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

Friday, Nov 23rd, 2012 (8:26 am) - Score 1,555

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)
http://www.ftthcouncil.eu/documents/Reports/FTTH_Finance_Report.pdf

Mark-Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
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