As full-fibre deployments recover from lockdown disruption, FTTH market fundamentals look healthy, but challenges remain for network rollout and customer take-up, writes Michelle Donegan.
The Covid-19 pandemic has clearly shown that high-speed broadband connectivity is vital for the economy, society and our day-to-day lives. In Europe, despite some deployment delays, fibre-to-the-home (FTTH) rollouts are starting to recover from the disruption of the pandemic and the commitment to full fibre remains strong.
Between February and May this year, at the height of lockdowns in Europe, FTTH deployments were largely disrupted as operators prioritised the safety of their workers, connectivity for healthcare workers, and critical maintenance to keep networks and services up and running. The impact varied – anywhere from a 20% reduction in deployment activity to a nearly full stop in some countries, according to Roland Montagne, Principal Analyst, IDATE, who is assessing the effect of the pandemic on the market.
“The recovery is now taking place in terms of deployment, but because of all the caution needed for cleaning and [social] distancing, it’s taking more time to deploy FTTH, especially when the technicians are working in the same square metres,” says Montagne. Depending on the country, he says he expects deployments in the region to return to normal in the first or second quarter of 2021.
Full fibre recovery
Some operators show no signs of slowing down. In July Telefónica unveiled a Digital Deal initiative to “better rebuild our societies and economies,” and committed to 100% FTTH coverage by 2025, taking centre stage in Spain’s recovery. For Deutsche Telekom (DT) and BT’s Openreach, any slowdown during lockdowns hasn’t deterred them from hitting FTTH coverage targets.
James Tappenden, Director of Openreach’s Fibre First programme, explains that some fibre build projects were affected more than others. For example, full fibre deployments to new sites were hardest hit because new home construction was stopped for two months.
Another example is multi-dwelling units (MDU), where Openreach decided not to work on fibre builds that involved going into customers’ premises for safety reasons.
“But then we adapted,” says Tappenden. “The resources that became available from not doing those things were freed up to do other programmes of work that we were able to speed up.” As a result, the operator emerged from the lockdown period with only a slightly lower FTTH run rate.
Openreach passed 420,000 homes in the quarter ending March 2020 and passed 405,000 homes in in the quarter ending June 2020, down just 3.5%. “Given where we were at the start of the quarter and the kind of scenarios we were looking at, we were really quite pleased with that outcome,” says Tappenden.
Accelerating to meet targets
Openreach is now accelerating the full fibre rollout with the aim of exceeding 500,000 homes passed in the third quarter of 2020, which would be a run rate of about 42,000 homes passed per week. Tappenden says the operator is on target to meet its full fibre goal of 4.5 million homes passed by the end of March 2021 and, longer term, 20 million homes passed by the mid to late 2020s.
DT’s fibre network expansion continues “under difficult conditions” and the operator remains committed to its target of passing 2 million homes per year from 2021, according to a company spokesperson.
Vincent Garnier, Director General, FTTH Council Europe, says it is too soon to know the precise impact of the pandemic on FTTH plans, but so far the group has had, “No indication that operators are reconsidering downwards their fibre deployment plans.” Indeed, there are good reasons to believe that deployments are more like to accelerate, he adds.
FTTH state of play
According to the latest market figures prepared by IDATE for the FTTH Council Europe (as of September 2019), FTTH/fibre-to-the-building (FTTB) coverage is nearly 50% across 39 European countries with 172 million homes passed, which is up from 160 million in 2018. Fibre subscriptions grew 15% in the year to September 2019.
The top-ranked countries in terms of penetration rates are Iceland (65.9%), Belarus (62.8%), Sweden (56.8%), Spain (54.3%) and Latvia (53.9%). Among the lowest ranked countries, with single-digit penetration rates, are some major European markets, including Germany, Italy, Austria and the UK.
The fastest growing countries in terms of FTTH/B penetration growth rates are Belgium (307%), Ireland (70.4%), Switzerland (69.1%), UK (50.8%) and Germany (33.5%).
Caption: European ranking of FTTH as of September 2019
Source: IDATE on behalf of the FTTH Council Europe ALEX SLIDE 17 of the attached deck
Garnier notes that telecom and FTTH markets are not immune to the challenges linked to Covid-19, but, longer term, he says there are many reasons to be optimistic. “We see the European Framework moving in the right direction, we see investors believing in the market,” he notes. “We see a combination of incumbents, which are ready to move and invest more than before, and challengers that are still eager to develop the network.”
