FTTH Business Guide/Why Fibre?
 Broadband technologies compared
FTTH has obvious advantages for the consumer, both today as well as in the foreseeable future, as it offers improved performance over broadband services that are delivered primarily over copper networks. FTTH offers the highest possible speeds of internet access downstream (from the network to the end user) as well as upstream (from the user to the network).
The following table shows typical download and upload times for image and video transfer using various types of consumer internet connection:
An interactive FibreSpeed comparison tool is available from the FTTH Council website: www.ftthcouncil.eu/about-us/about-ftth/fibre-speed-tool .
Several access network technologies such as VDSL2 and DOCSIS 3.0 are often claimed to be the “next-generation access”, with the promise of increased speeds. However, even though headline speeds are remarkable, it is important to consider other factors that impact on the end-user service.
FTTH speed is non-dependent on the distance from end-user to the telephone exchange, unlike the DSL family of technologies, whose speed reduces with distance. Headline rates of 24Mbps (ADSL2+) or 100Mbps (VDSL2) are theoretical maximums and can only be achieved if the end-user is located adjacent to the exchange or cabinet where the active equipment is installed.
DSL performance is also subject to random noise, other interference and crosstalk during operation which will impact on the overall throughput. The headline speed often includes protocol overheads; approximately 10% of bits are not available to transport data.
Marketing claims which state “up to 8Mbps” or “up to 40Mbps” services may, technically be correct, however end-users are becoming increasingly dissatisfied with the reduced performance that they actually receive, which in some case can be less than half of what was advertised. The performance of DSL technologies is close to the theoretical limit given by the Shannon theorem. (This is a formula that determines the maximum achievable bit rate over a transmission medium as a function of the frequency-specific signal-to-noise ratio (SNR) values. The SNR decreases with increasing attenuation and increasing noise from crosstalk.)
New techniques such as vectoring, which reduces the occurrence of crosstalk; and bonding, which treats multiple copper pairs as a single transmission line; will prolong the lifespan of DSL technologies. Indeed, 900Mbps transmission over four copper pairs has been demonstrated in the laboratory covering distances of several hundred meters. But it is not possible to sidestep the fundamental physics as described by the Shannon theorem.
Cable TV systems encounter a number of problems. DOCSIS 3.0 technology which is used by cable TV operators to deliver headline speeds of 100Mbps (or even 200Mbps in trials) is capable of achieving these higher speeds by “channel bonding”. This is a system which connects several channels from a fixed spectrum to increase capacity (these are frequency channels on the coaxial cable spectrum rather than physical channels).
As subscribers share these combined channels they increase their individual peak capacity (peak headline speed) however, they are subject to increased contention and a reduction in throughput at peak times. Furthermore, the design of cable TV systems optimises downstream usage, therefore upstream capacity is not only low, but is also extremely contended. These quality issues are familiar to many cable users.
Advertised speeds for wireless and mobile technologies based on 3G, LTE, can also offer comparable headline speeds to fixed-line broadband. However, these technologies have a number of drawbacks:
- In the case of DSL, wireless transmission technologies only deliver maximum throughput when the user is located adjacent to the base station. Wireless systems have been heavily optimised to make efficient use of spectrum (airwaves) and are also operating close to the Shannon limit.
- Wireless communication is based on a shared medium, called the air interface. Available capacity is shared by all subscribers in a given cell (the area addressed by one base station). As more subscribers use the system, the average bit rate per subscriber will be reduced.
In most circumstances, wireless and mobile technologies should be viewed as complementary rather than a substitute for fixed-line broadband as they allow nomadic use of broadband services.
 Bandwidth requirements
Over the past twenty years, connection speeds to access the internet have steadily increased due to a combination of increased computer processing power and software complexity, higher-resolution displays, and a trend from displaying text to pictures, audio and video.
Nielsen’s Law of internet bandwidth is an empirical observation and states that a high-end user's connection speed grows by 50% per year, or doubles every 21 months. This law has been observed from 1984 to the present day. Nielsen’s data point for 2010 is a connection speed of 31Mbps, a speed that is already familiar to many, but by no means the highest available to consumers.
