The rise of gigabit broadband in Europe
Interest and demand for gigabit broadband is on the rise with more than a hundred known deployments worldwide. But while the spotlight has mostly shone on North America over the past year, there is growing activity in Europe too.
To answer the question of who deploys gigabit broadband and why, Broadbandtrends recently interviewed 88 broadband operators around the world about their plans for providing and deploying gigabit broadband services. Gigabit services were defined as at least 1Gb/s in one or both directions – download or upload.
North American operators formed the largest group of respondents, but there was also a significant response from operators in Europe (18 per cent). To some degree, this breakdown reflects the lower volume of gigabit operators in Europe, but we see that situation changing quite rapidly.
Although gigabit broadband is not synonymous with fibre to the home (FTTH), the majority of gigabit networks around the world to date have been delivered over FTTH. With the relentless advancement of cable and copper-based technologies, it’s easy to forget that FTTH has been gigabit-capable for a very long time. Hong Kong Broadband Network (HKBN) launched its gigabit broadband services to city residents nearly a decade ago in 2005.
Presently, the majority of FTTH subscribers within the EMEA region lie in Eastern Europe, with Russia claiming the most subscribers of any country within this market. However, when we look at this from a gigabit perspective the view is – perhaps surprisingly – sometimes quite different.
One of the first countries to deploy FTTH, Sweden now has a plethora of service providers offering gigabit services over municipal fibre networks, which are enabled either by the municipal network provider themselves, or by third-party open access wholesalers. Labs2 subsidiary Bredband2 claimed to be first to offer gigabit speeds to residential customers in 2004 – for housing association HSB Skåne in the city of Lünd.
Portugal also saw early gigabit action, with cable operator Zon Multimedia announcing in 2009 the availability of a 1Gb/s service for home users on its GPON fibre network. Portugal Telecom responded that it too would launch gigabit service the following year, but reconsidered, rolling out 100Mb/s service instead, and later increased the maximum speed to 400Mb/s. Perhaps if that scenario were to play out again today, it would end differently!
In the UK, a country notorious for having relatively little FTTH coverage, gigabit provider Hyperoptic will soon reach more than 75,000 homes spanning 480 sites, with a target to pass half a million homes by 2018, while CityFibre is targeting Tier 2 cities with FTTH. In the north, community project B4RN is bring gigabit broadband to villages in a sparsely populated region. In the island state of Jersey, JT has connected around 12,000 properties under its Gigabit Jersey programme, which plans to roll out gigabit broadband to all 42,000 homes and businesses by the end of 2016.
More recently we see a battle brewing in Ireland as Vodafone, in a €450 million joint venture with Irish power utility company ESB, announced plans to roll out gigabit broadband to 500,000 homes, while Eircom countered with an announcement that it would bring gigabit connectivity to 66 communities across the country. Meanwhile, Magnet Networks has already been experimenting with gigabit broadband through its Project Leap in Dublin.
Over the last year or so, we count at least six further European operators that have launched gigabit service – including Lyse Telecom in Norway, Latvia’s Lattelecom, Free in France, POST in Luxembourg, RCS&RDS in Romania, and Swisscom in Switzerland – and many more are making plans. Spanish incumbent Telefonica said in October 2014 it has started to install XG-PON equipment, which will be used as a basis to offer symmetric gigabit services to residents.
How did we get here?
Although we see plenty of activity, gigabit broadband in Europe has been slower to take off than in North America. This reflects the fact that the market situation is quite different from the US. We found there are really three key differences between North America and Europe as it relates to gigabit broadband deployment.
The first is regulatory – the European Commission’s Digital Agenda set milestones that do not encourage the deployment or the necessity of gigabit broadband. Instead they set a requirement for universal coverage with 30Mb/s broadband and half of all subscriptions to be for 100Mb/s connections or faster by 2020. Current generation technologies – whether cable-based or copper-based (including VDSL2 vectoring and G.fast) are sufficient in their support to provide both fast (30Mb/s) and ultra-fast (100Mb/s) broadband.
Where such top-down political incentives are provided, operators respond. In Luxembourg, for example, in 2010 the government set targets to provide, by 2015, 100 Mb/s downstream and 50Mb/s upstream to all households. By 2020, Luxembourg wants all of its citizens, which currently number some 527,000, to have a minimum of 1Gb/s downstream access. State-owned incumbent POST, formerly P&T Luxembourg, launched its 100Mb/s LuxFibre service in September 2011, and in May 2013 boosted speeds to a gigabit.
The second difference is competition. In North America cable operators continue to outpace telecoms operators in terms of both subscriber acquisition and speeds. In the most recent quarter (3Q14), cable operators served 57 per cent of broadband subscribers, who typically receive speeds between 25Mb/s and 100Mb/s; while the majority of DSL subscribers receive speeds below 10Mb/s, according to data from the Federal Communications Commission (FCC). In contrast, there are only a handful of countries within Europe where there is significant competition from cable operators – most rely on local loop unbundling of the copper plant.
