1. FTTH: the European update Introduction
ONE 2006 – Session 2
Cannes, 24 September 2006
Roland MONTAGNE
Head of Broadband Practice

2. Agenda FTTH: Worldwide Status FTTH: Why? FTTH: Technology choice?
Rami Houbby, FTTH Council Europe, Allied Telesis
FTTH: Technology choice?
David Payne, BT
FTTH: Costs?
Roy Rubenstein, FibreSystems/Lightwave Europe
FTTH recent developments in Europe
FTTH: Forecasts for Europe in 2015

3. FTTH: Worldwide Status

4. FTTH worldwide status: Japan & the US
Japan: the FTTH leader
More new FTTx subscribers than new DSL subscribers since April 2005 (+100 K a month)
Since June 2005, with over 3.2 million subscribers, FTTH has overtaken cable and is now Japan’s number two broadband access mode
5.6 million FTTx subscribers at 2Q06: 55% FTTB & 45% FTTH
Very attractive prices, closing the gap with ADSL tariffs, with virtually no difference for apartment dwellers (but still around 40% higher for individual dwellings)
Regulation: both copper pair and fibre optic unbundling – Aerial deployments
Government’s proactive approach to FTTx deployment: 30 M FTTH subscribers in 2010
Very few IPTV subscribers in Japan but a lower churn observed for FTTH subscribers
USA: FTTH is the unique solution for RBOC’s
Length of the local loop and domination of Cable Modem on broadband access
Power of Cable operators: Time Warner, Comcast, CableVision launching 30 or 50 Mbps offers
By 1Q2006 Verizon had passed around 4M homes for fibre and counted 350 to FTTx subscribers. Expected for end 2006: 6M Homes passed and FTTx subscribers
Regulation: no unbundling for RBOC’s deploying Fibre in the access
Less than 0.5 million FTTx subscribers at 2Q2006 (estimation)
AT&T (more FTTN oriented) and Verizon launched Fibre access for doing HDTV

5. FTTH worldwide status: Europe
Mid of 2006, less than FTTx subscribers in the EU (+23% vs June 2005)
Mid of 2006, around 2.7 millions Homes passed in the EU (+10% vs June 2005)
 A global penetration rate of more than 28%
Mid of 2006, Deutsche Telekom covers 2.9 millions homes in 10 major cities in Germany with FTTN + VDSL2
Source: IDATE

6. FTTH: Why?

7. Services need for very high Broadband ?
Residential market
A demand today quite well satisfied by download rate proposed ADSL2+ but …
A few specific applications needing more Bandwidth: HDTV, video services, blogs, personal content exchanges,…
A growth of the needs concerning Bandwidth but also Symmetry … this will be driven by simultaneous usages in the home that have already started with Triple Play
Minimum bandwidth requirements
Source: IDATE

8. FTTH: Technology choice?

9. Status of FTTx technologies
Two distinct solutions possible for expanding fibre optic coverage
Fibre To The Node (FTTN)
An installation whereby fibre is brought to the distribution point – which can be the DSLAM switch. Last mile connection is supplied by VDSL on the copper network. This is also referred to as FTTC (Curb or Cabinet)
DSLAM
ATM/
Ethernet Switch
WiMAX
VDSL
FTTN
Fibre To The Home (FTTH)
A solution whereby fibre runs from the CO right up to end users’ premises (home, apartment or office building, or a university campus, etc.). This type of solution is also known as FTTP (Premise) and FTTB (Business)
FTTH
Splitter
ATM/
Ethernet Switch
PON
Active Ethernet switch
Ethernet
P2P
Passive network
Active network
Passive network
Source: IDATE/Lucent
Source : IDATE/Lucent

10. FTTN solutions: identified risks
Risks of interference between ADSL2+ and VDSL/VDSL2
ADSL2+ => up to 2.2 MHz
VDSL/VDSL2 => from 1.1 to 30 MHz
Several solutions can be implemented to remedy the situation:
Frequency separation: use of VDSL2 at frequencies above 2.2 MHz, albeit delivering lesser performances
Balancing traffic on frequencies below 2.2 MHz to limit performance loss (under consideration for the VDSL2 standard)
Asymmetry of VDSL/VDSL2 solutions
VDSL DSLAM localisation
local exchange?
switch, premises…?
Equipment
Upgrading the required DSLAM, depending on their location, to be able to deliver value-added services such as 2-3 TV channels per user.
Operating costs
Active equipment
Future-proof architecture?
FTTN then FTTH, or FTTH at the outset? A difficult choice…

11. Study case: Local copper loop in FranceLE
Street cabinet CP
(7 to 14 pairs)
PSTN subscribers d d’
12,500 in France
120,000 in France
Source: IDATE
Subscribers’ (d’) average distance from SC: 700 to 800 m; 300 m in Germany
Subscribers’ (d+d’) average distance from the local exchange:
29% of lines at less than 1 Km
39% of lines at less than 1.5 Km
52% of lines at less than 2 Km

