FTTH versus LTE : Friend or Foe

1. FTTH vs LTE : Friend or Foe
Dr.Ir.Joko Suryana
Lab of RadioTelecommunications and Microwave
STEI-ITB
Reference : Delta Partners and other sources from internet

2. Outline
• FTTH Fixed and Mobile Operators
• LTE for Fixed and Mobile Operators
• Basic Strategy Doing FTTH and or LTE Businesses

3. FTTH for Fixed and Mobile
Operators

4. FTTH Drivers: Fixed vs Mobile Operator
• The data revolution is pushing fixed and mobile operators across
developed and emerging markets to roll-out FTTH/B as customers
use video and cloud services across multiple devices.
• Fixed operators facing stable or declining revenues and increasing
operational costs (driven by legacy services and technologies) have
embarked on comprehensive transformation programmes .
• Meanwhile, mobile operators are also considering (and in some
cases already rolling out) FTTH/B.
• In developed markets, the rationale is to defend against incumbents.
• In emerging markets however, the rationale is to capture untapped
growth potential in the home and SME segments and to optimise
investments in LTE networks (reducing macro sites) by enabling a strong
converged offer.

5. FTTH/B Drivers: Fixed vs Mobile Operator

6. FTTH/B Drivers: Fixed vs Mobile Operator
• Fixed Operators :
• China, Hong Kong, Japan, the USA and EU and GCC countries but are also in
progress in countries including Brazil,Colombia and South Africa.
• Mobile Operators :
• In developed markets, the rationale is to defend against incumbents:
Vodafone Portugal
• In emerging markets :Turkcell, Mobily, Maxis Malaysia and MTN in South
Africa and Nigeria

7. Fixed Broadband Operators
• Wealthy countries including South Korea, Hong Kong and the UAE already
have high FTTH penetration as a percentage of fixed broadband
connections
• While countries such as China (the largest country by subscribers),
Lithuania, Romania and Bulgaria are gaining prominence through the
support of strong government incentives
• According to NetIndex, five of the world’s top ten cities by average
downlink speed fall within Lithuania, Bulgaria or Romania, the others being
Hong Kong, Singapore, Seoul andTaipei.The top 30 ranking includes cities
in Russia, Latvia, and Portugal, as well as from some other developed
countries such as the Netherlands, Denmark, Sweden, Japan, France and
UK.

8. Fixed Broadband Operators
• Notably, there are no cities in the USA , Germany or Italy.
• It comes then as no surprise that Google is trying to heat up
competition forAT&T,Verizon and Comcast by rolling out
FTTH/B in Kansas City and Austin with other cities being
announced.
• Just one week after this announcement, AT&T announced
their own 1Gbps FTTH rollout in Austin, suggesting that it is
indeed feeling the competitive pressure.
• There are already more than 100 million FTTH/B subscribers
in the world, of which more than 65% are in Asia and more
than 7% are in EU27 countries

9. Fixed Broadband Operators

10. Mobile Operators
• Furthermore, despite the high investment required, FTTH/B
rollouts are not the exclusive domain of fixed incumbents.
• Evidence shows that simultaneous, competitive rollouts are
occurring in many markets, with mobile operators such as :
• Vodafone in Portugal
• Turkcell inTurkey
• Mobily in Saudi Arabia
• Etisalat and MTN in Nigeria
• Vodacom and MTN in South Africa

11. Mobile Operators

12. FTTH/BTake up Rate
• The take-up achieved (customers as a percentage of homes passed)
shows that customers are welcoming fibre services.
• early FTTH/B rollouts have secured a take-up rate of 15-30% within four years
of rollout (e.g.Verizon,Turkcell Superonline) and 35-70% within eight years of
rollout (e.g. Altibox, HKBN).
• This high take-up of FTTH/B is despite the ability ofVDSL2 and cable
(DOCSIS 3.0) to deliver the bandwidth required for most services.
• This is a function of the superior quality-of-service provided by fibre
connectivity (GPON/NG-PON2 and Active Ethernet) which permits:
1. higher downlink and uplink bandwidths which are necessary to cope with
simultaneous use of multiple devices (HDTVs, tablets, smartphones, games
consoles, etc.)
2. lower latency which is generally considered essential for real-time and cloud
services
3. an easy (and cheap) path for future technology upgrades, ensuring products
remain competitive.

