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Being Second is a Disaster in FTTH Deployments

Local operators, represented by Turkcell Superonline, TTN, Turkcell mobile, Vodafone and Turknet were joined by speakers from Jersey Telecom, analysts and consultants; resulting in a highly successful event. There was a clear consensus from the discussions that FTTH is the only option for delivering super-fast broadband, a point to which we shall return in a future post. However, it’s equally clear that it’s both a difficult journey and cannot be a universal solution. And, there’s little reward for coming second.

According to Richard Jones, from consultants Ventura Team, limitations to mobile and alternative technologies mean that FTTH is the only future-proof option. But the challenges in deploying FTTH mean that it’s likely to be restricted to metropolitan and urban areas with the right characteristics. How these characteristics are identified and analysed is the material that supports a business case. It’s true that for areas which do not pass the test and for which a business case cannot be created, alternatives will have to be deployed. However, despite technological advances, these neither approach the speed of FTTH solutions nor provide a clear path to support future evolutions.

Of course, each situation is different and there are numerous factors to consider. Some of these are quite surprising. It might be assumed that the cost of deploying a connection is roughly the same for a given area. However, this is not the case. For example, the depth to which a road may have to be dug to lay fibre may be critical. Equally, the distance from the road to the premises is a factor. Similarly, while the target cost of connecting each customer premise may be supported by rigorous analysis, that cost is likely to change as deployment proceeds. High at the start of the project, it will fall as rollout progresses. Not accounting for this variation in the planning may make a considerable difference, quite apart from estimates of customer demand and uptake.

One thing is clear, however. Unless the infrastructure being constructed is for open access or there are wholesales arrangements in place (regulated or otherwise), being second means you lose. Once infrastructure has been laid in one location, it’s extremely unlikely that an alternative operator can do the same at a later time. They have already lost the race.

What this means is that operators planning FTTH deployments need to hurry up. Yes, they need rigorous planning, analysis and so on, but delaying the decision making process may allow competitors to seize the initiative. FTTH seems to have the characteristics of a natural monopoly. Private operators are seizing the initiative to cherry-pick deployment areas, ensuring that they address those areas that are likely to yield the best return first. This is only to be expected – but if anyone expects the digital divide to narrow, they had better think again. Private operators need to make a profit and will not risk resources – the only way to ensure the wider coverage that governments and economists tell us is desirable will be with heavy public subsidy. Whether that is available is another matter entirely.