Operators are considering investing billions of dollars in replacing their copper-based access infrastructure with fibre-based, next-generation access (NGA) networks. However, NGA networks have high fixed costs, so take-up is critical. This article considers the particular importance of coverage in achieving a rapid and high level of take-up. Our analysis suggests that lessons can be learned from the success of fibre in some countries in Asia. It appears that some form of government support, while not essential, can help in achieving high coverage and take-up.
A detailed study would also have to consider other factors which may affect take-up in a given market, including: timing of infrastructure roll-out; customer and network migration approach; retail and infrastructure competition; regulatory environment; and service pricing. These factors are not addressed in this article.
Figure 1 presents data from six leading NGA deployments worldwide. This shows that at low coverage levels there is wide variation in take-up as a percentage of homes passed, even when services have been available for some time. When NGA is more widespread, take-up quickly reaches levels in excess of 30% of homes passed. Categorising the NGA approaches adopted in each of these six countries provides some insight into how widespread NGA deployment can be encouraged, providing a solid base for rapid take-up.
Figure 1: FTTx coverage versus take-up as percentage of homes passed (2003 to June 2008) [Source: Analysys Mason; FTTH Council; OECD]
In the USA, coverage has only recently exceeded 10% of homes, and take-up amongst these homes is still below 20% and increasing relatively slowly. Here roll-out is incumbent driven and purely commercial: high-density areas where the business case for NGA is clearer have been targeted in response to competition from the cable companies.
In Italy and Hong Kong, NGA deployment has been new entrant driven and purely commercial1 as a result of either favourable demographics (Hong Kong) or a desire to invest in infrastructure where local loop unbundling is unattractive or unavailable (Italy). The evolution of coverage and take-up in Italy closely matches the USA, while Hong Kong has seen higher take-up, although the demographics here are relatively uncommon.
Sweden has experienced high levels of take-up due to the open access nature of the networks deployed. However, roll-out has been municipality based and therefore essentially piecemeal in approach. As a consequence, high coverage is unlikely in the medium term.
NGA networks in Japan and South Korea have been government backed and this support, including tax breaks and other incentives but not capital investment, has led to high coverage (with incumbent involvement) combined with high take-up. However, in these markets the high incidence of multi-dwelling units makes the economics of NGA more favourable than in many other countries.
Outside of Hong Kong, there have not been any purely commercial near-national scale NGA roll-outs, although KPN in the Netherlands is starting to build a national FTTH network. Meanwhile, the public sector is directly investing in NGA in a number of countries (e.g. Singapore, Malaysia and Australia) with the precondition that these networks are open access. When conditions are right, we would expect to see these initiatives reach take-up levels of 30%–40% of homes passed within 5–7 years. In countries where there is no commercial case for roll-out of NGA to near-national levels, the question is how best can such roll-out be encouraged given the characteristics of the particular market?
1 France also falls into this category