The latest data on United Kingdom fiber to home coverage shows that FTTH availability is not the same thing as “homes that actually buy FTTH service.” First of all, there are alternative cable hybrid fiber coax networks that seem to represent the majority of U.K. accounts buying service at gigabit-per-second rates.
That is not to deny FTTH adoption rates will climb over time. But FTTH availability does not highly correlate with consumer demand. Nor does FTTH availability highly correlate with “speed tier purchased.”
In the U.S. market, for example, AT&T says that about 30 percent of customers in areas where FTTH is available buy a speed tier of 1 Gbps. The rest buy some other lower speed tier.
The implication is that FTTH enables faster speeds, but customer demand does not highly correlate with uptake of service tiers at the highest advertised available rate. FTTH might be “necessary” for some internet service providers, but it is not “sufficient” to drive gigabit service tier take rates.
Customers tend to buy service plans that offer neither the slowest speeds nor the fastest, but someplace in the middle that offers a value proposition that is “good enough quality for a reasonable price.”
In markets with competitors using their own facilities, take rates for the fastest tiers of service might always be limited, as competent competitors will get a significant share of what demand exists.
In two-provider markets, that share could range from 40 percent to perhaps 50 percent. In markets with multiple providers operating at scale, it is conceivable that take rates could dip into the 20ish-percent range.
That degree of market share is likely sustainable for firms with low operating cost structures. Others might find they are not profitable at levels below about 30 percent.
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