Fiber in Europe: a journey of trial and error

Europe is in danger of finishing last in the race to connect nations with high-speed broadband, just as experience from the field clearly shows a hike in usage when consumers migrate to higher-speed broadband. This was one of the key messages to emerge from the FTTH Conference held in Lisbon last week.

Regional comparisons, however, mask individual success stories, notably markets such as Sweden and Slovenia. We would also question the emphasis on “being the number-one nation in fiber globally”. Not only does this omit the major role high-speed cable broadband plays, but also it fails to take into account the level of competition and consumer choice present in different markets.
For example, on this criteria Japan and the US both score poorly when compared with many European markets.
Having said that, Europe could certainly do better in terms of faster and smarter regulatory clarification and bolder action from governments to prioritize investment in broadband infrastructure as a way to stimulate the economy in the short term and prepare for long-term growth.
The debate is becoming increasingly passé about which users and applications will require upwards of 20–30Mbps (the average limit for FTTN/VDSL), as it is now recognized that such speeds will become necessary.
In fact, service providers should focus less on the impact of killer applications and more on prosaic drivers. The experience of telcos offering FTTH/B/DOCSIS 3.0-based broadband point to the following: 
  • The more bandwidth consumers are given, the more they use. Portugal Telecom reports four to five times more upstream traffic from fiber customers and two to three times more downstream traffic. 
  • The amount of simultaneous usage is increasing at home as more devices connect to IP networks, particularly for video consumption. This is a trend that is only set to continue. 
Finally, there is the clear frustration of content providers which, having embraced digital media and revamped their operations, are coming up against the last-mile bottleneck.
For example, Dutch content company NOS complains that even though it is ready to stream much more content in HD, it is unable to deliver it to customers because of limited bandwidth. Again, this will be an increasingly common story as TV services become more sophisticated: multi-room HD is already becoming mainstream and 3D TV is on the near horizon.
Rolling out high-speed broadband networks and infrastructure requires considerable time and investment and there is a danger of Europe falling behind in terms of developing national fiber infrastructure. McKinsey’s estimate that it will cost €300 billion to “fiber up” the continent came with a finger-wagging at governments and operators for dilly-dallying over investment, when from a wider economic point of view, this is a no-brainer.
The essential distinction here is between the commercial FTTB/H business case for vertically integrated operators (particularly SMP players) and the wider business case for comprehensive fiber deployment.
Next-generation access is an untidy hybrid of fiber, copper, and wireless technologies delivered via a blend of different models. In addition, having carefully spent the last decade liberalizing telecommunications, European governments and regulators are loath to start re-establishing monopolies.

This poses a real challenge for Europe. It is seeking not only to perpetuate the infrastructure competition that has served first-generation broadband well, but also to stimulate investment in NGA. By contrast, in North America and Japan where average FTTB/H deployment costs are lower, Verizon, AT&T, and NTT have also been able to invest, safe in the knowledge that their investment is relatively protected. 

The choice is not either/or. Shared investment in passive infrastructure reduces both the risk of network duplication and the cost of fibering up the nation, while ensuring that competition continues to exist at the active network level.
The use of public funding to stimulate commercial investment has worked well in a number of markets (notably Sweden, Slovenia, France) at the same time as ensuring a more comprehensive FTTH/B rollout to public buildings and small businesses, and not only to commercial sweet spots. It also makes sense in the light of other challenges:
  • the capex burden of FTTx, particularly outside urban areas, which creates the threat of a new and more extreme digital divide
  • the pressure on telcos to invest in other areas such as mobile broadband, new services, and software. 
The challenges that face Europe as it ramps up high-speed broadband penetration are multi-faceted, but building on bolder approaches that make a clearer break with the past will be essential.