the new broadband access boom -...

All Modes Lead to HomeThe New Broadband Access Boom

MONTHLY BRIEFINGSeptember 2019

CONTENTS

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Monthly Briefing: September 2019 | All Modes Lead to Home: The New Broadband Access Boom

03Introduction: The Many Flavours of Broadband

04The Winners and the Others

07It’s the Economics: When Fibre Makes More Sense than 5G, and Vice Versa

09How the Public and Private Sectors Can Help

10An Interview with Nick Green,5G Business Lead and Marketing Director, Three UK

12Additional Resources

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Mobile broadband in the form of 4G and now 5G may have been grabbing the headlines for the past few years, but in the background the fixed line broadband market has been growing steadily, driven by both regulatory imperatives and operator expansion ambitions on the supply side, and the increasing use of bandwidth-hungry applications on the demand side.

Although demand for ever higher-capacity broadband connections are often associated with entertainment services, for example high-definition video streaming or connected gaming, much of the demand for fixed line broadband connectivity is linked to the pervasiveness of digital lifestyles, as growing numbers of people require reliable Internet connectivity to support an ever broader range of applications -- remote working, financial services, medical care services, e-commerce and more – and an increasing number of devices.

Ovum, the research firm, reported that by Q1 2018, 1 billion consumers worldwide had been connected to broadband access networks. The firm forecast that the total number of broadband subscribers would top 1.1 billion by the end of this year. More than 20 million broadband subscribers per quarter have been added during the past two years.

Broadband access is an encompassing concept. Competing technologies have flourished during the past two decades. Some ride on the legacy copper PSTN networks – the various iterations of DSL technology and, most recently, Gfast – while others deliver fast Internet connections via cable networks, especially in North America. Satellite connections have also played a (limited) role.

In recent years, fibre connections running all the way to homes or buildings – collectively, fibre-to-the-premises (FTTP) -- has evolved from a niche, high-end solution to becoming a mass market proposition,

though this varies wildly from country to country. This medium promises the fastest broadband access speeds to support the most demanding of applications and, as will be evident at the Broadband World Forum in Amsterdam (October 15-17), it is still witnessing ongoing technological innovation as various flavours of passive optical networking (PON) technologies, such as XGS-PON and NG-PON2, come to market.

Meanwhile, thanks to the ascendency of 4G cellular technologies -- primarily LTE, but also WiMax – and the arrival of 5G, fixed-wireless access (FWA) is also gaining increasing, albeit still limited, traction. This option is usually associated with rural and/or under-served areas but is now becoming a viable option in urban areas where the deployment of fibre is challenging or deemed uneconomic.

In addition to the differences between technologies, what qualifies as ‘broadband’ has also been evolving. In 2010, when Finland became the first country to set out the national policy to define access to broadband Internet as a basic right, the threshold was set at 1 Mbps downlink.

The FCC has been using 25 Mbps/3 Mbps (downlink/uplink) as the benchmark to evaluate how well fixed broadband has been deployed. By way of contrast, the US regulator has adopted 5 Mbps/1 Mbps as the benchmark for mobile (LTE) data service coverage.

At the beginning of September 2019, the Norwegian government started the consultation process to make broadband access a statuary obligation by the operators, becoming the latest country to elevate or aim to elevate broadband access to the status of a legal right. Here the government proposed two sets of metrics on which to gather comments: 20 Mbps/2Mbps and 10 Mbps/2 Mbps.

The Many Flavours of Broadband Written by Wei Shi

INTELLIGENCE CONTENT MANAGER, TELECOMS.COM

INTRODUCTION

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INTRODUCTION, CONT’DIn its policy paper, titled ‘Connectivity for a Competitive Digital Single Market – Towards a European Gigabit Society’, published in 2016, the European Union’s vision included Internet access downlink speeds for all European households of at least 100 Mbps.

Sweden is the most aggressive country when setting its broadband targets. The country’s ‘Broadband Strategy’, published in 2016, defined a ‘completely connected Sweden by 2025’ in three tiers: 98% of all households and businesses should have access to a downlink speed of at least 1 Gbps; 1.9% should have access to 100 Mbps; and the remaining 0.1% should have access to at least 30 Mbps.

