Discussion Papers

René Arnold, Sebastian Tenbrock

Drivers of FTTP-Demand

No. 387/August 2014

(full version only available in German)

Summary

This discussion paper aims to answer the question if demand side determinants influence the roll out of FTTP (FTTB and FTTH) network infrastructures. Therefore, the impact of possible drivers on the roll out is analysed in different countries. Comparing Germany with other European countries, the FTTP supply as well as the FTTP demand are below the average. Since a direct correlation between the FTTP / NGA take up and the CAGR of the data volume per capita was not supported by data analysed for this paper, further determinants are identified that may affect the FTTP adoption in a country.

We analysed the impact of six determinants on the adoption of FTTP: the willingness to pay and the relative prices of DSL and cable connections, the network quality, the temporal development of the FTTP roll out, the services and applications used by end customers, and the governmental interventions in the telecommunications or broadband market. As a result, we were able to show that all mentioned determinants impact the FTTP adoption. However, the degree of impact varies significantly between different countries. It depends on the individual circumstances in the countries, whether supply-side or demand-side factors predominate the adoption.

To exemplify and study such differences, we conducted five country case studies to analyse the impact of the six determinants on the national markets. In two countries the progress in terms of FTTP roll out can be traced back to supply side factors: South Korea’s position as a global pioneer in terms of FTTP adoption can be explained by the very early start of comprehensive roll out programs as well as the number and intensity of governmental interventions. Likewise, Sweden’s role as the front-runner in Europe can be attributed to the combination of early roll out initiatives and the high extent of state intervention. The below average progress of two European countries can also be traced back to mainly supply side determinants. In the Netherlands the FTTP market development is slightly below the European average, which can be explained by the high degree of intermodal broadband technologies, especially the ubiquitous cable networks. The under average development in the UK can be attributed to the late and fragmented start of FTTP roll out programs and simultaneously the intense intermodal competition with other broadband technologies. In contrast, the progress of the FTTP adoption in the USA has been driven much more strongly by demand side factors. Specific market circumstances such as the high demand for TV and video-based services and a general high willingness to pay for high speed internet connections account for the progress with FTTP roll out.

Discussion Paper is available for download.

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