12. Study Case: Performance of French copper network
If all the CO are equipped with ADSL2+: 50% of the population eligible at 10 Mbps
If all the CO are equipped with VDSL2 : less than 10% of the population eligible at 50 Mbps
If all the SC are equipped with VDSL2 : less than 20% of the population eligible at 50 Mbps
The SC is not the right place of arrival for Fibre in a VDSL approach; the « Curb » or the « Building » is better

13. Ethernet P2 vs PON in Europe
Technical architecture of European FTTx deployments: Ethernet still outnumbering PON
But PON selected for several major projects since 2005:
in Spain, the government of Asturias has chosen an Open Access Network GPON for its infrastructure
Among the latest deployment, EnergiMidt, a Danish power utility has also selected a BPON technology – home passed mid 2006
Also in Denmark, SEAS-NVE is deploying BPON while SEF is deploying EPON
France Telecom is testing FTTH / GPON since several months

14. FTTH: costs?

15. Study case: Cost Model for FTTx in France (1/2)
Base option : Greenfield deployments main cities then residential areas
Technologies : GPON and Ethernet P2P
Deployment : 2006 to 2015 for a coverage of 40% of the population
In 2015 : 11.9 million homes passed and 5.3 subscribers
Results : total investments between 10.4 and 11.3 billions euros over 10 years
Civil Engineering represents 70% of the costs
EBIT positive in 2012
Entering in residential areas in 2010 with individual homes has a strong impact in deployment costs
Investments per year (in million EUR)

16. Study case: Cost Model for FTTx in France (2/2)
Option 1 : Paris with usage of passive existing infrastructure (Paris sewer)
At 1€/m/year it allows an economy of 30% compared to the Greenfield case
In 2015 : 1.1 million homes passed and 0.5 million subscribers
Option 2 : France with usage of ducts already existing
At 2€/m/year it allows an economy of 50% compared to the Greenfield case
In 2015 : 9.1 million homes passed and 2.6 million subscribers
Mutualisation is the key: access at existing passive infrastructure

17. FTTH recent developments in Europe

18. FTTH recent developments in Europe
The regional government of the Asturias project, Spain
Based on an open GPON access network
Fibre deployment begun in June 2006, the target for the Government of to Asturias is to cover over 30,000 homes by the end of 2008.
France Telecom pilot project announced
FTTH pilot in the Hauts-de-Seine department and in Paris region, covering several thousand households
According to France Telecom, FTTH is a matter of strategic investment… its future depending on upcoming regulatory decisions
The Amsterdam Municipality CityNet
Based on an Ethernet access network
25,000 homes connected by the end of 2007

19. FTTH recent developments in Europe
The Vienna city Council’s FTTH project
Based on an open Ethernet access network
FTTH pilot begun in 2006, the Vienna city Council’s FTTH network will cover over 50,000 homes by the end of 2006.
Erenis, in Paris (France)
Based on an Ethernet access network: FTTB+VDSL
85,000 homes connected at the end of 2006
CiteFibre, in Paris (France)
Based on a FTTH access network
100,000 homes connected at the end of 2007

20. Free FTTH announcement for France
4 M home passed through 2012 for a total investment of 1 billion euros
FTTH architecture: Ethernet P2P
Deployment limited to Paris and suburbs and some main cities boroughs – Paris recently announced that renting prices will be reduced for usage of Public Domain (25% to 90%)
No civil engineering but usage of Paris sewer system in accordance with Paris policy
Opening of FTTH services at the beginning of 2007
One condition: Local Exchanges will be equipped if at least 15% of the lines are Free subscribers
FTTH network will be open (parts or total network) to other operators – “Ethernet architecture will facilitate this”
Same monthly price: 29,99 euros !
50 Mbps Internet access
Unlimited telephony to fixed phones and some international destinations
New optical Freebox
To attract building owners: a free offer for every home passed
Digital Terrestrial TV
Narrowband Internet access
Phone lines
Optical Freebox (deposit needed)

21. Free FTTH announcement’ reactions
France Telecom: it’s too soon
ADLS2+ is sufficient for today Triple Play services
HD TV, main driver for FTTH, is not already available in France
Economy of the project
Free will be 100% independent ; no more LLU renting fees
Free will propose new value added services
Free will target not only Residential but also Business Units
IDATE cost model for France:
- 2010: 3.5 M homes passed and 1.1 subs for an invest/Home passed of 260 € (1087 € for connected subs)
- 2011: 5.3 M homes passed and 1.8 subs for an invest/Home passed of 260 € (1018 € for connected subs)
So this is not very far from Free calculation !!   250 eur / Home passed (1300 €/connected subs.)
FT raised the negotiations difficulties when entering MDU, furthermore 4 hours of technician needed in average for connecting a home