For any deployment of broadband connectivity to succeed, a number of factors need to be in place: There must be market demand that can be met by broadband connectivity; the technologies being used should be tried, tested and future-proof; the broadband service providers must be able to achieve a positive return on investment; and there should be a favourable regulatory environment.

Given the current market conditions impacting the suitability of the different technologies (see the next section), projected potential service uptake, and the drivers on the supply and demand sides, this report will focus on developments related to two key technologies: FTTP and 5G-based FWA.

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The Winners and the OthersThere have been plenty of debates on which broadband technology is superior, though there should be more nuance to the question than purely speed comparison. Despite the myriad of technologies on offer, with the exception of satellite, they fall broadly into two categories: fixed broadband access and FWA. Among them, the most future-ready solution, and the one that can deliver the most bandwidth, is fibre. Meanwhile, the industry, including the solution vendors and service providers, have shown high expectations for 5G-based FWA. It can be expected that the competing and complementing dynamics of FTTP and FWA will continue into the future. For the moment, and in the near future, however, the role FWA can play is still limited.

North America, in particular the US, has extensive cable network deployments, which provided the foundation for broadband connectivity using cable modems. However, in recent years, the cable broadband market has flatlined. The FCC’s ‘2019 Broadband Deployment Report’ showed fixed broadband connection through cable modems largely unchanged at 50% since 2013. Meanwhile, the uptake of FTTP-based services has been growing fast and gaining market share, primarily at the expense of copper wire-based DSL solutions. Ovum’s research in the US market shows that the install base of fibre subscribers was set to more than double from 10 million in 2015 to over 21 million in 2021.

The fastest fibre growth, and biggest user base, is in Asia Pacific. China, which, according to data from Point Topic, has contributed more than 70% of the world’s total new FTTx subscribers in recent quarters. 85% of Asia’s fixed broadband connections, and close to 60% of Oceania’s, are built on various fibre-based solutions.

Europe’s FTTP market has experienced fast growth recently, albeit coming from a low starting point. For historical reasons, Europe has heavily relied on technologies based on copper wire networks but now fibre broadband is becoming more common. The evolution from copper to fibre has been most notable in Spain in recent years. Thanks to a series of policies that encouraged competitive operator expansions, Spain moved from the mid-table position among European FTTP countries to top the table in just three years. By late 2017, national operator Telefonica claimed that it alone had laid fibre to the doors of 18.6 million households. In comparison, by 2018, among the other EU5 countries, FTTx passed 13.3 homes in France, 6.3 million homes in Italy, 3.1 million homes in Germany, and 2.8 million homes in the UK, according to research done by IDATE for FTTH Council Europe.

Europe is also showing enthusiasm for FWA. Turkcell in Turkey, UK Broadband (later acquired by Three UK), Telenor in Norway, Elisa in Finland, and Drei in Austria, to name but a few examples, have all either offered commercial service or pilot tested 4G/LTE-based FWA, with varied degrees of success. And as commercial 5G networks are switched on, an increasing number of 5G operators have chosen to include FWA-based broadband as part of their expanded service portfolios. Vodafone UK, Three UK and Switzerland’s Sunrise are among the latest to cater for broadband access needs from consumers and businesses with 5G-based FWA.

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THE WINNERS AND THE OTHERS, CONT’D

Source: Ovum

Offering 5G-based FWA is not only limited to Europe. Three of the major operators in the US -- AT&T, Verizon and T-Mobile USA -- all have included FWA in their offers. As a matter of fact, North America is expected to contribute the lion’s share of the world’s total 5G-based FWA connections by 2023, according to a forecast by Ovum: Europe will come in a distant second position.

Figure 1: Global FWA Forecast 2018-2023

2018 2019 2020 2021 2022 2023

With the copper wire-based market in decline and the cable broadband market limited in its scope for expansion, FTTP and 5G-based FWA appear to be the technologies set to underpin near-term broadband market growth — but will that trend be sustainable?

Americas Europe Middle East and Africa Asia and Oceania

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It’s the Economics: When Fibre Makes More Sense than 5G, and Vice VersaAll broadband technologies, especially FTTP and 5G FWA, will benefit customers. But the business can only sustain if it can also prove profitable for the operators.

