression and access technologies compete to meet demand for new services

3.1 Applications will continue to demand higher bandwidths
3.2 Major uncertainties remain over latent demand for pay VOD and videotelephony
3.3 Demand for bandwidth will be offset by the continual development of compression technologies
3.4 Some demand is created by the very existence of the technologies
3.5 FTTP can offer the future-proofing that VDSL cannot
3.6 Demand trends suggest that in receptive markets 58% of homes will want over 30Mbit/s of guaranteed bandwidth by 2014

4. The structure of TV markets will be a major factor in investment decisions

4.1 Considerable regulatory uncertainty remains over VDSL and FTTP
4.2 Operators may find it hard to tie in content, though the regulatory situation is improving
4.3 Dominant pay-TV broadcasters may choose IPTV for interactive services only

5. Demand for bandwidth may be categorised into four distinct scenarios

6. Under most scenarios, VDSL looks a sound investment option

6.1 The model forecasts ROI in a typical Western European country over 20 years
6.2 The existing pay-TV market structure creates different outlooks for ARPU
6.3 Operators must consider losses from not upgrading networks as well as gains from upgrading them
6.4 There are very few scenarios where widespread FTTP deployment makes good commercial sense
6.5 In most circumstances, VDSL looks to be a sensible option - at least within a time frame of ten years
6.6 No market looks ideal for widespread FTTP roll-out, but France comes closest

Actions

Companies discussed in this report include:

Skype, BSkyB, France Telecom, TeliaSonera, Telecom Italia, BT, Deutsche Telekom, Verizon, Belgacom, SBC, B2, FASTWEB, Time Warner Cable, 3vision, Comcast, Microsoft, FIFA, Google, Easynet, Freenet, United Internet, Mediaset, KPN, NTL, Telewest.

Figures and tables

Figure 0.1: Positioning of Western European countries under four demand scenarios
Figure 0.2: Four scenarios for ROI on FTTP deployment, plus negative cashflow from not upgrading network
Figure 1.1: DSL downstream speeds by length of copper loop
Figure 1.2: Distribution of local-loop lengths in selected Western European countries and the USA
Figure 1.3: Options for last-mile fibre deployments by telcos
Figure 1.4: Comparison of the frequency distribution of xDSL technologies
Table 2.1: Key cost components of VDSL2 deployment
Figure 2.1: Home run network infrastructure
Figure 2.2: Active star network infrastructure
Figure 2.3: Passive Optical Network (PON) network infrastructure
Table 2.2: Strengths and weaknesses of different FTTP network topologies
Figure 2.4: Video in an xDSL network
Figure 2.5: Estimated capital costs of various network installation techniques
Table 2.3: Key cost variables involved in a GPON deployment
Figure 2.6: Sensitivity analysis of GPON deployment per home passed
Figure 2.7: Cabinet interconnection topologies
Table 3.1: Demand for bandwidth from broadband applications
Figure 3.1: The impact of codec compression on the bandwidth demands of digital video
Figure 3.2: Forecast of demand for broadband access in a receptive market, 2006- 14
Figure 5.1: Four scenarios of demand for bandwidth
Figure 5.2: Demand for bandwidth modelled under four scenarios, 2006- 14
Figure 5.3: Broadband access demand in Scenario A, 2006- 14
Figure 5.4: Broadband access demand in Scenario B, 2006- 14
Figure 5.5: Broadband access demand in Scenario C, 2006- 14
Figure 5.6: Broadband access demand in Scenario D, 2006- 14
Figure 6.1: Telcos' share of residential broadband market under three network build scenarios
Figure 6.2: ROI on FTTP deployment under the four scenarios
Figure 6.3: ROI on FTTP deployment, four scenarios, plus negative cashflow from not upgrading the network
Figure 6.4: Broadband versus TV bandwidth demand
Figure 6.5: ROI on VDSL deployment, four scenarios
Figure 6.6: ROI on FTTP deployment under the four scenarios, plus negative cashflow from not upgrading the network
Figure 6.7: Household pay-TV penetration, 2005
Figure 6.8: Disposable income and receptiveness to new goods and services in Western Europe
Figure 6.9: Positioning of Western European countries in relation to the four scenarios

Fibre in the Last Mile: the Business Case for FTTP and VDSL

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