Arthur D. Little and Exane BNP Paribas: European telecom operators must partner to catch up with cable in super-fast broadband market
London, 20 April 2011
Super-fast broadband[1] roll-out is accelerating across Europe, with targets indicating almost 50% coverage by 2015. However, telecom incumbents face stiff competition from cable operators in bringing an economically viable offering to market. This is one of the main findings of ‘Super-fast broadband: catch up if you can’, the 10th edition of the respected annual telecoms report from global management consultancy Arthur D. Little and equity broker Exane BNP Paribas.
With cable operators driving the super-fast broadband market using low investment DOCSIS3.0 technology, incumbents must catch up by deploying FTTH (fiber to the home) in major population centers, even though economic returns are uncertain. In the nine local markets[2] analyzed in the report, incumbents will have to invest additional capex totaling €18-40bn, which could increase domestic fixed-line capex/sales ratios by 2.5-5%.
However, the report states that incumbents can significantly reduce their risk through increased infrastructure sharing. In a core scenario, the report demonstrates how the return on FTTH deployments can be increased from 12% to 23% if capex is reduced by 25% through partnering.
The report also states that telecom operators, especially the smallest ones, can improve the business case for super-fast broadband through the development of innovative service offerings such as “super triple-play”, targeted marketing and optimized distribution strategies.
Each country has its own distinct market dynamics, driven by competition, regulation and sophistication of consumer demand. The report predicts that the Netherlands, Belgium and Portugal will be the most advanced countries by 2015, while roll-out in the UK, Germany and France will be average.
Didier Levy in Arthur D. Little’s Telecommunication, Information, Media and Electronics (TIME) Practice, says, “Residential customers are not yet ready to pay a premium for super-fast broadband internet access, but may be responsive if it is marketed as a way to access “super triple-play”, including HDTV and multi-device connectivity.”
Antoine Pradayrol, Exane BNP Paribas, says, “For incumbents, rolling out FTTH is financially feasible, but challenging. While deployment in urban areas should deliver decent returns in the long-term, fiber in low-population areas is unlikely to be profitable unless co-financed with other parties such as local authorities.”
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