When technology choices are being made, if the only criterion is speed comparison, fibre will win hands down. However, it is not always the most logical choice. The cost especially labour cost could run too high. For example, to connect an existing house with fibre would involve digging up the road or other public land (after multiple bureaucratic hurdles are cleared), reaching the street cabinet, then in a multiple tenant property, gaining landlord agreement to access the premise, before distributing the connection to different households, followed by indoor installation.

William Webb, a telecom consultant, calculated that, in a typical case of one-third take-up rate and 10-metre home spacing in urban areas in the UK, the cost of fibre connection per home could go up to £2,000. Assuming the wholesale price is £15 per month, the implied payback period would be more than 11 years. In suburban areas where home spacing is larger, the payback time could run as long as 20 years. This could be a difficult decision for the CFOs, considering that most telecom equipment has a depreciation span of less than 20 years. (For example, AT&T depreciates fibre over a 20-year period.)

Assuming the range to raise price is limited, the focus should be on reducing the cost, to make fibre connectivity more economically viable. This should include reducing transaction cost, in particular simplifying and automating bureaucratic processes as much as possible. It would also need regulatory changes related to access to buildings. In a recent letter to the UK government, representatives from the broadband industry demanded two specific changes: to mandate prompt response from landlords to access requests to existing buildings, and to mandate new buildings should be fibre ready.

When these conditions cannot be met, alternative solutions for broadband connections should be considered, and 5G-based FWA appears to be an increasingly attractive candidate. In most cases, the data speed delivered by 5G-based FWA should be able to reach most “broadband” benchmarks set out by the authorities, probably with the exception of the top mark set by Sweden (1 Gbps for 98% of all the households and businesses). Qualcomm shared with Telecoms.com a recent FWA trial it ran: a 25.5-metre high 5G base station using mmWave (64GHz) was set up in the middle of a 1 square kilometre polygon with 550 houses in a West European suburb, 50% of the households received downlink peak rate of 1.8 Gbps, and 80% of all the household received at least180 Mbps.

However, as with FTTx, in spite of the proven technology and the time-to-market advantage, the economics need to make sense for the FWA operators. To optimise costs, FWA operators should be able to use existing structures, for example lampposts, for masts, to reduce base station building costs. They should use wireless backhaul to connect to the core, to reduce the transport cost. Also relevant is the installation cost. The installation of customer premise equipment (CPE) and the connection to the indoor modem should be designed as straightforward as possible, so that most users would be able to handle it by themselves. On-site engineer support can then be offered as a value-added service.

Although FWA is often associated with broadband connectivity in suburban and rural areas, it does not mean it has no place in the urban markets. Nick Green, 5G Business Lead at Three UK, told Telecoms.com Intelligence that the key to make sensible decision is precise local data. The company has started offering 5G-based FWA in locations in London where fibre deployment is challenging, and has accessed the location data of more than 3,000 households in Manchester where FWA is a more suitable solution.

( See the interview with Green at the end of this report.)

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How the Public and Private Sectors Can HelpDespite the fast expansion of broadband networks, be they fixed or fixed wireless, the vast majority of the world’s population -- 6.7 billion of the world’s 7.7 billion inhabitants – still do not have a broadband connection: Indeed, about 4 billion people are not connected to the Internet at all.

But there are initiatives that can be taken by both the public sector and businesses that can help to bridge the broadband gap.

There are two approaches governments can take to encourage the expansion of broadband connectivity, especially to under-served areas, both direct and indirect.

The indirect approach involves governments setting a policy framework in a way that is inducive to business investment, but which leaves the investment, planning, building and operating of the broadband networks to the operators. For example, governments could facilitate access rights to buildings, or demand the dominant telecom operators (typically former state monopolies) to open access to their ducts and poles to competitors, or mandate that ‘dark fibres’ (fibre optic capacity that is not being used) be open to competitors that want to become virtual operators or extend existing networks. To help improve the efficiency of FWA in more sparsely populated areas, the government could relax the limit on the height of masts.

