Thursday, November 11, 2010

Limited access to incumbents' infrastructure drives FTTH/B subscriber growth in CEE

LONDON, UK: Central and Eastern European (CEE) countries lead the European ranks in terms of fibre to the home/building (FTTH/B) subscriber growth. The fastest adoption of these technologies can be observed in countries where local loop unbundling (LLU) has either not been implemented or not gained much popularity.

In the long term, investment in FTTH/B technology will become one of the major competitive weapons for all fixed broadband operators in the ongoing battle against mobile broadband providers.

“The unquestionable FTTH/B leader in the CEE region is Lithuania, with a household penetration of over 20 percent,” notes Edyta Kosowska, Research Analyst for Frost & Sullivan Information & Communication Technologies group.

“The high prevalence of fibre technology across the Baltic States is, to a large extent, a result of the strong presence of Scandinavian operators in the region.” The newest solutions implemented in Scandinavia were also launched shortly afterwards in Lithuania, Latvia, and Estonia. Moreover, all new wired networks in Lithuania are based on fibre, as cable is considered as an outdated and deplorable technology.

Although FTTH/B penetration levels remain quite low in Russia, over one million subscribers connect via fibre, the highest number in any European country. As the prospects for obtaining access to the incumbent’s infrastructure were limited, FTTB has become the technology of choice for the largest operators, including VimpelCom, Comstar, ER-Telecom, and TTK. All of the companies plan to make significant investment in fibre network deployment.

Interestingly, several of the subsidiaries of the incumbent operator have also revealed plans to invest in FTTB. With a large population and low overall broadband penetration, Russia remains one of the most promising fibre markets in Europe.

In countries such as Bulgaria and Romania, the majority of FTTH/B subscribers are served by small operators. Approximately 40-50 percent of Internet connections come from LAN/MAN providers with many using FTTB technology.

As a consequence, a very high percentage of lines in Bulgaria and Romania offer speeds of over 10 Mbps. Some of the most important companies providing broadband in Bulgaria through FTTH/B technology are Vestitel, SpectrumNet and Netone. In Romania, the important provider is RCS&RDS, which also develops fibre networks in Hungary.

“Noteworthy is the fact that important broadband markets in the region such as Poland and Hungary were not included in the rank of leading FTTH/B countries,” says Ms Kosowska. “One of the reasons may be relatively higher popularity of the models allowing alternative operators to gain access to the incumbent operators’ infrastructure such as local loop unbundling (LLU) or bitstream access (BSA). Renting last mile infrastructure of the incumbent operator in the short to mid term is more economically justified than investment in fibre technologies."

Fibre technology will not exceed DSL in terms of subscriber levels in the CEE region over the next few years; however, the demand for FTTH/B will continue to grow, especially in Russia and the Baltic States. Significant subscriber growth can also be expected in the Czech Republic, as well as Bulgaria and Romania, where the overall broadband penetration remains low.

“In countries such as Poland and Hungary with a strong BSA model presence, widespread FTTH/B uptake is not expected before 2012. Alternative operators are likely to stick to low-budget investment models and take advantage of renting the incumbent’s network,” concludes Edyta Kosowska. “However, increasingly large investments in fibre networks can be expected to meet growing demand for high speed broadband and advanced multimedia services.”

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