Operators around the world are increasingly focusing on deploying full fibre (FTTP/H/B) broadband capable of gigabit speeds[1]. Of course, investing in fibre networks only pays off when a certain proportion of the available lines has been taken up by paying customers. Hence Point Topic has looked at fibre adoption rates in various countries and among different operators. We also developed a model that allows one to assess current and potential FTTP broadband subscription revenues that can be generated in a country and by an operator – the so called revenue headroom – depending on fibre adoption rates.
In this instance we are focusing on residential broadband services. At country level, we are looking at the European countries where the figures of premises passed by fibre networks are readily available. We also looked at selected FTTP providers in Europe and beyond. The model can be extended to the global scale as well as adapted to other technologies and services (for example, business broadband, pay TV) and different time scales.
This research combines data from two of our services - Global Broadband Statistics and Broadband Operators and Tariffs - as well as other inputs such as the Broadband Coverage in Europe[2] studies which Point Topic co-authored for the European Commission.
Fibre adoption rates: a mixed picture across countries and operators
First we looked at to what extent fibre adoption rates vary between countries and operators. By fibre adoption rate we mean the number of fibre broadband subscribers divided by the number of premises[3] covered by fibre networks in a country or on an operator’s footprint. As of Q2 2021, the country level fibre adoption rate ranged from 13% in Austria to 98% in Finland, with the average among the 24 European countries standing at 53%.
Taking these two countries as an example, in Austria, fibre adoption rate changed little between mid-2013 and mid-2021, hovering around 11-13%, while in Finland it shot up from 39% in 2013 to 98% in 2021.
To some extent this can be explained by well-established DSL (including VDSL) and cable (mainly superfast and ultrafast)[4] networks in Austria, with 97% and 59% of households still covered by them respectively in 2021. Between 2013 and 2021, DSL coverage in Austria has remained more or less stable, and cable coverage increased by 20%. In Finland, DSL coverage has dropped significantly from 93% in 2013 to 60% in 2021, while cable coverage also declined from 43% to 37% over the same period.
Although in both countries FTTP coverage increased between 2013 and 2021, Austria started with a much lower base of 7% of households covered by fibre networks in 2013, compared to Finland with 29%, and so saw a steeper growth in FTTP household coverage. Nevertheless, only 27% of Austrian homes had access to full fibre networks in 2021 as opposed to 40% of those in Finland.
Lower availability of full fibre networks in a country may impact consumer awareness of their advantages, as well as result in a low number of peers who adopted fibre services and whom other consumers may want to imitate. At the same time, high availability of VDSL and high speed cable networks means high numbers of subscribers to these platforms who are happy with the speeds they are getting and are less likely to switch to FTTP, which is often more expensive.
Having said that, we looked at various factors that may influence fibre adoption rates and found strong to moderate negative correlation with DSL market share (DSL share of all fixed broadband subscribers) in all but four countries. One could argue this suggests that consumers do tend to migrate from DSL to full fibre networks, not least because it’s primarily DSL network operators who upgrade their infrastructure to FTTP. We must be cautious, however, about drawing firm conclusions about this and other correlations we discovered due to the small sample size of the measurements (nine data points (time periods) per country, between 2013 and 2021).
Some recent studies looking at barriers for consumer migration to FTTP networks[5] discuss a number of other factors slowing down migration from copper to full fibre:
the FTTP upgrade process which requires an engineer visit and installation work at the property;
the tendency of consumers to stay with status quo;
the fact that VDSL consumers were often already told by ISPs they were getting ‘fibre’;
the lack of perceived reward (VDSL is ‘good enough’);
low demand from small households with a few devices, renters who may need landlord’s permission and time poor people.
Some of the above barriers are related to the lack of consumer understanding of, and probably caring about, the features and technology of the broadband services they are using. Our recent survey of UK consumers showed that between 16% and 30% per cent of the respondents, depending on the ISP, were unaware of their broadband speed tier. [6] Between 7% and 39% of the respondents did not know whether their broadband service was provided over full fibre. Also of note is the fact that the migration potential from copper to fibre varies considerably among the countries. By migration potential we mean broadband households using DSL (ADSL or VDSL) services. In theory, they could all be upgraded to FTTP as long as there are enough FTTP lines available in the areas where they live. This will of course depend on the number of homes passed by FTTP networks as things stand. In the markets where FTTP networks are not large enough to accommodate all existing DSL subscribers, the higher the migration potential there higher the rationale, one could argue, to extend fibre infrastructure further, while also taking into account the migration barriers outlined above.
In half of the 24 European countries covered in this analysis, there are more subscribers still using DSL broadband than FTTP lines available (‘FTTP headroom’ is the number of premises passed by FTTP minus current FTTP subscribers). Finland, Germany and Belgium especially stand out in this respect. In Belgium and Germany, the incumbents have been focusing on VDSL for a long time, with the number of available FTTP lines way below the number of households still on DSL broadband. In Finland, the number of DSL subscribers is relatively small but the headroom on FTTP networks is even smaller, with 98% of FTTP lines taken.
The migration potential from copper to fibre across Europe will of course change as FTTP networks are extended to pass more premises. One caveat is that migration from copper to fibre is not always possible as some FTTP providers (especially altnets) are rolling out their networks outside the areas where DSL subscribers are located, for example for new built homes or in wealthier rural areas, although this will cover a small proportion of households. At the same time, some DSL providers are slow to roll out FTTP networks, still content with VDSL.
Looking at other factors that might influence FTTP adoption, we noted varied correlation between the cable share of total broadband subscribers and fibre take-up across different countries. Positive correlation (where both fibre adoption and cable share of total subscribers grow) could be explained by the fact that in some markets consumers are generally happy with their cable broadband services and are unwilling to migrate to fibre (where they can, i.e. where there is cable/fibre network overlap, for example the UK), or indeed cable and fibre networks serve different geographic areas.