13. FTTH/BTake up Rate

14. Market Share Evolution: FTTH/B rollout
• Although still in the early stages, evidence suggests that operators
rolling out FTTH/B are gaining market share and, more importantly,
growing revenues.
• PortugalTelecom’s andTelefonica’s Q4’12 results in their home countries
show positive trends in their respective Meo and Fusion services

15. FTTH/B Investment
• Most fixed incumbents in developed markets have been hesitant to roll-out
FTTH/B due to the significant investment required to compete with the existing
coverage of cable operators (typically more than 60%-70% of homes).
• Investors also have doubts: a recent report by Goldman Sachs onVerizon’s US fibre
rollout concluded that the business case only achieves free cash flow breakeven in
the longer-term (over five years) and returns negative cumulative NPV over the
first ten years of investment.
• The economic reality is that FTTH/B investment varies from US$600-2,000 per
home connected.
• For a typical greenfield rollout, the investment ranges from US$800-2,200, of
which trenching and in-building or in-community cost represents more than 70%.
• The average FTTH/B revenue per line is only US$17 higher than the average DSL
revenue per line (according to statistics from the FTTH Council Europe).

16. FTTH/B Investment

17. Key Success Factors
• Commercial
• 4/5P offering withVAS for Residential and SME
• Pre-registration and cross-selling to reduce risk
• Customer experience driving operational requirements
• Network and operations
• Network rollout is geo-focused, and considers economics and
competitors' rollout sequence
• Network rollout leverages existing infrastructure
• Network technology/capacity is ready for bandwidth competition
• Operational efficiency focus to optimise return on investment

18. FTTH/B Service Offering
• Broadband Services :
• position fibre as the premium technology for broadband offer.
• Voice is always present in incumbent offers to enable disconnection of the PSTN
services.
• Pay-TV is also fundamental, in particular when competing with an established
cable operator.
• More than 85% of FTTH/B connections include voice services and more than 65%
IPTV services.
• Content andVAS :
• Content andVAS associated with operator platforms and cloud are essential for
maximising take-up by further differentiating fibre services from the competition.
• FMC :
• Bundling with mobile services further accelerates take-up through additional
discounts and the enablement ofWi-Fi offloading for tablets and smartphones

19. FTTH/B Service Offering

20. FTTH/B Service Offering

21. Guidelines for Rolling Out FTTH/B
• Fixed incumbents have four key considerations in terms of network
rollout:
• Greenfield deployments
• Network upgrades
• Deployment efficiency
• Legacy network decommissioning
• For a mobile operator or alternative fixed operator, the only relevant
areas of consideration are :
• Greenfield deployments
• Deployment efficiency.

22. Guidelines for Rolling Out FTTH/B

23. LTE for Fixed and Mobile
Operators

24. Fibre killed DSL in the metros :
Will LTE finish it off everywhere else?
• Key players in the US market seem to think so: together with
Verizon discontinuing naked DSL while planning to have LTE
deployed across the entirety of the 3G network by 2014.
• AT&T’s CEO Randall Stephenson admitted that DSL is an “obsolete
technology, which is slowly being replaced by wireless and fibre”.
• In November 2012 AT&T has decided to drop DSL, as the company
believes that an all-IP network is the path to more profitable future.
• But the US market is fairly peculiar: cable is the incumbent in most
areas, even rural (cable has ~40% market share in the broadband
residential market), and offers faster speeds than the legacy DSL of
Verizon andAT&T.
• In these areas LTE is a viable alternative, given the technology’s
superiority and its capability to provide high enough speeds to serve the
Home and synergies withVerizon’s and AT&T’s mobile businesses.