In the future, increased popularity of existing services combined with the introduction of new services will continue to push bandwidth requirements higher. As more and more information becomes available digitally, data will need to be accessed more quickly. Thus the development of new applications will take advantage of the improved capabilities of the network. Applications are already envisaged that require more than 200Mbps.
Broadband marketing has typically focused on downstream bandwidth, however upstream bandwidth will become increasingly important as applications requiring two-way video sharing become more commonplace, and cloud-based services, such as Apple’s iCloud, proliferate. FTTH not only offers the highest upstream data rates, it also opens the way to symmetrical bandwidth.
Some examples of current and future applications and their bandwidth requirements are shown in figure 2.
Video is expected to contribute significantly to the growth in global internet traffic; and in 2010, internet video overtook peer to peer traffic as the largest component of internet traffic. Numerous internet applications already depend on video:
- Catch-up TV services are becoming increasingly popular. The BBC’s iPlayer service in the UK, for example, requires a consistent 800 kbps of throughput; bandwidth requirements increase to 3.5bps for the HD version.
- DVD rental firms, such as Amazon, are now offering film downloads; consumers may wish to download and watch a film on the same night, this requires an internet connection that is fast enough to download the film in minutes rather than hours.
- In January 2010 Skype launched HD video calling, for which they recommend a sustained 1Mbps of throughput both upstream and down.
- Connected TV devices such as Apple TV, Boxee and Roku, some games consoles and internet-enabled televisions from firms like Sony, can stream internet video content from providers such as YouTube, Amazon, iTunes, Netflix and more (sources vary by country). Video quality is often automatically adjusted to suit the speed of the consumer’s broadband connection. Higher quality HD video requires approximately 4 Mbps or more throughput.
- In October 2010, Cisco launched űmi home telepresence, a consumer video conferencing system that works with the HDTV in the living room and a broadband connection. The HD experience requires a minimum 3.5 Mbps of throughput both upstream and down, although 5 Mbps is recommended.
These applications have been designed with the capabilities of the average broadband connection in mind; service providers need an addressable market for their product. However, the various techniques used to reduce the bit rate of HD video (a reduction in the number of frames per second, or compression techniques) do not come without loss of fidelity. HD video is likely to move towards higher quality as and when consumer broadband connections allow. For comparison, broadcast quality HDTV delivered by terrestrial, cable or satellite requires much higher bitrates in the region of 16—20 Mbps.
Future developments in video can be expected to push bandwidth requirements even higher. On the horizon is the 3D TV, or more accurately, the first generation stereoscopic TV. The first 3D-enabled TVs became available in the stores in mid-2010 and as Hollywood, film and TV studios prepare for 3D production, broadcasters are ready to join them. BBC broadcast the world’s first live 3D HD programme in 2008 and in 2010 the UK satellite TV provider Sky launched the UK’s first 3D channel on their HD platform.
Beyond HD is “Super Hi-Vision”. This has already been demonstrated in a live broadcast in 2008 by the BBC in collaboration with NHK of Japan and is envisaged as a 33 million pixel system (7680 x 4320), offering 32 times the information density of HDTV. This system is currently undergoing standardisation and could enter the broadcast arena as early as 2020 with a target to-the-home bit-rate of 65Mbps. Spectrum, whether satellite, cable or broadcast, is a finite resource and at this point multi-gigabit-per-second FTTH delivery will truly come into its own.
Several trends are also expected to multiply the bandwidth requirements per household:
- Multitasking: performing multiple, simultaneous activities online. For example, a user may browse a web page while listening to an online music or video service.
- Passive networking, whereby a number of online applications work passively in the background. These could include software updates, online backups, internet personal video recorders (PVR) as well as ambient video, such as nanny-cams and security-cams. Cisco estimates that the number of applications generating traffic per PC increased from 11 to 18 in 2009.
