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Hartwig Tauber
Director General
FTTH Council Europe
• Founded in 2004, non-profit organisation
• More than 100 members
• Members: manufacturers, construction & engineering companies, NPO, academia
The Organisation
• The vision of the FTTH Council Europe is a sustainable future enabled by Fibre to the HomeThe Vision
• The mission of the FTTH Council Europe is to accelerate the FTTH adoption by all broadband stakeholders through education and promotion in order to enhance the quality of life, contribute to a better environment and increased competitiveness.
The Mission
FTTH Worldwide June 2009
2 M >30 M> 4 M
...and FTTH continues to grow
Global
FTTH/FTTB
Ranking
• 13 European economies in
the Global Ranking
• But big economies like
Germany, France, UK etc.
are missing
• If European Union would
be seen as one economy
(like USA) then only 0.6%
penetration and no
mentioning in Global
Ranking
FTTH in Europe
Status June 2009
• 2.0 Mio. subscribers,
13 Mio. homes passed
(excluding Russia)
• 3/4 of subscribers
in just 6 countries
• 241 projects in Europe;
Majority of projects are
driven by municipalities
and utility companies
Source: FTTH-Council Europe/IDATE 2009
Evolution of FTTH/B subscribers in Europe (1)
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
450 000
Swed
en Italy
Fran
ce**
Nor
way
Nethe
rland
*
Den
mar
k
Ger
man
y*
Slove
nia
Finlan
d
Spa
in
Oth
ers
June 2005
June 2006
June 2007
June 2008
Dec 2008
Evolution of FTTH/B subscribers in Europe (1)
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
Rus
sia
Swed
enIta
ly
Fran
ce**
Nor
way
Nethe
rland
*
Den
mar
k
Ger
man
y*
Slove
nia
Finlan
d
Slova
kia
Lith
uania
Spa
in
June 2005
June 2006
June 2007
June 2008
June 2009
The need for fiber
• Access bitrate demand
continues to grow
exponentially
• Bitrate demand is driven
by both sustainable
throughput and latency
requirements
• Bitrates of 100 Mbit/s
and above can only be
provided by fiber
True broadband access
will be synonymous with
FTTHSource: Broadband Bandwidth Study,
FTTH Council Europe/Ventura
Pricing of Broadband
and FTTHFTTH Council Europe & Yankee Group
Overall analysis of strategies• Throughout the study it became apparent that three different strategies were at
play on the market. These strategies drive different approaches to services:
The broadband utility strategy
focuses on the access. They aim to
provide high quality reliable
internet access to as many
customers as possible.
The expand and cash-instrategy consists in a wide
network deployment with little
service added value until a critical
mass of customers is met.
The keep it premium strategy
aims for sexy NGA services at
premium prices, to address a small
customer base without
cannibalising existing revenues.
Often Witnessed In:
Local/municipal projects
Utility led projects
Altnets
Often Witnessed In:
Local Operators
Altnets
Cable Operators
Often Witnessed In:
Incumbents
Cable Operators
Low competition countries/areas
ARPU
TAKE-UP
Service portfolio overview
Communication
Services
Entertainment
Services
Wider-Economy
Services
IP
Telephony
Free Nat’l
Calls
Free Int’l
Calls
Commercial
FMC
Rich
Voice
TV
Videophony
IPTV
VoD
User
Shared-TV
Web 2.0
On TV
TV on PC
Web
on TV
Terminal
Videophony
Traffic
Information
Home
Surveilance
Home
Monitoring E-Health
Remote
Elderly
Care
E-Administration
Integrated
FMC
Widespread
Growing
Emerging
Enabling Services
Catch-Up
TV
E-Education
Interactive
TV Content
Envisaged
Home Tech SupportUp to 1000/1000 HSI
QoS GuaranteeHome Network Mg’t Up to 100/100 HSI
Up to 50/20 HSIWireless
DVR
All HD
HD
Advanced
EPG
Exclusive
Content
3D-TVApps on TV
(Open STB APIs)
NPVR
LAN Router
Child Protection
Pricing (broadband)• When comparing prices, projects
with high set-up fees tend to be penalized even if the prices examined are done so over a two year period.
• Generally, North American prices tend to be higher than European prices, which tend to be higher than APAC prices.
• There is a tendency for BB utilities to have lower prices although set-up fees can again offset this (Mälarenergi and Dong)
• Unsurprisingly, competitive intensity in a given country tends to drive prices down.