25. Fibre killed DSL in the metros :
Will LTE finish it off everywhere else?
• Beyond the USA, cases of LTE substituting DSL for last mile
connectivity are still few and far between.
• One of the few worth noting is Australia, whereTelstra is
complementing its newly launched NBN’s fibre network with LTE as
an alternative to ADSL+ to serve the traditional fixed broadband
market.
• To do so, it is extending its LTE footprint to two-thirds ofAustralia’s
population by the end of 2014, with the objective to capture a
segment of the traditional fixed broadband market.
• AT&T,Verizon andTelstra’s thinking is understandable: LTE
provides advantages over DSL and can be a viable alternative
even to FTTH, as long as some conditions are met.

26. The killing zone for DSL
• Low density - rural deployments
• LTE can provide speeds similar to
DSL but they can be variable and
difficult to guarantee given the
customer mobility and the fact that
bandwidth is shared amongst
customers in the same area.
• Other elements such as topography,
buildings, indoor vs. outdoor
coverage and weather can also
degrade LTE speeds
• On the other hand, DSL speeds are
usually dependent on the quality of
the copper and backbone
contention, together with the
distance from the exchange, both of
which can be predicted.

27. The killing zone for DSL
• Availability of low spectrum
frequency
• Spectrum plays an important role in
determining the benefits of LTE vs.
DSL, both from a QoS and financial
point of view.
• If LTE deployed on lower spectrum
(e.g. 700 / 800 MHz), it can deliver
speeds similar to DSL in sparsely
populated areas
• higher spectrum deployments (generally
more suitable for capacity purposes than
coverage) will generally deliver poor
indoor QoS.
• In fact, the majority of the examples of
rural LTE deployments mentioned
beforehand (e.g.Verizon,Vodafone
Germany,Telstra) leverage on low
frequency spectrum bands.

28. The killing zone for DSL
• Greenfield deployments /Too costly DSL infrastructure
• In greenfield deployments operators would never consider deploying DSL at
this stage, as Fibre and LTE are more modern and cost efficient technologies.
• If the number of subscribers on DSL is not high enough, LTE can easily become
a more profitable option.

29. The killing zone for DSL
• Low usage customers
• LTE packages have affordable entry prices and, for comparable speeds, an LTE plan (dongle/router)
carries a minimal premium (less than 20%) over DSL or is occasionally cheaper.
• Contrary to fixed broadband, LTE products tend to be volume-based, having caps often below 10 GB,
which is less than the average household consumption. For instance, in March 2011, AT&T reported
that its DSL customers used an average of about 18GB per month, and more recently 21GB.While
Cisco forecasts worldwide broadband consumption to more than triple by 2015, reaching 69 GB

30. LTE and Fixed to Mobile Substitution
• LTE has become the fastest growing wireless technology so far and
has started a wave of fixed-mobile substitution, but its effect may
not be so radical nor so imminent, due to a number of factors,
including:
1. The intrinsic limitations of wireless technologies
2. The lack of availability of low frequency spectrum to deploy LTE
effectively
3. The wide-spread presence of competitive DSL infrastructure in mature
markets
4. The need for usage caps.

31. Operator Strategy
• However, LTE still remains a viable alternative in a number of cases:
1. Mobile-only players that want to tap into the Home market (both in
rural and urban areas).
• LTE offers a new potential revenue stream to mobile-only operators
without fixed infrastructure. Mobily is a fitting example.Contrary to the
other two players in the market, it started its LTE deployment in smaller
cities and offering “millions of [remote] home users across SaudiArabia
access to fast broadband speeds that will exceed speeds of a fixed line
connection.
2. Mobile-only players already serving the Home market through
partnerships with fixed line players, but who want to cut the cord with
their fixed partners for last mile connectivity.
• LTE is likely to be cheaper than leasing DSL from the fixed incumbent – see
the case ofVodafone Germany where its CEO Friedrich Joussen believes
LTE is a much better investment than DSL as it avoids paying 10 Euro per
month to DT for every last mile fixed-line connection leased

