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16.12.2020

No. 465: Econometric analysis of FTTB/H roll-out activity in Europe

No. 465: Econometric analysis of FTTB/H roll-out activity in Europe

Authors: Marcus Stronzik, Gonzalo Zuloaga

(full version only available in German)

Summary

Against the background of the EU targets for digitisation and the very different developments in the Member States, considerable efforts will be required in the future to expand high-performance communications networks. Based on Within the framework of an econometric analysis, it is being investigated which factors could accelerate the expansion of fibre based on FTTB/H connections and which parameters could possibly counteract this goal. In contrast to conventional studies, which use the change in coverage as a proxy for investment costs, a model-based investment cost index for FTTB/H connections is developed for the EU-27. This index explicitly takes into account the fact that expansion becomes more cost-intensive with increasing coverage and is therefore much closer to reality than previous analyses.

The results of the quantitative analyses of potential factors influencing FTTB/H investment in Europe indicate a strong non-linear correlation between cable (in the form of DOCSIS) and FTTB/H. According to this, infrastructure competition between these two technologies will initially lead to an accelerated deployment of FTTB/H. However, above a DOCSIS coverage of 50%, cable has a restraining effect on FTTB/H deployment. This could be due to the fact that an increase in DOCSIS coverage is accompanied by a higher risk for fibre investments, as DOCSIS is in principle also gigabit-capable. Therefore, the market addressable by FTTB/H is relatively declining.

The data set on which the analysis is based covers the 27 EU Member States and a period from 2011 to 2017. The analysis is therefore based on past experience. Developments expected in the future tend to point in a different direction. It can be assumed that demand for bit rates will continue to rise strongly with a trend towards gigabit. On the supply side, FTTB/H is being promoted throughout Europe by extensive government support measures. Against the background of the performance of the technologies expected in the future, both developments could lead to a situation where broadband cable could become less attractive as a "shared medium" in relation to fibre. Studies on the costs of FTTB/H expansion also show that in about half of the access areas in Germany, marketing quotas of more than 50% are necessary for a profitable fibre expansion. Prospectively, this could lead to a situation in which only one infrastructure remains in many areas, namely FTTB/H.

Discussion paper is available for download.

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