However, these policies do not always work in one direction. Telefonica stressed that precisely because it was not demanded to open its network to competitors by the regulators, rival operators were compelled to build their own networks, which helped (along with policies that enables joint infrastructure rollouts) to expedite the expansion of fibre connectivity in Spain. Therefore, the balance between policy tools is critical.

Governments may also choose to introduce rules that directly lead to the rollout of broadband access networks to all households in one way or another. They may adopt the Finnish model, which the Spanish government largely replicated, and which the Norwegian government is aiming to achieve now, by assuming a legal mandate to demand one or more telecom operators to provide ‘universal’ broadband access. This is not unique for broadband access: In most countries, when mobile licences are awarded, they will come with both geographical and population coverage obligations.

Another approach is direct monetary intervention by public bodies, through investment or subsidies. One of the best-known examples of such tools is the Universal Service Fund managed by the FCC, which has been used to support connectivity in rural and other under-connected areas in the US. In the UK, the government believes it needs £3 billion ($3.75 billion) “from whatever sources,” to help take broadband connectivity to the final 10% of the population that is currently out of reach.

The governments may also choose to directly become involved in the network building process. Sweden’s national broadband strategy has included a measure for regional and city governments to “actively contribute to the construction and maintenance of covering, robust and reliable networks, through demands made at a possible procurement.”

On the business side, precise location information is critical for service providers to be able to attract customers -- for example, FWA service should not be offered to basement apartments. Other innovative solutions may include offering FWA on unlicensed frequencies to save spectrum acquisition cost. For example, mmWave bands above 40GHz are largely unlicensed and available in many countries, and commercial equipment on this band is already available. In less populated areas, where it is hard

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HOW THE PUBLIC AND PRIVATE SECTORS CAN HELP, CONT’Dfor one single operator to provide connection while making profit, some businesses may consider building a neutral host so more operators can lease the network to provide their customised services.

In summary, some governments’ fixation on enabling ‘full fibre’ is misplaced. As Nick Green of Three UK said to Telecoms.com Intelligence, “the medium to connect does not matter, the availability does.” The regulatory framework should be geared towards encouraging operators to provide broadband connectivity to as many customers as possible in a profitable way. When this is not achievable purely through market forces, direct or indirect government involvement is needed.

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An interview with Nick Green5G Business Lead and Marketing Director, Three UK

Q: Can you tell us a bit more about your role at Three UK and why 5G-based fixed wireless access (FWA) is critical to your business?

A: I had been part of the UK Broadband team. We had been running specifically 4G fixed wireless access business, under the Relish brand, for a number of years, and become a serious player. We reached 10% broadband market share in some areas we operated. The only thing that could hold you back is scale, and that’s something UK Broadband was never able to achieve. When we became part of Three, to support Three to reach its business goals, it was apparent 4G FWA was always going to be a challenge, due to the constraints of capacity, spectrum, etc. Now we have a big opportunity for FWA in 5G under the umbrella of Three with the spectrum asset. FWA will allow Three to enter a new category to deliver to both new customers and existing customers.

At Three I’m the 5G Business Lead as well as the Marketing Director.

Q: Building 5G will need big investments, on top of the auction fees. Do you think it will pay off by focusing initially on FWA? What is the advantage to this approach?

A: The new category service, FWA, will allow us to do more than connecting mobile phones to 5G. We can get a second connection into people’s home, or broadband could be the first Three connection in the home, which will generate additional revenues for Three. True, building 5G is a big investment, but you get the interest in FWA that you will not get from mobile only offers. For example, although we have not launched 5G in our additional cities, we have the knowledge and data of over 3,000 households in Manchester that are interested in having our service. Information like this will be used to optimise our network expansion plans.

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INTERVIEW WITH NICK GREEN, CONT’D

Q: There is a strong government push for fibre connections in the UK, for example reaching 15 million homes with full fibre by 2025. Do you see that as a direct competitive threat to 3UK?

A: It can also be an opportunity. We’ve been in constant conversation with Ofcom, and FWA is increasingly recognised as a viable solution, and sometimes a better solution than fibre. We could view what we did with 4G as a practice. Now with the 5G, FWA can offer equivalent or better service to fibre. As an operator, we should always follow the business. We have tools that guarantee we only market the service to customers that we know we can provide a good service. For example, we will not actively offer FWA to customers living in basement flats, or those customers in high rising buildings that live on floors way higher than the nearest tower.

