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Study Claims EU Needs 92 Years to Switch from Copper to Fibre Broadband

Friday, November 23rd, 2012 (8:26 am) - Score 1,443

The latest research from consultancy firm Ventura Team and finance group Portland Advisors has estimated that at the current “snail’s pace” it could take Europe 92 years and £211bn to completely switch from existing copper-based telephone and broadband ISP infrastructure to a fully fibre optic (FTTH) service.

The new study, which was perhaps unsurprisingly funded by the FTTH Council Europe, claims that a full switchover to a Fibre-to-the-Home (FTTH) network offering true 100Mbps+ style broadband ISP speeds to every home (over 210 million premises) in the EU (EU27) and UK would cost an earth shaking €261 Billion in CAPEX (£211bn estimated). This excludes the 40% in urban areas that the report assumes will take cable broadband (e.g. Virgin Media).

Ventura Team’s study estimates that the industry currently invests roughly €20 billion per annum in fixed networks but on average, over the last four years, it has invested less than €3 billion per annum of that into fibre optic infrastructure. The fear is that such an allegedly weak level of investment could “obstruct economic growth across Europe for a long time to come“.

Stefan Stanislawski, Co-Author of the Study, said:

Every technical expert will agree that fibre is the only real technological option capable of meeting the demand for broadband in the long run. But in Europe we are still not investing enough money into fibre, and this is not for lack of capital. The industry could fund the switchover itself over a period of 25 years with the right regulations.”

The study therefore advocates a 7-point Fibre Switchover Plan with changes in telecoms regulations in the form of a coordinated program to drive the switchover, which would also aim to give ISPs more incentive to switch from the current copper to fibre infrastructure. “Right now there is little incentive for fixed telecom operators to affect a switch to fibre since the cash keeps flowing from the old copper networks,” said the report.

The 7-point Fibre Switchover Plan

1) Modify the regulatory approach to the local loop putting long-term contractual relationships to the fore and thereby creating public, operator and investor confidence in a stable, transparent and predictable regulatory environment. Commitments to delivery by operators should be public, reinforced by performance guarantees, and non-delivery should be penalised with appropriate penalties and/or cash clawbacks;

2) Enforce the existing social contract for replacement so customers get the modern infrastructure that they are already paying for;

3) Change the economics of grey and white areas using targeted transfers or interventions so that PPPs and similar project financing approaches stimulate renewal of the natural monopoly access network;

4) Use strategic pricing to ensure that regulated wholesale prices for copper access reflect its long term higher costs and charge a sufficient premium to drive technological migration in retail markets. Additional cashflows generated by such strategic copper prices should be directly used to help fund the Fibre Switchover;

5) Update the concept and mechanisms of universal service to fully support the Fibre Switchover in the grey/white areas. Greater symmetry in fixed market regulation of black areas should ensure that Cable TV operators make a fair contribution in any Member States where they do not already do so;

6) Smarter interventions by Government and EU Authorities to both emphasise stimulus rather than subsidy (thereby also reducing total life costs of intervention to the taxpayer) and the establishment of Fibre Development Corporations to act as impact investors – creating a pipeline of bankable deals and a financing ecosystem to accelerate the Fibre Switchover;

7) Provide active support for community self-provision in those areas where this will either deliver faster modernisation or significantly reduce whole-life costs to other customers and taxpayers.

We note that point 4, and to some extent point 2 (the ‘social contract’ is very vague), suggests that customers on existing copper based (ADSL etc.) broadband connections should be forced to pay more for their service through “strategic pricing” to help pay for a new fibre optic infrastructure.

A similar idea was proposed by the EU not too long ago, and the UK before that (50p phone line tax), although both were ultimately rejected because they were unpopular and potentially tedious to implement in aggressively competitive markets.

Meanwhile Europe’s current Digital Agenda strategy, which was launched in 2010, aims to make 30Mbps+ speeds available to 100% of EU households by 2020 (with 50% being within reach of a 100Mbps+ service), which is currently based off a technologically neutral approach (although they are encouraging fibre optic infrastructure for related investment inside cities).

