Are FTTH Take Rates Really 50%?

According to the Fiber to the Home Council, half of homes passed by fiber actually buy service.

That seems too high, and is almost certainly a statistical artifact caused by a Verizon sale of assets that subtracted millions of copper-served homes from the actual “homes passed” base.

Verizon supplies most FTTH connections in the United States, so any big change at Verizon will affect the whole market (AT&T’s FTTH passings are growing, and other ISPs operate, but Verizon is the dominant provider of fiber-to-home connections.

In the first quarter of 2016, Verizon FiOS Internet access connections reached 7.1 million accounts, on a base of about 15 million homes. So adoption of FiOS Internet services could be as high as 47 percent.

It all depends on how many homes passed Verizon has. Prior to asset sales to Frontier Communications, there were 19.8 million homes passed by FiOS networks, so take rates for customers able to buy it were once about 36 percent.

Then Verizon sold 4.8 million lines (and more homes passed than that) to Frontier Communications. After the asset sales, Verizon now passes about 15 million homes.

In other words, because Verizon sold assets that mostly did not have FTTH activated, the denominator was reduced more than the numerator when calculating fiber adoption. But nothing really changed in terms of Verizon adoption rates or availability.

It is correct to say that Verizon FTTH take rates (Internet and video) are about 50 percent, where the services are available for purchase.

Still, it has to be noted that other competitors will find it hard to match those levels of adoption. Verizon FiOS has been marketed the longest in the U.S. market, and generally has faced access competition primarily from cable operators. If Verizon gets 47 percent adoption, then cable could potentially get 53 percent.

We will see what happens as competition grows, especially as Comcast activates gigabit capabilities that operate faster than FiOS. Eventually, we also should see additional fixed wireless and mobile competition, plus potential independent ISP market entry in a few instances.

New Zealand Launching Gigabit Services Nationwide

Chorus, the New Zealand wholesale access provider,  is extending its gigabit (1Gbps) residential and business fiber Internet access service across its entire “Ultra-Fast Broadband” (UFB) footprint, starting October 1, 2016.

Currently, the average download speed across Chorus' networks is 30.5 Mbps.

In practice, customers will see download speeds between 900 Mbps and 970 Mbps and upload speeds of up to 500Mbps.

Chorus’ residential wholesale gigabit broadband service will be available to broadband retailers at an introductory price of $60 per month until 30 June 2017, after which it increases to $65 per month.

The business service will be priced at $75 per month from launch.

4K is Marketing Hype for TVs and Smartphones, Useful Mostly for Tablet, PC Applications

Up to this point, most advances in image quality (high definition TV, for example) have been about “large screen” viewing. Ironically,  4K and higher resolution video standards (though undoubtedly propelled by large and small screen sales) might actually be the first image improvement standard with greater relevance for tablet or PC screens or “lean forward” applications than traditionally has been the case.

source: rtings.com

Whether there are perceivable advantages for smartphones and TVs is questionable.

The reason is that most consumers, sitting at normal TV viewing distances in their living rooms, media rooms or family rooms, will not actually be able to perceive a quality improvement over HDTV.

Image improvement really requires that users be very close to their screens. In fact, for HDTV, viewers have to avoid sitting too close.

In fact, 4K Ultra HD resolution is not worth it if you are sitting more than six feet away and have a 50-inch TV, since the human eye cannot tell the difference between 4K resolution and HDTV.

One additional caveat: screen sizes are quoted on the diagonal. TV viewing distances might, or might not, refer to actual vertical height.

So “ultra HD” only makes sense if you want a really big screen and plan on sitting close to it. Or, perhaps, if your vision vision actually is “perfect.”

source: appliancesonline

At around the distance of 10 inches, people with average vision can discern an image with ~344 PPI, and people with perfect vision can discern an image with higher resolution up to ~573 PPI.

If one assumes that most people cannot detect an image quality difference greater than 344 PPI, 4K is wasted on any screen size smaller than about eight inches.

