Monday, March 17, 2008

The EUR 100 trillion FTTH investment opportunity

FTTH is a hot topic already and it is only a matter of time before investors start realizing the true potential by launching special products or investment funds. The only trouble is, there are few FTTH pure plays in the public realm (unless you count any telco as such, because FTTH is the inescapable way forward). However, direct investments may come into play.

The Swedish Ventura Team recently reported on usage, which provided some reassurance to anybody displaying scepticism over what to do with all that bandwidth. Here is a link to the presentation sans graphics, or mail me for the original PDF.

Their main findings:
  • Nielsen's Law (available speed increases at a 50% CAGR) generally holds. The Ventura Team expects it to hold for at least another decade. This means that 100 Mb/s will be available in France in 2008, in Poland in 2012 and in the UK in 2015.
  • The mass market lags the high-end user by 2-3 years.
  • FTTH customers generate >3x more traffic. Surprisingly, the inbound/outbound traffic ratio seems to be similar to the one for ADSL networks (notwithstanding an expected P2P concentration on FTTH networks).
  • P2P and video are the most important applications.
  • Operators will need to invest and upgrade (a EUR 100 trillion wave of capital investment).
Here is a short overview of the elements of the FTTH market:
  • Benefits: social, economic, environmental.
  • Business models: PPP, separation, open access, layere model (netco, opco, servco).
  • Revenue models: pricing, revenue sharing, etc.
  • Value-added services: ranging from P2P and internet video to e-health, teleworking, monitoring and IPTV/HD/3-D.
  • Participants: network operators and service providers, vendors, construction companies, consultancies.
  • Technology: active/passive, standards, performance, components, architecture, tools etc.
  • Practicalities: plan ahead (or be behind Korea, Japan, Sweden), VDSL for interim, rights of way and construction labor availability are bottlenecks.
  • Regulation: open access, wholesale, interconnection.
The interesting thing to me is that the investment opportunities reach far beyond the traditional telco ecosystem of operators and vendors.

Even in the Netherlands, we have a very diverse range of (not all public) companies involved in what no doubt is the most important development for the next few years:


Rudolf van der Berg said...

Tim you forgot Volker Wessels Telecom as a big construction player

Andrew Schmitt said...


There is little hard data on how FTTH drives bandwidth usage increases. Japan is the only place with good detailed data and it contradicts what you present from the Swedish report. I put together such an analysis here.

If you can send me a copy in .pdf that would be great. schmitt at nyquistcapital dot com

Anonymous said...

Isn't the problem with the Ventura research that it showed it is still hard to find legal drivers for 100mbps+ bandwidth - they note that in 'some cases' (would be interesting to see how many) 80% of the usage of increased bandwidth was through P2P?

If you could email through a full copy of the report to me I would be grateful! pwnedn00b at gmail com

Brough said...

Tim, Thank you for this excellent summary of the Ventura Teams report. If you can send me a copy of the PDF I'd be very grateful. broughturner using gmail.

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