2008 European - Cable and Fibre Market

The cable sector, having lost broadband market share to DSL alternatives, has recently been revitalised by the continuing consolidation among operators, particularly in Germany, which has enabled them to invest in network upgrades. Using DOCSIS 3.0 technology, Virgin Media in the UK and UPC in its several European markets provide the fastest copper-based services available. Their plans to upgrade to a 200Mb/s service by 2012 will place them on a par with Europe’s FttH providers. Cable broadband also continues to enjoy popularity in Central Eastern Europe and the Baltic region where a handful of major players have emerged following merger and acquisition activity. Cable is also popular in Russia, Bulgaria and Romania. Most major cablecos have also launched triple play offerings.

Europe’s fibre market has out-performed cable and DSL in terms of growth since 2007, yet the region still lags behind Asia and the USA. Most of the growth in FttH is based in only a few countries, while more than half of all connections are managed by only five operators. The rest of the region lags far behind, and new-build activity – particularly in the ten new EU member states (Slovenia being the exception) – remains low. Yet stimulated by government policies and favourable regulatory regimes, new access network deployments are now centred on fibre. The financial factors which initially restricted deployments to densely populated areas will be partly overcome during the next few years as national governments and the EC allocate funds to improve broadband infrastructure. Regulated access models aimed at facilitating competition and reducing civil engineering costs will also result in faster growth in the fibre market. Within Eastern Europe significant FTTx networks have been deployed across the region, including Albania, Russia, Estonia and the Czech Republic. FTTx deployments have a bright future in the region in coming years given the lack of extensive fixed line infrastructure in many countries.

Key highlights:

France

France is among the top three countries in Europe for fibre deployment. Since 2005, central and municipal governments have been at the forefront in pushing a national fibre strategy. Much of the market’s success has been achieved by alternative operators, which in turn has stimulated France Telecom to adopt an aggressive fibre roll-out as well as promote equal network access among providers. The August 2008 Economic Modernisation Law (EML) included a number of provisions for network sharing, and forms a key component of France’s regulatory framework designed to achieve widespread fibre deployment. As a result, the major providers Numéricable, Orange and SFR have agreed to share fibre installations between themselves and open them to other operators. Given the regulatory provisions and operator co-operation, in coming years France will retain its position as a leading fibre nation both in terms of network deployment and in effective strategies.

The UK

The UK was comparatively slow to develop its fibre sector, but considerable changes are expected by 2012 as a newly adopted regulatory regime provides operators with guaranteed returns on investments, so stimulating the business case for developing network builds. BT’s NGN, providing hybrid VDSL / FttC to up to ten million households, is expected to be supplemented by up to one million households with FttH connections in a program costing up to £1.5 billion. The regulator’s approach of removing wholesale access regulatory barriers should stimulate fibre builds in coming years, and so propel the country to the forefront f fibre infrastructure in Europe.

The Netherlands

The Netherlands is one of Europe’s top markets for both cable and fibre. The incumbent KPN and its part-owned provider Reggefiber operate a wholesale access service through their joint venture Glashart. Some of the conditions required from the Dutch regulator and cartel authority include a guarantee that other telcos have non-discriminatory access to the network at a fixed wholesale rate. The Netherlands has also benefited from innovative municipal involvement in fibre roll-outs, particularly in Amsterdam and Rotterdam. The sector has also been characterised by the wide range of non-telco activity, including the direct involvement of construction companies, individuals digging their own trenches, real estate investors and pension funds. Given these collective efforts, The Netherlands has shown the rest of Europe than FttH can be developed through the initiative of players other than the major telcos and cabelcos.

Data in this report is the latest available at the time of preparation and may not be for the current year.

The following notes provide some background to our scenario forecasting methodology:

·         This report includes what we term scenario forecasts. By describing long-range scenarios we identify a band within which we expect market growth to occur. The associated text describes what we see as the most likely growth trend within this band.

·         The projections shown in the tables in this report are based on our own historical information, as well as on telecommunication sector statistics from official and non-official, national and international sources. We assume a possible deviation of 15-20% around this data.

·         All statistics for GDP, revenue, etc are shown in US$, in order to maintain consistency within and between markets. At the same time we acknowledge that this can introduce some irregularities.