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FTTH Economics Remain Challenging

July 06, 2012

FTTH Economics Remain Challenging

By Gary Kim
Contributing Editor

Copper networks continue to be the “typical” way for telephone companies to provide broadband access service, globally, as more than 367 million subscribers worldwide in 2011 were served by digital subscriber line technologies. And though optical fiber long has been considered the preferred and ultimate access medium, the economics remain challenging.

So how fast, or even whether fiber-to-the-home will displace DSL remains a key question for landline network services providers.

“Financial instability in the advanced economies of Western Europe and lack of innovative internet video services force telcos to look into the cost to value proposition delivered by making large scale investments into FTTH,” according to Adarsh Krishnan, ABI Research senior analyst of TV & Video at ABI Research (News - Alert).

Up to this point, government subsidies often have been required to fund large fiber builds. Still, in a global business that has revenue in the trillion dollar range, fiber to home or fiber to business revenue still reached only about $30 billion in 2011, ABI says.

Global revenues from DSL broadband services reached $106 billion, with a compound annual growth rate of 14 percent in the last five years up until 2011. The Asia-Pacific region continued to be a critical growth region for DSL broadband with China playing a dominant role accounting for 33 percent of the worldwide subscribers in 2011.

But a reasonable person might argue that rapidly-developing mobile broadband, the decline of voice revenue and emerging online threats to the video business now have become a key factor in industry thinking about fixed broadband investments.

In other words, right at the moment when massive investments for fiber access are contemplated, the revenue streams that could be generated are declining or threatened. That is hardly the sort of scenario likely to convince executives and firms to invest aggressively.

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Edited by Rich Steeves
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