22. FTTx Forecast for Europe

23. Country potential for VHS
VHS rollout estimates:
Level of concentration:
Number of nuts5 in a urban area means the number of cities where pop density > 500 inhabitants per km²
Suburban (Pop. density between 100 and 500 inhabitants per km²)
Potential coverage
Number of inhabitants living in a urban/suburban area
Government support for VHS
State and local authorities’ involvement in VHS (e.g. leasing dark fibre from municipalities, or government incentives for VHS)
Consumer demand for VHS
Population’s potential willingness to subscribe to VHS broadband

24. Country potential for VHS
Country rating
Overview of potential VHS coverage in the countries being examined
Coverage expected to be high in Finland, Denmark, Norway & Sweden (mark > 7 points)

25. When are players likely to invest in VHS broadband?
Current level of national penetration
Assumption: high level of BB penetration likely to fuel a VHS broadband battle
Incumbent’s strategy:
Assumption: incumbent’s involvement is key for VHS take-up. Incumbent likely to adopt VHS broadband if:
Market share on broadband market is low and/or (BT)
Share of net adds is low (DT)
LLU and alternative operators strategies:
Assumption: we believe that incumbent will more likely invest in VHS in countries where LLU take-up is strong (% of DSL lines)
LLU is strong in France, the Netherlands and Sweden
Competition with cablecos:
Assumption: a high degree of competition between telcos and cablecos is likely to drive adoption of VHS broadband
Strong competition from cablecos in Austria, Belgium and the Netherlands
Little competition in France and Germany
No competition in Italy and Greece

26. When are players likely to invest in VHS broadband?
Country rating
This gives us an idea of when players will implement VHS
First expected to rollout VHS are: the Netherlands, Sweden and Finland (mark > 12 points)

27. Abandoning xDSL for FTTH?
Local loop length breakdown:
Assumption: incumbent more likely to choose FTTH (PON + E P2P) than upgrading xDSL if their local loops are long
Short loops: xDSL will be upgraded progressively to FTTx+VDSL
Long loops: more favourable to FTTH rollout
Short loops (estimated 70% of lines < 3km): Spain, Italy
Long loops (estimated less than 50%-55% of lines <3km): France, Germany, UK
Average number of lines per MDF
Assumption: a high score means that an average MDF covers a large number of line and is thus favourable to an xDSL rollout
Average number of lines per MDF is high in Belgium and the Netherlands
Average number of lines per MDF is low in Finland and Sweden

28. Abandoning xDSL for FTTH?
Country rating
This gives us an idea of operators’ likelihood of switching to FTTH, or of keeping DSL as their main VHS technology
Rating: more VDSL oriented <3< more FTTH oriented

29. VHS BB market overview VHS potential take-up across Europe
Classic broadband, led by ADSL, will remain by far the leading means of access
In Europe, replacing classic BB with VHS will begin in earnest in 2010/2012
VHS will represent around 19% of Western Europe’s total BB base by 2015.
FTTH will be the first VHS broadband technology, with on average 11% of Europe’s total BB base by 2015.
VDSL will represent 8% of Europe’s total BB base by 2015.

30. Key points Europe & Key Questions
As of mid-2006, the VHS market is gaining momentum in Europe, with less than 800,000 FTTx subscribers and 2.7 million homes passed… concentrated for the moment primarily in Northern Europe and Italy.
Including VDSL Europe counts 5.6 million homes passed mid 2006
Rami: What will be the drivers to see FTTH explosion in Europe?
If Ethernet is currently the most widely-used technology, several recent major deployments have opted for PON (Denmark, France Telecom test in France).
Leading incumbents starting to deploy FTTN+VDSL2 solutions on a large scale (Deutsche Telecom, KPN, Swisscom, Belgacom, TDC) … others like France Telecom look at FTTH/PON architectures
Dave: What’s the better option for FTTH deployments?
In Europe, 2007 will be the year of regulatory adjustments to take account of FTTx and for testing the different technologies… leading to a series of major rollouts in 2008… but cost remains an issue
Roy: Is economics still the sticking point to roll out Fibre in Europe?

31. a
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32. Round Table: Key Questions
What will be the role of content providers in FTTH? Do they have interests in delivering HDTV on Fibre?
Regulatory issues: what is the good position? Regulatory holiday? Sharing of passive infrastructure (ducts, Fibre)?
Who will lead FTTH developments in Europe? The role of Municipalities and Local Bodies will be essential?
Maturity of the FTTH technologies? What are the reasons for choosing Ethernet P2P or PON architectures for an operator?
Wireless technologies will play a role in VHS deployments?
Access to the Buildings could be a major barrier in Europe: solutions?