Fibre deployments heading in the right direction, sales not so much

New data from the FTTH Council Europe points to promising trends for fibre deployment, but a closer look at the figures suggest demand is not quite as high as some would imagine.

As somewhat of a disclaimer, immediate sales are not necessarily required, fibre-optic broadband infrastructure is not going out of date anytime soon, though return-on-investment (ROI) is a major element factored into CAPEX decisions. As long as the services are sold over the next 30-40 years, ROI can be realised, however the telcos are impatient, short on cash and being asked to spend an eye-watering amount everywhere (fibre deployments and 5G); the sooner the better for ROI.

The table below might seem confusing, but it demonstrates that telcos haven’t quite figured out how to sell fibre broadband solutions to customers.

Country Homes Passed (FTTH/B) Take-up Total Subscribers
UK 15.1% 18.2% 2.8%
France 57.1% 44.8% 25.6%
Germany 10% 32.8% 3.3%
Spain 85.6% 63.4% 54.3%
Iceland 96.7% 68.2% 65.9%
Italy 30.6% 13.5% 4.1%

The ‘Homes Passed’ column is the percentage of households within that country who are able to subscribe to fibre broadband. The ‘Take-up’ column shows how many who are able to purchase fibre actually do. The final column is the percentage of households across the country who have fibre connectivity. The remainder will either be on copper products or perhaps a FWA solution.

What is worth noting is that while it would be unfair to assume a 100% ‘Take-up’ rate, the fact that the ratios are very slow demonstrate there is perhaps not as much demand as some would assume. This could be explained by three points:

  • Fibre connectivity is being priced too high
  • There are not enough usecases/applications to justify upgrading to fibre
  • Misleading advertising is breaking trust and dampening demand

There will of course be other factors in-play impacting the adopting of fibre broadband services, but these are the three which we feel as the most relevant for the moment.

As mentioned above, immediate demand is not a necessity for fibre services, as there is plenty of time to demonstrate ROI. Adtran Chief Technology Officer Ronan Kelly highlighted to Telecoms.com that fibre infrastructure has a guaranteed product lifecycle of at least 40 years, though we do not exactly know how long it actually is. The first deployments have not gotten to this point yet, so it might well be longer depending on degradation.

Another point which Kelly made was the dangers of comparing nations without taking into account the differences and nuances. For example, smaller and less geographical diverse countries will be easier to deploy fibre connectivity, while nations like Spain have a higher percentage of citizens living in multi-dwelling units (MDUs), again making the task of deploying fibre infrastructure to higher percentage of the population simpler.

Overall, the trends are heading in the right direction. Government policy and political rhetoric are adding momentum to the fibre rollout movement, while investors are mobilising behind a wide range of telcos to add more cash. Consumer demand for fibre services will be a contributing factor, but the demand creating by 5G backhaul also makes fibre investments more attractive nowadays.

Trends are coming together very nicely, and now the telcos just need to figure out how to sell these fibre services properly.

As mentioned before, due to the lifetime of fibre-optic products, the pressure to upgrade customers from copper to fibre is lessened, but considering the financial strain some of Europe’s telcos are facing, increased ARPU and ROI for fibre deployments would certainly be a requirement.

CityFibre completes £200mn FibreNation acquisition

With TalkTalk shareholders approving the sale of FibreNation to CityFibre for £200 million, the wholesale infrastructure challenger has increased its rollout target to 8 million premises.

With an existing FibreNation network in York, construction projects underway in Harrogate and Dewsbury, as well as plans slated for Bolton, CityFibre has now set its sights on 62 towns and cities outside of London for fibre. The rollout of services to 8 million premises will eventually span to 100 towns and cities, as CityFibre continues its mission to be a scaled and nationwide competitor to Openreach in the wholesale segment.

“In the face of the rapid spread of the Coronavirus and its unprecedented impact on the UK’s society and economy, we believe that the need for world-class digital infrastructure has never been greater,” said CityFibre CEO Greg Mesch.

“Completing our acquisition of FibreNation marks an acceleration in our ability to deploy the critical future-proof digital infrastructure our country needs. By significantly expanding our rollout ambition to up to 8 million premises, CityFibre is helping to answer the call for a full fibre Britain.”

