What are the Key Success Factors for viable and

enticing FTTH deployment in Europe?

Dorian OrtollandConsultant at Capgemini

3,5 million FTTH connections in service in Europe (October 2010)

Nearly 75% of FTTH subscribers are located in Sweden, Italy, France, Norway, the Netherlands and Denmark

8 millions FTTH subscribers forecast for 2012 The total number of households passed which has nearly tripled

in 2 year, from 5,8 to more than 18 million

FTTH: European market overview

SFR, Free, Orange, Noos:

22 FTTB/H public projects

KPN : FTTx projects 40 Local FTTH

projects

DONG Energy/TDC14 FTTH projects done mostly by local utilities

Fastweb: FTTH since 1999

Telecom Italia: FTTB/C

B2 and Bostream: FTTH since 1999 150+ Local FTTH

networks

Dispersed market with over 410 FTTx projects

FTTH market forecasted growths

FTTH forecasts from 2007 to 2013 in terms of thousand households connected

The development of FTTH in each European country Depends on: The importance operators give to

VDSL and other broadband technologies.

The competition level on the market and the role of public authorities

Cities and regions ambitions in terms of FTTH deployments

FTTx deployments in Europe as of October 2010 shows that

the FTTH market in Europe continues to grow

Technologie: GPON vs P2P

◦ Users aggregated in the OSP (passive outside plant) This considerably reducing fiber in the

CO (central office). ◦ An optical splitter which is a

passive device is set up in OSP High stability, low failure rates and no

requirements for cooling or powering.

◦ Ethernet-based technology The direct fiber access to individual

subscribers Future proof solution which allows virtually

unlimited bandwidth per customer A kind of network showing higher flexibility

and allowing more subscriber management.

◦ Allowing also more scalability by the easy replacement of end devices in case of the use of another technology

PtM PON (Passive Optical Network) P2P AON (Active Optical Network)

Technologie: GPON vs P2P PtM PON (Passive Optical Network) P2P AON (Active Optical Network)

◦ Speeds up to 2,5 Gbps for downstream and up to 1,25 Gbps for upstream.

◦ PON infrastructure mostly used for mass-scale deployments Low total cost of ownership (TCO) Passive outside plant (OSP) and long reach.

◦ “Fiber troubleshooting” is simple with P2P

◦ Strategic possibility to include or exclude some operators. Interesting for operators trying to improve

their position within the market.

The bandwidth shared among all users on the tree.

A strong encryption required to prevent security failures.

Corrupt one CPE can impact the entire PON tree.

The maximum number of customers per tree is rarely reached

The LLU is also virtually impossible

GPON would bit less relevant for Greenfield scenarios

PON inconveniences.

Passive Optical Network Architecture

Technologie: GPON vs P2P

Requires much more fibers and OLT ports (One port per homes)

Need for a deployment of active equipment in the outside plant

the CO consumes 3 times of what consumes PON’s CO

More complicated to implement on aerial cabling

PtP inconveniences.

Home Run Fiber Architecture

Technologie: GPON vs P2P

Multi-fiber Model for PON and P2P architecture

Multi-fiber architecture deploys more than one single fiber per home. Multi fiber enable several operators in parallel to get access to the same customers The multi-fiber model generates more competition at deeper level than service wholesales.

Multi-fiber Model for PON and P2P architecture

Higher number of fibers per customer leads to additional works Total investment for a multi-fiber network is between 10 % and 20% higher than for the comparable single fiber networksBut in term of relative value, a multi-fiber approach with two operators reduces investment per operator by about 40 % to 50 %

Multi-fiber Model for PON and P2P architecture

The highest increase in investment results especially for P2P. The effect is higher for P2P, because the more fibers are deployed, the lower is the incremental investment per fiber

FTTH network‘s organisational choice

Network operator

Service Providers

End users

Network owner

Network infrastructure

Network operation Commercialisation

Owns and operates the nework and resell capacity to service providers

Owns the passive layer. A private company opereates the active layer and resells dark

fiber and capacity to service providers

Owns, operates and provide services over the network

FTTH organisational choices

Direct subsidy

Charging Users

Compensation Fund

Local government pays for passive network Management of active layer concedes to

private carrier‘s carrier Pay back from active layer resell

Financed by access charges Each user pay for his access to the fiber We usualy see price from 300 to 3000 euros

Sector-Internal Financing by a Compensation Fund

All market participants contribute Complement of Govn‘t fundings

Coverage of local govt needs

Local govt owns the network

Easy to implement

Cheapest way

A Mix of public/private fundings

Impact on local taxes

State aid

Can reduced network usage

Needs 40% FTTH penetration

I f the base is small, rates will become too high.