Screen Size	Optimal Distance 1080p
25"	3.3' (1 m)
30"	4' (1.22 m)
35"	4.6' (1.40 m)
40"	5.3' (1.62 m)
45"	6' (1.83 m)
50"	6.6' (2.01 m)
55"	7.3' (2.23 m)
60"	8' (2.44 m)
65"	8.6' (2.62 m)
70"	9.3' (2.83 m)

EU Ponders More Regulation for OTT Voice, Messaging

How to regulate new services and apps, how to foster innovation and yet maintain a “level playing field” always are key issues in the telecommunications business, exemplified most clearly by the debates policymakers, app and service providers have had for decades over IP-based voice services.

In India, mobile operators have argued that over the top voice and messaging apps are, in fact, full substitutes for traditional mobile voice and messaging, and therefore should be covered by the same rules as carrier voice and messaging.

The European Union, for its part, is considering mandating some security rules  for WhatsApp, Skype and Apple Inc's FaceTime.

The proposed rules would increase levels of regulation for OTT apps.

Sometimes, aside from the sheer merits of regulating competitors, there are industrial policy issues as well.

“The proposal is part of a broader drive to level the playing field between European companies and mainly U.S. tech firms,” Reuters reports.

CenturyLink Will Meet Minimum Internet Access Speed Conditions: Will it be Good Enough for the Market?

Internet speeds in the former Qwest territories are a good news, bad news story for CenturyLink.

The good news is that CenturyLink is going to meet conditions related to its acquisition of Qwest, related to consumer Internet speeds.

The bad news is that lagging rural speeds, and to some extent future urban customer speeds, show what an existential problem fixed network telcos often face, where it comes to revenue sources and ability to compete with cable TV companies.

Markets have moved way beyond the minimums CenturyLink will meet.

CenturyLink, in reporting the status of speeds across the legacy Qwest 14-state region, notes that 23 percent of rural households can buy service at a minimum of 40 Mbps, compared to 51 percent of urban households.

By April 2018, CenturyLink, as a condition of its acquisition of Qwest, has to supply 30 percent of household locations with 40 Mbps minimum speeds. Qwest already has met that objective.

Qwest also has lower-speed targets to meet, all merger conditions related to Internet speed, and is very close, overall, to its required goals.

Rural customers, as it always might be expected, are lagging in terms of speed minimums, however.

The former US West (Qwest, now CenturyLink) always had the most-rural, least-dense footprint of all the former Regional Bell Operating Companies.

That remains the case, with some very-obvious implications for Internet access speeds, as well as the capital required to provide faster speeds in rural areas.

That data is part of a larger strategic problem for U.S. telcos. Recently, cable TV companies have been gaining all the net high-speed Internet access additions. Not even Verizon’s FiOS networks have been able to avoid losing accounts, on a net basis.

If one assumes high speed access now is the strategic service, most likely to propel future revenues, that is a very-big problem. The largest telcos also lost linear video entertainment customers in the second quarter of 2016, and have been losing voice accounts for more than a decade.

It really is becoming an existential (relating to existence) problem. Some of us already believe cable TV companies will emerge as the dominant suppliers of fixed network services to consumers, and perhaps dominant suppliers of fixed network services to business customers as well (best prospects in the small business and mid-market).

Cable companies will be strong contenders in the next-generation (IP and Ethernet access) data access markets, in all business customer segments.

If so, telcos will have to find big new roles in new services to offset the coming decline of all their legacy services (including high speed access and business services). It will not be easy, and will be particularly hard for rural and smaller providers.

Not only will stranded assets be a growing problem for next generation network investment, but smaller and rural operators have less opportunity to create or participate in the lucrative new services that should develop from Internet of Things and machine-to-machine communications markets.

Lower FTTH Costs Improve the Business Model, But How Much?