What this means for TalkTalk remains to be seen, though it appears its mission to challenge the ISP market by both owning the infrastructure and the relationship with the customer is drawing to a close. Sceptics might suggest this transaction is a sign of a struggling business, as a result of the lower-cost fibre services and the vast expense of deploying full-fibre networks, weighing heavily on the spreadsheets.

“The sale of FibreNation to CityFibre, in combination with a competitive wholesale agreement, enables us to continue our strategy to accelerate TalkTalk’s fibre growth for our residential and business customers, thereby delivering a superior customer experience at an affordable price,” said TalkTalk CEO Tristia Harrison.

This is of course another step forward for CityFibre. This is a company which is cash rich, thanks to it being acquired by a Goldman Sachs owned fund, allowing for aggressive construction of full-fibre networks, though acquisition is in the heritage of this business. Let’s not forget, CityFibre exists thanks to the acquisition and integration of distressed fibre businesses (H2O Networks, Fibrecity Holdings and Opencity Media, for example) in 2011.

On the construction front, CityFibre has been given the greenlight to continue its ambitious rollout from the UK Government. Prime Minister Boris Johnson has paid particular attention to the progress being made in the broadband segment, and recently requested deployment should continue during the outbreak as it will allow both society and the economy to function and to enable rapid economic recovery when the crisis is over.

Italian networks having a bit of a wobble under the strain

Although Italian networks seem to be holding-up under the increased traffic, data from Opensignal and MedUX suggests there has been material levels of service degradation.

What is worth noting it that while performance is seemingly suffering, there is not a threat of a full internet black-out in the impacted regions. Customers might just have to be a bit sympathetic to the circumstances and wait a bit longer.

Starting with the mobile networks, Opensignal measured the performance of the networks over a six-week period, starting at the beginning of February and finishing towards mid-March. Over the first five weeks, network performance was consistent, though from March 10 onwards, the beginning of the lockdown in the country, there was a very notable decline in 4G download speeds.

Although these numbers are still at speeds which might be tolerable, the longer the lockdown continues, the more people will be working from home, the greater the strain will be. This is far from a threat of the networks shutting down due to increased traffic, but it is a degradation which people will have to be aware of.

At the time of writing, the Italian Government has warned that while the COVID-19 impact was stabilising in the Northern regions, there were signs of increased effects in the Southern regions. Should there be a significant flare-up in the South, it would suggest the lockdown would continue across the country, instead of drawing to the end as some had been hoping.

Looking at fixed broadband networks, MedUX has done some analysis on the performance of Telecom Italia, Fastweb, Vodafone and Wind. Once again, the networks are holding pretty steadily, but performance has been impacted.

While there has been an impact on networks throughout the country, Piemonte, Lombardia, Toscana, Emilia-Romagna, Campania, and Sicilia have had a more material impact.

During the week beginning March 9, MedUX notes there has been up to a 50% increase in latency for FTTH during morning hours and up to 150% increase during afternoon hours. For FTTH and VDSL services, there was also a 15% decrease in compliance with contracted download speeds. The team also noted a 15% increase in web loading time and a 10–15% increase in the start-up and loading time of videos during the afternoon on the worst effected days.

Although these statistics are a slight dampener, the networks are still continuing to perform their duties. It might not be the lightening speeds which are promised in adverts, but these are extraordinary times where consumers might have to offer some flexibility to the telcos.

Saudi Arabia drives fibre penetration with open access network

Saudi Arabian regulator, Communications and Information Technology Commission (CITC), has managed to get all telcos on the same page to join an open access network initiative.

While the theory of an open access network is one which can be appreciated by many, the realities of making such initiatives work are another matter. Not only does the appropriate frameworks have to be put in place, all the telcos have to agree. This is a significant hurdle, but it seems the CITC has negotiated it quite effectively.

“The adoption of an open access model will increase the use of our fibre-optic infrastructure through the development of commercial agreements that make it easier for subscribers to move from one provider to another,” said Mohammed Al Tamimi, Governor of the CITC.

The objectives of the agreement are to promote competition in the market, support investment by the telcos to improve fibre connections and also improve the quality of the service. Through this initiative, the CITC hopes to add more than 3 million households to the fibre networks, allowing subscribers to choose their broadband supplier independently from the infrastructure owner.

As it stands, Saudi Arabia can boast of FTTH penetration of 41.8%. There are of course several nations who can told this, but this is considerably more advanced than the vast majority. Across the Middle East region, the numbers do look very attractive, especially compared to Europe where the average for the 28 member states of the EU is 13.1% penetration.

