Calix Calls for U.S.-Style Catalysts to Drive Gigabit Services Growth across Europe
Lack of broadband competition and minimal government support for local grassroots fiber efforts combining to threaten Europe’s status as a technology leading region
AMSTERDAM – October 20, 2014 – Calix, one of the major forces behind the gigabit community wave sweeping across the United States, is warning that Europe needs to foster a major effort to drive it forward and keep pace with North America and Asia in advanced broadband infrastructure. The comments came today on the eve of the Broadband World Forum in Amsterdam, where Andy Lockhart, senior vice president, international sales at Calix, said that major events in the U.S., such as the targeting of hundreds of communities for gigabit services by incumbent service providers like AT&T and CenturyLink, and the emergence of a variety of alternative service providers like Google, utility cooperatives, and municipalities, are positively changing the dynamics of the North American broadband landscape. In North America and Asia, investments in gigabit capable infrastructure are stimulating economic development and creating new and much more competitive service provider business models. A recent study of 55 communities conducted by the economic, financial, and strategy firm Analysis Group found that gigabit communities had a significantly higher GDP (1.1%) than those unserved by gigabit services. Regulatory, political, and economic barriers in Europe have discouraged this same level of innovation and investment, and without intervention will quickly result in Europe falling behind in global competiveness as well as a substandard consumer broadband experience.
Observations from analysts have confirmed the Calix viewpoint.
“Europe is beginning to really lag behind other parts of the world in terms of gigabit services,” said Teresa Mastrangelo, principal analyst and founder of Broadbandtrends LLC.
“A growing number of operators in communities across the globe have taken a leap of faith towards a gigabit future and are already seeing a positive return on that investment. More importantly it is having a catalytic effect within each market spurring a competitive response by those operators that want to be viewed as the technology leader. In the less competitive and more conservative European market, investment in arguably less capitally intensive but significantly less robust technologies such as copper has been favored, especially among incumbents. The result has been the creation of a widening and major gap between what is happening in North America, Asia and Europe.”
Calix, from its own experience in the U.S. and increasingly across the global market, is well-placed to make the comparison: “From our experience, the first service providers to make the leap to gigabit services find themselves at a definite competitive advantage – the quicker you go gig, the better the business case. This is complemented by an important correlated finding – that those who invest in fiber first significantly undermine the business case for everyone else, capturing a disproportionate share of subscribers and creating a very sticky consumer experience,” said Lockhart.
Both Calix and Mastrangelo agree on the reasons why things are the way they are in the Europe versus. North America gigabit stakes: “While there are some pockets of activity in gigabit broadband in parts of Europe, mostly in the UK where alternative operators have started to build their own fiber offerings because the market is underserved by the incumbent, the continent as a whole is far behind other parts of the world. Europe does not have the same competitive imperatives as the U.S., where there is much more healthy competition between the telcos and the cable operators which is driving the need to build bigger, faster networks. Additionally, in the U.S. in particular, the government has stepped in to offer both a ‘gigabit challenge’ to each state as well as create experimental programs that incentivize gigabit capable infrastructure investment,” said Lockhart.
“In the U.S., service providers in virtually every market – large and small – compete every day for subscribers and the differentiation that gigabit services provide is proving to be a great motivator for investment. In addition, government at the federal level, and in many regions at the state and local levels have adopted policies that specifically encourage gigabit investments, and local referenda are encouraged to drive grassroots efforts.”
He pointed out the European Commission’s “Digital Agenda for Europe” program, part of the EU’s Europe 2020 Initiative, as one of Europe’s main broadband drivers. But this only identifies the need for speeds of 100 megabits per second (Mbps) as the target – far below the rates targeted in other parts of the world. Since this 100 Mbps target can now be achieved with traditional physical media like copper using technologies like VDSL2 with bonding and vectoring, investment in fiber is arguably disincentivized. Widespread European policies on unbundling also provide incumbent service providers little incentive to replace their existing infrastructure with fiber, effectively stifling the innovations offered by new media. At the same time, the EU has many initiatives around smart cities and smart grid deployments, which would benefit from fiber upgrades and gigabit services.
“Gigabit services have proven to be real game-changers in the communities where they are deployed – offering major enhancement in such important social initiatives as telemedicine and e-education,” said Lockhart.
“We have seen some of the most successful gigabit deployments in the U.S. launched by offering gigabit services for institutions such as schools and hospitals, which have provided new services while supporting local communities in the process,” he added.
But Lockhart saw signs of optimism from a number of European countries where there is more interest in high-speed services and where Calix is already working with service providers, counties, and communities who have prioritized world-class broadband infrastructure. Recent projects have been announced in parts of Belgium, the Netherlands, Sweden and Ireland.
However, continent-wide progress has been slow. “The path towards gigabit services will not be simple, it will not be fast, and it will not necessarily be easy. But it is not impossible,” said Mastrangelo. “Being perceived as a technology leader was the number one driver stated by operators of all types in a recently published survey by Broadbandtrends – ‘Gigabit Broadband Services & Deployment Strategies.’ Being perceived as the technology leader is proving to deliver positive results across all parts of the gigabit service provider network – resulting in higher take rates and revenues even in areas where gigabit services have not been deployed yet. The perception of leadership is that powerful.”
Calix (NYSE: CALX) is a global leader in access innovation. Its Unified Access portfolio of broadband communications access software, systems, and services enables communications service providers worldwide to transform their networks and become the broadband provider of choice to their subscribers. For more information, visit the Calix website at www.calix.com. For more information about Calix enabled gigabit networks, visit www.calix.com/gigabit/.
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