The fibre conundrum

Michael Philpott, Principal Analyst

This week we attended two European-based conferences where access fibre was high on the agenda. Strange in a way, as neither conference was focused on optical fibre, or indeed on the access network in general. However, in any discussions around converged, high-quality multimedia and communication services, the talk soon focused on the strongly held opinion that ADSL will simply not provide enough bandwidth. This quickly led to the conclusion and the now familiar cry of 'we need fibre!'

A number of large European network operators have announced initiatives and 'plans' around installing optical fibre deeper into the access network - sometimes even all the way to the home. So, are the prayers of application developers and content providers now being answered?

Much excitement was created at the start of 2006 when France Telecom, one of the largest incumbent operators in Europe, announced that it preferred to move to a fibre-to-the-home (FTTH) architecture, rather than a fibre-to-the-cabinet (FTTC) plus VDSL architecture, in order to provide the broadband services of the future. The initiative would start with a live trial covering six districts in Paris and six cities in the Hauts-de-Seine. However, it was confirmed this week by the CEO of France telecom, Didier Lombard, that no further commitment has yet been made to a greater deployment, stating "we will do it [FTTH deployment] when we have content."

In these few words Mr Lombard has summed up the problem that European incumbent operators face in this area. They all know they need to do it - the existing infrastructure will just not be able to cope if the consumer's future demand for multimedia services is anything like what the industry expects - but when and what is the business case are still two very hard questions to answer.

FTTx will largely be driven by video services, both streamed down to and up from the consumer. Operators know such services will be popular, but how popular, how quickly will they be taken up and how much money can be made from them are largely unknowns. This provides operators with a bit of a conundrum, as creating a business case around access fibre becomes extremely difficult and yet at the same time they know it is the future. For some, Belgacom and KPN for example, the decision has been made a little easier. The competition from cable is so strong in such countries that operators literally have little choice if they are simply to remain in business.

Regulatory uncertainty, impact on company share price and other, but equally important, issues such as national and local authority planning rules, cause further problems for incumbents and competitive carriers alike. Such issues simply have not been worked through in Europe as yet.

All this points Ovum to one conclusion - large-scale FTTH is many years away in Europe. Fibre-to-the-node (FTTN) plus VDSL2 is more likely in the medium term, as many operators simply will have no choice but to do something, and Ovum expects to see further deployments, especially in the 2008 to 2010 timeframe.

Michael Philpott is a principal analyst specialising in broadband access technologies and next-generation networks. Michael is also manager of Ovum's Broadband@Ovum team and is responsible for all of Ovum's broadband access research. Michael's contribution to this research includes reports in areas of broadband technology, operator strategy and broadband markets, as well as detailed broadband network cost modelling and service demand forecasting.