While the Middle East region is not one which is often discussed in the global telecoms space, progress is looking very steady in Saudi Arabia. Alongside the ambitious plans to drive 3 million FTTH connections, the telco regulator also claims there are now 5,797 5G base across 30 cities, with three service providers offering 5G contracts.

Tory leadership favourite makes 2025 FTTH commitment

Former-Foreign Secretary and the favourite to be the UK’s next Prime Minister Boris Johnson has undercut DCMS and Ofcom commitment for full-fibre by eight-years.

Writing an op-ed piece for The Daily Telegraph, Johnson (BoJo) has suggested his government would commit to delivering fibre-to-the-home (FTT) broadband connectivity to 100% of the UK population by 2025, beating out current commitments by eight years.

“Think what we could achieve if the whole country had the same lightning access to this essential tool of progress,” BoJo stated. “If the Spanish can do it, why can’t we? Let’s say goodbye to the UK’s manana approach to broadband and unleash full fibre for all by 2025.”

As it stands in the Future Telecoms Infrastructure Review (FTIR), the UK Government has targeted full-fibre broadband for all households by 2033. This might sound like a ludicrous amount of time, though it is the final 10% which is envisioned to be the most difficult. There has been progress in upgrading the UK from copper to fibre, though the UK does seem to be falling behind other European nations.

According to the latest statistics from the Fibre to the Home Council Europe, 1.5% of UK subscribers have adopted fibre services. The industry is suggesting 7% availability of fibre services, while the Government is targeting 15 million premises to be connected by 2025. Steps forward have been made, albeit smaller ones than the likes of Spain, Latvia, Lithuania and the Nordics.

The issue with connecting all of these homes is down to the commercial gain for the telcos. When you get to the rural regions of the UK, delivering FTTH, or even fibre-to-the-cabinet, is not commercially attractive. Not only do you have to worry about the raw materials, there is the complication of civil engineering and the difficulties of navigating the red-tape maze of local authority governance.

This is why the Government is not worried about the first 90% of UK premises, but it is the final 10% which everyone should be concerned over. To connect these final premises, the telcos would have to be encouraged with public funds, as the commercial gain is seemingly below-par.

“But when I mentioned another priority of mine – almost casually – those farmers smote their weatherbeaten hands together and roared their assent,” said BoJo. “They want better broadband. They are indignant at the current failure to provide it – and they are absolutely right.

“A fast internet connection is not some metropolitan luxury. It is an indispensable tool of modern life. You need it for your medical prescription, for paying your car tax, for keeping up with the news and with your family and friends. It is becoming the single giant ecosystem in which all economic activity takes place. It is the place you find bargains. It is the place you find customers.

“It is not only the place you can find a job. It is the means by which you can be interviewed, and your talents uncovered, without incurring the cost of a rail ticket. If your area has a truly fast broadband connection, that area will be a better place to live, to invest, to set up a business; and that area will have a better chance of retaining talented young people and allowing them to start-up businesses and bring up their families.”

Undercutting Government objectives is of course a good way for a leadership hopeful to gain column inches and woo party members, many of whom will live in the more affluent rural areas, but is it actually possible? BoJo has already faced criticism because of dubious claims, just think back to the £350 million a week savings which was emblazoned across the bus during the Brexit campaign.

Telcos can of course be coerced into getting on with their jobs faster than they would like to, but this is an arduous process; the telcos have become masters of stubbornness. And as you can imagine, BoJo has been light on details as to how this accelerated rollout would be achieved, simply stating it would require more government investment.

So here is the question; does BoJo genuinely believe he can speed-up the transition to a fibre diet, or is this another suspect claim which will lead to another member of the general public taking him to court?

Europe missing its ultrafast targets

With only 20% of European customers adopting broadband services over 100 Mbps, the European Commission is falling behind its own targets with six months to go.

While the targets are certainly ambitious, the European Commission has decided it would like to have 50% of all broadband customers across the bloc subscribing to 100 Mbps by 2020. With only 20% subscribing to an ultrafast service, it looks like it is becoming a big ask as we head towards the mid-point of the year.

There will of course be numerous reasons for a lack of adoption. Some will suggest the telcos are not deploying suitable infrastructure to enough people, while others will say they are charging too much. That said, a more sensible explanation is that irrelevant as to how cheap a 100 Mbps service is, it is still too much; why would a normal person need such speeds today? Without the applications, customers would be paying for redundant speed.

