RESEARCH FORECAST REPORT FTTx COVERAGE, CONVERSION AND CAPEX: WORLDWIDE TRENDS AND FORECASTS 2016 2021 RUPERT WOOD Analysys Mason Limited 2016 analysysmason.com
About this report This report analyses and forecasts coverage (premises passed), conversion (active connections as a percentage of premises passed) and capex for FTTx architecture and technologies during 2012 2021. It is based on several sources, including: Analysys Mason s internal research, including our core telecoms forecasts, our quarterly NGA tracker, our fixed data traffic forecasts, and our detailed modelling of the costs of technologies and deployment. Our modelling and assumptions are informed by professionals in our 12 offices worldwide. ongoing engagement with stakeholders in the FTTx market, including operators and vendors. WHO SHOULD READ THIS REPORT This report provides strategic planners with detailed and comprehensive insight into the development of FTTx in comparable markets, allowing them to understand what level and type of investment is appropriate, and where opportunities lie. For equipment vendors, construction businesses and component suppliers, it shows the scale of opportunity in FTTx. The model can also serve several other functions beyond the immediate scope of this report. It can be used to provide the costs of alternative scenarios, including different mixes of technologies, different demand profiles in different geotypes, and different completion dates. If you wish to explore these options, please contact the author. GEOGRAPHICAL COVERAGE Eight regions Western Europe (WE) Central and Eastern Europe (CEE) Middle East and North Africa (MENA) Sub-Saharan Africa (SSA) China Rest of emerging Asia Pacific (EMAP) Developed Asia Pacific (DVAP) North America (NA) Latin America (LATAM) 64 individual countries see the Forecast methodology and assumptions slide for a full list). KEY METRICS Coverage (premises passed) Conversion (premises with active connections as a percentage of premises passed) Capex (split into network and connection) Split by architecture/technology: FTTC/VDSL or G.fast FTTB/VDSL or G.fast FTTB/LAN FTTP (split by incumbent and alternative operator) Cable DOCSIS3.0 or 3.1 Note: capex is not provided for cable DOCSIS3.0 or 3.1. Analysys Mason Limited 2016 2
Contents [1] 7. Worldwide trends 8. Worldwide: Coverage growth will slow by 2021, but conversion will continue to grow steadily 9. NGA will be available to 1.3 billion premises worldwide by 2021 10. FTTP availability is increasingly dominated by emerging markets 11. Global capex will start to shift to second infrastructures and to upgrades 12. The availability of an NGA connection is fast approaching the number of households that could afford such a connection 13. The cost:value metrics of FTTP for mid-income countries are generally better than for richer countries 14. FTTC incumbents facing a new phase of investment have to balance shortterm tactics and long-term 15. There is interest, particularly in North America, in 5G fixed wireless access as an alternative to wireline NGA 16. Western Europe 17. Western Europe: Coverage will fall 12% short of the 100% target set by the European Digital Agenda by the end of 2021 18. Western Europe: Over 50% of Western European premises will have an NGA connection by 2020, but not all will be 100Mbps 19. Central and Eastern Europe 20. Central and Eastern Europe: CEE has good, inexpensive broadband, but rural areas are generally underserved 21. Central and Eastern Europe: Fixed mobile convergence may stimulate take-up 22. Middle East and North Africa 23. Middle East and North Africa: There is little incentive to invest outside the GCC markets 24. Middle East and North Africa: Lack of competition keeps fibre broadband prices high 25. Sub-Saharan Africa 26. Sub-Saharan Africa: The costs of fibre-based broadband are disproportionately high for a low-income region 27. Sub-Saharan Africa: Services are too embryonic for conversion rates to be meaningful 28. China 29. China: The focus of investment has switched to network upgrades and additional competitive infrastructures 30. China: Multi-infrastructure competition and FMC is driving prices down and take-up has boomed 31. Rest of emerging Asia Pacific 32. Rest of emerging Asia-Pacific: Where it exists, state-managed roll-out of fixed broadband has led to impressive results 33. Rest of emerging Asia-Pacific: Where investment has occurred, take-up rates have the potential to be very good 34. Developed Asia Pacific 35. Developed Asia-Pacific: Investment is now focused on new and upgraded fibre infrastructures 36. Developed Asia-Pacific: Strong traffic growth and continued take-up spur the case for further investment Analysys Mason Limited 2016 3
