Spurred on by EU-mandated local loop unbundling, the broadband 'sick man' that was Europe has made a dramatic recovery in recent years, actually overtaking Asia and the US to become the world's biggest high-speed access market. But there's no room for complacency. With some countries in the region still barely registering on the broadband radar, European interest is growing in extreme forms of deregulation such as 'naked' DSL and in ultra-high capacity technology such as VDSL and FTTX
The rapid spread of broadband access has been one of the most striking European telecom developments of recent times. Europe, with around 51 million enabled lines, is the planet's largest regional consumer of DSL. The EU added 16.7 million DSL subscribers last year, an increase of 53%, and now accounts for almost 35% of the world market.
According to Point Topic, European countries occupy five of the top ten slots worldwide for total DSL subscribers. 'By the end of 2005, 20 countries had a DSL subscriber population of more than one million - half of these are in Europe,' said Michael Brusca, chairman and president of the DSL Forum.
As a result of this tremendous growth, it can be argued that some European countries have now entered a 'second age' in terms of the broadband experience. In this phase the market emphasis shifts away from simply expanding subscriber numbers and enlarging the capacities of the requisite pipes and moves toward much closer engagement with the challenges associated with managing the applications and services that are run over the expanded pipes.
And these challenges are not trivial. For example, if the introduction of a broadband-based triple-play service repertoire is to be successful, service providers may find themselves wrestling with new and unfamiliar demands in areas such as time-to-market, scalability, security, QoS and measurement of the end-user experience.
Support systems may need to be upgraded. As noted by Fabien Maisl, marketing director at Thomson-owned next-generation networks company Cirpack, many small ISPs launch services using information systems developed in-house. 'This is okay for start-ups because it's cheap and simple,' he accepts. 'But when the network starts to scale you need dedicated systems to make sure the order management, the work-flow and the provisioning are fully automated and work well.'
Beefing up the help desk component of the operation may also be necessary. Kenny Van Zant, senior vice president of marketing and products at management software specialist Motive, points out that service providers can currently expect an average of two and a half support calls per subscriber within the first 30 days of an IPTV installation going live, and says that fielding the floods of phone calls requires massive staffing investment on top of the huge capital investments made to build networks capable of supporting such a service.
In the loop
It's difficult to generalize about an entity as diverse as Europe, but there is some consensus that local loop unbundling (LLU) has contributed significantly to an increase in the take-up of broadband across the region - or, at least, the take-up of DSL-based broadband. Adopted by the EU as a means of loosening the incumbent's lock on the local loop, LLU was subsequently introduced with varying degrees of vigor and success by individual national regulatory authorities.
'In the last few years EU deregulation has really helped to enable LLU business models,' asserts Maisl.
Pioneered in the US, but losing relevance there as the supply side of the market consolidates, LLU takes a number of forms - three main ones being line sharing, bitstream access and full LLU. In simple terms the first involves other licensed operators (OLOs) leasing part of the spectrum of the copper loop while the incumbent retains control of the copper pairs and still provides voice service. In the second, the incumbent also provides the ADSL which the OLO resells. In full LLU the OLO gets full control over the copper loop.
Over time there has been a switch of emphasis in Europe from the second to the third variety of LLU. 'It's been a particular kind of regulated structure that has obliged incumbents to have cost-based DSL bitstream access,' observes Rupert Wood, principal analyst with the Analysys market intelligence company. 'Now there is certainly more emphasis in most countries on ISPs using unbundled local loops. This gives [OLOs] more say over quality of service and transmission speeds and so on than they would have if they were re-selling the incumbent's DSL access.'
Unbundling still makes news in Europe. Famously Deutsche Telekom has implied that it could pull out of a planned x3 billion investment in a very high-speed digital subscriber line (VDSL) network in 50 cities in Germany if it is forced to provide access to that network to its competitors. Or, at least, the suggestion is that the investment could be jeopardized unless DT gets to influence the terms under which access is allowed. Opening the company's 15th Internationales Presse Kolloquium in February Deutsche Telekom management board chairman Kai-Uwe Ricke observed: 'We still have the necessary resources, but we need the right type of environment. Unless regulatory policy shifts, Germany will lose its edge.'