- Multiple users sharing a broadband connection in a typical household. For example, one person could be doing online shopping, another accessing their work email over the VPN, a third doing homework through the school website and a fourth watching catch-up TV.
 Service provider benefits
The advantages for the consumer translate into benefits for the service provider, because they help the service provider to attract and retain customers. However, the potential upside to the service provider extends further to include:
- new revenue opportunities, such as IPTV
- lower running costs
- improved network reliability (optical fibre is immune to electromagnetic interference, for instance)
- the possibility to consolidate central offices
- a future-proof network infrastructure guaranteeing ease of future upgrades
To be able to offer new services is essential for service providers if they are to stay ahead in a highly competitive environment.
- The entertainment services segment is extremely dynamic and has been the driving force behind consumer adoption of new technology. For example, the number of IPTV service subscribers increased to around 21 million worldwide during 2008; the prognosis is a growth rate of, at least, 28% per year for the next 5 years. With associated revenues amounting to approximately $6 billion (€4 billion), this is an important and growing revenue source for both established and new entrant service providers.
- The terrestrial analogue TV transmission switch-off deadline of 2012 which is recommended by the European Commission is looming on the horizon for many European countries. The transition to digital terrestrial transmission has already proven to be a major market disruption that can be successfully leveraged by IPTV providers, and will result in increased subscription rates.
- HDTV service is a fertile area for new business strategies as it provides a differentiator for service providers. Even in developed markets such as the US, which has 61% of the global total of HDTV households; 43% of all households either do not have or do not watch HD content. This represents a considerable market opportunity. With 150-inch displays already available on the market, it is perhaps only a matter of time before films are premiered directly to the home on IPTV, instead of through cinematic release.
A 2008 study of NGA service portfolios, commissioned by the FTTH Council Europe, also showed that FTTH operators received on average 30% higher revenues per user. This is not due to expensive product services rather more services being purchased by subscribers.
One argument often raised by operators unwilling or uninterested in investing in fibre is they “do not see the demand”. Of course, consumers are unable to demonstrate demand for services that are not available to them. However, the NGA service portfolio study found that FTTH subscribers consume three to five times more bandwidth (aggregate uploads and downloads) than ADSL users. The same study showed that FTTH subscribers are net contributors to the internet, uploading more material than they download. In other words, once subscribers get access to more bandwidth, they spend longer making use of existing services, as well as becoming proficient in using new ones.
An additional motivator for service providers is that FTTH networks have lower operating costs (OPEX) than existing copper or coaxial cable networks.
- FTTH networks consume less electricity with some reports putting the figure at 20 times less than HFC or VDSL.
- Network operation and maintenance is simplified using full automation and software control, requiring fewer staff.
- Maintenance costs are also reduced as there is no active equipment in the field to maintain, and optical components are extremely reliable.
- Optical fibre is not affected by electromagnetic interference, which is a source of downtime in copper networks.
Verizon in the US has reported that its FiOS FTTH network showed a decline of 80% in network fault report rates, with subscribers being more satisfied with their services which are now more stable and downtime is considerably less. Higher customer satisfaction leads to improved subscriber loyalty and lower churn, which also impacts positively on OPEX. The cost of servicing an existing subscriber is less than recruiting new.
FTTH is often described as being “future-proof” but what does this really mean?
- The lifespan of the fibre optic cable is in the region of 30 years.
- The composition of the cable is plastic and glass, which is robust and has an extremely slow degrade rate.
- The fibre in the ground has virtually unlimited capacity with bandwidth upgrades requiring only changes to the equipment on the ends of the link. Although the active equipment on the ends of the link have a shorter lifespan, often five to seven years, this is true of all broadband technology.
Incumbent operators while historically committed to their approach, are nevertheless aware of the inevitability and are thus planning FTTH deployments in the next few years. Telecom operators and cable TV providers will eventually drive fibre all the way to the home, or go out of business: all recognise fibre as the “end game”. Some operators have already covered the intermediate steps: Swisscom, for example, has previously invested in ADSL and then VDSL access technology, but now decided to adopt FTTH.