Price Comparison for Broadband (~30/30)(Normalised USD)
Broadband: as close to 30/30 as possible
0 20 40 60 80 100 120 140 160 180
R eggefiber
M N ET
F ree
KT
H KB N
N T T
SK B ro adband
Swissco m
Virgin M edia
Orange
Video tro n
Verizo n
D o ng
B elgaco m
T ransact
Lyse T ele
Surewest
A T &T
D u
M älarenergi
Pricing Differences are Huge
• Prices difference in Europe (examples):
• Netherlands:
– KPN: 100/6 MBps package with premium triple play: EUR 110,--
– OnsNet: 100/100 MBps internet only: EUR 32,50
• Portugal:
– PT: 100/10 MBps package with premium triple play: EUR 64,90
– Soneacom: 100/10 MBps package with premiumtriple play: EUR 64,90
– ZON: 100/6 MBps package with premium triple play: EUR 64,90
Pricing (downloaded megabyte)• North American prices per
Mbps are the highest, and Asia-Pacific are the lowest.
• FTTN prices are the highest while FTTH/B and DOCSIS 3.0 prices are comparable.
• Operators following Premium strategies are the highest priced. Utility and Cash-In have comparable prices• The exception is
Mälarenergi whose business model loads up-front costs and therefore skews the average.
Pri
ces p
er
Mb
ps d
ow
nlo
ad
(N
orm
ali
sed
US
D)
0 0,5 1 1,5 2 2,5 3 3,5 4 4,5
APAC
EMEA
NAM
0 0,5 1 1,5 2 2,5 3 3,5 4 4,5 5
FFTN
DOCSIS 3.0
FTTH/B
0 1 2 3 4 5 6
Utility
Cash-In
Premium
By G
eo
gra
ph
yB
y T
ec
hn
olo
gy
By S
tra
teg
y
Pricing (triple play)• Triple play pricing is slightly less
dispersed than broadband pricing.
• Bundled-only offers (Free, Orange) or bundles with significant discounts (SK Broadband) tend to be better priced.
• Overall, North America tends to be the most expensive again and APAC the cheapest.
• Technology choices seem to have less of an impact on triple play prices than they have on broadband prices.
Price Comparison for Triple Play (Normalised USD)
Broadband: as close to 30/30 as possible
TV: basic package (when available)
Telephony: basic subscription
0 50 100 150 200
F ree
M N ET
Orange
SK B ro adband
Swissco m
R eggefiber
KT
N T T
H KB N
Virgin M edia
T ransact
Video tro n
Verizo n
D o ng
B elgaco m
Lyse T ele
A T &T
Surewest
D u
M älarenergi
ARPU• ARPU of the access line varies
considerably, even putting aside the fact that pure wholesale operations have lower ARPUs by definition.
• Again, US service providers have considerably higher ARPUs than in the rest of the world.
• For most SPs that have both legacy broadband and NGA, ARPUs are significantly higher (20-30% on average) even with service offerings that are not necessarily considerably different.
• Unsurprisingly, SPs with “utility broadband” strategies have lower ARPUs than those with more service oriented strategies.
ARPU through broadband access(Normalised USD)
Sources: Official releases, primary interviews, YG estimates
Missing: Du, M-NET & Transact
0 20 40 60 80 100 120 140
M älarenergi
D o ng
R eggefiber
F ree
H KB N
N T T
Swissco m
Orange
Virgin M edia
Video tro n
SK B ro adband
Lyse T ele
B elgaco m
KT
Surewest
A T &T
Verizo n
Wholesale
ARPUs
Economic considerations
and service strategies
• FTTH deployment payback ranges from 6 years to ~20 years.
• Large Incumbent: « The FTTH product will be profitable in 2010.»
• A number of fiber projects have already broken even (Lyse, HKBN, Mälarenergi)
• For most altnets, the key driver to adoption and also the most profitable service is broadband. TV tends to be low margin because of rights issues and Telephony is a low attractiveness service.
• Altnet: « TV is expensive to set-up and the rights are very expensive, especially for “small” operations like ourselves.»
• For most incumbents, the key driver to adoption is HDTV and the key revenue generator is legacy voice.
• Incumbent: « In the absence of significant penetration of IP Telephony, our most profitable product remains PSTN, but we believe that will diminish over time, hence the need to develop today the revenue generators of tomorrow.»
• Free estimates that its FTTH product will ultimately generate over 70% gross margin. HKBN currently generates around 30% and has a long term goal of 45%.
Key Learnings
• A number of FTTH
operations are already
profitable
• Service prices vary
widely accross
geographies
• NGA ARPUs are reliably
30+% above DSL ARPUs
• Broadband in itself is a
profitable product (in fact,
the most profitable for
many players)
• FTTH users currently
use 5 to 10 times as much
access line capacity as
DSL users
• FTTH-only operations
tend to be net
contributors of traffic to
the wider internet
• Peering and transit
dynamics are evolving
driven by NGA
• Most service portfolios are
currently designed to drive
adoption
• HD is a key driver for
adoption and the target for
service providers is to deliver
2+ simultaneous HD streams
• The SoHo market is
underserved with NGA
service offers and seems to
be a disregarded low-hanging
fruit
• Video communications are
seen as a crucial service and
enabler of wider-economy
services, but are still
underdeveloped
Economics &
Business Model
Usage &
Network Impacts
Services &
Innovation
FTTH COUNCIL EUROPE
Thank you for your attention!