Deploying more bandwidth – all systems go in 2015

The demand for bandwidth in Europe continues to meet and often exceed our ability to supply it.  Good news for equipment manufacturers, ISPs and consumers but likely to be bad news for the Digital Agenda and the Digital Divide.

A clear demonstration of increasing penetration of superfast bandwidths can be seen in the reporting on the EU broadband portals.  A recent paper shows that since 2010 (pages 9-11) the adoption of superfast (30Mbps+) and ultrafast (100Mbps+) tariffs has been accelerating.

It isn’t at first glance a particularly stellar performance however; with penetration in early 2014 at 6.7% for superfast and less than 2% for 100Mbps and above when looking at the population of the EU 28.  Only 60% of the population was within the deployment footprint of suitable technologies at the time.

In early 2015, 12 months later, we show superfast adoption just over 7.4% of all EU28 households.  Again not a startling change but if you look more closely at the areas where competitively priced ultrafast (100Mbps+ downstream with significant upstream too) services are available then penetration is reported between 30% and 70% from the UK to Romania (page 14) and today for example we estimate that more than a third of fixed broadband lines in the UK now qualify as superfast (30Mbps and above again with reasonable upstream).

We want more bandwidth but where and how?

Here we start to encounter a number of solutions.  The requirement for more downstream is mirrored although to a lesser extent in the demand for upstream improvements too.  The leading technology for these requirements is (end to end) fibre.

An early objective for the EU to deploy end to end fibre solutions soon foundered on the rocks of reality however as cash disappeared from the system, particularly problematic when it comes to large infrastructure investment.

The compromise in many markets is fibre to the cabinet with existing infrastructure is re-used where possible and the high cost elements of deployment, mostly involving people and digging, are minimised.  This has enabled an incremental approach to the spread of bandwidth with a more manageable cost profile.

In Europe today the current mass deployment bandwidth leaders are also the largest closed networks, the cable companies.  Very often owned Liberty Global in some form who have decided that there’s plenty of money in the bandwidth market to come and have been on a significant, strategic, buying spree in the last few years.

Cable in Europe has something of a chequered history with various occasions when the investment burden drove them into receivership or the arms of others.  There is now however a good opportunity for a company with controllable debt, access to millions of consumers and for the moment a closed set of networks and with their lead in bandwidth still relevant across a decent proportion of their footprint and that’s before DOCSIS3.1 starts to spread

This is the group the incumbents, the primary owners of the copper in Europe, are most directly in competition with and until recently there wasn’t much they could do about it.  Outside the cable operators Europe for the next decade at least will predominantly be about the advance of fibre into the local loop.

G.fast – overhyped and over here?

The desire to compete with cable in particular has driven the requirement but the demand for bandwidth, amongst subsets of the households of Europe is also present as we’ve noted above.  As we’ve seen it’s also vital for business and the analysis highlighted by the BRESAT project emphasises that SMEs in particular can’t get better broadband quickly enough.

G.fast won’t offer a gigabit solution though, at least not initially.  The full vectored solution currently tops out around 650Mbps at 50m loop length.  The industry needs to be careful with this point.  Hyperbole is poorly tolerated by consumers and after a decade of ‘up to’ promises and some disappointments as a result has damaged the copper ‘brand’.

If this offering follows the adoption patterns of previous waves of broadband then we’ll see rapid take-up in the market that is going to take the service but then quite a long and resistant tail.  This reflects the latent demand in the market that has already existed but also grows over time as consumers move up the adoption ladder.  The trick is to identify where and when particular sectors and demographics will take what.

Swisscom for example is powering ahead with FTTS.  Which although not actually G.fast marks a transition stage to the technology goal.  The physical deployment of the bulk of the infrastructure to enable G.fast is achieved and isn’t wasted either as a result.

Other transitional steps, like midi-DSL, are in play.  Where more bandwidth is delivered by shorter copper loops and often a VDSL2 solution in conjunction with various flavours of vectoring.  This will allow of the order of 200Mbps.

With a range of tools and significantly more information on the market and it’s behaviours than ever before it will be a more measured deployment of bandwidth than in the past.  We’ll see an initial rush over a period of two to three years which will cover between 50% and 75% of the available areas but then it’s likely to slow a little.  However it’s likely that demand in more fringe areas will comntinue to crystalise and the pre-identification models (as used by Google in the US and coming for Virgin Media in the UK) where consumers club together and guarantee a level of adoption will be more and more common.

 UK cable deployment and Point Topic metro areas in 2015Figure 1: UK cable deployment and Point Topic metro areas in 2017

Metro Areas, cable areas, high bandwidth adoption – a view of gigabit demand for Europe

Telecoms and broadband are location dependent services.  It matters where you are, who you are and what else is around you in terms of understanding the supply and current and future demand for bandwidth.  So a large part of understanding where demand will be is understanding what is happening where today.

The first target areas for deployment will be revenue and population dense, they will have a cable offering usually and preferably have a high proportion of young, well off, families.

So in the UK the most interesting areas are picked out in red with the expansion/secondary areas also indicated.

As we progress with our models the targeting of particular areas will start to clarify.  There’s plenty of opportunity in Europe too of course.

We can apply a series of layers across our maps of deployments for cable, FTTx and DSL along with other demographic and broadband related data we are then able to produce outputs that help us and our clients understand the likely future.

 Forecast coverage of high bandwidth broadband services at end of 2017Figure 2: Forecast coverage of high bandwidth broadband services in Europe at the end of 2017

In summary

G.fast is going to be part of European incumbents planning almost everywhere.

It offers, along with some transitional steps, a way to make competitive offerings for those with significant copper networks without the expense of accessing every unit that needs deployment.

  • It will mature over the next five years. More bandwidth, better equipment and likely better range.
  • Demand will be strong in the right areas. Halo effects, latent demand and general evolution will provide the secondary market.
  • Segmentation will help ISPs and equipment manufacturers but it will deepen the Digital Divide
  • The Digital Agenda may well meet the target of 50% take-up at 100Mbps and above by 2020, it will however be in a more fragmented market with significantly more households and businesses outside the footprint of superfast broadband than had been hoped.

While we expect G.fast to help incumbents compete and hopefully add to their competiveness and future prospects we don’t see it as the end game for bandwidth in Europe.  It offers a good compromise between cost and benefit and hopefully that will mean better service for all of us before the end of the decade.

Find out more

More information on broadband availability and take-up at provincial level can be found in Point Topic’s Broadband Competition Map of Europe service. Please telephone +44 (0)20 3301 3303 or e-mail tim.johnson@point-topic.com for more details.

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