What is worth noting is that connectivity is improving on the whole. The availability of ultrafast broadband has increased to 60% across Europe, up from 57% in 2017, while there have been gains on the mobile side as well. The DESI Report claims that 4G coverage is now almost universal in European homes, while rural coverage is also increasing.

We’ll be ready for 5G by 2020 – Reliance Jio

Reliance Jio owner Mukesh Ambani has stated India will be fully-4G by 2020, and is setting his eyes on the 5G euphoria already.

The statement of intent adds to a remarkable couple of years for Reliance Jio and the Indian digital economy on the whole. Starting from nothing in December 2015, Reliance Jio has risen to become arguably the most influential telco in India, dragging the country’s digital economy into the 21st century. A little over two years ago, India was in the digital baron lands, though now the Indian digital appetites are as insatiable as those in ‘developed’ nations.

“India has moved from 155th rank in mobile broadband penetration to being the number 1 nation in mobile data consumption in the world… in less than two years,” said Ambani at the India Mobile Congress, courtesy of Live Mint. “This is the fastest transition anywhere in the world from 2G/3G to 4G. By 2020, I believe that India will be a fully-4G country and ready for 5G ahead of others.”

Paying complements to the pro-active approach to stimulating the digital economy from the Indian government, Ambani is continuing the ambitious expansion of the Reliance Jio business. 5G is what will attract the headlines, most notably after a few telcos highlighted 5G is not a top priority for some nations at Broadband World Forum last week, but the broadband ambitions are just as important.

Tackling the 5G euphoria and increasing broadband penetration across the country perhaps work happily alongside each other when you consider the importance of a fibre network in both cases. The JioGigaFiber proposition, announced during the company’s AGM in July, promises FTTH connectivity in a market where broadband penetration is roughly 10%. ‘Fibering up’ the country is critical for 5G, and Reliance Jio has already started the mission.

“India will be among the largest digital markets in the world,” said Ambani. “Every enterprise must have an ‘India First’ vision to participate in this market. We will need to reinvent to grow and nurture this market to its full potential. This will be a win-win for the entire industry, for India and for the entire world.”

One interesting question which remains is whether the lessons taken from the Jio-effect can be implemented into other nations which are struggling in the lowly places of the digital league tables.

Open Fiber banks €3.5bn for Italy FTTH push

Open Fiber has raised €3.5 billion from a pool of commercial banks, Cassa Depositi e Prestiti and the European Investment Bank (EIB) to fuel the firms FTTH push across Italy.

The investment will be pooled together with resources made available by shareholders and recent profits to bolster spreadsheets to $6.5 billion. The plan is to expand the firms fibre footprint to 19.5 million homes, both in urban and rural regions.

“The financial market has shown great interest in the Open Fiber Industrial Plan,” said Elisabetta Ripa, CEO of Open Fiber. “The transaction involves the most important Italian and international credit institutions. This is an important sign of confidence in the project, in the wholesale only model and especially in the Open Fiber people who have done a fantastic job in recent months.”

“The presence in the pool of lenders of several foreign financial intermediaries of primary importance is, implicitly, a sign of confidence in our country, significant in a phase of nervousness of the markets; the operation is also a new demonstration of the growing attention of the markets for the validity of the business model adopted by Open Fiber and other innovative European companies, the most suitable to meet the need to realize, with long-term investments, the infrastructures new generation network for the Gigabit Society,” said Franco Bassanini, President of Open Fiber.

Open Fiber has been making the right noises in recent months, though the Italian market on the whole might look like a very different place before too long. And not a moment too soon for customers who have been experiencing average broadband download speeds of 15.1 Mbps.

Aside from the fibre assault here, board reshuffling and arguments with the Italian government have meant the fixed business unit will be spun off into its own separate, though still 100% owned, business. The move is very similar to the BT/Openreach separation in the UK, though some might hope the same shambles isn’t experienced in Italy.

FTTH on the up, but UK still lags miles behind Europe

Ofcom has released the Spring edition of its Connected Nations report, revealing there are now more UK consumers who have access to FTTH connectivity than those who struggle to get a 10 Mbps connection.

In terms of progress since the last report, which was released in December 2017, the number of homes which have access to superfast broadband, 30Mbps or higher, now stands at 93% of homes, up from 91%. While this statistic is moderate for today’s digital economy, what is less encouraging are the number of homes who have access to full-fibre connectivity. This number is now 4%, or 1.2 million homes, which pales in comparison to the continent.

