Two new studies take the pulse of the fibre-to-the-home (FTTH) industry and report progress – in one case quite dramatic progress.

In Western Europe, according to Informa Telecoms & Media’s Broadband Subscriber Database, expansion is quite modest and may be shaped in large part by the particular business model adopted.

Informa calculates that the region now has over 1mn FTTH subscribers and although this form of access represents only 1.4% of Western Europe's 79mn-plus broadband subscriptions, the nascent business models behind the networks are already having a significant impact on competition in Scandinavia. FTTH is most-advanced in Sweden, where the technology is used for 650,000, or over 27% of the country's 2.34mn broadband subscriptions. Informa finds it significant that the 150 municipal networks serving these customers tend not to be owned by conventional telecoms operators, but by utilities or local authorities. These new-entrants tend to offer an ‘open access’ model, whereby any third-party can provide their own-brand services over the networks.

The company believes that the success of the model is likely to be further bolstered by February’s launch in Sweden of Europe’s first scheme to co-ordinate activities around municipal networks on a national level. To date, companies that wanted to get involved would have had to negotiate deals with each project separately or on a regional basis, which has discouraged large, national operators from providing services over, or submitting tenders to operate the networks. However, the Citynet Access scheme has been endorsed by several of Sweden’s conventional telecoms and cable TV operators, including TeliaSonera. The former state-owned monopoly already provides retail services over a number of municipal networks.

Informa reckons that, generally speaking, there is less interest in building FTTH networks from conventional, national telecoms operators, who argue that the approach is currently too expensive to carry out on a widespread basis. The majority of former state-owned monopolies, for example, have instead committed to fibre-to-the-node. These networks use fibre for part of the last mile connection and the traditional copper network for the final leg to the home, which generally limits commercial speeds to around up to 50Mbits/s. But France Telecom and its domestic competitors, Iliad and Neuf Cegetel, are notable exceptions, having each begun to roll out FTTH in cities and suburbs across France.

Apart from France, Scandavia and the Netherlands, Informa believes there is no immediate prospect in Western Europe that FTTH services will enjoy widespread availability. In part, this is due to a lack of initiative from utilities and local authorities, but also because markets are dominated by incumbents and cable operators, who have no incentive to make hefty investments in brand new infrastructure.

It’s a very different story that emerges from Dittberner Associates’ worldwide ‘Broadband Shipment Analysis’. This survey finds that FTTH shipments grew 41% quarter-on-quarter in Q4 2006 and were up 58% in all of 2006 to a record 4.6mn optical network termination (ONT) and optical line termination (OLT) ports. Dittberner says the jump in Q4 2006, after flat growth in the second and third quarters, was due to the change in the mixture of detached homes and apartments in the dominant Japanese market. This changing mixture will cause some lumpiness in the FTTH shipments for the foreseeable future, although the general trend is upwards.

Dittberner argues that the FTTH market is still dominated by domestic Japanese suppliers who are supplying GePON equipment. Japan has 4.8mn FTTH subscribers, which is about four times more than the next largest market, the USA. So even though the USA’s largest FTTH supplier, Tellabs, had shipments grow by 27% in 2006, it kept pace with neither the Japanese nor the overall market. The top five suppliers – Mitsubishi (40%), Sumitomo (24%), Hitachi (13%), Tellabs (10%) and UTStarcom (5%) - actually increased their market share from 91.6% to 91.9% in 2006.

Light year ahead
Dittberner predicts changes to this scenario in 2007. Korea has launched a large FTTH initiative and Siemens’ GePON shipments in Q4 2006 reflected the start of this build-out. In Q4 2006 Siemens shipped a large number of GPON OLTs and Alcatel-Lucent announced a GPON initiative with France Telecom. In addition, Verizon will add 1mn FTTH subscribers in 2007, mostly with GPON, but this should boost Tellabs’ shipments as well as those of Alcatel-Lucent, Verizon’s chosen GPON supplier.

Dittberner believes that these new FTTH initiatives coupled with the existing Japanese build-out will see the market grow to 6.8mn ports in 2007. The Japanese suppliers’ market share will be reduced to 55% of the FTTH ports shipped in 2007 from 82% in 2006. BPON shipments will decline sharply as a percentage of the overall market while GPON will become significant and will continue to grow in the coming years as major service providers in Europe and North America launch more GPON FTTH Initiatives. The analyst judges that Siemens, (whose merger with Nokia is being finalised), Alcatel-Lucent, and Ericsson, (who recently acquired Entrisphere), are poised to be the biggest beneficiaries of this new growth in FTTH.

A couple of other things to bear in mind about the future FTTH business. One is that the ADSL2+ technology favoured by many telcos may not hack it when IPTV programming migrates from standard to high definition, leaving VDSL2 and fibre as the only viable alternatives (click). The other, says broadband market research specialist Point Topic, is that the cost of fibre in general is falling (click).
John Williamson