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09.11.2007
Originally featured on BroadcastEngineering.com
FTTH could tip competitive landscape in favor of telcos, says iSuppli analyst

Fiber-optic cable to the home, although more costly to deploy, ultimately will win out over other alternatives for deployment of IPTV services, according to Steve Rago, principal analyst for market researcher iSuppli.

Rago, who has authored several reports on the topic of fiber and its impact on IPTV, forecasts that fiber to the home (FTTH) may take 15 to 20 years for that happen with fiber to the curb and VDSL providing an important step along the way. Not only will that allow telcos to offer more channels and greater services to consumers, it also will mount increasing pressure on cable MSOs to take steps to remain competitive.

IPTV Update spoke with the author of “Broadband’s Next Big Step: Fiber to the Home and VDSL2” to get some more perspective.

IPTV Update: You say despite being a costly technology, fiber to the home (FTTH) will ultimately win out in telco IPTV delivery. Is the reason simply the bandwidth FTTH offers?

Steve Rago: It’s the need for bandwidth, and that need is being driven by the need to support new services going over the existing infrastructure. This boils down to the fact that the telcos need to reinvent themselves if they are to survive.

Part of that scenario is that they want to become video service providers. This is a worldwide phenomenon, so it’s more than just the U.S. To do that, especially in the U.S., they recognize the need for much fatter pipes than they have today, so fiber is a way to go. Deep fiber and VDSL is another way to go.

Fiber is the only future-proof technology. Once I put in fiber, I can scale up bandwidth virtually indefinitely, whereas deep fiber and VDSL do have their limiting points. The bottom line is to be able to offer the new services, and for its very survival, telcos need to deploy fiber eventually. Now, the question is how quickly they will deploy it. On a worldwide basis, you see Verizon for one, Japan NTT for two and there have been announcements that French Telecom is going to go FTTH. Other major incumbent telcos have talked about driving fiber deep into the neighborhood, such as AT&T and Deutsche Telekom, and then running high-speed ADSL to the home as their first step.

Inflection points to drive fiber faster would be if telcos cannot provide a video experience over copper that’s equal to or better than what the consumer can get over broadcast, satellite or the cable MSO.

If they cannot achieve their goal, then my feeling is that they will spend the money to provide FTTH.

IPTV Update: Fiber to the curb (FTTC), or deep fiber, can save telcos 50 to 65 percent of the cost of provisioning broadband subscribers, according to your reports. Does that mean telcos will deploy fiber to the curb as a stop gap, or will it be an end-game, ultimate solution?

Steve Rago: FTTC with VDSL is not the end game. The only future-proof technology is fiber all the way. It’s a logical way to go, however, because of the cost involved is to bring fiber very close in the neighborhood where I have rights of way to run the fiber. In other words, I am not trenching, digging up homes, digging up rights of way and then having to put it back the way it was prior to my digging. That’s a very large expense. So, they’ll bring fiber as close as they can given rights of way and given conduits they have at their disposal, and then go over the copper plant. I fully believe that over time, that is going to migrate to FTTH. In 15 to 20 years, the install base will migrate to fiber.

IPTV Update: Will that be new construction or in existing neighborhoods?

Steve Rago: It will eventually be both. Currently, all the telcos have said that for greenfield locations, they will drive fiber all the way to the home, and it’s actually cheaper. But for brownfield locations, existing locations, with the exception of the countries I mentioned before — that is Japan, Verizon in the U.S. and French Telecom — most of the incumbent telephone companies are talking about driving FTTC or near to the subscriber, and then using existing copper.

The reason Japan, Verizon and French Telecom can do it is because, in the case of Verizon, 60 percent or more of the subscribers they are targeting their FiOS TV at are aerial-fed. Deploying fiber over aerial-fed is much, much cheaper. Japan is all aerial-fed and much cheaper, and in the case of French Telecom, the city of Paris is where they are going to do their deployment and the sewer system in Paris provides French Telecom with rights of way right to the residences. So for the most part, the three of them do not have to dig up the large amounts of real estate to deploy fiber. They have other ways of doing it that are much cheaper.

IPTV Update: What measures do you anticipate cable MSOs will take to counter triple- and quad-play threats from telcos throughout the next few years?

Steve Rago: That’s the million-dollar question. One, there will be much more switched digital video, allowing many more video-on-demand services than they have today. To do that, they’ll figure out ways of reducing the bandwidth required to handle broadcast to a given group of customers, and, therefore, free up bandwidth so they can do more video on demand. So, there are some new technologies there.

There has been some talk of using the DOCSIS 3.0 standard and providing video on demand over their IP network, if you will. There is some talk of that, but I am a bit skeptical of that succeeding. Their first step will be to free up the given bandwidth occupied by broadcast and provide more video on demand in that bandwidth.

IPTV Update: You note that consumers’ perception of the quality of telco video is a gate telcos must pass before becoming a competitive threat to cable MSOs. What do you see right now as the general consumer perception of telco video?

Steve Rago: It’s actually pretty good. I say that indirectly. I’m hearing that directly from the telcos themselves and the OEMs who are supplying the telcos. The third leg of that stool is the significant take rate certain telcos have experienced when they started offering video.

I think that they have proven that they can provide a good consumer experience. The question in my mind is if they can do it as they start scaling from hundreds of thousands of customers to millions of viewers. Scaling still has to be proven; there may be some room for innovation in the telco world.

IPTV Update: How will increasingly scarce bandwidth for the cable MSOs play into the competitive situation with telcos, particularly with the increasing number of HD channels MSOs are carrying?

Steve Rago: What I understand is happening is that the cable people realize that as they fill up the pipe and send it to 1000 homes or 500 homes, at any given instant, only a fraction of that broadcast actually is being looked at. So, they’ll use switched digital video scheme, populating the pipe with only the programs that are being watched at that time and thus free up a good deal of the pipe for video on demand.

It looks like, on the surface at least, that it is a very doable technology, so I don’t see any problems there. Whether or not they can get to where the potential telcos can with pure IP and switched digital programming, that remains to be seen. I think that is still quite a few years out.

For example, if you’re in the United States and you want to watch the Brazilian soccer game as it is happening, it’s very real that in an IP world with switched digital video you can get real-time access to that video. Obviously, a lot of infrastructure has to happen, but there is nothing to preclude that, and you can scale it infinitely. In the cable world, that becomes very problematic. You can’t scale infinitely. Now, you need to use DOCSIS 3.0 or change the way you distribute video.

IPTV Update: Is there anything else you’d like to add?

Steve Rago: I think the cable people have to take a look at the fact that worldwide, many homes are being serviced for broadband from the telco, and a large percentage of those homes have sufficient bandwidth to provide video.

I think that it’s just a matter of time before telcos could start servicing more customers than cable does. What that means is that the telco people will become very proficient at doing that. They eventually will have the kind of momentum to go head to head with cable and perhaps surpass it.

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