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FTTH Stakeholders /= FTTH Shareholders

Monopoly Money

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.

Hat Tip: Telebusillis
Full Disclosure: I own shares in NTT
Photo of Monopoly Money courtesy of Scott Willis


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  1. So the immanent question is who will blink first: consumers that will be willing to pay more or regulators who will be willing to decrease competition from alternative operators (and by that, let consumers pay more…).
    The European Commission seems to be pretty decisive in his approach. I wonder who will be viewed as the villain in this story by the public opinion , carriers or regulators.

    Posted by ohad | April 17, 2007, 6:23 AM
  2. A good question. Germany is a very good proxy. The German govt and DT appear to be winning the battle against the EU Telecom Witch Queen Viviane Reding.

    As for the villain, the media will pin the blame on big Telco, no doubt about it.

    Posted by Andrew Schmitt | April 17, 2007, 8:00 AM
  3. Looking at Geramany, it seems like regulations only apply on DT and its subsidiaries. Local operators like NetCologne focus only on densely populated areas and nobody cares.

    btw, what do u think about their decision to use FTTB instead of pure FTTH? What makes their case different than VZ?

    Posted by ohad | April 21, 2007, 4:45 AM
  4. VZ has a lot of aerial cabling so the decision to use FTTH was more straightforward than SBC/Bellsouth which has more buried cable.

    I am not familiar with DT’s installed base. I would assume it is older, much like VZ, and primarily aerial.

    The FTTH to FTTB holy war provided you get close enough to the customer. I think 25-50 Mbs is enough for everything except broadcast TV and it should be straightforward to make an incremental investment to go fiber all the way when needed.

    AT&T’s ADSL2 won’t be enough. They are using short term thinking.

    Posted by Andrew Schmitt | April 21, 2007, 9:30 AM
  5. I thought you all might want to take a look at an event my company (IIR) are running in June. It’s bringing together many of the stakeholders from across Europe, and many of the Telco operators will be in attendance.

    Sponsors are Nokia Siemens & Ericsson, with Huawei, GM Plast, NetAdmin, Iskratel, Twentsche Kabel, AFL Telecommunications all taking part in the small exhibition alongside the event.

    Sorry to promote on your website, but many of the issues that you are discussing above are covered. Senior people from DT will be there, as weill France Telecom, BT, Telefonica, Telecom Italia and OFCOM…

    Could be very interesting!!

    Posted by Dan Collins | April 27, 2007, 6:50 AM