A compromise devised by the German regulator, the Bundesnetzagentur (BNetzA), that VDSL would be excluded from market regulation where it is used to serve new geographic areas with broadband or provide new types of service, but regulated where VDSL is used simply as a replacement for other existing forms of broadband access, may not satisfy the EC in the longer term. Adding to the fun, remarks made in March by German Chancellor Angela Merkel at the opening of this year's giant CeBIT exposition were seen as favoring Telekom and a regulatory regime that would encourage the company's investment in the VDSL network.
Naked truths‾
A newer mechanism that could increase competition in broadband access in Europe is the arrangement whereby the end-user is provided with DSL broadband without a compulsory PSTN voice service subscription, an arrangement otherwise known as 'naked DSL' (NDSL). In its different forms NDSL is available in markets such as Belgium, Denmark, the Netherlands, Norway and Sweden, and is being considered by regulators in some others.
In the past incumbent telcos have generally viewed NDSL as a threat while broadband VoIP start-ups such as Vonage have seen it as an opportunity.
By way of illustration, last year Vonage UK released the results of research that it said indicated that two out of three UK Internet users were unhappy about paying line rental to the incumbent BT in addition to a broadband subscription, believing it to be unfair in an open market.
'Broadband subscribers deserve the right to choose their broadband and telephone providers independently without being forced to pay for a telephone line they may never use,' remarked Vonage UK managing director Kerry Ritz, when these findings were announced. 'Naked DSL is the only option that offers genuine consumer choice, and we believe that the UK needs to show leadership in supporting this cause.'
More recent research has questioned whether the threat posed by NDSL to the incumbent is that great. In the Analysys report 'Naked DSL: challenges and opportunities' published in February, one suggestion was that, depending on their revenue structures and competitive positions, incumbents could see slight overall revenue gains or losses by embracing NDSL.
'These changes are largely insignificant in the context of the continuing decline in traditional PSTN revenues' reasons Analysys associate and report author Tim Hills. 'However, incumbents can use NDSL to strengthen their position as broadband and mobility become the key consumer telecoms markets and the traditional PSTN service declines in importance.'
Hills reckons that to squeeze an advantage out of NDSL, incumbents need to undergo a major change of attitude. 'They need to develop a strong and appealing retail NDSL offering to capture as much as possible of their existing large PSTN customer base as it migrates to NDSL. Vitally, they must also provide an attractive wholesale NDSL offering to competitors in order to cap the growing threat posed by fully unbundled local loops,' he concludes.
At the same time, other observers have started to question whether, NDSL or not, there is still a long-term opportunity for VoIP start-ups in markets such as France where the trend is for the incumbent and its full service rivals to sell broadband access ready-bundled with flat-rate voice minutes and services such as IPTV.
'I don't see operators just sitting down and leaving the Internet start-ups to take all the money,' said Maisl. 'There is a question about the long-term viability of that type of business model.'
Other kids on the block
Over time the flavor of DSL being deployed in Europe has changed from ADSL to ADSL2+ and now to VDSL and soon VDSL2, with ISDN DSL (IDSL) being something of a minority sport and neither ADSL2 nor symmetric DSL (SDSL) really making waves in the market.
But, of course, DSL isn't the only broadband game in town. Cable is important in some markets - notably Scandinavia and the Netherlands - and there has been a lot of interest in, and demos and trials of, WiMAX in many countries across the region. A number of broadband satellite initiatives have also been progressed in the region.
Fiber is increasing in importance, with Denmark, Italy, the Netherlands and Sweden perhaps in the vanguard of early adopters in the region, and France and Ireland looking to be promising future markets.
Interestingly, as was announced following the DSL Forum's annual meeting in Vienna, it is expanding its remit to include FTTP and FTTN approaches to broadband access.
'We have built on our end-to-end architecture, broadening Layer 3 specifications that are applicable to FTTP and FTTN (PON) in addition to DSLAM-based platforms,' explained Brusca. 'Our DSLHome work has been expanded to cover management of common CPE and devices for all types of wide area networks and consumer electronics networking requirements.