Other important drivers for the market are wholesale business models, such as Deutsche Glasfaser in Germany or CityFibre in the UK, which is recruiting 10,000 employees to support its £4 billion FTTH rollout to 8 million premises. “Very large investors are looking at telecom infrastructure as interesting, long-term investments with a 20 to 30-year return on investment,” says Garnier.
The surge in fibre investments has triggered a reaction from incumbent operators. Back in 2011, alternative ISPs dominated the market and accounted for 71% of FTTH deployments, while incumbents’ share was just 21%, according to IDATE. In 2019, while altnets still deployed the majority of FTTH (55%), incumbent activity dramatically increased to 41% of deployments.Two examples are the aggressive deployment plans of DT and BT’s Openreach.
DT’s multi-pronged approach
Germany languishes near the bottom of the FTTH Council Europe’s ranking with a 3.3% FTTH penetration rate. The country’s laggard fibre status is partly due to the dominance of xDSL (G.fast) and cable broadband (DOCSIS 3.1).
After years of investing in copper-based broadband upgrades, DT is now ramping up FTTH rollouts. In terms of gigabit speed offerings, the operator has fallen behind rival Vodafone, which has already deployed DOCSIS 3.1 to 21 million homes and can offer up to 1Gbps broadband.
In its full fibre push, DT increasingly relies on cooperation models -- wholesale and partnering -- in addition to its own buildout. DT and utility company EWE launched a joint venture in January this year, called Glasfaser Nordwest, that will build FTTH to 1.5 million households and businesses in the northwest part of the country. Together, the companies will invest up to €2 billion over ten years.
The operator is also working with 174 municipalities through a cooperation agreement with Gigabit Region Stuttgart. The goal is to expand FTTH to 90% to all businesses (of which there are about 140,000) by 2025 and 90% of households (about 1.4 million) by 2030. The agreement also calls for 99% LTE coverage by 2025 across the region.
More barriers to break down
Most governments and policymakers have ambitious ‘gigabit’ targets. Covid-19 amplified the need for such goals and the criticality of full fibre infrastructure to achieve them. But there is more work to be done to facilitate deployments.
From a policy perspective, the European Telecommunications Network Operators Association (ETNO) would like to see efforts to reduce the cost of deployments (that is, easing access to facilities or streamlining permit processes), more open mindedness about business models, and more exploration of digitisation initiatives or targets for the demand side of FTTH, says Maarit Palovirta, Director of Regulatory Affairs, ETNO.
“We need to think about who will be using these networks,” she says. “The Covid crisis showed that not all European users, smaller medium enterprises or citizens who are in a public sector like healthcare and education, were prepared to use digital and high-speed solutions.”
For IDATE’s Montagne, the key issues are facilitating copper switch-off as fibre replaces copper access lines, making it easier to obtain rights of way, and supporting more open access networks for rural deployments.
In Germany, DT’s FTTH challenges include “strict, complex and inconsistent building regulations; long and complex approval procedures; difficulties to use empty [ducts] and in general the level of urbanisation in Germany,” according to a DT spokesperson. There are also construction requirements and reluctance to allow alternative installation methods.
“We need incentives for cooperation models; faster, simpler and standardised licensing procedures; and state investments in regions where an economic expansion is not possible. It is also important to find a solution for an open network access to FTTH networks of all network operators,” says the spokesperson. “To accelerate the expansion, we would very much like to use the ‘trenching’ technique for cable laying much more often and to build more above ground.”
Will the pandemic boost demand?
Rolling out fibre to homes and buildings is one thing, but getting people to subscribe to new services is another. Might the Covid-19 lockdown experience make consumers more willing to pay a premium for full fibre services?
“The networks held up pretty well during lockdown, but everybody has been experiencing far from perfect quality of videoconferencing,” says FTTH Council Europe’s Garnier. “Maybe subscribers will be more sensitive to full fibre offerings, which is probably a bit more expensive than the standard broadband. And that could help develop further the investment in favour of high-capacity, fibre networks.”
If we’re going to be working and learning from home more in future, full fibre broadband won’t be a cure-all, but it many ways it will make the ordeal more bearable.
This article first appeared in the Q3 2020 edition of Mobile Europe/European Communications which can be downloaded from here.