European Communications

Last update11:04:00 AM

Next gen broadband growth slows as “mass adoption” phase begins

Growth in fibre-based broadband levelled off in H1 2011, according to a new report by the DigiWorld Institute.

The global FTTx subscriber base increased by 15 percent to over 112.6 million between January and June, of which over half were FTTH/B subscribers.

Growth was driven by China, which consolidated its position as the world’s second largest FTTH/B market behind Japan.

However, the rate of growth was down markedly on the previous six months when FTTx subscriber numbers increased by 39 percent.

According to France-based Digiworld, this is due to the fact that Chinese carriers released more information about their penetration levels for H2 2010.

Oliver Johnson, CEO of analyst house Point-Topic, told European Communications that the slowdown in growth should be viewed as a blip.

“The evidence from mature markets in particular is that people are prepared to pay for FTTx. We are moving to a mass adoption phase,” he explained.

Russia remains the largest FTTH/B market in Europe with close to 5.2 million subscribers.

Sweden is the second biggest, but saw little progress from the previous six months and was overtaken by India in the global table.

France is the third biggest market in Europe, but is having trouble persuading broadband customers to switch to FTTH/B, DigiWorld said.

The rest of Europe will soon fall behind developing nations, the report authors added.

This trend is highlighted in the list of top FTTx providers in which Russian triple-play provider ER Telecom was the only European operator to make the top 10.

Asian operators, led by China Telecom, took seven of the top 10 spots. US-based Verizon and AT&T completed the list.

On Monday, ER Telecom announced it had 1.94 million broadband subscribers out of four million in total. It is currently building FTTH networks from scratch that will provide 100Mbps in 42 Russian cities.

“ER is one of the few telecom companies that is growing organically by rolling out its own networks,” claimed Mikhail Vorobyev, the company’s deputy general director of commerce, in a statement.

“That is why we can say that each of our four million subscribers has chosen the quality of services and support provided by our company,” he added.

This strategy chimes with what Johnson believes operators need to be doing if they are to profit from next generation broadband.

First, they need to be more analytical in deciding where to install networks that will deliver a return on investment. Said the CEO: “Build it intelligently and they will come.”

Carriers continued to roll out infrastructure in anticipation of future demand, according to DigiWorld; by June last year, the number of homes "passed" increased by 47 percent to over 361.7 million.

Second, a focus on customer service must take precedence. “This is increasingly important as competing services continue to proliferate," said Johnson. "Customer service needs to continue to move up the list of priorities at operators.”

However, as the latest financial results from TeliaSonera demonstrate, seeing improvements to the bottom line is not yet a reality.

The Sweden-based operator’s broadband services unit registered an eight percent decrease in net sales during 2011 and a seven percent fall in EBITDA.

Nevertheless, Johnson believes operators just need to be patient. “FTTx will be dominant technology over next five years,” he said.

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