Wednesday, June 16, 2010

FTTH in Asia-Pacific: Near critical mass of positive results

Daryl Inniss, Practice Leader, Ovum

AUSTRALIA: As the Asia-Pacific region has the largest number of subscribers on a FTTH/B based network, and the conference host country leads the world in FTTH household penetration, the setting was perfect to review progress and highlight future directions.

FTTH installations show positive financial results
Chul Jeung Hwang, the Director General of Korea Communications Commission cited the familiar adage—(FTTH) is a first pay, later return method, in his opening keynote speech. But the telecom market has been anxiously awaiting “the return”. At this years annual meeting near critical mass of positive financial results were on display. Here are some examples:

* NTT reported its FTTH ARPU increased 16 percent from 2006 to 2009 (4,800 yen per month to 5,590).
* Broadband ARPUs were reported to be up 30 percent when compared to DSL. But interestingly FTTH users consume 5 to 10 times as much access capacity as does DSL users.
* NTT boasts increased revenue from IPTV viewers at the tune of $10 million per month.
* Capex reduction for FTTH deployments was noted. These advances come from cost reduction in fiber deployment, home installations, materials, and cost sharing with homes passed and subscribers. NTT reported reduction for a single house from $3400 in FY2004 to $1500 in FY2009. Similar cost reduction rates were cited for Verizon and tier 2 carriers in the North American.
* Profitability was cited for Hong Kong Broadband Networks and Lyse Tele in Norway based on their FTTx operations.

While we note these positive indicators, we are still awaiting the tipping point which makes FTTH the compelling access technology.

South Korea and Japan markets driving ubiquity and services
South Korea and Japan have double digit household penetration rates and Ovum projects them to be close to saturation by 2013 thereby representing a unique situation as the first countries to reach this level. Their focal point shifts to ensuring high connectivity and low, technology agnostic, access barriers to services.

Kuei Tai Choi’s Korea U-City presentation illustrated the vision in South Korea and NTT in Japan is launching LTE and expanding its NGN network to support more users at higher bandwidths.

The high bandwidth required by TV continues to be the “killer application” for FTTH. The 3DTV demonstration by Olleh KT and the South Korean cable television operator CJ HelloVision were of high quality helping pave the way for high acceptance.

And, NTT’s Next Generation Services Joint Development Forum serves as an example to nurturing emerging services and support fast tracking them to commercialization.

The Forum is an incubator for marketing and technology consulting. It provides NGN test beds, value added interfaces, and supports the development of new services on its network.

These FTTH developed regions, including Singapore are also increasing data rates to 1 Gbps per subscriber.

Structural separation and open networks as way forward
Cost remains the biggest challenge for anyone to deploy FTTH. Sharing a network can help and providing an open platform may create an innovative business environment.

Australia’s National Broadband Network serves as one example that will be examined closely as it emerges. The government targets serving 90 percent of its population notwithstanding the fact that it is more geographically dispersed than Japan or South Korea thereby making fiber deployment expensive. Furthermore it is challenged with building a cooperative relationship with the Telstra, the leading incumbent telecom operator.

Nonetheless, the government appears intent of building one FTTH network. The current proposal is that the network operator can only offer wholesale services. Competition is proposed for providers to deliver services above layer 2 presenting what appears to be a favorable situation for end-user service providers. But, a challenge for this model is managing stacked margins so services are cost competitive for end-users.

New Zealand and Singapore are also pushing structural separation models and it is being recommended in France.

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