Fibre-to-the-home/building (FTTH/B) services are witnessing strong demand across the world. The global FTTH/B subscriber base is expected to surpass 198 million by 2015.

One of the key factors contributing to the growth of the global FTTH/B market is the higher bandwidth requirement of end-users. There is increasing bandwidth demand for broadband applications such as web surfing, email, file downloading, online gaming, IP video-on-demand and videophones. In addition, government-led e-initiatives and programmes in several countries are contributing to the implementation of FTTH/B projects. The majority of telecom operators are using fibre on their backhaul networks as long term evolution services are taking off.

Key FTTH/B markets

Asia Pacific

The Asia-Pacific (APAC) region leads the global FTTH/B market with the highest fibre broadband penetration. As per the FTTH Council Asia Pacific, the number of FTTH/B subscribers in the APAC region increased by 28 per cent to 58 million in 2011 as compared to the previous year . Also, about 90 fibre-based projects are being implemented in Asia Pacific. The incumbent operators have taken the lead in fibre deployments in the region, accounting for 67 per cent of homes connected through FTTH/B.

FTTH has emerged as the main network configuration in Asia Pacific, replacing DSL and cable modems. In Taiwan, for instance, 37 per cent of broadband subscribers have availed of a fibre-based service. This share is 42 per cent in Hong Kong, 60 per cent in Japan and 58 per cent in South Korea.

The key FTTH/B markets in the region are Japan, China and South Korea. As per TechNavio, Asia Pacific has the largest share in the global FTTH ports shipped across the globe. Japan continues to be the global leader in terms of FTTH/B subscribers, followed closely by China.

Currently, China is witnessing faster FTTH/B deployments as compared to Japan. Between June and December 2011, the Chinese FTTH/B market grew by 44 per cent as compared to 6 per cent growth in Japan. China is also investing significantly to replace its existing copper-based network with fibre-based network. Going forward, strong demographics will be an advantage for China in terms of FTTH/B network expansion. On the other hand, countries like Japan and South Korea have already achieved optimum network coverage and are currently focusing on facilitating user migration to other networks. Given this trend, China may overtake Japan as the FTTH/B market leader in a few years.

The subscriber base is also increasing in Vietnam, Singapore and Malaysia. Government initiatives in the broadband space are the key drivers of mass market migration to fibre-based networks in the APAC region. For example, the Japanese government provides subsidies in the form of preferential tax and accounting concessions for carrier investments in fibre infrastructure. Also, in South Korea, fibre infrastructure investments have been a key component of the country’s information and communication master plans. In Singapore, the next-generation broadband network is expected to achieve 100 per cent penetration by 2013. Similarly, Australia’s broadband network is expected to achieve 93 per cent premises fibre penetration by 2017.

Europe and Russia

The adoption of FTTH/B services has been growing in European countries. According to IDATE, over 600,000 FTTH/B subscribers have been added across the region since June 2011. Countries such as Andorra, Croatia, Iceland, Israel, Norway, Serbia, Switzerland and Turkey have accounted for the majority of these additions.

In 2011, FTTH/B roll-out in Europe registered an annual growth of 41 per cent. Further, the FTTH/B subscriber base across 38 European countries is expected to increase from 10.3 million in 2011 to 32 million in 2016.

Growth of the region’s FTTH/B market is being supported mainly by countries in Central and Eastern Europe. The economics and demographics of Eastern Europe – low civil engineering costs and a population that is concentrated in apartment buildings – make it suitable for the adoption of next-generation access technologies. Sweden is the largest FTTH/B market in Western Europe with 625,000 subscribers. France is emerging a key market in the region with 556,000 subscribers as of June 2011. However, countries like the UK have been slow to migrate to fibre-based networks. This is because the country’s operators are opting for different technologies. For example, BT is deploying FTTC+VDSL while its competitor Virgin Media is investing in cable + DOCSIS 3.0 infrastructure.

According to IDATE, traditional companies are playing a less important role in fibre roll-outs as compared to alternative operators and municipalities. The majority of operators in Europe have been reluctant to invest in fibre-based networks as FTTH/B services do not offer attractive ARPUs. However, as per IDATE, telecom operators’ claim that there is not enough demand from end- users for next-generation network services is not true. As such, there are no demand-related issues, but an FTTH/B market takes time to develop and users are willing to pay more for premium services like home monitoring and TV-on-demand. FTTH customers are more likely to avail of additional services because they will meet their expectations in terms of quality. In fact, through FTTH, an average operator can generate 30 per cent higher ARPUs as compared to any other technology. To provide an impetus to FTTH/B services, most European governments are using public funds to upgrade the broadband infrastructure.

Russia is another major FTTH/B market in the region. ER Telecom and Vimpelcom/Beeline are the two key players that are focusing on FTTH/B services in the country. Both  companies are deploying FTTH/B infrastructure in several cities simultaneously.

So far, telecom operators have been leading the deployment of FTTH/B in Eastern Europe, which has resulted in the region having higher FTTH/B subscribers as compared to Western Europe. Ukraine is another fast emerging market for FTTH/B services in Europe. Strong demographics and consumers’ willingness to pay for faster network solutions are the key drivers of FTTH/B services in Ukraine.

The US

The US is the world’s third largest FTTH/B market after Japan and China with 11.4 million subscribers as of mid-2011. The country’s FTTH/B segment is dominated by Verizon and AT&T. Both companies are looking to consolidate their market position by rolling out high speed broadband networks. Most cities and local governments have been awarded government subsidies under the National Broadband Stimulus Program to develop broadband infrastructure. This has encouraged players, apart from Verizon and AT&T, to enter the FTTH/B space. The US government is focused on increasing broadband and superfast broadband coverage across the country, especially in rural areas which are not covered by private internet service providers (ISPs).

However, subscriber addition is a major challenge for operators in the US. They face competition from cable companies which dominate the broadband market by offering services comprising innovative TV and video solutions. Therefore, operators are increasingly focusing on offering innovative and price-competitive services.

Unlike the US, Latin American countries have not witnessed any major activity in terms of FTTH/B service provision. A few companies including Bell Alliant have planned FTTH roll-outs, but on a small scale.

Most ISPs providing ultra-fast broadband services are depending on FTTN+ VDSL configurations.

In Chile, Uruguay and Costa Rica, efforts are being made by some operators to establish smaller-scale FTTx networks.

The Middle East and Africa

As of June 2011, users in the Middle East and Africa accounted for less than 1 per cent of the global FTTH/B subscriber base. Limited government and municipal support, broadband access and involvement of utilities such as power and gas companies are the key reasons for slow FTTH/B deployments in the region. Currently, the UAE is the leading market in the region with over 1 million connected homes/ buildings. Fibre deployments are at a very nascent stage in other countries. During the past few years, small-scale FTTH/B roll-outs have been initiated in Qatar, Egypt and Saudi Arabia, most of which are greenfield in nature and are aimed at new buildings. Going forward, real estate owners are expected to create a demand for fibre deployment as a value-add for their new housing programmes.

The way forward

The lack of supporting infrastructure has been a key reason for the slow roll-out of FTTH/B projects worldwide. Also, deploying these projects involves significant investments and is time consuming. Moreover, operators require skilled personnel for fibre deployment.

These challenges notwithstanding, the FTTH/B segment is gaining importance in operators’ portfolios across the world. These services will enable service providers to meet the increasing demand for high-bandwidth applications. Also, given the social and economic benefits offered by high-bandwidth services, governments across the globe are expected to undertake major FTTH/B projects. Content providers are also likely to focus on the segment and develop content and new applications, which will increase service uptake.