At the same time, consumers in the markets where cable broadband is still popular and growing are more used to higher speeds as well as digital phone lines as opposed to the old analogue ones or no landline at all, so some of them are more likely to be interested in fibre services when and where they become available. As a result, both cable and fibre take-up continues to grow, while traditional copper (DSL) services suffer.
In other markets, fibre providers manage to wow consumers with even higher often symmetric speeds, value added services such as UHD video and streaming channels, exclusive sports channel deals and/or favourable initial pricing, or cable providers upgrade their networks to full fibre (Lithuania is one of the examples). Thus, as fibre adoption grows, cable subscriptions go down, and the correlation is negative. Again, a note of caution on the values of correlation coefficients and their interpretation due to small sample sizes. Also, not all new FTTP subscribers will have migrated from another technology – some of them will be taking up a broadband service for the first time.
We looked at correlation between fibre adoption and fibre broadband pricing but there was no definite trend. Nevertheless, high inflation across Europe will have an effect of consumers’ willingness to pay a premium for more advanced fibre broadband services. For example, according to the latest report by the UK regulator Ofcom, around 32% of UK households are already experiencing difficulties in paying for communications services.[7]
We also looked at fibre adoption rates among selected operators. In Q2 2022, they varied from 12% for Consolidated Communications in the US with more than two thirds of their subscribers still on copper, to 47% for KPN in the Netherlands with 51% of their retail broadband customers on fibre.
Fibre broadband revenue: current and potential
Whatever the reason for the lack of fibre adoption in some markets, the data on adoption rates can be used to estimate and benchmark current and potential additional revenue (headroom) from fibre broadband services.
Our FTTP revenue model describer below is using a hypothetical split of fibre broadband subscribers by tiers of tariffs they subscribe to (monthly subscriptions). The calculations are based on Point Topic’s tariff and subscriber data as of mid-2022. All tariffs used in this model are at USD$ PPP rates. The maximum available revenue is based on 100% of FTTP premises passed subscribing to an FTTP service.
In this first example we set the tariff tier split as follows:
So, we assume that 10% of residential broadband subscribers take the most expensive FTTP services, with 20% taking the mid-price ones and 70% going for the lowest monthly subscriptions. (Of course, the tariff tier splits will vary between different countries and operators, and the model gives users the flexibility to adjust the tier splits depending on each particular case.)
In this example we compare the two selected countries – Austria and Finland.
With the tariff tiers set as above, Finnish operators would be currently generating seven times more revenue from residential FTTP broadband services at almost $50m (PPP) compared to $7m (PPP) in Austria. Conversely, potential additional revenue that could be generated from such services if 100% fibre adoption were achieved, is significantly higher in Austria - $48m (PPP) compared to $1.3m (PPP) in Finland. This is the case because, as we saw earlier, fibre adoption rate in Austria was only 12.6% leaving a lot of scope for adding new fibre customers, while the same metric in Finland was 97.5%, with most of the potential FTTP customers already signed up.[8] In terms of the average ARPU, it would be $51.77 (PPP) in Austria compared to $46.17 (PPP) in Finland.
If we adjust the tariff tiers to 20%, 30%, 50%, we get the following results.
If Finnish operators were able to persuade fibre broadband subscribers to move up the subscription tier ladder they would increase their current and potential revenue more than the Austrian ones - by 28.5% compared to 8.8% respectively. Also, the average ARPU in Finland would be $59.32 (PPP) compared to $56.31 (PPP) in Austria.
This model can also be used to compare revenues at the operator level. The example below shows that at 10% / 20% / 70% tariff tier split, Orange Spain would generate 4.9 times more revenue than Orange Poland and 3.4 times more additional revenue given the latest known fibre adoption rates for these operators (mid-2022). Despite the fact that FTTP adoption rate for Orange Spain is 22% compared to Orange Poland’s 16% and so the Spanish operator’s FTTP take-up headroom is lower, Orange Spain’s tariffs are significantly higher, resulting in higher potential additional revenue as well as higher ARPU at $75.67 (PPP) against $51.16 (PPP) for Orange Poland.
Of course, some countries and operators will exceed or miss their fibre adoption targets and so the actual take-up of FTTP broadband services will likely be lower than 100% of households passed by FTTP networks. This model estimates the maximum revenue headroom possible. It is down to the countries and operators to convince all eligible consumers to migrate to FTTP.
We have made this model available publicly to demonstrate how data from different Point Topic’s services can be combined to produce various insights. See the spreadsheet attached to this report with four countries and operators used as an example. More countries, operators, different tariff tiers, and metrics can be compared using our analytical tool available to Point Topic customers. To learn more about becoming one please contact isabelle.anderson@point-topic.com
[1] For brevity, we will be using FTTP and ‘fibre’ interchangeably to denote FTTP/H/B variants. [2] See https://digital-strategy.ec.europa.eu/en/policies/desi-connectivity
[3] In this report, ‘premises’ and ‘households’ are used interchangeably; even though some operators include business sites in their premises covered figures, they tend to be relatively small compared to then number of residential premises. [4] DSL here includes superfast VDSL networks and cable includes such superfast/ultrafast technologies as Docsis3.0 and Docsis3.1. All of the three technologies are capable of high enough broadband speeds to compete with full fibre, at least in many consumers’ eyes. [5] Unlocking the Gigabit Dividend, Frontier Economics, August 2022. [6] The UK’s TV, Streaming and Broadband Market: cost of living crisis challenging bundled synergies, Point Topic, 2022, publication forthcoming. [7] Affordability of Communications: September 2022 update, Ofcom, December 2022. [8] Note: in this example we are using Q2 2022 tariff data.
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