The result is that many countries have already spent two years designing their related rules, processes, assigning contracts and in some cases even beginning the roll-out. At the same time most of Europe is stuck in economic deadlock over spending, with many facing stalled economies, which makes it hard to make a case for significantly more investment through state aid.

On top of that big telecoms operators, such as BT, are already proposing partial solutions like FTTP-On-Demand (due spring 2013). This will bring an FTTH/P style connection to anybody that already has an FTTC line (expected to reach 66% of the UK by spring 2014), albeit only if you’re willing to pay the potentially huge “last mile” style cost of replacing the old copper line with fibre.

Financing Stimulus for FTTH (PDF)

Leave a Comment
13 Responses
  1. Avatar hmm says:

    92 years to upgrade BY which time fibre will be out of date

    1. Avatar Me says:

      Copper has last over 125 years why couldn’t fiber optics?

  2. Mark Jackson Mark Jackson says:

    What would you replace it with?

    1. Avatar Bob says:

      Who knows at this time but one can bet that within 90 years something else will come along

    2. Avatar FibreFred says:

      Why Bob? I would have thought the speed of light is sufficient?

  3. Avatar Phil says:

    How about Fibre broadband ran by ekectricity ? Surely I seen somewhere ages ago in latest technology as broadband can go up to 1Gbs by electricity.

    1. Mark Jackson Mark Jackson says:

      But why would that be better than fibre optic cables? Light is very open to manipulation in all sorts of ways, so in 90+ years’ time we might still have the same cables but be doing different things with the light itself.

      Electricity has all sorts of problems, not least with efficiency and interference, but that depends upon what you’re doing with it and how.

    2. Avatar Kyle says:

      Indeed. I bet the Victorians never thought of the wonderful things we’d be doing with copper (ahem) now… Oh no, we’re not.

    3. Avatar FibreFred says:

      Exactly Mark, fibre is fibre, its about the optics and colours and how you use it.

  4. Avatar The Builder says:

    what about the possibility of going everything wireless?

    Even the backhaul through satellite? Surely in 90 years time, through innovation of new materials (light, strong, durable, efficient) we might able to deploy satellites systematically enough to form backhaul, PoPs, data centre, to transmitt broadband back to earth? 🙂 oh the fantasy.

    1. Avatar Gadget says:

      unless we have also discovered warp drive there will still be the round-trip delay to the satellite however…..

  5. Avatar RD says:

    forget about it as BT are going to keep us all on FTTC like copper.That is until the future taxpayer comes up with a 500 million fund to roll out a new XTTC version of whatever replaces fibre.

    We wont ever see FTTP now they got the money for FTTC.They will bog off with the profits and if anyone wants needs FTTC they will have to pay thousands of pounds themselves to have BT’s overpriced engineeers lay fibre overhead.You will own the fibre but will still be charged the same price probably.Imagine this happening with any other infastructure!

  6. Avatar DTMark says:

    What this is beginning to smack of is the following:

    EU decides that we should all have a certain level of broadband availability, recognising its importance;

    A random pot of money is found without considering the actual or likely costs;

    A flawed process here (less so in other countries, it appears) has meant that absolutely none of the money gets spent on next gen, simply getting spent on whatever the operator (singular) would like to spend it on: cabinets, with a lack of transparency. In other words, a private company sees a windfall coming and makes the most of it;

    It becomes abundantly clear that there is an enormous disconnect between the objectives at the top and the delivery largely because, for some odd reason, when Governments hand out money they seem to lose sight of the “Idiots guide to how business works” especially with incumbent monopolies;

    Now, and only now, is there some “looking ahead” which should have come at the outset of the project, so as to see if the next tranche of money can be more effectively spent;

    And here in the UK, thanks to BDUK, any notion of any private investment in broadband in this country from any other operator than BT has been destroyed, indeed OFCOM and BDUK together have acted to do as much as possible to destroy competition.

    Private investors should run a long way from going near broadband infrastructure with such dangers lurking.

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