“There have been further improvements in the availability of broadband services across the UK,” the Ofcom report reads. “However, more needs to be done to provide all consumers with access to decent broadband and to encourage further investment in more reliable, faster full-fibre broadband services.”

Looking across the English Channel to the continent, Spain has passed 17.5 million homes with full-fibre connections, with roughly 33.9% of the population subscribing to the services. Spain has the highest penetration across Europe, but it isn’t the only Spanish we’re lagging behind. According to the Fibre to the Home Council Europe, the majority of the continent are ahead. Latvia apparently has more than 50% of the homes passed with fibre at the top of the list, while Lithuania and Sweden exceed 40%. Only Poland, Czech Republic, Italy, Germany Croatia, Ireland, Serbia and Austria are worse than us.

Looking at 4G services across the UK, 57% of geographic area is covered by all operators, up from 43%, while 13% is not covered at all. This is down from 22%, but is still quite a large number for a nation which is not necessarily the largest around. Indoor coverage is a bit better for 4G at 68%, but these numbers are still not incredibly encouraging.

For a country which constantly preaches about its supremacy on the global economics stage, harbouring ambitions of leading the next era of the digital economy through dominating the AI field, the foundations are severely lacking. We certainly hope this report has found its way onto desks at the Department of Digital, Culture, Media and Sport, as a reality check is probably needed.

San Francisco building own Open Access Fibre network for $1.9bn

A report has emerged from City Hall in San Francisco which assesses the final details for the city to build its own fibre network, passing 100% of homes and businesses, for $1.9 billion.

While there will be likely be hundreds of conversations around the US on how fibre can be delivered to the home, most of which will be nothing more than blue-sky thinking, this is one we like. The city already has the appetite for fibre after false-promises from Google Fiber last year, and the attitude of the ISPs when it comes to net neutrality might force the hand of the city. $1.9 billion is also not a huge amount when you actually think about it.

This would certainly be an approach to connectivity which would raise some eye brows, and one which could start a trend across the states. This would be a network which is designed and managed on principles which are governed by the opinions of the local population not federal regulation. The city has promised it will close the digital divide, ensure net neutrality principles are maintained and privacy concerns are addressed.

Even the emergence of such a scheme perhaps demonstrates how bored the US people are of the current telco industry. Service is highly prioritised in the urban or affluent areas, it is expensive, customer support is usually poor and fibre rollout plans are staggering. To ensure fairness throughout the city, a free Wifi service would be offered in public areas, while low-income residents would qualify for subsidies to make connectivity more affordable

Add into the mix that the people of California are not happy with the way net neutrality rules are being relegated to the footnotes, and the idea of a publicly funded and owned network becomes more attractive. State Senator Scott Weiner has already introduced Senate Bill 822, which aims to re-establish net neutrality rules across the state, though by owning its own network San Francisco would be able to enforce its own governance policies on ISPs.

The network would essentially function in similar manner to Openreach in the UK. The infrastructure would be owned and managed by the city, who would provide an ‘OTT’ service to the ISPs over the same lines. A two-tier data highway would not be allowed, and ISPs would also be forced to request ‘opt-ins’ from customers for any data collection or dissemination. It sounds like a great idea for those who oppose the current path of the FCC.

The only concern here would be the price. In the telco world, $1.9 billion is not a huge amount any more, but when it is public funds it is a monstrous amount of cash. However, the report notes that the benefits of a full fibre network should outweigh the investment. The digital economy is booming in California already and a full-fibre network would only accelerate this momentum in San Francisco. Add in the idea that 12% of the city lack internet access at home, a number which raises to 15% when you measure public school students alone, and the merit of the scheme becomes more promising. There are still a huge number of questions to be answered, for example whether it would be a lit or dark fibre network or the nitty gritty details of funding, but progress is being made.

The ISPs will of course not like this idea, as it creates a level playing field (everyone will use the same infrastructure) which encourages a pricing race to the bottom and forces the development of a customer service environment which actually cares about the customer. Genuine value adds will also have to be considered as holding customers to ransom as the only provider in an area will not exist anymore. You should expect some sort of lobbying or legal action to disrupt development.

That said, looks like the balance of power will be rightly back in the hands of the purchaser. You can read the full report here.