Cable operators haven’t been completely left behind. Hybrid fibre coax (HFC) networks based on DOCSIS 3.0 or later can in theory support a gigabit downstream, providing that the necessary upgrades are made. However, until recently most operators haven’t been ready to make the investment in gigabit speeds – perhaps they have been waiting for the improved capabilities of DOCSIS 3.1, expected to arrive this year.
Finally and perhaps the most influential driver has been Google Fiber. Yes, there are other operators that have been offering 1Gb/s broadband services longer than Google; but Google Fiber has done more to plant 1Gb/s into the consciousness of both consumers and competitors’ minds than any other operator in any market.
The simple act of announcing plans to expand in additional markets has forced many cities to re-evaluate their own broadband position, while incumbent operators – whether cable or telco – stepped up to the plate and announced their own plans to offer gigabit broadband services (AT&T, Cox, CenturyLink, Frontier, Suddenlink, TDS, to name only a few).
To further the efforts, the FCC issued its own Gigabit Challenge in 2013, when FCC Chairman Julius Genachowski challenged broadband Internet providers and local and state governments in the United States to bring at least one gigabit-speed Internet community to all 50 states by 2015. At the time of the original announcement, Gigabit broadband networks were present in only 13 states. By the end of 2014, all 50 states were able to claim at least one gigabit broadband network.
The halo effect
Our study found that gigabit broadband is being deployed by a variety of operator types. These include incumbent carriers, competitive (alternative) operators, over builders (alternative operators such as Google Fiber that are “over-building” on top of existing infrastructure), municipalities and communities, power utilities, cable multi-service operators (MSOs), and even wireless operators.
Interestingly, we did not find many regional variations in market drivers – differences were more pronounced among operator types versus regions. We found that the relative importance of the drivers seem to determine who deploys gigabit broadband and why.
For incumbent operators, being perceived as a technology leader, retaining customers and increasing revenues are key drivers for deployments. For competitive carriers, new customer acquisition was the overwhelming driver. However, in both cases, operators experience what is termed the ‘halo’ effect, in which a customer’s overall impression of a company has been positively influence by the simple fact that they are offering a leading-edge technology.
Economic development was more often cited as an important driver for cities and municipalities, where leaders are beginning to truly understand that bandwidth has significant external benefits for their communities. They also want to support emerging applications in areas such as health care, education and public safety, where high-speed networks act as an essential foundation.
Evidence is already emerging that gigabit networks can become an economic engine. Results from a study by the Analysis Group, conducted on behalf of the FTTH Council North America, claimed that communities with widely available gigabit broadband enjoy per capita GDP that is 1.1 per cent higher than similar communities with little to no availability of such services.
According to our survey, the top driver cited by participants across all operator categories was technology leadership and perception. This was followed by new customer acquisition (40 per cent) and the ability to increase broadband revenues (38 per cent). The ability to support emerging high-speed applications ranked surprisingly low at only 22 per cent, while the ability to offer advanced service bundles that would leverage these faster speeds ranked even lower. This discrepancy may be attributed to the fact that there are few applications that require gigabit broadband speeds, but that gigabit broadband will be sufficient to support any emerging applications.
Unfortunately for operators, predicting bandwidth requirements has become particularly challenging, as new applications continue to be developed and consumers continue to find new ways to utilise large amounts of bandwidth. This is further compounded by the ever-increasing number of broadband-enabled devices. Depending on the service mix of the customer’s household, bandwidth requirements may vary considerably, which further complicates network planning. In some sense, gigabit broadband provides operators with an ‘insurance policy’ against an uncertain future.
For example, a basic triple-play service (two simultaneous streams of high-definition broadcast TV or streaming video, Internet and telephony), will require about 20Mb/s of bandwidth. However, if this includes additional features such as multi-room DVR, video-on-demand as well as over-the-top (OTT) video, the amount of bandwidth required could easily exceed 50Mb/s. In addition, growing interest in bandwidth intensive services such as 4KTV, continue to push the limits of bandwidth demand.
Not only is demand for downstream bandwidth increasing, but new applications such as on-line and multi-player gaming, video-sharing, interactive applications, e-learning and telepresence are driving the need for higher upstream bandwidth. As a result many operators are re-engineering their networks to increase the upstream speed capabilities and in many cases offer symmetrical service.
At present, only FTTH architectures enable cost-effective deployment of symmetrical high speed services. And while many operators are offering symmetrical 100Mb/s service, a number of them are re-engineering their networks to support gigabit service. This provides a significant competitive advantage over operators using DSL and cable HFC networks.
In future, we expect technology leadership will continue to drive development of broadband services, but operators are going to have to work harder to stay ahead of the pack. In Japan we see signs of what may come, where in April 2013 Sony-owned internet provider So-net launched a multi-gigabit service, delivering 2Gb/s download (and 1 Gb/s upload) at the affordable price of $45 (€37.6) per month. One day, perhaps as soon as 2020 according to our survey respondents, we may all take gigabit broadband for granted.
Teresa Mastrangelo is founder and principal analyst at Broadbandtrends LLC