Challenges for FTTB/H in Europe
International Conference, Berlin, Germany, 23 - 24 March 2009
On March 23/24 WIK’s international conference on challenges for fibre in Europe took place in the heart of the German capital city. The event was truly international with delegates from 27 countries and about a third of the 170 participants coming from Germany.
Keynote FTTH Council Europe
In her keynote speech Galit Wellner (Board member of the FTTH Council Europe) emphasized the positive impact of FTTB/H on Society and Quality of Life, Economy and the Environment. The following lively discussion focused on the need for attractive services and concrete demand in order to overcome economic challenges of FTTB/H deployment and to generate the desired positive impacts.
The technology session, moderated by Ken Carter (Senior Consult, WIK) hosted a very transparent comparison of pros and cons of different FTTB/H architectures by proponents of GPON (Alf Henryk Wulf, Chairman of the Board Alcatel Lucent) and Point-To-Point (Wolfgang Fischer, Sr. Mgr. Business Development Cisco). While both speakers described video-related applications and symmetry as key drivers for bandwidth demand there was significant disagreement on the interpretation of the characteristics of the preferable architecture.
Mr. Wulf highlighted the combined benefits of passive GPON architecture citing Passive Outside Plant, Cental Office scalability & Consolidation over 20+ km and Fiber Cost & Management as key strengths. Contrary to this Mr. Fischer emphasized that choice of fiber topology and architecture has a long-term impact on the capabilities (i.e. achievable bitrates, upgrading individual ports) and the competition scenarios (e.g. requirement for physical fiber unbundling) enabled; he deemed Point-To-Point deemed superior to PON considering these aspects. Both speakers agreed that Point-To-Point deployment is more expensive than PON. However, Mr. Fischer argued that the difference is relatively small unless space in existing ducts is just large enough to permit PON deployment.
The case study session highlighted lessons learned from international experience with commercial provisioning of services on FTTB/H by three leading European carriers.
Jos Huigen (Director European Public Affairs, KPN) characterised FTTH as real option for KPN whose commercial success however, still needs to be proven. KPN is therefore going forward very cautiously, e.g. by rolling-out FTTH only selectedly together with its partner Reggefiber.
Vianney Hennes (Senior VP European and International Regulation, France Telecom) elaborated on the strategy of France Telecom and explained that the debate in France is focused on "mono-fibre" vs "multi-fiber" and the location of the mutualisation point for third party access to the fibre network. He stressed the need to revise the conditions of network access potentially shifting away from a "per-access" charge and deriving new sets of fixed/variables elements.
Enrico Pietralunga (Manager of Services and Design, Fastweb), Italy demonstrated the experience of Fastweb in deploying FTTH and highlighted critical operational issues encountered. Even though Fastweb used a Metro Ethernet approach he emphasized that Metro Ethernet and GPON are closed solutions and do not (easily) allow unbundling. In a forward-looking perspective with regard to a broader coverage with FTTH, Point-To-Point should rather be considered because it is open and allows unbundling, Pietralunga argued.
This session, moderated by Vianney Hennes (Senior VP European and International Regulation, France Telecom) gave insights on the current status quo of formulating a new scope of regulation and adaption of regulatory principles.
Remko Bos (Director of the Department Markets / Member of the Board, OPTA) presented OPTA’s approach to regulating FTTx networks and made clear that wherever possible infrastructure-based competition should be promoted and wholesale broadband access regulation should be minimized (e.g. no bitstream for FTTH). According to him long-term regulatory certainty in pricing principles and actual prices for FTTH access are essential for both investors as well as access seekers. OPTA has generated a specific price control mechanism which properly balances the different requirements.
Roland Honekamp (DG Information Society, European Commission) informed how regulatory approaches to NGAs were currently being developed in three areas: 1) co-operation between national regulatory authorities and Commission in Art. 7 procedure– case law, 2) Planned Commission Recommendation on regulated access to NGAs and 3)Reform of the regulatory framework.
Kioyshi Mori (President, Japan Data Communications Association) provided an overview on Japan’s Broadband policy and explained the reasons why FTTH gained its current importance. He elaborated on the ICT and NGN strategy and competition policy of Japan, highlighting the new competition program 2010 and its main policies (including e.g. promotion of facility-based competition).
Keynote Speech Deutsche Telekom
Timotheus Höttges (Board Member for Finance, Deutsche Telekom AG) stated that the current regulatory environment will only allow limited fiber rollout in Germany and distinguished three different geographic areas (infrastructure competition, economic viability for only one network, no fibre rollout without public support). He elaborated that new pricing models for VDSL are necessary to increase coverage of FTTC citing unit prices adjusted for utilisation, quantity commitments, longer contract duration or upfront payments as elements of such a pricing model. In addition Telekom is endorsing cooperation models with reciprocal access to FTTC or access to ducts.
