FTTH Market & Financing of FTTH

Hartwig Tauber, Director General, FTTH Council Europe

Workshop on Municipal Fiber Networks

FTTH Council Europe

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FTTH Council Europe

Our Vision: A sustainable future enabled by Fibre to the Home

Our Mission

• To accelerate FTTH adoption through information and

promotion in order to enhance the quality of life, contribute

to a better environment and increased competitiveness

Organisation

• Founded in 2004, non-profit industry organisation

• More than 150 member companies

• Industry only – no operators

FTTH Conference 2012 14-16 February 2012, Munich, Germany

www.ftthconference.eu

Europe in the slow lane?

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Digital Agenda of European Commission

• By 2020…

• At least 50% of the households in European Union will use broadband connections of 100 Mbit/s or more

• All households in European Union have broadband connections of

at least 30 Mbit/s available

• Published in Q2/2010

• High priority in some European countries

FTTH Global panorama mid-2011 – Total subscribers

4.6 M

46 M 9.5 M

… and FTTH continues to grow

5.6 M

0.3 M

FTTH Global Ranking – mid-2011

FTTH European Ranking – mid-2011

New FTTH/B subscribers 1H11

Source: IDATE for FTTH Council Europe

• Top 5 countries

• France

• Portugal

• Bulgaria

• Netherlands

• Spain

+87,300

+71,000

+69,000

+43,000

+41,149 (Russia: + 964,000)

• EU is not one single telecommunication market (like US)

• Each member state has its specific broadband market with different players involved. Examples:

• Countries with strong utility involvement: e.g Sweden, Denmark

• Countries with strong competition on last mile: e.g. The Netherlands, France

• Countries with strong government involvement: e.g. Portugal, Slovenia

• Countries with strong incumbent and competition mainly on unbundling basis: e.g. Germany, UK

• Countries with main focus on mobile market: e.g. Austria

• There are no real „pan-European“ players. One operators often acts very different in different countries, e.g. Deutsche Telekom or France Telecom

Analysis of European Broadband Market

• High number of former Easter European countries in European ranking: • Baltic states

• Slovenia

• Slovakia

• Bulgaria

• Rumania

• Czech Republic

• Three main reasons:

• Need for building or rebuilding communication infrastructure (e.g. Lithuania)

• Strong involvement of Western European Operators (e.g. Slovakia)

• Dynamic market with many new players (e.g. Bulgaria)

FTTH in Eastern Europe

European Region FTTH Forecast

Source: Heavy Reading for FTTH Council Europe, February 2011

Note: Households connected directly to fibre (FTTH) and apartments connected via basement fibre termination (FTTB)

18923509

5519

8265

11065

14476

19430

25665

32604

0

5000

10000

15000

20000

25000

30000

35000

2007 2008 2009 2010 2011 2012 2013 2014 2015

Co

nn

ecte

d H

ou

seh

old

s, 000s

Europe in Context: the Race to Fibre Maturity

Source: Heavy Reading for FTTH Council Europe, February 2011

Country 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

After

2020

Japan

Korea

China

Taiwan

Australia

India

USA

Canada

Brazil

Russia

France

Germany

Italy

UK

Spain

Sweden

Netherlands

Portugal

Switzerland

Denmark

EUROPEAN UNION

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Note: chart shows the year in which each territory

is expected on current trends and plans to

achieve “fiber maturity”, defined here as 20%

household penetration of FTTH or FTTB

Financing of FTTH Networks

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• FTTH is an infrastructure financing needed

• Financing of deployment of end-user fixed network is a new scenario for all players

• Typical misunderstandings:

• FTTH financing does not work because ROI is more than 4 years basic misunderstanding: FTTH is an infrastructure

• FTTH is too expensive (I) investments in Telecommunication infrastructure in Germany was 82,7 billion EUR from 1998-2008. This is 2.000 EUR/household

• FTTH is too expensive (II) no need for expensive frequency spectrum fees. In Germany operators paid 3 billion EUR just for frequency-licences of the “digital dividend” in 2010

• FTTH investments are compared with interim investments in “alternative” technologies FTTH is the end game solution, no expensive “migration path” necessary

• Situation changes if FTTH is understood as infrastructure like railroads, streets, water supply or sewers

The Challenge

Different Players – Different Requirements

Municipalities & Utility companies

• Long term investments

• Regional projects

• Project costs relatively small

• Business case based on open access in many cases

• Lack of experience in planning, operating and marketing telecommunication networks

Alternative Operators

• Enter a competitive market

• Limited cash flow

• Challenge of low equity

• Short-term planning

• High risk

• Good experience in operating and marketing telecommunication networks

Incumbents

• Own a telecommunication network already

• Limited by „shareholder value requirements“

• Short-term (and sometimes mid-term) planning

• „big and slow“

• „bound“ to national perspective

Different Players – Different Requirements

Institutional Investors

• High volume

• Stock exchange listed companies only (with some exceptions)

• Require a „professional“ business case

• Some understanding of FTTH

Banks

• Low volume

• Risk avers (Basel III)

• Lack of understanding of FTTH

Risk Capital & Business Angels

• Medium volume

• Need to be addressed directly

• Need for a good „business story“

• Short term investments

• Lack of understanding of FTTH

EIB

• High volume

• Official „role“ to finance FTTH

• Good understanding of FTTH

• „slow“

• Trigger private share

How to Match?

Networks

• Municipalities & Utility Companies

• Alternative Operators

• Incumbents

Financing

• Institutional Investors

• Banks

• Risk Capital & Business Angels

• EIB

• Create understanding &

increase awareness

• Neutral information

• Political agenda

• Marketing

• Lower risk

• Eurobonds

• PPP

• Cooperation models

• Public investment

• Innovative approaches

• Investment aggeregation

• „multiple usage“ of

investment (e.g. for LTE)

The Impact of FTTH

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Example of Hudkisvall

• Hudkisvall: – Population: 15.000

– Location: 300 km North of Stockholm

– FTTH-Network decision: 2004

• Impact: – Population decline stopped, partial increase

– Increase of number of businesses: 6-14% per year

– Two high-growth businesses founded premises in Hudkisvall

– Old@home Ehealth-project started

– National research instituted stared subsidiary

Example of ARGE Glasfaser Waldviertel

• Three municipalities (Bad Großpertholz, St. Martin, Großschönau) in rural Austrian area

• Start of deploying new sewers network in 2006 • Mayors decision: deployment of FTTH in parallel

– With support of local population – Against incumbent and regional politics (Bundesland)

• Impact:

– 100 Mbit/s parallel network available including triple play

– Young families start to move back into municipalities

– “Connected tourists” – “Sonnenplatz” – competence centre on passive

houses founded in Großschönau – Special connected homes for elderly people will

open 2012

Conclusion

Conclusion

• FTTH is the infrastructure of the 21st century

• FTTH stands for – Quality of life

– Economic leadership

– Socioeconomic benefits

• …and the basis for a competitive Europe

Thank you for your attention!

www.ftthcouncil.eu