Hartwig Tauber, Director General, FTTH Council Europe
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1 When public money is invested, there must be a future-proof solution, which is FTTH, when it comes to bandwidth capacity, speed, security and scalability. Hartwig Tauber, Director General, FTTH Council Europe 1
2 FTTH in Europe One goal, 28 paths Scan for mobile reading Despite the region s ongoing financial difficulties, the FTTH Council Europe predicts that in the next five years the number of fiber-to-the-home/building (FTTH/FTTB) connections in Europe will double from the 2013 figure of 77.8 million. Groundbreaking applications and services have been developed across a wide range of fields, from e-health to online gaming. Hartwig Tauber, Director General of the FTTH Council Europe, answered our questions about the big picture. By Linda Xu Ambitious goals WinWin: The Digital Agenda for Europe has set a clear target that by 2020, half of European households should enjoy ultra-broadband connections of 100Mbps or greater. Such a high penetration would require almost ubiquitous availability. How can FTTH be leveraged to deliver those services? Hartwig Tauber: The targets concerning broadband entail universal availability of fast broadband at speeds of 30Mbps or more, and at least 50% takeup of ultrahigh-speed broadband services of at least 100Mbps. Some European national governments have allocated funding to help meet these targets, particularly for rural and lowincome areas where it is less attractive for private players to deploy new broadband infrastructure, but when public money is invested, there must be a future-proof solution, which is FTTH. The FTTH Council believes that FTTH is the key to developing a sustainable future, as it is now widely acknowledged that it is the future-proof technology when it comes to bandwidth, capacity, speed, security and scalability. What does 100Mbps mean for end users? A 100Mbps connection, over ten times the average broadband speed in most European countries, would make it possible 2
3 The European FTTH market is still playing catch-up. By the end of 2013, total FTTH/B subscribers exceeded 10 million in North America and over 80 million in Asia-Pacific, compared with 28 European countries 7.8 million subscribers. to download an entire music album in five seconds, a television show in 30 seconds and a high-definition movie in just seven minutes. However, only 2% of Internet users in Europe are currently able to enjoy such ultra-high speed. The 100Mbps connection speed should be defined as not only the downlink speed but also the uplink. Such ultra-fast broadband speed over FTTH enables services and applications such as healthcare and security which require ultra-high quality and reliability to work better, on a massive scale. The European FTTH market is still playing catch-up with the two leading regional markets. By the end of 2013, total FTTH/B subscribers exceeded 10 million in North America and over 80 million in the Asia-Pacific, compared with 28 European countries 7.8 million subscribers in total. That s why the FTTH Council Europe believes that we really need to make decisions now to strive towards fiber rollout more aggressively. Otherwise, we will lag far behind. Patchy growth in Europe WinWin: Fiber strategies across Europe are diverse; how do you see the deployment of FTTH progressing? Tauber: There is not a single European market. Take the European Union as an example and you have 28 markets. The outside world is normally under the illusion that once the European Commission makes a proposal, you have a fully-regulated European market. However, each of the markets has a specific history and specific way for how liberalization of the market is implemented. It has different segmentations. We have markets that have invested in mobile for a long time, like Austria. Others have done strong investment in the fixed lines, such as the Nordics. That s why the FTTH Council Europe thinks that there should be a very positive framework for broadband and fiber investment. According to our latest released statistics, there was a total of around 320 FTTH/B projects in EU39 countries, including CIS countries, by the end of Lithuania, Latvia and Andorra all take the first leading place of FTTH/B coverage with 100% and Portugal enjoys the second (67%). Both Turkey and Spain witnessed the highest growth rates. Russia has been the largest market in terms of the absolute number for two consecutive years via considerable subscriber growth (over 1,4 million), followed by Turkey, France and Spain. However, the traditional economic jumbos such as France and Italy languish at the bottom of the ranking. Germany and the U.K. are still missing from the ranking. In order to further drive the FTTH rollout, there should be some understandings on the policy side. We desperately need regulatory certainty from policymakers so that we can stick to our fiber deployment plan. If operators invest in fiber, their funding should be secured for the long-term, and the market can grow more prosperously. Now, we have the Nordic countries that are dedicated to fiber even in rural areas. WinWin: Over the last six years, approximately EUR17 billion has been committed to fixed networks annually. That s a lot of money; how can telcos guarantee reasonable ROI? Can you give us an example? Tauber: EUR17 billion sounds huge, but if you compare it with how many kilometers of highway you can build with EUR17 billion, you realize that it is not much. Investment in broadband infrastructure is much lower than in many other forms of infrastructure. Every year, there is EUR24 billion invested in fixed and mobile networks. Operators claim they have done a lot of new construction, so the question is whether the real investment is used in upgrading networks or just maintaining the existing ones. Here comes a successful example. Stokab, a municipallyowned passive fiber infrastructure provider in the city of 3