32. Operator Strategy
3. Fixed providers wanting to expand into rural areas currently not covered by
fixed technology
• Fitting case isVerizon’s program called “Connecting Rural America”, aimed at
providing home connectivity via LTE to the 19 million rural Americans who don’t
have Internet access at home
4. Fixed providers wanting to boost their residential market penetration by
offering lower-end urban /sub-urban areas an affordable broadband solution
• Tele2 in Sweden is the perfect example where the operator has a small share of
the DSL market (~10%), and decided to launch LTE for the Home as a way to
elbow out DSL rivals, providing greater speeds at more affordable pricing

33. When is LTE a suitable replacement for DSL to
address the Home?

34. Basic strategy

35. Choosing A Network Investment Strategy
• When deciding on a strategy for investing in tomorrow’s telecom networks,
we need to resolve four interlinked questions.
• The answers to these questions can help top managers decide which
network technologies offer the best return on investment (ROI) and how
their companies can capture the most powerful fixed/mobile network
synergies.
1. How far should I roll out fiber-to-the-home and curb?
2. Can I use LTE as a last-mile substitute?
3. Should I roll out 4G LTE rapidly, or push 3G HSPA+ to its limit?
4. Can technologies such as femtocells andWiFi effectively reduce mobile network
investments?

36. Choosing A Network Investment Strategy

37. Choosing A Network Investment Strategy
1. How far should I roll out fiber-to-the-home and curb?
• Fixed-line industry has moved quickly to meet consumer bandwidth needs, and have
progressed from ISDN to DSL to ADSL/ADSL2 toVDSL and FTTH
• FTTH installation costs per home could vary three- to five-fold depending on the “density” of
the housing involved and the accessibility of the horizontal and vertical ducts that installers use
to thread fiber cable into homes.
• In locations where fiber makes no economic sense, operators can expand the performance (and
useful life) of their traditional copper networks in a number of ways.

38. Choosing A Network Investment Strategy
2. Can I use LTE as a last-mile
substitute?
• Wiring up the last mile to a
customer’s residence can be
expensive in rural areas.
• One alternative is to use mobile 4G
LTE technology to wirelessly bridge
that last mile.
• LTE not only has the potential to
lower network costs, but it also offers
better speeds at longer distances
from the base station than ADSL2+.
• LTE could substitute for fixed
networks in 10 to 30 percent of
households. However., LTE has yet to
become economically feasible for
high bandwidth applications such as
IPTV, for instance.

39. Choosing A Network Investment Strategy
3. Should I roll out 4G LTE rapidly, or push 3G HSPA+ to its limit?
• Planning new network technology roll-outs requires leaders to trade off cost
against performance.
• Operators seeking technology leadership often make the leap from basic
HSPA to LTE, while those who are quick to follow have the option to upgrade
current networks to HSPA+ and can only switch to LTE at a date.
• However, even for mobile leaders, market broadband demand and the
availability of 4G frequencies will ultimately trigger a decision LTE roll-out.

40. Choosing A Network Investment Strategy
4. Can technologies such as femtocells and
WiFi effectively reduce mobile network
investments?
• Ballooning mobile data consumption could
make LTE economics less feasible in the mid-
to long-term.
• To reduce the escalation of data traffic,
operators can explore opportunities to
offload traffic to public WiFi networks.
• Along withWiFi, femtocells and picocells
offer an attractive option for limiting
network capacity investments.
• Operators could offload a significant amount
of mobile network traffic, since most
wireless traffic (up to 70%) occurs in places
that have fixed-line connectivity options
nearby.
• WiFi, femtocells, and picocells could
theoretically double network capacity at a
fraction of the cost of adding new network
sites.