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The business case for FTTX - fibre to the building or fibre to the home - is built, at least in part, around the weaknesses of DSL which is delivered over copper wires. DSL bandwidth capacity diminishes rapidly over distance, constraining delivery of broadband content and applications. Operators can exploit the ability of the current copper network to deliver very high bandwidth over short distances, using VDSL. This can be achieved through the complementary use of fibre and copper, as the alternative operator TransAct is demonstrating in the Australian capital, Canberra.
It means deployment of fibre further into the access network is a logical extension of the use of network technologies to date. Fibre is already well-established in the core network - it is now being deployed successfully into the access network.
Defining the benefits of fibre in the access network
For incumbent operators, they must weigh up the cost of deploying fibre, which potentially cannabilises their existing investment in DSL. Against this they must calculate the recurrent cost burden of copper access networks, and assess ways in which fibre can minimise this cost. The access network accounts for about 70% of the total cost of the fixed network infrastructure, and the operating expenses are a significant portion of this. A fibre access network offers both lower operating expenses and a lower cost of capacity upgrade. In addition fibre and copper are complementary - fibre can be laid well into the access network, and then VDSL can be deployed over copper.
Plus the competitive factor cannot be ignored - in Asia, as in many other markets, incumbents still have a stranglehold on the local loop which regulated access is only partially overcoming. It makes FTTX attractive to competitive carriers unencumbered by legacy systems. Incumbents are all too aware that if they don't move towards FTTX, another operator will. A third factor is that fibre is often described as "future proof". It offers very high bandwidth - 100mpb/s plus - and can scale efficiently, allowing operators to offer video on demand. This is attractive in Asia, where operators are actively leveraging their full service capability to aggressively pursue triple-play strategies bundling telephony, broadband and TV or entertainment on demand.
The market opportunity
Globally FTTX is still under trial and evaluation. Sweden and Italy have seen commercial rollout, with e-Biscom in Italy taking market share from incumbents.
In Asia-Pacific, the potential for FTTX will vary according to local market conditions. Early adoption is in markets where there is high urban density. For example, Korea, Japan, HK and Singapore all have a high proportion of multi-tenant units which can be easily equipped with fibre connections. In Korea, for example, the majority of consumer access fibre networks are FTTB - known in South Korea as fibre to the curb (FTTC). The final customer connection is ADSL. So while the service is simply marketed as DSL there is relatively high fibre penetration in the access network.
Asia-Pacific government strategy is also key: the regulatory environment can be highly managed and interventionist in order to achieve policy objectives of an information society. So, for example, the Japanese government's policy is to emphasise the long-term goal of creating an extensive fibre infrastructure, delivering the high bandwidths that only fibre can provide. As Japan's population is highly concentrated, with 32% of its citizens living in 4.4% of its land area, and 38% in multi-tenant units, it provides an attractive target for fibre rollout.
In Singapore, the SingaporeONE project was launched in 1998 to build a broadband network using fibre backbones, and a combination of fibre, DSL and cable for last mile access. In April 2002, the government supplemented the SingaporeONE programme with a new 'Connected Homes' programme. By April 2002, the government claimed there were 950,000 broadband users in April 2002, although it is not clear how many of these users access the network from schools and libraries, and how many have residential or business subscriptions.
In other markets, however, the business case is less clear. In Australia, broadband penetration is growing but still lags other developed markets. FTTX is being viewed as a means of networking new apartment and business blocks, rather than anything more ubiquitous - although there are regional players such as TransAct which have aggressively deployed fibre and VDSL are reporting strong uptake.
Building the business case is tough - Greenfield sites are the first market
The issue of FTTX deployment is not if it should be deployed, but rather when. Deployment is not an all or nothing proposition: it can be selective. However there are also fundamental barriers. Incumbents can readily justify fibre in the core network on cost grounds alone. But in the access network, the business case must be built on a demand model for broadband-based services, which is far harder to quantify. It makes for a very long-term business case, with return on investment based either on revenue generation or enabling the retirement of the copper network and its associated costs. Neither will happen in the short term, hence the incumbent's dilemma - particularly if a new entrant moves first. It means that while many incumbents are currently evaluating and trialling FTTX there are no examples of committed and aggressive commercial rollout. Instead the pioneers have been start ups like e-Biscom in Italy and TransAct in Australia, which have reported strong take up - although this is in the absence of any aggressive response from the incumbent.
Where incumbents are moving - and where the first obvious opportunity lies - is in deploying fibre in high density, high value business precincts, high rise, high value residential apartments and greenfield industrial sites. This is the first testing ground for the business case. The other main area of activity is closely watching for smoke signals - monitoring development around the world to see which incumbent opts for full commercial rollout and their relative success or failure.
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