Business Models Matter More than Access Media

Though the standard prescription for better broadband globally is fiber to the premises, there are some significant differences in a few countries. Looking at where gigabit internet access speeds are now available, In the United States 80 percent of locations are reached by cable operators. About 25 percent of telco FTTH homes supports those speeds, Analysys Mason data indicates. 

In South Korea, about 60 percent of homes can buy gigabit service. About 80 percent of homes served by telcos can do so. In Japan, nearly the same percentage of cable homes can buy gigabit service, while 75 percent of telco homes can do so. 

In Europe, about 40 percent of homes can buy cable gigabit service from a cable operator, compared to about 25 percent of homes able to buy gigabit service from a telco. 

source: ETNO, Analysys Mason 

Two points are noteworthy in this regard. FTTH and HFC refer only to access media. Use of either media does not mean “gigabit per second speeds.” Cable networks also can do so. But most U.S. FTTH networks are not yet supporting gigabit speeds. 

The point is that the traditional telco framing of the FTTH deployment case is about access media, not speeds. If speed, and coverage, are the issues, then hybrid fiber coax often is a major--if not the leading--platform. 

Future proofing also is an issue. Still HFC architects have successfully boosted speeds to gigabit ranges, with a roadmap to 10 Gbps speeds and higher speeds (up to 100 Gbps over the next decade), before the platform possibly reaches a limit. 

As a practical matter, one might ask whether the cable HFC business model ever reaches a point of limits over the next few decades, if speeds can be pushed to 100 Gbps, and made more symmetrical. 

The issue is not simply speed, but what it costs competitors to invest in platforms to do so, what the expected take rates might be, and what the business model therefore delivers, in financial terms, when most consumers rely on mobile service, and mobility drives total revenue and profit. 

The existence of strong cable competition in some markets necessarily limits the financial return any leading telco can expect from new FTTH deployment, and increases the risk of substantial stranded assets which produce zero return. 

In deployments to date, telco FTTH networks have struggled to exceed 40 percent take rates, which means 60 percent of the assets serving consumers are stranded. Conversely, only about 30 percent of cable assets typically are stranded. 

As always, the better mousetrap does not always win, assuming FTTH is deemed the better technology than hybrid fiber coax. The HFC upgrade path seems always to have been more incremental and more graceful (financially), as FTTH is “rip and replace.”

It remains true that for a legacy telco, FTTH remains a “better” technology choice than copper access. Whether it always is the better business decision remains the issue.