Contents [2] 37. North America 38. North America: Investment levels are weak in North America 39. North America: Unless prices fall, US conversion rates for FTTx will stagnate; in Canada, the regulator has intervened 40. Latin America 41. Latin America: Cable operators are already well entrenched in the main addressable markets 42. Latin America: Conversion rates remain rather subdued 43. Forecast methodology and assumptions 44. Geographical scope: Forecasts are provided for 64 countries in 8 regions 45. Definitions 46. We take baseline costs for each technology and then apply several contextspecific variables to determine total capex 47. Top-level breakdown of the relative costs of FTTx technologies: basic topologies 48. Baseline unit cost assumptions for FTTC/VDSL and FTTB/dp/VDSL 49. Baseline unit cost assumptions for FTTP/GPON 50. About the authors and Analysys Mason 51. About the authors 52. About Analysys Mason 53. Research from Analysys Mason 54. Consulting from Analysys Mason Analysys Mason Limited 2016 4
List of figures [1] Figure 1: NGA coverage by technology, worldwide, 2011 2021 Figure 2: Fixed broadband active connections, by technology, and NGA share of connections worldwide, 2011 2021 Figure 3: Conversion rates for NGA overall, and FTTP and FTTX, worldwide, 2011 2021 Figure 4: NGA coverage by region, 2013 2021 Figure 5: NGA subscriptions by region, 2013 2021 Figure 6: NGA subscriptions as a proportion of premises passed, by region, 2013 2021 Figure 7: FTTP coverage by region, 2013 2021 Figure 8: FTTP subscriptions by region, 2013 2021 Figure 9: FTTP subscriptions as a proportion of premises passed, by region, 2013 2021 Figure 10: FTTx capex, by worldwide region, 2013 2021 Figure 11: NGA affordability, availability and adoption, worldwide, 2013 2021 Figure 12: Benchmark cost per premises passed, FTTP deployments worldwide Figure 13: NGA coverage by technology, Western Europe, 2014 2021 Figure 14: FTTx capex by technology, Western Europe, 2014 2021 Figure 15: Conversion rates for NGA overall, and FTTP and FTTx, Western Europe, 2014 2021 Figure 16: Active connections per premises, by technology, Western Europe, 2014 2021 Figure 17: NGA coverage by technology, Central and Eastern Europe, 2014 2021 Figure 18: FTTx capex by technology, Central and Eastern Europe, 2014 2021 Figure 19: Conversion rates for NGA overall, and FTTP and FTTx, Central and Eastern Europe, 2014 2021 Figure 20: Active connections per premises, by technology, Central and Eastern Europe, 2014 2021 Figure 21: NGA coverage by technology, Middle East and North Africa, 2014 2021 Figure 22: FTTx capex by technology, Middle East and North Africa, 2014 2021 Figure 23: Conversion rates for NGA overall, and FTTP and FTTx, Middle East and North Africa, 2014 2021 Figure 24: Active connections per premises, by technology, Middle East and North Africa, 2014 2021 Figure 25: NGA coverage by technology, Sub-Saharan Africa, 2014 2021 Figure 26: FTTx capex by technology, Sub-Saharan Africa, 2014 2021 Figure 27: Conversion rates for NGA overall, and FTTP and FTTx, Middle East and North Africa, 2014 2021 Figure 28: Active connections per premises, by technology, Middle East and North Africa, 2014 2021 Figure 29: NGA coverage by technology, China, 2014 2021 Figure 30: FTTx capex by technology, China, 2014 2021 Figure 31: Conversion rates for NGA overall, and FTTP and FTTx, China, 2014 2021 Analysys Mason Limited 2016 5
List of figures [2] Figure 32: Active connections per premises, by technology, China, 2014 2021 Figure 33: NGA coverage by technology, rest of emerging Asia Pacific, 2014 2021 Figure 34: FTTx capex by technology, rest of emerging Asia Pacific, 2014 2021 Figure 35: Conversion rates for NGA overall, and FTTP and FTTx, rest of emerging Asia Pacific, 2014 2021 Figure 36: Active connections per premises, by technology, rest of emerging Asia Pacific, 2014 2021 Figure 37: NGA coverage by technology, developed Asia-Pacific, 2014 2021 Figure 38: FTTx capex by technology, developed Asia-Pacific, 2014 2021 Figure 47: Conversion rates for NGA overall, and FTTP and FTTx, Latin America, 2014 2021 Figure 48: Active connections per premises, by technology, Latin America, 2014 2021 Figure 49: Countries covered in this report, by region Figure 50: Definitions used in this report Figure 51: capex model outline Figure 52: Basic overview of FTTx network topologies and elements Figure 53: Baseline capital unit cost assumptions, FTTC/VDSL and FTTB/VDSL Figure 54: Baseline capital unit cost assumptions, FTTH/GPON Figure 39: Conversion rates for NGA overall, and FTTP and FTTx, developed Asia- Pacific, 2014 2021 Figure 40: Active connections per premises, by technology, developed Asia- Pacific, 2014 2021 Figure 41: NGA coverage by technology, North America, 2014 2021 Figure 42: FTTx capex by technology, North America, 2014 2021 Figure 43: Conversion rates for NGA overall, and FTTP and FTTx, North America, 2014 2021 Figure 44: Active connections per premises, by technology, North America, 2014 2021 Figure 45: NGA coverage by technology, Latin America, 2014 2021 Figure 46: FTTx capex by technology, Latin America, 2014 2021 Analysys Mason Limited 2016 6
