People tout the big benefits of fiber but refuse to allow those who put capital at risk to make big profits. They seem to be afraid that someone, somewhere, might actually make some money.
A report from the Broadband Stakeholder Group summarizes ongoing worldwide fiber to the home (FTTH) projects . The report highlights the need for FTTH in the UK, something BT (BT) has steadfastly refused to do.
I cannot blame BT- asking them to deploy an expensive network and then be forced to lease it out to competitors (with no downside investment protection of course) is a ridiculous thing to expect of a profit driven entity.
Matt Beal, CTO of BT Wholesale:
“You have to be ready to pay for that investment. My shareholders are not a charity. It isn’t a regulation issue, it’s a market issue – if no one wants to pay for [high definition video] streams they’re not going to magic themselves into people’s homes.”
Note three of these seven projects are fiber-to-the-node, not true FTTH. Another three of these projects (DT’s (DT) VDSL initiative, AT&T’s (T ) Lightspeed, and Verizon’s (VZ) FiOS) were green-lighted only after a relaxation of the regulatory environment.
Another chart within the report shows penetration rates for recent communication technologies. Notice the slow penetration of wireless vs. broadband and dial-up.
This is a good example of how technologies that can leverage existing infrastructure (i.e. copper local loops) grow much faster than those that require large capex, digging, and rights-of-way (Note: ISDN failed simply because it just wasn’t compelling). Unless the regulatory environment awards the large risks inherent in big telco investments, they simply won’t happen.
As a result, I expect the FTTH curve to look much like the wireless curve, except in areas where labor is cheap and greenfield construction is plentiful, like China. This is particularly true in the OECD, where outside of the US operators who make investments in FTTH are forced to lease their assets to others. The exception is Japan because the rates NTT (NTT) can charge for this transaction make it a profitable endeavor. We’ll look at this tomorrow.