4 Our current problem is that many of the incumbents owned by shareholders are not interested in long-term development. They want to see high dividends and high shares instantly. Stockholm, was estimated to have garnered economic gains of at least EUR1.9 billion. For nearly 20 years, Stokab invested and expanded open, competitively-neutral fiber connections for all. It is seen as a model of municipal fiber deployment with virtually no public subsidies, and has led to competition in the delivery of telecom services in Stockholm. Telecom operators can lease and design their own fiber networks without having to make costly investments or lease from a competitor. Today, leasing fiber in Stockholm costs less than half (sometimes much less) than in other capitals around the world. This means lower costs not only for operators but also for all enterprises that have a need for fast and reliable communications. Lower costs have also driven adoption of new superfast broadband services like healthcare in the city and have helped the city administration reap significant benefits, thanks to its e-government services. As a result, Stockholm now boasts the world s largest and most well-known open city network for broadband communications. Over 90% of the city s households are connected and essentially 100% of the companies. It took Stokab more than five years to generate positive cash flow. WinWin: What factors have restricted the growth of the FTTH market in Europe? Tauber: Our current problem is that many of the incumbents owned by shareholders are not interested in long-term development. They want to see high dividends and high shares instantly. As such, the FTTH Council Europe established a special taskforce for investors two years ago. We bring typical institutional investors together who already have invested for the long-term to share experiences and explore business models. Today, typical incumbents have a vertically-integrated approach. The incumbents are not just building fiber networks; they have everything from fiber service to operational offerings. For them, the lowest layer (the physical infrastructure) cannot lose value immediately and can be used for many years. That s where they want to invest. Fortunately, some incumbent operators have already taken steps for fiber rollout. For instance, Portugal Telecom is in the forefront of fiber deployment, having already covered 46% of the country s population. Most of the markets just concentrate on the incumbent operators. But when we look at the Nordic market, the big fiber players are not the incumbents but the neutral fiber players such as Stokab and utility companies, because they more easily make the long-term investments. In many cases, if the incumbents would like to invest in fiber, there should be a positive environment on the political side. Incumbents in one country find fiber is not an option in their home country, as it is too expensive. In another country, their subsidiary builds fiber networks extensively. The typical example is Deutsche Telekom. In Germany, they are in the slow lane of fiber adoption, while its subsidiaries in Macedonia and Hungary have 4
5 We don t see real competition between mobile and fixed lines. The more mobile you use, the more fiber you need. If you want to build LTE anywhere, delivering 100Mbps to users, it needs base stations everywhere connected to fiber. deployed a lot of fiber. In summary, incumbents can t be the only ones building fiber. We need to understand how incumbents can adopt fiber in a way they need in different environments, because they need to have shareholders investments on their sides. You can t have one without the other WinWin: Huawei envisions a world enabled by ubiquitous broadband, and some believe that mobile access will be the dominant factor. What is your take on that? Tauber: We love mobile, because mobile is part of our life and we always use smartphones and tablets. We don t see real competition between mobile and fixed lines. The more mobile you use, the more fiber you need. If you really want to build LTE networks anywhere, delivering 100Mbps to the end users, you need base stations everywhere connected to fiber. Besides, at home, you will not connect your 4K TV set or PlayStation 3 to a mobile connection. Even at home, most people are starting to build their own wireless networks with wireless routers. This only works if the fixed network to their home is fast enough. As in my case, when my daughter, my son and I start to use tablets and watch something streamed, the whole network breaks down if I don t have a decent connection, so it is really a complementary relationship. Mobile and fixed networks are equally important. WinWin: How do you see FTTH development over the next five years? Tauber: I ll start with the buzzwords, such as e-learning or e-health. We have talked about them for 20 or 25 years. They didn t really takeoff, because the network quality was too poor. Now with fiber networks, e-care robots that can help elderly people stay at home longer as they can get remote support through them. Similar experiences also happen in many other services. If you look back through the last ten years at what we had with broadband service, there wasn t YouTube, Facebook, or Instagram available, where we could upload our videos or movies. Now, we have completely different ways of using broadband. We talk about infrastructure like smart cities, smart regions, and autonomous car driving. People will see all these enabled with wireless connection. But how do you see the offloading of wireless traffic? You need fiber again. You need fiber everywhere. One future service that will definitely drive high traffic is the new 4K ultra-high definition content. I was at the Consumer Electronics Show in Las Vegas this year and made a quick calculation on the spot. If I need to download an 80GB ultra-high definition film, I need to wait for three days with DSL connection; it is not ondemand at all. With fiber networks, the experience will be greatly enhanced. Currently, there are several markets moving forward, including the Nordics, Spain and Portugal. We believe that we will be successful in convincing the decision-makers. It s important for Europe to decide the right solution and like our President said, Do it once, do it right. Then we will accelerate fiber rollout. Everybody knows fiber rollout is a protracted process, including the decision phase, preparation phase and implementation phase. Only when you get to the construction stage does the rollout really get started. Editor: Jason jason.patterson@huawei.com 5
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