NGA will be available to 1.3 billion premises worldwide by 2021 At 2016, emerging economies account for 72% of the world s premises; developed economies account for 28%. The burden of legacy and the disproportionately higher cost of replacement mean that developed economies have a greater mix of NGA technologies than emerging economies. Cable represents a significant part, as do copper-based access technologies. Therefore, developed economy regions occupy a higher proportion of premises passed by NGA than they do by pure fibre approaches. Figure 5: NGA subscriptions by region, 2013 2021 1 By the end of 2016, 58% of premises passed by NGA technologies will be in emerging markets, rising to 60% by 2021. The proportion of connections in emerging is about two percentage points lower, but rising at a similar rate. Figure 4: NGA coverage by region, 2013 2021 Figure 6: NGA subscriptions as a proportion of premises passed, by region, 2013 2021 1 Developed countries appear in shades of blue; emerging countries appear in shades of pink. Analysys Mason Limited 2016 9
The cost:value metrics of FTTP for mid-income countries are generally better than for richer countries Analysys Mason has collected operators estimates of cost per premises passed (CPPP) for FTTP projects worldwide. The ability to offer fibre connections for less than USD15 is dependent on this measure. Labour costs vary with income levels. However, given that for any given roll-out, there will be a significantly less-variable cost for equipment than for labour, it is striking that the cost of roll-out in low- to middle-income markets is often as low as it is. Economies of scale in some large roll-outs help to explain this (the lowest data point in Figure 12 is China Telecom), as does premises density in many cities. However, a further factor is that in lowerincome markets, planning laws can be looser, which reduces costs to overheads and also facilitates cheaper, though more visually intrusive, modes of deployment. In addition to stricter planning regulations, dispersed larger premises in affluent markets tend to be more expensive to cover, even if these properties may appear attractive from a demand side. A number of factors can explain the reasons for low CPPP in higher-income markets, but by far the most-significant of these is access to physical infrastructure: our benchmarks are capex, and the cost of shared infrastructure becomes an opex charge. Furthermore, cost per premises connected (CPPC) is variable, but does not vary exactly with premises density. Tiny rural clusters can, in this respect, be inexpensive, whereas once again suburban plots, with yards, can be expensive to connect. Figure 12: Benchmark cost per premises passed, FTTP deployments worldwide High-income, excess capex High-income, discount capex See the second sheet in the data annex for the named list of benchmarks Low-income, discount capex Analysys Mason Limited 2016 13
CONTENTS WORLDWIDE TRENDS REGIONAL TRENDS WESTERN EUROPE CENTRAL AND EASTERN EUROPE MIDDLE EAST AND NORTH AFRICA SUB-SAHARAN AFRICA EMERGING ASIA PACIFIC DEVELOPED ASIA PACIFIC NORTH AMERICA LATIN AMERICA FORECAST METHODOLOGY AND ASSUMPTIONS ABOUT THE AUTHOR AND ANALYSYS MASON Analysys Mason Limited 2016 50
About the author Rupert Wood (Research Director) is the lead analyst for Analysys Mason s Network Investment Strategies and Traffic Forecasts research programmes. His primary areas of specialisation include next-generation networks, long-term industry strategy and forecasting the dynamics of convergence and substitution across fixed and mobile platforms. Rupert regularly contributes to the international press on a wide range of telecoms subjects and has been quoted by The Times, The Economist, Business Week, Telecommunications Online and La Tribune. Rupert has a PhD from the University of Cambridge, where he was a Lecturer before joining Analysys Mason. Analysys Mason Limited 2016 51
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