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Fibre Forward: FTTx likely to transform wireline broadband connectivity

September 02, 2014

Broadband in India has historically been associated with fixed technologies. However, with the growth in 3G- and 4G-based broadband networks in the past two years, the overall internet and broadband mix in India has significantly shifted in favour of wireless technologies. As per the Telecom Regulatory Authority of India’s (TRAI) performance indicator report, as of March 2014, only 18.5 million of the total 251.59 million internet subscribers had wired connections.

While this trend is only likely to receive a further fillip with the growing focus on enhancing 3G and 4G networks, the prospects of fixed broadband cannot be ignored. Fixed broadband is gradually emerging as a niche last mile technology within the home broadband market, aside from the enterprise segment, which has been the key market for the technology. This change is largely driven by the cable digitisation process.

Known as fibre-to-the-x (FTTx), where the x can represent the neighbourhood, desktop, premises or home, this broadband technology involves using optic fibre cable to provide all or a part of the local loop used for last mile telecommunications. Optic fibre is capable of providing faster speeds and greater carrying capacity compared to copper wires, which have been traditionally used for the purpose. A typical household consumer of an FTTx broadband connection can bundle multiple services such as telephone, video, audio and television with this connection, thus eliminating the need for multiple lines.

Globally, FTTx has emerged as a successful medium to provide broadband services. Reports by Point Topic, a London-based telecom research firm, suggest that the share of copper wires in the market for fixed line broadband connections has fallen below 50 per cent in the first quarter of 2014. This marks a move towards greater reliance on optic fibre. Globally, the most exciting development is the US majors Google and AT&T competing for supremacy in the optic fibre broadband market. While Google Fiber is expected to reach 8 million homes by 2022 (an estimate by Goldman Sachs), AT&T is aggressively expanding its presence in areas where Google operates.

In yet another development, US-based telecom carrier Verizon has installed a 17,000 mile optic fibre network in New York City. This includes facilities for interoffice and backbone network equipment, enterprises, consumers and small businesses. In a similar move, Vodafone Portugal has signed agreements with Portugal Telecom to deploy and share fibre networks. Vodafone Portugal aims to provide high speed broadband, fixed telephony and television services to 2 million consumers by 2015. The UK’s Gigaclear is involved in providing broadband services through fibre to rural households in the country. It already operates eight fibre networks in the rural areas and plans to take this number up to 25 by end-2014. While private participation is increasing, governments in many countries have also been instrumental in facilitating the roll-out of fibre-to-the-home (FTTH) networks. In Germany, the government in Munich laid an underground duct system to be used by all utility providers, including telecom operators. In Singapore, the government mandates that every household should allow access to operators for deploying fibre infrastructure.

In India, FTTx remains a niche technology and deployment is lagging as compared to the global scenario. However, realising the advantages that this technology offers, the government has put in place various programmes for its faster deployment, the most ambitious being the National Optical Fibre Network (NOFN) project. Launched in 2011, the NOFN project aims to link all panchayats with broadband connectivity using optic fibre. All service providers will be given non-discriminatory access to this network in order to encourage them to launch various services in rural areas. While the government is making attempts to drive investment in this area, private players have not shown the same enthusiasm. The roll-out of FTTH networks by service providers has been slow despite the opportunities this segment offers.

Setting up FTTH poses several challenges, the biggest one being the high cost involved. Obtaining right of way (RoW) for laying fibre is costly in India. Other significant costs relate to consumer premises equipment and optic network terminals. While the costs are high, returns are not easily forthcoming. Investment in FTTH generates returns only when subscribers use services at the connected location and the network becomes idle when a subscriber shifts base. Limited consumer awareness and availability of alternative technologies make FTTH less attractive. To encourage private investment, therefore, there is a need to make FTTH a high-revenue zone.

Globally, network providers are increasingly using their FTTx networks to offer video services and TV channels to earn additional revenues. This has resulted in IPTV becoming one of the most popular revenue generating applications. According to Point Topic, global IPTV subscriptions reached 100.9 million in the quarter ended June 2014. China leads the way with 32.7 million subscriptions. A related trend has been the increase in speed that these providers offer. In 2007, the FTTH network for 1 Gbps was standardised. Since then, it has come a long way and now FTTH is being deployed commercially to provide speeds of up to 10 Gbps. This further enables network providers to offer bundled services of a much higher quality. However, India’s experience with IPTV has been disheartening. Its uptake has been slow and the space is dominated by public sector players such as Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited. Private players have so far shied away mainly on account of the high costs and lukewarm response of consumers to these services. But the shape of the market is changing with the increasing availability of content, growing need for high bandwidth networks and technological advancements.

Most operators have already started witnessing an increase in the share of revenue derived from data usage on wireline networks. According to a PricewaterhouseCoopers study, 71 per cent of mobile internet subscribers use the Wi-Fi platform to access internet services. As mobile networks get capacity constrained, users demanding higher speed are switching to the Wi-Fi platform. This presents an opportunity for network providers offering broadband services through FTTx. Since FTTx offers higher bandwidth, it is the most efficient technology to deal with the challenge of providing a high speed internet experience.

FTTx also has potential in the area of efficient delivery of services in sectors such as education, health care, banking and agriculture. In developed countries, these areas are now being increasingly served by high speed broadband. By offering unlimited bandwidth, FTTx enables participants to undertake activities over high quality videoconferencing and facilitates quick access to shared enterprise applications. The Indian government’s National Knowledge Network (NKN) is an endeavour in this direction. The NKN is a multi-gigabit network based on fibre that provides a unified high speed network backbone for all knowledge-related institutions. It covers areas such as agriculture, health, education, e-governance and grid computing. As of May 2014, 1,261 links to institutions have been made operational. The network aims at connecting a total of 1,500 institutions.

While the government is creating an environment for encouraging the growth of broadband data services, the major hurdle that India has faced in terms of FTTx roll-out is its limited revenue-generating capacity. The challenge, therefore, is to stimulate and incubate new applications and services to enhance investment returns in this segment. With a large population that does not have access to any sort of broadband connectivity, India holds vast potential for the deployment of this technology for the benefit of both the provider and receiver of FTTx services.

 
 

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