FTTH in Europe: green shoots need water

Last week we attended the FTTH Council's European conference in Copenhagen. The exhibition floor was crowded; the sessions had a good turn out, a clear signal that next generation access (NGA) broadband is now regarded not only as crucial to economic growth, but to economic recovery.

There was an equal recognition that for fibre to flower, it needs a lot more nurturing: from private investors, governments and regulators alike. In a climate where water is now in short supply this poses a big conundrum. The list of to dos was long, with many pens poised as key decisions over how, when and why were hotly debated.

If you're Swedish; you're lucky

No fibre is equal in Europe. Sweden's achievement of 30% fibre penetration is so far the exception, not the rule. But understanding how and why it has achieved this, and whether it will continue to rollout fibre with similar success is of considerable interest to other markets. This is in part due to what some may regard as a clear anomaly.

A good deal of Sweden's fibre is present in dense urban areas like Stockholm. But a good deal is also to be found in small rural towns in remote areas, which can testify to penetration rates of upwards of 90%. This at a time when 30% of the EU's rural population have no access to broadband at all. The Swedish example is stimulating a keen interest in understanding the pros and cons of community-based broadband rollout and the role of municipalities, energy companies and aggregated local demand in bringing NGA to rural areas.

Where major players fear to tread, others must step in

When it comes to incumbents and universal broadband, it is clear that the rules have changed. The UK's interim report on Digital Britain has raised questions as to how NGA will be financed as BT tightens it belt. These questions are being asked across Europe as many other incumbents do likewise.

The pragmatic approach of Danish incumbent TDC - rolling out fibre as and when the market requires it and when there is a clear business case to do so - would seem sensible to many commercial companies.

Unfortunately, at a time when governments and business leaders posit the fundamental importance of a robust NGA infrastructure to the economy/recovery/future of their respective countries, this approach leaves a chasm.

The prospect is looming of "patchwork quilts" of NGA access unfolding out over Europe with top down ¬- large telcos, cablecos and private-funding ¬- ¬meeting bottom up (utility, community, public and private) funding. FTTx will be key, but mobile and wireless will play a greater role too.

Think global, act local

Key to the "˜bottom up' is a more active role by regional and local authorities who have a much more vested interest in their region's overall economic and social progress. So rather than being purely operator driven broadband rollout, with an eye on NGA access and more ubiquitous coverage comes under the wing of the region, working in partnership with private companies.

This approach has been crucial to rollout of fibre in Sweden and is being replicated elsewhere in Europe on a larger scale.

 

A number of regions including South-West France (Pyrenees-Atlantiques) and Southern Spain (Catalonia) are embarking on this road.

Regulators must tread carefully

It was only when incumbents lost their monopolies and local loop unbundling was implemented that first generation broadband got the kick-start it needed. So regulators prefer infrastructure-based competition as broadband evolves to NGA, but many are dubious (or undecided) about the role of public-funding.

Perhaps in part as they are looking over their shoulders to ensure private investment in current infrastructure can be realised. A boom bust in NGA is the last thing they (or anyone else) wants.

Patchwork quilts also bring challenges; conditions for shared-access, competing technical solutions, pricing, significant market power, competition issues in addition to a pressing need for ensuring interconnection and network efficiency. As ever, the devil is the detail. We expect the next six months to be crucial as regulators at both an European Union and a national level get to grips with a complex, changing, but vibrant landscape.

Charlie Davies, Senior Analyst, Consumer Practice

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