Interestingly, the suggestion has been made that the EC could now revise the technological neutrality stance it has maintained on regional broadband. Addressing the 2006 conference of the FTTH Council Europe organization -- also in Vienna -- EC Commissioner for Information Society and Media Viviane Reding's final question was whether technological neutrality was still valid. 'The question we should ask: 'is the way we implement the technology neutrality principle of the regulatory framework slowing down the roll out of innovative networks‾' This conference is interested in fiber, but we might pose the question about other wireless services and hybrid solutions of fixed and wireless.'
'Is it time to rethink our concept of technological neutrality in order to stimulate innovation and investment in innovative networks‾'
But while the interested parties mull the options, the European broadband beat goes on.
Size still matters
While some European markets may be entering the second phase of the broadband experience, there's still a land rush to increase broadband subscriber numbers in others. Broadband pipe size also remains as a considerable consequence in many markets.
Some European broadband statistics may be ahead of the global curve, but averaged out across the region some of the numbers aren't all that impressive. Nor are some of the individual country tallies.
You can slice and dice the figures different ways. Rupert Wood from Analysys, for example, points out that last December, the percentage of households with broadband stood at 30.8% in Western Europe, compared to 35.2 % in the US, 43.2% in Canada, 51.5% in Japan, and 69.8% in South Korea.
In her address to the FTTH Council Europe meeting, EC Commissioner for Information Society and Media Viviane Reding pointed to data that indicates that broadband subscriptions in the year to October 2005 grew nearly 60% in the EU 25 member states. 'This is good news,' she said. 'But the penetration rate is still only 11.5% of the population and this still does not compare well to other parts of the world - the US, Japan and Korea - where there is not only higher penetration, but much higher speeds.'
Nor do individual countries such as Greece have anything to crow about in terms of penetration. In October 2005, at around a miserly 1%, the penetration of retail broadband in that country was the lowest among the 15 EU states.
A number of European markets are also still characterized by tit-for-tat campaigns by competing operators that progressively ratchet up the bandwidth on offer to potential and extant end-users. Telecom Italia and FASTWEB in Italy have conducted such campaigns, and likewise France Telecom's announcement in January that it would be testing 100Mbits/s FTTH is probably not entirely unrelated to initiatives by competitors such as Neuf Telecom and FREE DSL to take their ADSL2+ offers beyond 20Mbits/s. 'Bandwidth has been used as a very blunt marketing tool, and it is true that many applications need far lower maximum bandwidth than the headlines, although there is also often need for steadier data rates too' reasons Wood.
It's also the case, as intimated by Wood, that some services simply require more bandwidth than is made available by the technologies that are already in the network. In March BT launched BT ADSL Max and BT ADSL Max Premium broadband services allowing customers to obtain line rates of up to 8Mbits/s. As Wood notes, the operator emphasises appropriateness and reliability for applications over sheer speed for these services. 'But,' he states 'IPTV, let alone HD IPTV, even with advanced codecs, requires substantial bandwidth, which ADSL2+ may struggle to deliver over more than one stream per household. And video communications will never take off without VDSL-type upstream bandwidths.'
Green light for Ireland‾
Ireland is one European market already dipping its toes into the FTTH waters with companies such as Smart Telecom and Magnet Networks providing fiber to new build homes. Major acceleration could be in prospect.
In February the Irish association of chambers of commerce Chambers Ireland called on the government to invest in a ‾ billion fiber-optic network that would deliver extremely high quality broadband to every business and household in the state at a minimum of 50 times the current capability. 'Ireland is aiming for a 1-Mbs network, but the needs of Irish business have already surpassed that, and within ten years, 10- to 100-Mbs access speeds by both consumers and small and medium sized enterprises will probably be essential,' stated Chambers Ireland director of policy Se Murphy. 'There is no point in investing in a network now to match the needs of today - we need to plan for the needs of ten years from now.'
And, in a separate Irish fiber development, in March the EC authorized a x170 million scheme to boost broadband availability by helping the Irish government to create open-access fiber-optic MANs in more than120 Irish towns.
Competition Commissioner Neelie Kroes commented: 'I am pleased to endorse this expansion of the Irish Metropolitan Area Network programme. The open networks will enable all operators to offer high-speed broadband services to businesses and citizens in the towns concerned. The project will boost competition in the area and is fully in line with the Commission's policy to promote broadband in areas which would otherwise miss out.'