Posted by Tom Carpenter | Jan 14, 2015 in m2fx blog
Following on from my half year report back in June 2014, I thought it is worthwhile to share my views on what has been happening across the Fiber to the Home (FTTH) market, with a particular focus on last drop connections, as well as looking at what I believe 2015 has in store.
The positive news is that growth appeared to continue throughout the second half of 2014. CRU's bi-monthly report on the fiber cable market stated that the high level of fiber demand seen at the start of the year remained solid through to the 3rd Quarter of the year. CRU forecast that more than 300 million km of bare fiber will be shipped during the year. For me, this is a staggering quantity – equivalent to the diameter of our planet's orbit around the Sun or enough fiber to circle the Earth 24,000 times.
Encouragingly, the main reason for growth was backbone FTTx deployments, which means there is a whole load of fiber backbone out there waiting to be connected up to properties in 2015.
Our own experience echoes CRU's positive predictions. We saw strong sales growth in all regions where we operate for our pushable fiber, in-building and fiber broadband products. Across the industry fiber cable related material lead-times continued to increase throughout the year, showing rising demand.
m2fx saw strong sales expansion in the United States during 2014 and believes this will continue through 2015. My colleague Larry Malone is going to talk about the market in a separate, future blog, but I'll give some high level commentary, centered around the net neutrality debate.
In an attempt to protect net neutrality, the Federal Communications Commission (FCC) has stated that it is considering reclassifying broadband internet as a common carrier service – like the telephone – and giving the regulator greater power to control prices and services.
This is potentially impacting plans, although Time Warner has said that regardless of what the FCC does on net neutrality it finds the broadband internet market very attractive.
Google appears to be supporting the FCC drive as it believes that reclassifying would allow it to gain rights of access to utility poles and other related fiber infrastructure such as ducts, conduits and rights of way currently enjoyed by incumbents. Earlier in the year Google Fiber announced expansion to a further 34 cities – however, at the time of writing, Google has not released deployment dates for any cities on the short list.
The FCC intend to vote on net neutrality in February 2015. With conflicting interests among the various stakeholders it will be interesting to see what the final proposal will be. Interesting times ahead.
However, given demand and the plans already announced, regardless of the eventual net neutrality decision, we believe that FTTH rollouts will accelerate throughout the United States this year.
In Europe there are patches of growth when it comes to FTTH, but so far there haven't been the widespread rollouts that other regions have seen. In mainland Europe, the market still appears to be flat, with Ireland and to a certain extent the UK, bucking the trend.
In the UK, BT has continued to accelerate its rural fiber broadband rollout throughout 2014, although there are several more years to go with this program.
Over in Ireland, 2015 is looking to be a pivotal year for fiber connections with both Eircom and the ESB/Vodafone launching major FTTH rollout plans. ESB/Vodafone has announced a 500,000 premises rollout utilizing ESB's powernet work infrastructure, whilst Eircom is launching a directly competitive aerial fiber network in 66 Irish towns.
After its acquisition of Ono, Vodafone has reduced its FTTH aspirations in Spain although its stated target of 2 million homes connected in 2015 still counts as a major rollout.
In Belgium, Belgacom ran some trials connecting up some 400 households. However, no date has been announced for a commercial FTTH rollout.
In Italy, FastWeb has announced plans to extend its FTTx network – with a mixture of FTTC and FTTH connections to 100 new cities, targeting 2.3m connected homes by the end of 2016. However rumors persist that FastWeb owner, Swisscom, has put the telco up for sale with (surprise) Vodafone being mooted as a likely acquirer.
Middle East Reorganizations
Middle East demand slowed slightly in the second half of the year, due to a combination of telco reorganizations, acquisitions that fell through and the launch of new initiatives that I'd expect to accelerate rollouts in 2015.
Saudi Arabia remains the largest market in the region with two competing, large scale FTTH rollout programs from STC and Mobily.
The internal reorganization at STC that I mentioned in June is now more or less complete. STC has now consolidated its installation contractors, moving from 50 plus separate installation contracts to approximately a dozen broad regional master companies. We believe that STC will now accelerate FTTx home connections throughout 2015.
Mobily has also consolidated the number of installation companies that it uses. However, after the recent suspension of the Mobily CEO for auditing errors that wiped out previous profits and the likely investigation we think it probable that FTTx investment will slow over the coming months.
In Qatar, the attempted purchase of state owned Qatar National Broadband Network (QNBN) by Vodafone caused multiple in-building installations to be delayed. Vodafone has since announced that it has terminated plans to acquire the network. We believe that with this deal falling through many of the in-building network installation projects will recommence during over the next 6 to 9 months.
In Oman, the Telecommunications Regulatory Authority (TRA) announced FTTH tenders in April 2014, following up with the announcement of the creation of a state owned optical fiber network company. While it is quite early days, it looks like the government view's FTTx broadband networks as a vital investment for the country. Currently, the focus is on a fiber backbone, but we feel confident that this will move towards direct fiber connections in number of major cities in the next 12-18 months.
Finally, UAE still has the highest fiber connection rate in the world – 85% of dwellings have a FTTH connection. This will surely drive Etisalat – Mobily accounting issues notwithstanding – and Du to drive rollouts throughout the region over the coming years.
Africa continues expansion
As we've previously discussed, we are excited about the African market, where we see a mixture of regional multi-nationals (MTN, Vodacom) and smaller national FTTH rollouts.
Liquid Telecom has continued its expansion throughout sub-Saharan countries throughout 2014. This is likely to continue through 2015 and beyond. We are now also beginning to see local incumbents such as ZamTel in Zambia release FTTH tenders to compete.
In South Africa, MTN and Vodacom continue to focus on backhaul, with limited final connections. However, this looks likely to change in 2015. Vodacom has announced that it will acquire internet provider Neotel in order to speed up the connection of fiber to homes and businesses. Telkom S.A. is attempting to sell its mobile infrastructure to MTN – and this is likely to leave the company with the funds and a renewed focus on upgrading its fixed lined network to fiber and Fiber to the Premises (FTTP).
MTN conducted pilot FTTH installations in June 2014, and is now offering on-demand fiber connections to gated communities starting 2015.
Earlier in the year Dark Fibre Africa (DFA) announced the acquisition of last-mile fiber optic company Conduct and it has been conducting modest last drop rollouts ever since.
In Namibia, Telecom Namibia trialed FTTP services for businesses and consumers with download speeds of up to 120Mbps in limited areas around the capital Windhoek, and nearby city Swakopmund. It is very early days, but the company has stated that it plans to expand the service to other towns and business districts in Namibia.
2014 was a strong year for m2fx and FTTH and we see that accelerating in 2015, with perhaps the exception of mainland Europe. It will therefore be interesting to see the latest report on FTTH country rankings when it comes out at the FTTH Council Europe conference in February in Warsaw – the risk is that Europe is being left behind when it comes to superfast broadband and the benefits it brings.