It is not clear where customer revenue or network cost now are the biggest obstacles to wider deployment of high-bandwidth or “gigabit” networks in either the United States or United Kingdom.

A U.K. group representing competitive access providers claims fiber-to-home network costs now are substantially lower than in 2008, and faster fiber-to-premises investment would be made if some policy changes were made in the U.K. market.

On the other hand, Google Fiber seems to have encountered not so much a network cost issue as a “lack of customers” (revenue) issue with its own fiber to home efforts. And cost reductions might have hit a plateau.  

To be sure, both capital investment and revenue are key components of the business model. But Google Fiber seems to have concluded that even lower FTTH costs (equipment, make ready, construction) are not sufficient if take rates are too low, as the stranded assets problem is so significant at low adoption rates.

And Google Fiber is not the only major ISP (or would-be major ISP) looking at newer alternatives, especially fixed wireless. For some providers, including Verizon, the network facilities required to support a mobile business with lots of small cells and millimeter wave spectrum also change both the business model for fixed wireless and fiber-to-customer.

To be sure, key cost elements have declined in cost since 2008. Since then, fiber-to-home deployment costs are either “substantially” or “to some extent” lower, the U.K. Independent Network Cooperative Association says.

INCA argues that electronics costs are lower by 15 percent to 25 percent since 2008.

New construction methods, for example micro trenching in urban areas, deliver a cost saving of around 30 percent.

Fiber optic cables cost 15 percent to 20 percent less than in 2008, while backhaul and trunking network electronic costs are lower by as much as 50 percent.

Of those elements, it is the 30 percent cost reduction for tranching that likely is most significant, since construction, civil works engineering, obtaining permits and right-of-ways account for roughly 67 percent of total cost, while the equipment accounts for about 33 percent.

If network element costs are down 20 percent overall, those price reductions might shave the network gear portion of FTTP costs about seven percent.

If construction can be reduced 30 percent, and if construction itself represents 80 percent of outside plant cost, actual construction represents about 54 percent of total FTTP network cost.

Slicing that cost by up to 30 percent is the most-significant change in investment requirements.

The business case also hinges on revenue, however, and that likely is the biggest problem. As Google Fiber apparently has discovered after building and activating its own fiber to home networks, take rates--and revenue--are the crucial variable.

No matter how much construction, make ready and equipment costs have fallen, “lack of customers” is the really-big problem.

U.K. Competitive Carriers Want Fast Shift to "Fiber to Premises"

Independent facilities-based service providers in the United Kingdom want the U.K. government to shift priorities away from hybrid fiber backbone distribution networks with copper drops to fiber-to-premises technology, along with measures to speed construction, raise capital and create incentives for faster fiber builds.

That would help fulfill Ofcom’s view that “a good long-term outcome would be to achieve full competition between three or more networks for around 40 percent of premises, with competition from two providers in many areas beyond that.”

The implication is that third parties (other than BT and a cable TV operator) would need to operate in about 40 percent of the country.

Given a “more supportive policy and regulatory environment,” INCA believes the independent providers could increase fiber-to-premises deployment by between 25 percent and 50 percent.

The plan does not call for direct subsidies

Among measures the group seeks:

1. Creation of a broadband investment fund
2. Modified or 10-year suspended taxes on “lit” fiber
3. Ease “make ready” rules
4. Ensure speedy access to ducts and poles, with streamlined permitting
5. A prohibition on public financial support for “overbuild FTTP” facilities
6. Encouragement of local government partnerships with service providers
7. Universal service support awards that allow altnets to receive such support
8. No use of universal service support funds where competitive networks are being built

INCA’s (Independent Network Cooperative Association) 2016 Member survey shows that “Altnets already pass more than twice as many premises with FTTP as BT.

By 2020 independent providers believe their FTTP networks will pass nearly five million premises (18 percent of total locations). That would represent 1.5 million more premises than BT and Virgin Media’s planned FTTP builds combined.