Although VDSL technology continues to improve, it must be seen as a technology with a limited operating life and hence a challenging payback case. It is unlikely that operators will be able to invest in upgrades in the shorter perspective; therefore they need to learn the lessons from early adopters and invest in the most future-proof solution from day one.
 Socio-economic benefits
FTTH will also be an enabler, providing considerable social, environmental and economic benefits. Many countries that adopted FTTH within the past decade, are already experiencing tangible benefits, these include Sweden. For governments, local authorities and also communities, these benefits may represent compelling arguments for fibre in their own right and commercially-driven organisations could also recognise the financial benefits from these so-called network externalities, for example, by acquiring public funding, or signing up a healthcare provider as a core subscriber.
Communities connected to FTTH can experience genuine advantages through the availability of a wider range of internet services. Examples of potential benefits that FTTH networks can generate include:
- boosting economic growth and increasing the competitiveness of the community’s business base;
- enhancing a community’s ability to attract and retain new businesses;
- increased efficiency in the delivery of public services, including education and healthcare;
- enhancing the overall quality of life of the community’s citizens by increasing the opportunities for communication; and
- reducing traffic congestion and pollution.
Quantifying these benefits in isolation is challenging. A study by Ovum on behalf of the FTTH Council Europe looked at the socio-economic benefits of FTTH across different communities in Sweden. Ovum’s conclusions were that FTTH has a positive influence on health, education and other public services. For example, in Hudiksvall, a town on the eastern coast of the Baltic Sea with around 15,000 inhabitants, a clear link between the installation of fibre optic communications and the ability to attract new businesses to the area was visible. The study suggests the impact will be greatest in rural areas where local resources are limited and end-users face significant travel requirements.
A number of studies have noted a statistical connection between higher broadband adoption and increased economic prosperity on both local as well as national levels. Evidence-based studies on FTTH have not yet been conducted as the technology is still relatively new, therefore a real-world analysis on the economic impact of FTTH will be carried out in due course. However, several reports have attempted to make realistic predictions regarding the impact FTTH networks have on job creation and the GDP. For example:
- The Columbia Institute for Tele-Information (CITI) conducted a quantitative analysis of the macroeconomic impact of investment in broadband infrastructure in Germany. To meet Germany’s national target of providing 50% of households with at least 100 Mbps and an additional 30% with 50 Mbps by 2020 would require investment of €36 billion, they claimed. This would create an additional 541,000 new jobs in the construction and electronic industries, while job creation triggered by enhanced innovation with new services, would create a further 427,000 jobs. The impact on the GDP in Germany is estimated to be €171 billion between 2010 and 2020 which amounts to 0.6% of the annual GDP.
It has also been calculated that usage of FTTH-services can have a positive impact on the environment. The FTTH Council Europe commissioned life-cycle assessment experts PriceWaterhouseCoopers/Ecobilan to study the environmental impact the deployment of a typical FTTH network would have on the environment.
The study found that the environmental impact through the deployment of a typical FTTH network will be positive in less than 15 years compared to the scenario where no FTTH network existed. The energy and raw material used to produce the equipment, transport it and deploy the network is easily compensated by FTTH-enabled services such as teleworking, fewer miles travelled for business, and a reduction in long distance transportation of patients.
Intelligent deployment using existing ducts, and sewers, where available, can further improve the positive environmental impact of FTTH. The FTTH Council North America asked Ecobilan to calculate results tailored to the circumstances of the USA. Results showed that the environmental pay back would be 12 years mainly due to the existence of aerial cable.
It may be difficult for service providers to experience immediate financial benefits from these externalities in the form of service fees, however, other parties involved in the network deployment may include them in their decision-making process. For instance, the potential social and economic benefits for the community could gain local support for the project, thus paving the way for a smooth local deployment process resulting in increased numbers of subscribers. The business case should address all alternative motivators and methods for funding the network rollout.