Financing Network Deployment strategy

Co-Investment

Local government invests as a private player (through a venture deploying the network)

No state aid Local govt

shares the risk of failure

Need to find private partners to invest

Key actors for FTTH deployment in Europe

High investments Regulation on SMP and

unbundling of their infrastructure

Key Actors

Incumbents involvement

Government Ultra-high broadband strategies Public subsidies

Municipalities and local authorities

Involvement of energy utilities controlled by municipalities

Local initiatives in rural areas against a lack of private investments

Regulator Adequate rules and

regulatory framework

ISPs Fair, transparent non

discriminatory access to key infrastructures

Clients

SMEs: access to affordable Ultra-Broadband and competitive offers

Private: decline on tariffs

EU commission

Measures to facilitate access to physical infrastructure

Creation of BEREC, the European regulator

Implication of government and public authorities Several countries presented a government involvement under national broadband

strategies or specific regulations

Broadband Action Plan

€200 Mio investment €67 Mio government

subsidies Aid for rural areas

only for OAN

Government strategic orientation Law 32/2009 to regulate the

access to infrastructure Creation of a central data base

of ducts and infrastructure €800 Mio credit to support a €1

Bio investment by 4 main operators

French regulation and investment Dedicated regulation

according the type of zones Grand Emprunt in 2009: €2

Bio Call for FTTH pilots project:

€500.000 per projects

Public authorities often involved in rural areas More than 173 power utilities controlled by municipalities involved in a FTTH deployment in

Sweden More than 70 active corporations which build and operate fiber networks in Norway

The involvement of the government and public authorities could have a strong leverage effect for the deployment of FTTH under OAN model

Role of public authorities and utilities

Municipalities and utilities are still the main category of players involved in FTTH deployments in Europe as they

represent 58% of total number of projects.

◦ Reasons Guaranteeing economic prosperity Allowing the retention of existing businesses ,the attraction of new

ones. Territories becoming more attractive Enabling innovative e-services for inhabitants and businesses

Speeds and scope of FTTH deployments closely linked with regional authorities’ involvement.

Utilities and FTTH Assets and advantages from utilities for

FTTH deployment ◦ Assets allowing them to easily enter the telecoms

market Owning energy network supporting the deployment of new

telecommunication infrastructure. Putting fiber on the high, medium and low voltage ,very much

cheaper than digging an underground network. The building costs considerably reduced by using existing

resources and the planning could be done faster Knowledge of existing networks and topology often already

overtaken into a GIS (Geographic Information System)

◦ Some utilities teaming up directly with operators in order to reduce the investment costs related to the FTTH investment.

Utility’s image and credibility facilitating the commercialisation among the end users

Open Access Network‘s Organisation

Network operator

Service Providers

End users

Network owner

Equal conditions access to the broadband telecoms network

Network infrastructure Network operation Commercialisation

Choice and creation of the carriers’ carrier

!

Based on three main principles

Neutrality Non-discriminationTransparency

Public availability of essential information

related to the OAN infrastructure and its

operation

Guarantee of neutrality related to

geography and technology oriented

issues

Treatment of all service providers or entitled entities requesting access to the Open Access network in equal conditions

Open Access can help alleviate specific barriers to develop FTTH, increasing competition, reducing costs and allowing public authorities to operate into the

telecom market

Open Acces and FTTH

A valuable alternative model Open access offers, lowers the financial

barriers to entry for operators, but also increases the profitability in the upper layers of the market and can also serve more efficiently the local communities.

What are the benefits? Bring faster payback period on the fiber

investment Accelerate service take-up for faster ROI Comply with regulations for open &

competitive access Allow innovation and faster introduction

of new services Support a competitive retail environment Promote flexible end-user choices

Methods used to enable Open Access for FTTH

Methods employed will vary from country to country, regulator to regulator as local market conditions are taken into account.Open Access methods into two main groups, service access and fiber access.

Service AccessA wholesale service offered by the infrastructure provider whereby the

competitive provider has no equipment co located with the infrastructure provider but the

customers will have access to their content and services via the fiber access network.

Fiber AccessAwholesale service whereby the CP will co-

locate network elements at some point in the fibre access network. This could be at the CO

or further towards the customer premises.

OPEN ACCESS refers to the situation where multiple retail service providers may use the FTTH Network on an equable base by connecting at a packet layer interface and compete to offer their Services to end users

But OAN not a concern by public authorities only Incumbents could be reticent regarding Open Access

◦ More competitors◦ Less customers, less direct revenues◦ Utilization of their capacity of investment by alternative operators without

taking the risks However, some incumbents see specific chances with the model

Multifiber model in partnership with municipal utilities At least 1 fiber dedicated to Swisscom to provide its own services Generate revenue from the fiber renting

Joint Venture Model Agreement with the regulator OPTA to implement the concept of Open Network

Some incumbents promote Open Access for their deployment, with or without specific regulation, principally for the high revenue from the leasing of the fibers but also to become a key infrastructure provider

Probably choose as the only operator for the Strategy for Ultra-High broadband

Incitement to deploy multi-fiber network

French cooperation between SFR and the incumbent Agreement between SFR and Orange (incumbent) to test co-investment in a trial

Investments will be shared and every holder owns the network depending on their investment

Roll-out in two municipalities (Bondy and Palaiseau)◦ SFR will build network in Bondy and Orange in Palaiseau

SFR and Orange plans to form a company open to any operators who wish to join it

Bondy

Sharing point

Palaiseau

Between 100 and 1000 HH

Orange‘s fiberSFR‘s fiber

Nobody can deploy the fiber without Orange. But no more that Orange can make it alone.

SFR communication

Orange is changing its mind from closed to open network. Covering rural areas is really difficult without the help of the investment capacities of the incumbent,

thus Open Network become an adequate solution

In this presentation, we aimed to indentify the key success factors for a viable and enticing FTTH deployment in Europe.

The key elements are: ◦ Regulatory framework and governmental incentives◦ The local authorities and utilities involvement. ◦ The Private Public Partnership option◦ The organizational choice (3 layers)◦ The network access, Open/Close Access ◦ The technological and architectural choice

Criteria for FTTH new project assessment

Thank you for listening