Investment and financing
This session, moderated by Dieter Elixmann (Head of Department Market Structure and Business Strategies, WIK), combined three perspectives towards financing and investment and showed what requirements the capital market expects from operators.
Olivier Duroyon (Caisse des Dépôts et Consignations) described the characteristics of French public broadband infrastructure projects and explained the role of the Caisse des Depots in such undertakings (e.g. financing up to 30% of project volume). In his presentation he also gave examples of the implementation methodology for local authorities.
Stefan Doeblin (Chairman, Network Economy) elaborated on his experience with infrastructure deployment and the advantage of local public private partnerships. He also detailed the structure of deals negotiated with municipalities.
Hannes Wittig (Head of Telecom Services, JP Morgan) explained the perspective of the capital market and made clear that consolidation in what he called overcompetitive markets like Germany would be viewed upon beneficial by the stock market and that fibre investment has sometimes been seen as a signal for such consolidation process. Financial markets would expect incumbents as the primary driver for FTTH deployment but still look favourably upon Joint Ventures.
National Fibre Plans
This session, moderated by Jörg Eberspächer (Technical University Munich), combined three perspectives towards financing and investment and showed what requirements the capital market expects from operators, how local and regional players can be supported by public banks and how municipalities may partner with turn-key provider/investors.
Henry Ergas (Chairman, Concept Economics) presented the process, current situation and outlook of the Australian governmental funded "NBN"-project. The government has issued a request for proposals to deploy the Next Generation Broadband Network with some specifics on network parameters (architecture: FTTN or FTTH, speed: at least 12 Mbps downstream, Coverage: 98% of population) with up to A$4.7 billion of public funds committed to the rollout. Ergas questioned whether the benefits of the government plan exceed the costs considering the risks associated to this project and unsolved open issues, especially now that the incumbent’s bid has been rejected in recent tender evaluation.
Juha Parantainen (Vice Chair of the National Broadband Advisory Committee) described the ministry’s goals and strategy for broadband deployment and also stated reasons for the change in policy. Parantainen explained that government funding can be used to reach the "last 5%" of the population by extending fibre from built-up to rural areas.
Kip Meek (Chairman, Broadband Stakeholder Group) highlighted the critical issues in developing the British broadband market especially calling for an alignment of risk and reward in the value chain. In the following discussion round opinion was voiced that the issue of national fibre plans really comes down to what decision makers believe that people in highly remote areas are entitled to.
Business Cases and Viability of NGA Deployments
The two leading consultancy groups presented their views on critical impact factors on the business case and the viability of NGA deployments in this session moderated by Roland Montagne ((Head of Broadband Practice, idate), James Allen (Head of Regulation, Analysys Mason Consulting) once more underlined the irregularity of DSL-provisioned bandwidth and that FTTB/H is required for future service portfolios. He made clear that public sector intervention should probably be focused on rural areas and should not neglect demand-side stimulation.
Thomas Plückebaum (Head of Cost Modelling, WIK-Consult) showed that the profitable deployment of FTTB/H is very limited in Europe citing e.g. 25% of homes for deployment of the German incumbent in a PON FTTH architecture compared to 70% of homes in a VDSL architecture. According to WIK the most future-proof access technology (FTTH P2P) is only 10% more expensive then PON and is best suited for all wholesale approaches.
Final panel discussion
In her opening statement Gabrielle Gauthey (Senior Vice President, Public Affairs, Alcatel-Lucent) called for a common view on goals, first rules & recommendations, guidelines for public intervention & financing saying that widespread adoption of FTTB/H requires national strategies and cooperation of all stakeholders especially of local authorities. Similarly Iris Henseler-Unger (Vice President, Bundesnetzagentur) suggested to come up with a European plan to address key regulatory issues of FTTB/H deployment. Jan van Rooijen (Financial Director, Reggefiber) stated that key drivers for success in FTTB/H are not financing or regulation but rather having an open network model, using Point-To-Point architecture and positioning FTTB/H as a utility rather than a telecom service. Ilsa Godlovitch (Director Regulatory Affairs, ECTA) said that regulators must act early in order to make sure that architectures remain open while not necessarily having to rewrite all rules for FTTB/H but considering new options such as functional separation.
Panellists agreed on the need to balance long term rules and flexibility since competitive requirements of NGA cannot all be anticipated. In addition they emphasized the need to agree on principle guidelines and law early on and implement them. In addition the role of local authorities was regarded particularly important for the development of FTTB/H in Europe.