When we expand the networks to other cities outside of London, it’s all about ensuring that we create the right coverage, we have the right areas, and market to the customers what services are available. Even 5G may not always be the best answer. In a lot of cases 4G is perfectly adequate.

Q: How do you see the dynamics between FTTx and 5G-based FWA in general?

A: They both deliver fast access to the internet. For customers waiting for broadband connection, the medium doesn’t matter. The availability of service does. Often the absolute speed is irrelevant, because it depends on the demand of the applications. Most of our customers get 150Mbps to 200Mbps service and they have seen it value for money for the convenience, the quality, the ease of use and other benefits. Currently the pivot point of the marketing message is on 5G, but in 12-24 months’ time we probably would stress more the flexibility of the product. Afterall, the speed is a great way to start, but it’s the experience that keeps the customers.

Q: As a global telecom operator, will FWA be part of the 5G proposition in other Three markets too?

A: I’m not qualified to comment on other Three Group businesses. But I’ve spoken to my international colleagues. For example in Austria, Drei has done a terrific job with 4G FWA. I would be very surprised if 5G-based FWA should not be offered.

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Additional Resources

FWA Can be the Fuel for Fibre Ambitions – Huawei CTO(READ ARTICLE)

NEWS

When Fixed Wireless Access Makes Sense(READ OPINION)

OPINION

Three, Samsung and Sprint/T-Mobile(WATCH VIDEO)

VIDEO

BT Said to Plan Copper Broadband Network Switch Off By 2027(READ ARTICLE)

NEWS

FCC Allocates $20bn to Close US Digital Divide(READ ARTICLE)

NEWS

Europe Missing its Ultrafast Targets(READ ARTICLE)

NEWS

http://telecoms.com/496647/fwa-can-be-the-fuel-for-fibre-ambitions-huawei-cto/

http://telecoms.com/opinion/when-fixed-wireless-access-makes-sense/

http://telecoms.com/interview/the-telecoms-com-podcast-three-samsung-and-sprintt-mobile/

http://telecoms.com/499776/bt-said-to-plan-switch-off-copper-broadband-network-by-2027/

http://telecoms.com/498833/fcc-allocates-20bn-to-close-us-digital-divide/

http://telecoms.com/497908/europe-missing-its-ultrafast-targets/

19th Annual

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Mansoor Hanif Chief Technology Officer OFCOM

Lars Godell Vice President, Group Public & Regulatory Affairs TELENOR

João Cadete de Matos Chairman ANACOM

Agnieszka Gladysz Director, Department of Strategy & Analysis UKE POLAND

Juan Diego Otero Martin Director, Telecom Market Analysis CNMC

Erzsébet Fitori Director General FTTH COUNCIL EUROPE

Maria Cuevas Head of Research Core Networks & Services Team – 5G & Fixed Wireless Access BT

Christian Gacon VP – Wireline Networks & Infrastructure ORANGE

Paul Hjul CEO HJUL CONSULTING

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New for 2019, the Telecoms.com Intelligence team are publishing monthly in-depth briefings reports on hot industry topics, to coincide with key industry events.

If you are looking to align your company with a key industry topic shaping the telecoms.com industry, this is the perfect opportunity.

Topics confirmed for 2019 include:•• August

The role of Edge Computing in 5G •• September

FTTx: A New Lease of Life•• October

Open RAN & Connecting the Unconnected •• November

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Network Security in 5G Networks

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Monthly Briefings

New for 2019, the Telecoms.com Intelligence team is publishing monthly in-depth briefings on hot industry topics, to coincide with key industry events.

If you are looking to align your company with a key industry topic shaping the telecoms industry, this is the perfect opportunity.

Topics confirmed for 2019 include:

OctoberOpen RAN & Connecting the Unconnected NovemberDigging into Digital Transformation DecemberNetwork Security in 5G Networks

For more information on Telecoms.com Intelligence Briefings, and how we can help generate high-quality leads for your company whilst showcasing your brand, please get in touch at [email protected]

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